April 30th, 2010 at 1:05pm
Neil Barofsky is the head of the Office of the Special Inspector General for the Troubled Asset Relief Program, or SIGTARP. His job is a tough one: to oversee and catch fraud and waste in the federal government’s $700 billion TARP program (Troubled Asset Relief Program), passed in 2008.
Although under the Treasury, SIGTARP has had plenty of criticism of its parent agency and Treasury Secretary Timothy Geithner.
Read the full article in SFGate, the San Francisco Chronicle.
April 30th, 2010 at 12:46pm
The owner of Cedar Funding in the Central Coast of California was ordered to stand trial this coming October on fraud and conspiracy charges related to a $160 million business involving 1,600 investors.
Bankruptcy trustee Todd Neilson said that David Nilsen used his business Cedar Funding to operate a Ponzi scheme, paying dividends to his early investors with funds he took from the later ones. Nilsen, who is representing himself at his trial, has filed for Chapter 11 bankruptcy, but not before assigning the deeds to over a dozen properties to individuals, according to Nilsen. Nilsen also said that many of the loans in Cedar Funding’s portfolio were second, third or fourth deeds of trust, the value of which were mostly lost once the homes for which they had liens went into foreclosure. To date, the bankruptcy trustee has only recovered approximately $1.9 million, although he is still liquidating properties and attempting to set aside assignments of some of the trust deeds.
Warning: DO NOT purchase junior trust deed (2nd, 3rd, etc.) unless you are a very sophisticated investor. If the first trust deed, or one of the junior liens that is senior to yours forecloses, you are likely to lose 100% of your investment.
Read the full article in the Silcon Valley Mercury News.
April 30th, 2010 at 9:16am
Milton Retana, 45, a subject of several previous articles in the California Real Estate Fraud Report, is facing 27 years in prison. That’s what federal prosecutors are probably going to ask a judge to impose on Retana, who ripped off more than 2,000 investors out of more than $62 million in a real estate fraud crime spree.
Retana targeted fellow Latinos in a case that could be described as ethnic fraud or affinity fraud, which occurs when the perpetrator seeks victims of a similar demographic group. He found his victims by advertising in Spanish-language publications and by holding seminars. In the end, Retana did little more than operate a Ponzi scheme, paying early investors using money he raised from later ones.
According to Thom Mrozek, a spokesman for the U.S. Attorney’s Office in Los Angeles, Retana operated a Ponzi scheme using Best Diamond Funding, his own firm, to promise investors unbelievable returns of up to 84 percent per year. Many took out second mortgages so that they could buy in, according to prosecutors.
Retana’s wife owned a religious bookstore called Libreria del Exito Mundo, which is located next door to Best Diamond Funding. When postal inspectors and FBI agents raided Best Diamond Funding and Libreria del Exito Mundo, they found almost $4 million in cash in the two buildings.
*** Note: after this writing, Milton Retana was sentenced to 25 years in prison.
Read the full article in the Daily Breeze and Businessweek.
April 30th, 2010 at 9:01am
Joseph John Pugliese has been indicted for conspiracy to commit mail fraud along with 17 other individuals who were real estate agents, loan officers or bank employees. He has pleaded not guilty and could be sentenced to 30 years in prison and receive a $1 million fine if he is convicted.
According to federal prosecutor Jeffrey Rabkin, “Pugliese, together with others, fraudulently inflated the creditworthiness of the borrowers by falsifying personal and financial information that was material to the mortgage lenders in making their lending decisions.” Rabkin states further that Pugliese”who was at the time an area manager of Countrywide Home Loans, Inc. – regularly purchased forged and falsified documents such as W-2 statements and bank records that were then used to support false and inflated information listed in the borrowers’ loan applications.”
Countrywide Home Loans was a major subprime lender that was absorbed by Bank of America.
Read the full article in the Marin Independent Journal.
April 23rd, 2010 at 9:31am
San Diego U.S. Attorney Karen P. Hewitt announced that Michael Alexander, who owned several San Diego telemarketing companies involved in a real estate investment fraud scam, was sentenced to serve 30 months in prison after pleading guilty to mail fraud and filing a tax return. Alexander was also ordered by U.S. District Court Judge Roger T. Benitez to pay restitution of $1,799,580.78 to his victims of the fraud scheme and to the Internal Revenue Service (IRS).
Alexander pleaded guilty two years ago to mail fraud and filing a false tax return using the Rose Fund, LLC to solicit money from investors. He then set up TRF Holdings, Inc., to capitalize the Rose Fund. The lead salesman Alexander hired was a convicted felon named William Wright.
This case was a joint investigation by the Internal Revenue Service Criminal Investigation Division, the U.S. Postal Inspection Service, and the Federal Bureau of Investigation.
Read the Full Article in Webnewswire.com
April 23rd, 2010 at 9:20am
Thomas Hastert used to be a mortgage broker and owner of Loan Sense. In 2009, Hastert pleaded no contest to 63 counts of embezzlement and illegally selling real estate securities.
Forty-five victims of Hastert, who brokered more than 270 hard money loans totalling $20 million, showed up to attend the restitution hearing in Nevada County Superior Court Judge Robert Tamietti’s courtroom. They had submitted more than $2 million in claims for their losses. The restitution hearing could amount to little since Hastert claims to be broke.
Hastert faces six to 15 years in prison when he is sentenced, per his plea agreement.
You can search the California Real Estate Fraud Report for more articles about Thomas Hastert.
Read the full article in The Union.
April 23rd, 2010 at 9:08am
A San Leandro woman is looking at four years in prison after pleading guilty to defrauding an elderly, disabled woman in San Jose. If it were not for a concerned neighbor of the victim who contacted the Santa Clara County District Attorney’s real estate and elder-dependent adult fraud unit, this criminal would have gotten away with her crimes.
Diana Marks, 45, conned the victim into gift-deeding her property to Marks. The property had been paid off except for $26,000 in liends and was worth approximately $300,000. After gaining title, Marks refinanced the home, spent the money on herself and her family and let the property go into foreclosure.
The victim lost all of her money. Whether she gets the restitution from Marks as ordered, remains to be seen.
Read the full article in the Silicon Valley Mercury News.
April 20th, 2010 at 8:32am
A Los Angeles firefighter who resigned from the department in December 2009 to avoid being fired has now pleaded no contest to numerous felony counts in a real estate fraud prosecution.
The Los Angeles County district attorney’s office said Bren Lamont Mathews, 43, pleaded no context to six counts of forgery, three counts of recording a false or fraudulent instrument and four counts of grand theft, as well as admitting two special allegations of taking more than $500,000. Mathews still holds a real estate broker’s license according the California Department of Real Estate (DRE). His former girlfriend, Joi Rochelle Smith, 34, already has pleaded no contest to one count of recording a false or fraudulent instrument and has received a slap on the wrist of 52 days community service and 3 years probation.
Read the full article in the Los Angeles Times.
April 19th, 2010 at 5:25pm
Three people have been charged in an 83 count indictment by a Santa Clara County grand jury for loan modification fraud. The crimes that are alleged include enticing homeowners in foreclosure by promising them principal reduction that involved selling the homeowners’ loans to investors (or straw buyers) and then reselling the home at a lower price back to the original homeowners.
Prosecutors allege that San Jose residents Rene Alvarez and Mariano Ortega, and Cydney Sanchez of Los Angeles, were part of a seven state scam that involved 400 homeowners and the theft of more than $2 million.
The district attorney’s office states that Alvarez and Ortega owned and operated M&R Contemporary Solutions Inc., a Campbell-based “foreclosure consulting” company from 2008 to 2009. Sanchez was the owner/operator of West Coast Mortgage and Horizon Property Holdings in Beverly Hills.
The only good news in this story is that M&R’s bank accounts were frozen so that the victims could receive restitution if the defendants are found to be guilty.
Read the full article in the San Jose Business Journal.
April 19th, 2010 at 10:19am
Attorney General Edmund G. Brown Jr. announced he is taking bond rating firm Moody’s Investor Service to court to force it to explain how it decided to give its highest ratings to subprime mortgage-backed securities that ruined investors and caused the government to force taxpayers to bail out the makers of these “risky and toxic” financial products. Moody’s had refused to respond to the Attorney General’s subpoena, forcing Brown to take court action.
Brown accuses Moody’s and other ratings firms of working closely with the Wall Street firms that formulated the securities in order to earn what amounted to billions of dollars in revenue from those same firms, ignoring ethical, regulatory and legal considerations about remaining “arm’s length” as a rating agency.
“A central question in the aftermath of the financial meltdown is whether Moody’s gave investment banks and other securities packagers unwarranted high ratings at the expense of investors, who depended upon the integrity and independence of Moody’s ratings,” according to AG Brown.
The subpoena from Attorney General Brown’s office seeks to learn:
– Whether Moody’s knew that the AAA ratings it gave to high-risk securities weren’t warranted
– Whether Moody’s made fraudulent representations about the quality of its ratings
– Whether Moody’s made fraudulent representations concerning the independence of its ratings
– Whether Moody’s conspired with companies it rated to the detriment of investors
– Whether Moody’s profited from giving inaccurate ratings to some securities
– Whether Moody’s compromised its own standards and safeguards in order to increase its own profits.
Read the press release by the California Attorney General’s Office.