California Real Estate Fraud Report

James Delbert McConville, indicted along with five co-conspirators in May as ringleader in a real estate fraud at several condominium complexes, was arrested in Valley Acres, southwest of Bakersfield. The condos were located in Escondido, San Marcos and a 300-unit complex in Ridgecrest, north of the Antelope Valley. The indictment originated out of the East (San Francisco) Bay because McConville’s offices were located in Fremont.

McConville not only found straw buyers who were stupid enough to rent their good credit ratings to purchase the condos, he charged “marketing” fees that ranged upward of half the purchase price of the properties, all of which he later ceased making payments on and allowed to fall into foreclosure.

Read the full article in the San Diego Union Tribune.

As if there weren’t enough real estate-related crimes for consumers to navigate, there is now “landlord fraud”, in which a person impersonates a landlord, usually to rent property he or she does not own to unsuspecting prospective tenants. Craig’s List has often been used by the phony landlords to attract their victims and it is not unusual for the criminals to “rent” the same house to numerous renters.

Out to deter those thinking of scamming would-be tenants, Assemblewoman Fiona Ma (D-San Francisco) and Assemblyman Curt Hagman (R-Chino Hills) have co-authored Assembly Bill 1800, which would elevate the crime of posing as a landlord from a misdemeanor to a felony. AB 1800 has already been passed out of Senate Public Safety Committee with a bi-partisan vote of 7-0.

If you are a renter, always ask a real estate agent to look up the title profile for a property to verify the ownership and the authority of the landlord before you hand over any money.

Read the full article in the California Chronicle.

Rollo Richard “Rick” Norton II is on his way to prison after being sentenced by U.S. District Judge Marilyn L. Huff to just 24 months for mail fraud. His partners-in-crime Scott Greer and Todd Johnson have pleaded guilty and are now awaiting their fates in front of Judge Huff.

Norton participated in a complex real estate fraud investment scheme in which $30 million of his investors’ life savings was used in numerous purchases and refinances in a San Diego condominium complex.

Read the full article in the San Diego Union Tribune.

Prosecutors in Ventura County are busy after arresting 13 people last week for their alleged involvment in mortgage fraud conspiracies in which unqualified borrowers submitted loan applications that were doctored by the defendants in order to obtain millions in loans. Many of the homes fell into foreclosure afterward, causing large-scale losses for the banks while the real estate professionals pocketed commissions that were truly unearned.

According to Ventura County District Attorney Greg Totten, “The criminal conduct that is the basis of today’s federal indictments is our own Ventura County example of the greed, avarice and fraud that drove much of this nation’s real estate meltdown.”

And from said U.S. Attorney André Birotte Jr., “The perpetrators range from professionals in the industry— people like real estate agents and mortgage brokers—to individual borrowers who wrongly thought they could game the system”

The first indictment targeted Oxnard-based Mortech Financial. Employees there are alleged to have falsified loan applications, resulting in losses to the lenders totaling $25 million.  Now facing charges for their roles are Rosa Amelia “Rosie” Fernandez, 34, / Mortech Financial; Raul Rocha, 37, Fernandez’s brother / Century 21 Premier Hills and Estates; Luis Ramos, 40; Patricia Vega, 43; Rogelio Vega, 43, of Oxnard; Leticia Hernandez, 38, of Santa Paula; Eduardo Magdaleno, 62, of Ventura; Richard Ceniseroz, 57, of Oxnard; Lilibell Meza, 34, of Fillmore; and Eduardo Reyes, 33, of Oxnard.

The second indictment is against Platinum Power Mortgage, also in Oxnard, for the same crimes. Charged in that case are Miriam Sukey Estrada, 32 / Platinum Power and Premier Tax Service in Oxnard; Adela Naranjo, 50 / co-operator of Platinum Power; Maria Del Rocio Partida, 45 / a real estate agent at Century 21 Premier Real Estate in Oxnard; and Juan Manuel Banales Venegas, also known as “Chicken Little,” 23.

Read the full article in the Acorn.

Ten months after admitting his responsibility in the Ponzi scheme perpetrated by Ponzi-king Bernard Madoff, his former finance chief was released on a $10 million bail.

Frank DiPascali, 53, left U.S. District Court in Manhattan. He had provided information to investigators that has led to the arrests of Bernard Madoff’s former auditor and two computer programmers (hmmm, computer programmers, really dangerous types).

U.S. District Judge Richard Sullivan has twice rejected bail packages that were acceptable to prosecutors, instead noting DiPascali’s “crucial” role in the fraud, which DiPascali admitted he had known about since the 1980s or early 1990s and presumably voluntarily participated in.

Read the full article from the Associated Press in Yahoo News.

California Attorney General Edmund G. Brown Jr. today issued a press release that warns of a rise in short sale fraud.

Just as the federal government’s program to encourage banks to extend distressed homeowners loan modifications spawned an entire, mostly sordid, industry of loan modification consultants and foreclosure consultants, the new HAFA initiative (Home Affordable Foreclosure Alternatives Program) is proving to be a magnet for individuals claiming to be “short sale negotiators”.

Says Brown: “While short sales can provide homeowners with a last-ditch alternative to foreclosure, this market is rife with scam artists. Homeowners and buyers, agents, and lenders should beware of short sale negotiators who operate without licenses, use straw buyers or charge illegal fees.”

As a note, I believe a lot of the short sale fraud being perpetuated involves crooked real estate agents. One such agent who worked for Coldwell Banker is Sergio Natera, who was prosecuted and pleaded guilty in Connecticut to defrauding Regions Bank in a short sale fraud scheme in which Natera flipped a property he had purchased through a short sale to the higher bidder on the property. Read the press release by the U.S. Department of Justice in which Sergio Natera’s plea is described.

Brown’s press release states the the California Department of Real Estate (DRE) is currently investigating more than 40 complaints of short sale fraud, whereas there were none just three months ago.

Consumers: use common sense when hiring people to assist you. Like any real estate transaction, your “negotiator” should be licensed. Ask for the license number, look it up, and make sure that the license and the person are one and the same. Also, never, never pay upfront fees to parties unless they have an advance fee agreement registered with the DRE.

Read the press release from AG Brown’s office.

Three people have been charged indicted by a federal grand jury for conspiracy to commit mail fraud, wire fraud, bank fraud and 15 counts of mail fraud.  

Eric Ray Hernandez, 34; his wife, Monica Marie Hernandez, 29; and Evelyn Brigget Sanchez, 27, are accused of defrauding SunTrust Mortgage Inc., Long Beach Mortgage Co., WMC Mortgage Corp. and Washington Mutual Bank (WaMu) out of $2.5 million. In addition, the Hernandez’ are accused of money laundering.

According to the indictment, Eric Hernandez worked first at Network Source Funding and then at New Millenium Lending as a loan officer, while Evelyn Sanchez worked at both lenders as loan processor. Monica Hernandez also worked as a loan processor. Neither Network Source Funding nor New Millenium are still operating.

If they are convicted, the defendants could be sentenced to up to 30 years in prison be fined $1 million.

Read the full article in the Bakersfield Californian.

A unique twist to this fraud is that the defendants offered more than the listing price for the properties and explained to the sellers that the excess funds were going to be used to make the properties habitable by disabled people, when the money actually was going into the pockets of the defendants.

Read the full article in the Modesto Bee.

Tony Huy Havens, 36, already a convicted criminal (see earlier article in the California Real Estate Fraud Report) has been indicted on 30 charges by a federal grand jury, according to U.S. Attorney Benjamin B. Wagner.

Havens, of Modesto, California, faces possible conviction on wire fraud and criminal forfeiture after seeking investors in at least eight states for high-end construction projections that were in financial distress. He gave potential investors copies of fraudulent documents purporting to show that a lender was going to make a loan to the investors pending receipt of advance fees. Havens is accused of victimizing at least 15 borrowers by collecting advance fees of at least $248,750 by wire transfers but never extending the loans.

If convicted, Tony Havens could be sentenced to 20 years in prison and a $250,000 fine on each count. Havens was investigated by the FBI and the Stanislaus County District Attorney’s Office.

Read the full article on Web News Wire.

Sisters Ralondria Stafford, 36, and Necole Ward, 31, who operated a real estate office called RN Realty in Vallejo, have pleaded guilty to bank fraud in front of United States District Judge Morrison C. England, Jr .

The sisters ran a mortgage fraud scheme in which they recruited straw buyers at $5,000 each for the use of their names and credit histories, which were used to purchases homes that were over-valued. They promised the straw buyers that they would re-purchase the properties within a year. In fact, they did not re-purchase any of the properties, and as a result, each property was foreclosed upon and sold at auction.

Stafford and Ward will be sented by Judge England in August, at which time they could receive up to 30 years in prison and a $1 million fine.

Read the full article in 7thSpace Interactive.