California Real Estate Fraud Report

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Seven Persons Indicted for Mortgage Fraud Scheme

April 4th, 2013 at 9:41am

Benjamin Wagner, U.S. attorney for the Eastern District of California, announced that a federal grand jury has returned indictments against seven men and women, who have been charged with mail fraud, wire fraud and making false statements involving the purchase of at least 23 homes in a mortgage fraud conspiracy.

Readers of the California Real Estate Fraud Report recognize that Wagner is by far the most aggressive federal prosecutor for his district in California.

The defendants are Jannice Riddick, aka Jannice Frazier, 30, of Sacramento; Aleksandr Kovalev, 50, of Rocklin; Arthur Chang Menefee, 42, of Stockton; Adil Qayyum, 31, of Rosele, Ill.; Elsie Pamela Fuller, 38, of Richmond; Leona Yeargin, 46, of San Pablo; and Florence Francisco, 62, of Houston, Texas.

Elsie Pamela Fuller and Leona Yeargin were additionally charged with aggravated identify theft because they allegedly used stolen identification to purchase one or more of the homes.

Read the original article in the Sacramento Bee.

 

Man Killed in Washington State Stand-off Wanted in Sacramento for Real Estate Fraud

April 4th, 2013 at 9:21am

The Sacramento Bee reported that a local man who was killed in a showdown with Washington State police was the subject of a 2004 warrant from the Sacramento County District Attorney’s Office.

The warrant from the DA’s office charged Sacramento residents Nina and Rick Marlowe of Sacramento with filing a false or forged instrument, theft by false pretenses and identity theft. Although the warrant had been active for eight years, it wasn’t until very recently that the investigation led authorities to a home in Hoquiam, Washington. Authorities arrested a woman but the man showed fraudulent identification. When police returned to arrest the man, whom they believed to be Rick Marlow, he shot Police Sgt. Jeff Salstrom.

The warrant was issued after investigators believe the Marlowe’s forged the name of a woman who co-owned a piece of property (title fraud) so that they could sell it (real estate fraud).

 

 

Hendrix Montecastro, Helen Pedrino Convicted in $142 Million Ponzi Scheme in Riverside

April 1st, 2013 at 12:30pm

Hendrix Montecastro, 40, of Maryland, was convicted on March 25 of 304 counts in a complex real estate fraud case that prosecutors say cost the victims $142 million in total. According to Riverside County Chief Deputy District Attorney Vicki Hightower, the jury convicted Montecastro on charges that included grand theft, destruction of evidence and felony fraud against 26 of 27 named victims — with asset losses totaling $3.6 millions.

He faces a prison sentence of more than 100 years.

Helen Pedrino, 61, of Murrieta – the mother of Hendrix Montecastro, was found guilty of 54 felonies based on her recruitment of five victim investors. When she is sentenced, she could spend up to 30 years in prison.

James Benjamin Duncan, who orchestrated the fraud, testified against Montecastro and Pedrino after making a deal with prosecutors. He is going to be sentenced for his crimes this month, along with Maurice McLeod, who also played a prominent role. A third man, Christopher Oetting, hanged himself on February 16, 2010 in his home, after admitting he to charges of conspiracy, money laundering and multiple counts of filing fraudulent tax returns.

The remaining defendants: Charlie Choi, Cindy Kelly and Thuan Nhan Du pleaded guilty to selling securities without a license and received probation.

As with all Ponzi schemes, this one worked well because friends and relatives convinced each other that the defendants’ “real estate investment” program was profitable. Good judgment was suspended and people refinanced their homes to draw out equity, cashed in their retirement plants and charged up their credit cards. Almost all of the victims were completely ruined as no monies have been recovered.

In a nutshell, the real estate investment fraud worked by the use of two companies set up by the defendants: Jovane Investments and Stonewood Consulting. The investors placed their money into Jovane, a shell company. The investors paid the seller the asking price or close to it and Jovane Investments funded the loans, but at 20-25% more than the appraised value.

The investors were unaware that Stonewood would locate the properties, also arrange financing and do so also at inflated values.

To understand the depth of this real estate fraud, refer to the article published in the Press Enterprise.

Part of Hendrix Montecastro’s defense was that he was a victim of James Benjamin Duncan too, but Prosecutor Hightower showed that Montecastro was anything but poor, spending $500,000 just before the Ponzi scheme collapsed on a non-profit called the Biocybernaut Institute.

Fannie Mae Sales Associate Indicted for Demanding Kickbacks for REO Referrals

March 27th, 2013 at 4:50pm

A former Fannie Mae employee who demanded kickbacks in exchange for handing out REO listings (REO fraud) got stung when a real estate broker informed the feds and participated in taking down the man.

Armando Granillo, 44, who worked out of Fannie Mae’s Irvine, California office as an REO specialist, has been indicted on three counts of wire fraud. Granillo’s job was to review applications from prospective listing agents for Fannie Mae foreclosures.

The honest broker is located in Tucson, Arizona. Granillo travelled to Phoenix to meet the broker in anticipation of a 20% “referral fee” for himself, which amounted to $11,200 of the broker’s legitimate commissions. During the meeting, which was recorded by the investigators from the Federal Housing Finance Agency’s Office of Inspector General, Granillo is alleged to have stated that the kickbacks were “a natural part of business.”

The U.S. Attorney’s Office for the Central District of California is the prosecuting agency for this case. Armando Granillo is out on bail pending his arraignment. Read a copy of their press release by clicking here.

This prosecution for REO fraud is a first . . . and just the tip of the iceberg for this type of real estate fraud. Any real estate agent who has sold REO properties knows that kickbacks to bank employees occurs. Some of the worst REO listing agents get listing after listing and yet do a poor job of marketing, showing and maintaining bank-owned properties, even ones where their relatives get the trash-out and remodeling contracts from the banks. They rarely, if ever, respond to or return phone calls from buyers’ agents. Ever wonder why that is?

The good news is that REO listings are significantly down  – 67%  according to my research – in certain sections of Los Angeles. So REO fraud is being extinguished as banks have come to the astounding conclusion after seven long years that it makes better business sense to do short sales or provide creative financing terms to keep borrowers in their homes than to foreclose.

Read the original article in Inman News.

Irvine Man Indicted for Mortgage Fraud Using Straw Buyers

March 27th, 2013 at 10:04am

Alexander Romaniolis, 48, of Irvine, was arrested in a mortgage fraud case involving residential properties.

Romaniolis was arrested in Huntington Beach after a federal grand jury in Sacramento returned a three-count indictment for mail fraud. The indictment charges that he recruited five straw buyers to purchase the residential properties in Rocklin, Roseville and San Clemente and used his position as a real estate licensee to help them falsify their income, employment and other financial information to the lenders (loan fraud, mortgage fraud).

The value of the loans was over $5 million and the losses due to the resulting foreclosures amounted to more than $2 million.

The case was jointly investigated by the California Attorney General’s Mortgage Fraud Strike Force and the FBI.

Read the original article in the Sacramento Bee and the Sacramento Business Journal.

Vallejo Woman Convicted of Bank Fraud in Father’s Estate

March 27th, 2013 at 9:51am

Myra Holmes, a 55-year old Vallejo woman, was convicted on March 21 by a federal grand jury of concealing assets from her father’s bankruptcy estate in order to pay off her personal debts, which included gambling and shopping.

Holmes’ case was heard in front of U.S. District Court Judge Edward J. Davila in San Jose. Her convictions were for bankruptcy fraud, bank fraud and making false statements to a bank; she was acquitted on two other charges.

Prosecutors said Holmes’ father had declared bankruptcy but that she had hidden the fact that she had received his half-interest of ownership in the Vallejo property after he died. Without the knowledge or permission of the bankruptcy court, she then refinanced the home, draining the equity of approximately $147,000 – none of which has been repaid.

The judge could sentence Myra Holmes to 35 years in prison and fine her $1 million.

Read the original article in the Times-Herald.

Tracy Man Pleads Guilty in Mortgage Fraud Case

March 27th, 2013 at 9:25am

Reginald Dodson Sr., 42, of Tracy, California, pleaded guily on Mar 18  to mail fraud charges for his role in a mortgage fraud conspiracy.

Dodson was a loan office for W.B. Financial and assisted the real estate agents in getting financing for three properties, for which kickbacks were received without the knowledge of the lending institutions.

According to prosecutors, Sacramento real estate agent Buena Marshall allegedly used Temika Reed, 32 of Bay Point, to act as a straw buyer to purchase seven properties. Another woman, Suisun City real estate agent Deborah Loudermilk, 55, was an agent on two of the real estate sales.

The scheme involved inflating the sale prices of the properties (appraisal fraud), using 100% percent financing (never a bright idea for lenders), with the extra money being allocated supposedly as cash back to the buyer (Reed).

Read the original article in the Stockton Record.

Judge Throws the Book at Defendant Who Was Part of Rincon Hill Gang Real Estate Fraud

March 20th, 2013 at 9:09am

One of the principal defendants in the real estate fraud that almost cost a woman her multi-million dollar condominium in San Francisco, is going to to prison for a long time, thanks to the jury that convicted him and the judge who pronounced his sentence.

Jay Shah, 48, was convicted last September of more than a dozen felony charges, along with former tennis instructor Winston Lum. They and others attempted to steal the luxury condo belonging to Shirley Hwang located at One Rincon Hill. Hwang herself discovered the scam when she was mistakenly sent title and other documents sent to her other address and alerted authorities immediately.

San Francisco Superior Court Judge Charlene Kiesselbach prounounced a sentence of 20 years on Jay Shah and further ordered him to pay $14.1 million – double the amount purportedly stolen.

San Francisco prosecutors, including Assistant District Attorney Sandip Patel, said Shah and Lum conspired with others to create fraudulent real estate documents (title fraud) in order to transfer expensive properties in the names of co-conspirators. They would then drain all of the equity from the properties by taking out loans (loan fraud, mortgage fraud) and deposit it through their shell companies (money laundering).

Another of the co-defendants in this case was Kaushal Niroula, who was convicted in this scam as well as the murder of Clifford Lambert. Both he and defrocked attorney David Replogle are serving life sentences for that crime, after both were convicted.

Read the original article in KTVU.com and the San Francisco Examiner.

There are also many postings on the California Real Estate Fraud Report about the inception of this crime as well as the trials of David Replogle and Kaushal Niroula, which you can locate by using the search tool on the left side of the page.

Bay Area Real Estate Agent, Two Others, Indicted in Real Estate Fraud Case

March 15th, 2013 at 11:33am

Back to fraud committed by “the little people” (see posting preceding this post).

A father, his son and a third person have been indicted by a federal grand jury with committing mail fraud, bank fraud and false statements on a loan and credit application (loan fraud).

Charged are real estate agent Rajeshwar Singh, 38, of Pleasanton; his father Surjit Singh, 66, of Dublin; and Anita Sharma, 51, of Gilroy. If they are convicted, they could receive sentences of up to 30 years in prison (doubtful) and a $1 million fine (also doubtful).

The indictment accuses Surjit Singh of recruiting persons with good credit to act as straw buyers for homes his family or friends owned. The Singhs are alleged to have received more than $2.1 million in residential loans as a result of falsifying the buyers’ financial statements. Anita Sharma is alleged to have been one of the straw buyers of the properties, all of which went into foreclosure.

Read the original article in The Oakland Tribune.

Former S&L Regulator Cites Study That Accuses Banks of “Pervasive” Control Fraud

March 15th, 2013 at 11:11am

William K. Black, JD, PhD is an Associate Professor of Economics at the University of Missouri. Dr. Black took the notes of the meeting that led to the Senate Ethics investigation of the Keating Five, including Senator John McCain (R-Arizona).

In the Huffington Post (aka HuffPost), Dr. Black recently wrote an article that reviews an academic paper published in February 2013 by Tomasz Piskorski (Columbia Graduate School of Business), Amit Seru (University of Chicago and NBER) and James Witkin. Titled Asset Quality Misrepresentation by Financial Intermediaries: Evidence from RMBS Market  (PSW 2013), the three financial scholars argue that over time, the regulations that require both disclosure by financial institutions regarding the quality of their financial products as well as prohibition of misleading information have been degraded as more agents and intermediaries have entered the “supply chain” of credit. Their research looks specifically at RMBS products (residential mortgage-backed securities) and the effect that this weakening of regulation and controls has had on capital markets.

The findings of the study’s authors are that the RMBS market, which was $2 trillion in 2007, was rife with “instances where, in the process of contractual disclosure by the sellers, buyers received false information on the characteristics of assets,” rather than simply being the result of the sellers of these products having more information than the buyers. They found further that the “propensity to misrepresent loans is pervasive among reputable firms.”

In his HuffPost article that discusses PSW 2013, Dr. Black describes these misrepresentations as control fraud, a term he coined which describes deception or manipulation in an organization by a person or persons with a high level of responsibility (C-Suite, Senior VPs) for the purposes of personal gain. I interpret personal gain as to also include the gain of the organization, i.e., banks. It is obviously the highest form of white-collar crime in that the stakes and rewards are astronomical in comparison with the losses that occur with most white-collar crimes.

As further examples of the control fraud he believes are being perpetuated by financial institutions, Dr. Black refers to page 2 of PSW 2013 and comments “The definitive evidence of control fraud that PSW2013 identifies is by mortgage lenders who made, or purchased, mortgages and then resold them to “private label” (non-Fannie and Freddie) financial firms who were creating mortgage backed securities (MBS). The deceit they documented by the firms selling the mortgage loans consisted of claiming that the loans did not have second liens. The lenders knowingly sold mortgages they knew had second liens under the false representations (reps) and warranties that they did not have second liens.”

Why am I writing about this in the California Real Estate Fraud Report? Very simply, local, state and federal authorities have investigated and prosecuted thousands of mortgage fraud and loan fraud (application) cases by individuals since the real estate market soured in early 2007.  While many of these were “liar’s loans” in which the applicant fabricated his/her financial standing, Black argues that “it was lenders and their agents who “deliberately” put the lies in liar’s loans,” driven by upper-management sales pressure, profitability and lots and lots of bonuses. One story of such bonuses is related in my ebook “How to Commit Short Sale Fraud . . . and Get Away with It.” It means that the feds ultimately have a “hands-off” policy when it comes to large-scale institutional fraud and restrict themselves to the low-hanging fruit that most likely has a significantly smaller impact in the fight against fraud and a similar smaller impact on the economy and real estate markets. In other words, being effective in combating mortgage fraud is not a goal of the U.S. Department of Justice.

Further, if control fraud is as “pervasive” as both Black and the authors of PSW 2013 contend, this then brings to mind the March 2013 hearings in which Sen. Elizabeth Warren (D-Mass.)  challenges Attorney General Eric Holder’s statements that some banks are too big to prosecute and their executives (=Presidential campaign donors) too big to jail.

You can read a summary of Senator Warren’s questioning of AG Holder in the Huffington Post.

William K. Black also wrote a presentation of control fraud using RiteAid as the company of discussion.

 

 

© Copyright 2007-2014 Monique Bryher

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The information and notices contained on The California Real Estate Fraud Report are intended to summarize recent developments in real estate fraud, mortgage fraud, short sale fraud, REO fraud, appraisal fraud, loan modification scams, loan modification fraud and other real estate related crimes occurring in Los Angeles and California. The posts on this site are presented as general research and information and are expressly not intended, and should not be regarded, as legal advice. Much of the information on this site concerns allegations made in civil lawsuits and in criminal indictments. All persons are presumed innocent until convicted of a crime. Readers who have particular questions about real estate fraud, mortgage fraud and appraisal fraud matters or who believe they require legal counsel should seek the advice of an attorney.

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