California Real Estate Fraud Report

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Archive for March, 2013

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 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.



$142 Million Hendrix Montecastro Trial Will Go to Jury Soon

March 13th, 2013 at 8:23pm

One of the biggest real estate investment fraud trials in the history of Riverside County (or anywhere) will soon be in the hands of the jury.

Jurors in the trial in which prosecutors accuse Hendrix Montecastro and his mother, Helen Pedrino, of felony crimes and securities investment fraud have concluded their closing arguments.

The trial is being heard in front of Riverside County Superior Court Judge Jeffrey Prevost.

Hendrix Montecastro, 40, stands accused of being at the center of a Ponzi scheme that numbers 27 victims. Helen Pedrino, 61, has been accused as recruiting five of the victims.

Two other defendants, purported “mastermind” James Duncan, and Maurice McLeod, have already pleaded guilty, as have several other co-conspirators/defendants.

Read the original article in the Press Enterprise.

Riverside Increases Filing Fee in Order to Fund Real Estate Fraud Investigations

March 13th, 2013 at 8:09pm

Consumers in Riverside County may get some assistance when they feel they are victims of real estate fraud.

Riverside County District Attorney Paul Zellerbach was successful in his bid to convince the Board of Supervisors to raise the filing fee for real estate documents to $10. The fee represents an increase from the original $3 fee prior to February of this years and in my opinion is a mere pittance if it will enable the Riverside D.A.’s Office to to expand its Real Estate Fraud Unit and hire more real estate fraud investigators.

Readers of the California Real Estate Fraud Report know well that Riverside, like most other counties in California, is home to not only real estate fraud but ample numbers of cases of foreclosure rescue scams, loan modification fraud and plain-old mortgage fraud.

Both a prosecutor representing Zellerbach’s office and Assessor/County Clerk/Recorder Larry Ward appeared before the Board of Supervisors, pleading for the fee increase due to the Riverside District Attorney’s Office being flooded with complaints. To illustrate, in fiscal 2011-12, the D.A.’s office received more than 2,400 referral having to do with real estate fraud, which was 500 referrals higher than the prior fiscal year.

The $10 fee is projected to raise almost $5 million annually and would increase the Riverside office’s staff from four investigators to seven and add a forensic accountant, a a real estate fraud document examiner and a forensic computer examiner. It would also fund regional teams in the southwest part of Riverside and also Indio.

Read the original article in the Press Enterprise.

Two New Guilty Pleas Added to the Dozens of Guilty Pleas in Alameda County Auction Bidding

March 8th, 2013 at 10:28am

Another two Northern California real estate investors have thrown in the towel and agreed to plead guilty for their roles in numerous conspiracies to rig bids at public foreclosure auctions in Alameda County.

The guilty pleas came after felony charges of bid rigging and mail fraud were filed in the U.S. District Court for the Northern District of California in Oakland against Peter McDonough of Pleasanton and Michael Renquist of Livermore.

The U.S. Attorney’s Office has taken an aggressive stance against this particular antitrust operation, which to date has resulted in 29 persons either pleading guilty or agreeing to do so.

Including today’s pleas, 29 individuals have pleaded guilty or agreed to plead guilty as a result of the department’s ongoing antitrust investigation into bid rigging and fraud at public real estate foreclosure auctions in Northern California.

As with the prior 27 criminals, McDonough and Renquist were accused in court documents for conspiring with others not to bid against one another during the period of November 2008 and January 2011 in public real estate foreclosure auctions. Rather, the conspirators designated a winning bidder and then determined the final winner in a second private auction.

Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division said “The conspirators suppressed competition and lined their pockets through fraudulent and collusive conduct at the expense of lenders and distressed homeowners. The Antitrust Division and its law enforcement partners at the FBI will continue to hold accountable individuals who subvert the competitive process at foreclosure auctions around the country.”

Added David J. Johnson, FBI Special Agent in Charge of the San Francisco Field Office, “The FBI and the Antitrust Division continue to bring to justice those individuals who engage in fraudulent anticompetitive practices at foreclosure actions. The foundation of our real estate market depends on fairness and transparency of all participants, and we are committed to working with our local and federal partners to ensure that conspirators are held accountable.”

According to the press release by the U.S. Department of Justice, a violation of the Sherman Antitrust Act “carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for the Sherman Act charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victims if either amount is greater than $1 million. A count of conspiracy to commit mail fraud carries a maximum sentence of 30 years in prison and a $1 million fine. The government can also seek to forfeit the proceeds earned from participating in the conspiracy to commit mail fraud.”

In addition to the FBI and the U.S. Attorney’s Office, these crimes were investigated by the Financial Fraud Enforcement Task Force (FinCEN) established by President Obama.

© Copyright 2007-2018 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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