California Real Estate Fraud Report

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Archive for May, 2013

FHFA-OIG to Scrutinize Fannie Mae, Freddie Mac for REO Sales

May 31st, 2013 at 8:41am

REO (foreclosure) sales are winding down; investors will tell you the inventory is dwindling. This is due to the banks finally waking up years after Realtors® told them it was better for the bottom-line to allow homeowners to do a short sale.

HUD, FHFA, Fannie Mae and Freddie Mac (the latter two are GSEs) still have sizeable REO inventories across the country. Now the Office of the Inspector General for HUD (HUD-OIG) and the Office of the Inspector General for FHFA (FHFA-OIG) are taking aggressive steps to study how those inventories can best be managed, how to reduce REO fraud and to ultimately reduce inventories with minimal negative impact to neighborhoods.

FHFA-OIG has implemented an evaluation strategy, the objective of which is to learn whether both FHFA and the GSEs are maximizing financial recoveries and minimizing the negative effects of foreclosures on affected communities during their management of REOs. Part of FHFA-OIG’s task will be to audit the effectiveness of these REO management activities and determine if proper risk management controls have been established to avoid fraud and abuse.*

*Note: having sold REOs for banks and seen first-hand how some agents manipulate sales, including property management, for their own benefit (REO fraud), I’d say the FHFA-OIG has a difficult task ahead.

Read the entire well-written article in

Disgraced Former Michigan Supreme Court Justice Diane Hathaway Sentenced to Prison for Short Sale Fraud

May 29th, 2013 at 5:02pm

In California, homeowners who commit short sale fraud are very rarely investigated or prosecuted for the crime. There is not one conviction of which I’m aware, which is why short sale fraud is so rampant. Nor is there any criminal or civil downside to banks that knowingly approve short sales that are not arm’s-length.

In Michigan, the same property owners are convicted of short sale fraud and they go to prison.

In a long-awaited and much-anticipated decision, Judge John Corbett O’Meara sentenced former Michigan Supreme Court Judge Diane Hathaway to one year and one day in prison.

Hathaway, who also held a real estate license, pleaded guilty in January to one count of bank fraud in the short sale of her Grosse Pointe, Michigan home.

During the short sale of the Michigan home, Diane Hathaway concealed ownership of her second home in Florida when she filed her hardship declaration to lender ING by transferring the home via quit claim to her husband’s daughter prior to the short sale. Following the short sale, the home Hathaway and her husband owned free-and-clear in Windermere, Florida, was quit-claimed back to her.

In addition to her sentence, Hathway must pay $90,000 in restitution to ING and be on probation for two years following her sentence.

Hathaway’s attorney, Steven Fishman, failed in his attempt to convince the judge that she did not deserve prison. In a pre-sentencing memorandum to the court, Fishman wrote of Hathaway that “Her fall from the pinnacle of professional success has been swift, sudden, and tragic.”  He also wrote that he felt that Hathaway, who made a bee-line to Florida after the scandal broke, could volunteer at a women’s shelter by doing interior decorating or a local cancer support organization.

U.S. Attorney Barbara McQuade prosecuted the case and was insistent on prison time. “Homeowners who play by the rules should know that those who don’t will be held accountable, no matter who they are.”

Michigan Attorney General Bill Schuette also supported the sentence and commended the FBI for investigating the case. “Public corruption scandals have damaged the public’s trust in government and tarnished our state’s reputation. No matter who you are or what position you hold, the same rules apply.” 

Robert Foley, Special Agent in Charge of the FBI Detroit office was quoted, “Regardless of a person’s stature or position in life, we must all follow the same set of rules. In this case, an individual in a prominent position of public trust made extremely poor choices that have resulted in criminal activity. The FBI is committed to stopping these illegal acts.”

Read the original articles in USA Today and in AOL Real Estate. There are also previous postings in the California Real Estate Fraud Report on this case which can be found by using the Search form on the left side of this blog.

Oakland Banker Charged with Elder Financial Abuse

May 29th, 2013 at 4:26pm

Linda Sue Foss, 62, a Dublin-area woman,  pleaded not guilty to 20 felonies after been charged with grand theft, money laundering and elder financial abuse on May 13 in Alameda County Superior Court.

According to authorities and court documents, Foss embezzled over $1 million from at least two customers while she was employed at U.S. Bank in Oakland and from another three other customers when she became a manager at a nearby First Republic Bank branch.

The alleged crimes, which may have begun three years ago, came to light last month when an eagle-eyed wealth manager noticed that one of his client’s statements was altered, with the CD (certificate of deposit) dropping in value from $972,000 to $353,000 appeared altered.

After she was fired from U.S. Bank in March, Foss went to work at First Republic Bank, where she allegedly took over $164,000 from a customer there and used it to cover a theft to one of the U.S. Bank customers. 

Read the original article in ABC7 News and the San Francisco Chronicle.

Attorneys, Cuesta Title Battle in Deposition of Former Employee

May 29th, 2013 at 3:49pm

In the long-running civil litigation against developer Kelly Gearhart and Hurst Financial Inc., a former Cuesta Title employee has refused to respond to deposition questions by the plaintiffs’ attorneys, invoking her Fifth Amendment right against self-incrimination.

When investors filed suit in 2009, they accused (now) Stewart Title and (formerly) Cuesta Title of aiding, abetting and/or conspiring with Hurst Financial Inc. and Gearhart to defraud  seniors by running illegal investment schemes. The list of plaintiffs includes over 500 investors includes conspiracy, fraud, financial elder abuse and negligence in the eight causes of action. If the allegations against the title companies are true – that the closed escrow, recorded ownership interests and transferred funds in a real estate investment fraud scheme – the losses would amount to more than $73 million.

Kim Bucknell is the employee who has refused to give testimony. In April, Stewart Title and Cuesta Title filed a motion asking the court to give Bucknell immunity from criminal prosecution or to agree to delay the civil trial that is set to start on July 29.

Opposing the motion is Assistant U.S. Attorney Stephen Goorvitch, who filed his own declaration, stating that granting Kim Bucknell immunity could interfere with current and future criminal proceedings.

Last week, San Luis Obispo Superior Court Judge Charles Crandall denied the defendants’ request for immunity for Bucknell.

Read the original article in CalCoastNews. You can also use the search tool in the California Real Estate Fraud Report to read the numerous previous postings on Hurst Financial, Kelly Gearhart and Cuesta Title.

Former Sales Manager for Discover Sales Pleads Guilty to Bribery

May 24th, 2013 at 11:18am

The sales manager for Discovery Sales, Inc. for the period of 2006-2009 has pleaded guilty in federal court in San Francisco today to paying bribes to a Bank of America loan officer for approving loans for unqualified home buyers.

According to United States Attorney Melinda Haag, Jason Sterlino, 34, was managed home sales for the Monte Vista Estates and Monte Vista Villas residential developments in Oakland. As part of his plea agreement, Sterlino confessed that he had an arrangement to pay kick-backs to a mortgage broker who facilitated loan referrals to the Bank of America loan officer, who received part of the kick-back money, as did Sterlino. Under the federal Real Estate Settlement Practices Act (RESPA), kick-backs and/or undisclosed referral fees are illegal – not that this doesn’t happen every day in real estate. Sterlino admitted that he personally received about $100,000 in cash as a result of this conspiracy, for which Bank of America funded approximately 20 loans.

Jason Sterlino was charged with one count of bank bribery in violation of 18 U.S.C. § 215(a) to which he pleaded guilty.  He will be sentenced by Judge Jeffrey White in San Francisco on October 24, 2013, at which time his cooperation in the FBI’s ongoing investigation will be taken into consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Read the original article in LoanSafe.

Prominent San Francisco Broker Sued for Real Estate Fraud by Investors

May 24th, 2013 at 10:55am

San Francisco real estate broker W.B. Coyle is the target of multiple civil lawsuits by investors after complaints to the NBC Bay Area Investigative Unit brought unwanted attention to him. Over a dozen investors have filed more than 20 lawsuits against Coyle, accusing him of diverting their investment funds, failing to provide financial records and real estate fraud. Coyle has denied the accusations and filed countersuits against the investors.

“I believe he embezzled more than $200,000 from us,” said investor Ralph VonderHaar.  Another of the investors, Elizabeth Klein said, “It is just horrible the level of damage that he has caused is incredible and nothing is being done.”

The California Department of Real Estate has jumped into the fray and filed a five-part accusation  against W.B. Coyle and Telegraph Hill Properties, for which he is the designated officer. Tom Poole, the Department of Real Estate’s Acting Chief of Enforcement, says of the DRE’s investigation,  “It’s about as serious as it gets.  The accusation speaks for itself.”  The DRE will be trying to prove that Coyle committed fraud or dishonest dealing, misrepresentation, failing to provide records, commingling funds and taking secret commissions. 

Coyle’s real estate license is expired, according to DRE records.

A lot is at stake besides the administrative actions of the DRE. The investors, who were forced to mandatory arbitrary because Coyle refused to settle with them, say$15 million of their money has been tied up for almost 10 years that was supposed to be invested in over two dozen properties.  Documents certified by the San Francisco Office of the Recorder-Assessor indicate that Coyle has received multiple notices of default or foreclosure. 

W.B. Coyle filed for bankruptcy protection on April 30, possibly in response to one arbitrator ruling in favor of five of the investors, awarding them $1.1 million.
Read the original article in NBC Bay Area.

OF Lending President Target of Restitution Lawsuit

May 24th, 2013 at 10:22am

Prosecutors in the case against William Hogarty are hoping to win restitution for Bay Area homeowners who paid a total of more than $350,000 in fees to him and his company for what is alleged to be a mortgage rescue scheme. He has been charged with 16 criminal counts of grand theft, real estate fraud and perjury; three other suspects face charges as well.

Hogarty, the president and founder of OF Lending, located in Pleasanton, has already surrendered his real estate license. This occurred after an investigation by the California Department of Real Estate  determined that he and his company violated the ban on taking advance fees. Hogarty’s attempt to discharge his debts through bankruptcy were denied by a federal bankruptcy court.

Hogarty was in a Pleasanton court on April 22 for charges of attacking his former roommate. During the hearing, the judge said that a warrant had been issued for his arrest on real estate fraud charges and he was taken into custody.

Twenty-two people have filed a civil lawsuit against him seeking restitution.

Read the original article in ABC7 News.

Escondido Women Sentence for 8-Year Mortgage Fraud

May 24th, 2013 at 9:35am

Safieh Fard, 52, of Escondido, has an upcoming five year engagement in federal prison as a result of being convicted for conspiring with her family to commit bank fraud and tax fraud.

Fard, her sister Sedigheh Bahramian and her sons Mohsen Kikalaye and Ahmad Kikalaye began their elaborate and profitable mortgage fraud scheme starting in 1997, when they were given loans after overstating their income and assets to lenders (loan fraud, mortgage fraud). They leveraged the monies to buy homes in Newport Beach, which they at first sold back-and-forth to each other and then eventually to third-parties, pocketing almost $4 million in profits. They might not have been caught had they not wired money to and from their accounts and if they had reported and paid taxes on their gains.

The U.S. District judge in Los Angeles who sentenced Safieh Fard also ordered her to pay $549,000 to the IRS for unpaid taxes. No word if the California Franchise Tax Board feels it is owed taxes too.

The investigating agencies were the IRS and U.S. Department of Homeland Security. The case was prosecutd by the U.S. Attorney’s Office in Santa Ana.

Read the original article in the San Diego Union Tribune.

You can read an earlier article in the California Real Estate Fraud Report about Safieh Fard, Sedigheh Bahramian, Mohsen Kikalaye and Ahmad Kikalaye by clicking here.

Superceding Indictment Returned in Foreclosure Auction Bid Rigging Prosecution

May 17th, 2013 at 7:21am

A Danville man who was indicted by a federal grand jury in December 2011 with rigging bids at real estate foreclosure auctions and mail fraud faces new charges having to do with evidence tampering.

Andrew Katakis of Danville is the recipient of a superceding indictment charging him with obstruction of justice in the federal investigation. He is now accused of convincing his co-defendants Donald Parker, Anthony Joachim and Theodore Longley to install and run software to overwrite deleted documents stored on their computers (spoliation).

Note: when computer users delete a file, it is not actually deleted, but the space in which it is located is flagged by the system as available for a new file to be written (unallocated space). The purpose of the software is to locate unallocated space and overwrite it one or more times with new data.

“Obstruction of a grand jury investigation is a crime the Antitrust Division takes seriously,” says William Baer, assistant attorney general in charge of the Department of Justice’s Antitrust Division. “We will prosecute those who subvert the competitive process, as well as those who attempt to conceal their illegal actions by destroying evidence.”

“The new charge arises out of a long-running investigation that has already resulted in guilty pleas by numerous other defendants who participated in the scheme charged in this case,” says U.S. Attorney Benjamin Wagner.

Ten defendants have already pleaded guilty in this conspiracy: Anthony B. Ghio, John R. Vanzetti, Theodore B. Hutz, Richard W. Northcutt, Yama Marifat, Gregory L. Jackson, Walter Daniel Olmstead, Robert Rose, Kenneth Swanger and Wiley Chandler.

The current investigation is being conducted jointly by the Antitrust Division’s San Francisco office, the U.S. Attorney’s Office for the Eastern District of California, the FBI’s Sacramento Division, and the San Joaquin County District Attorney’s Office.

Read the original article in the Central Valley Business Times. There are also earlier articles about this auction bid-rigging and prosecution in the California Real Estate Fraud Report.

Orangevale Man Indicted by Federal Grand Jury for Mortgage Fraud

May 9th, 2013 at 6:32pm

An Orangevale man has been indicted by a federal grand jury on five counts having to do with mortgage fraud and loan fraud.

Valeri Kalyuzhnyy, 41,  is charged with making false statements on a loan and credit application and money laundering. The charges date back to the days of Washington Mutual Bank, Countrywide Bank, Bank of America and US Bank, when Kalyuzhnyy worked to prepare and then submit loan applications to the four lenders. According to the indictment, he originated close to $4 million in mortgages by falsifying the income, assets and employment status of the prospective borrowers as as the (non-) fact that they intended to occupy the loans.

The case will be prosecuted by Assistant U.S. Attorneys Stephen Lapham and Lee Bickley and was investigated jointly by the FBI and IRS.

Read the original article in the Sacramento Business Journal.

© 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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