In the following press release Donald W. Washington, United States Attorney for the Western District of Louisiana announced the unsealing of a federal indictment and the arrest of William Everett Nichols (below), age 56, of Alexandria, Louisiana, on federal charges involving bank fraud. On July 23, 2009, a two-count indictment was returned by the Western District of Louisiana Federal Grand Jury charging Nichols with one count of conspiracy to commit bank fraud and one count of bank fraud.
___________________________________________________________________________________

Additional Materials

• Press Release
• Indictment

Photo from TheTownTalk.com
__________________________________________________________________________________
The indictment alleges that Nichols, who is the President and sole shareholder of First Fidelity Mortgage, Inc., [Editor note. dba Southern Funding - pictured] knowingly and willfully conspired to devise a scheme to defraud Sabine State Bank and obtain money which the defendant, Nichols, was not entitled. Nichols and others prepared fraudulent notes by forging signatures of borrowers and notaries public, and would then deliver them to Sabine State Bank as collateral in order to cause the bank to deposit money into an account of First Fidelity Mortgage, Inc. The First Fidelity Mortgage bank account was controlled by Wiliam Everett Nichols.

If convicted, the defendant faces a maximum penalty of thirty years in prison, a fine of $1,000,000, or both.

An indictment is merely an accusation and all defendants are presumed innocent unless and until proven guilty. Defendants are entitled to a presumption of innocence under the law, and the government has the burden of proving every element of the charge beyond a reasonable doubt.

The case was investigated by the Federal Bureau of Investigation, and is being prosecuted by Assistant United States Attorney Alexander Van Hook.

In the following press release Ralph J. Marra, Jr., Acting U.S. Attorney for the District of New Jersey announed that the former operator of a Clifton-based real estate investment program pleaded guilty today to operating a Ponzi-scheme in which she raised in excess of $15 million from hundreds of investors in New Jersey and throughout the United States, Acting U.S. Attorney Ralph J. Marra, Jr. said.

Marcia Sladich, 51, pleaded guilty before U.S. District Judge Katharine S. Hayden to a one-count Information charging her with mail fraud in connection with the fraudulent real estate scheme Sladich orchestrated and ran from 2004 through December 2007. Judge Hayden scheduled sentencing for Nov. 24. Sladich remains in custody, where she has been since her arrest last August.

In 2004, Sladich began soliciting investors to invest in a purported real estate investment program. In her plea hearing, Sladich admitted that she told investors that the money they invested would be invested in real estate in the United States and overseas. Sladich also admitted that she promised investors that they would make a 100 percent return on their investment within one year and that their investments would be secure and risk-free. To induce more investors to provide money, Sladich said she promised existing investors extra money for every new investor they recruited to invest. During her plea hearing, Sladich admitted that contrary to these representations, she did not make real estate investments, but used new investor money to make principal and interest payments to existing investors and to purchase real estate in Florida and Brazil in her name and in the names of her relatives, and pay personal expenses, including the mortgage on her personal residence and personal credit card bills. In total, Sladich raised more than $15 million from investors during the scheme.

The mail fraud charge to which Sladich pleaded guilty carries a statutory maximum penalty of 20 years in federal prison and fine of $250,000 or twice the aggregate loss to any victim or aggregate gain to Sladich. However, under the advisory U.S. Sentencing Guidelines, Sladich faces an actual sentencing range of between 63 and 78 months in federal prison. The Sentencing Guidelines are advisory only, and Judge Hayden has discretion to sentence within or outside of that sentencing range.

Marra credited Special Agents of the FBI, under the direction of Special Agent in Charge Weysan Dun in Newark, and Postal Inspectors with the U.S. Postal Inspection Service, under the direction of Postal Inspector in Charge David L. Collins, with the investigation that resulted in today’s guilty plea. Marra also thanked the U.S. Securities and Exchange Commission, under the direction of George S. Canellos, the Regional Director in New York, for its assistance in the investigation.

The case is being prosecuted by Assistant U.S. Attorney Justin W. Arnold of the U.S. Attorney’s Office Securities and Healthcare Fraud unit in Newark.

In the following press release William J. Edwards, United States Attorney for the Northern District of Ohio, announced today that a four-count information has been filed against Douglas E. Shaheen charging him with two counts of bank fraud and one count each of wire fraud and access device fraud. Shaheen, age 59, resides in Strongsville, Ohio.

The information alleges that Shaheen obtained numerous loans and credit accounts totaling more than $6 million at seven different financial institutions in his father’s name without his knowledge or consent. Specifically, count one alleges that Shaheen obtained two mortgage loans for $2 million and $700,000 on a residence in Henderson, Nevada, in September 2006, in his father’s name. The information further alleges that Shaheen refinanced those loans in March 2007 for $2,764,000 and subsequently obtained another $200,000 home equity line of credit on that residence. The information charges that Shaheen also provided false and fraudulent financial information about his father to obtain these loans. The information states that Shaheen subsequently defaulted on these home mortgage loans and Coutrywide Bank sustained a substantial loss of an undisclosed amount.

Count two of the information alleges that in October 2006 Shaheen purchased a 2007 Mercedes-Benz SL65 convertible for a total purchase price of about $202,000. The information states that Shaheen purchased this vehicle jointly in his own name as well as his father’s, again without his knowledge or authorization. The information further alleges that Shaheen financed $177,362 of this purchase price and again provided false financial information about his father as well as himself. The information charges that Shaheen defaulted on this automobile loan, surrendered the vehicle in November 2008, and the Mercedes was later resold at a substantial loss. As a result, the information states that Mercedes-Benz Financial sustained a loss of $84,888.77.

Count three of the information alleges that Shaheen opened ten credit accounts and lines of credit in his father’s name at MBNA America Bank, National City Bank, U.S. Bank, and CitiBank. The information again alleges that Shaheen provided false and fraudulent financial information about his father, he used those accounts fraudulently, and subsequently defaulted on them. As a result, the information alleges that these four financial institutions sustained losses totaling $181,212.31.

Finally, count four of the information alleges that Shaheen fraudulently opened two credit accounts in his father’s name with American Express in August 2007. The information further alleges that Shaheen fraudulently used those accounts, defaulted on the balances owed, and caused American Express to incur a loss of $56,371.80.

If convicted, the defendant’s sentence will be determined by the Court after review of factors unique to this case, including the defendant’s prior criminal record, if any, the defendant’s role in the offense and the characteristics of the violation. In all cases the sentence will not exceed the statutory maximum and in most cases it will be less than the maximum.

This case is being prosecuted by Assistant United States Attorney John D. Sammon, following an investigation by the Cleveland Office of the United States Secret Service.

An information is only a charge and is not evidence of guilt. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.

Information supplied [Redacted Complaint] by the United States Attorney’s Office in Brooklyn, NY shows that on Tuesday July 28, 2009 Barbara Armas, Nervin Coronado and Ricardo Gutierrez were charged with using straw buyers to take out fraudulent loans that defrauded financial institutions and preparing false loan documents as part of a fraud ring of which includes Realtors, lawyers, mortgage brokers and appraisers.

Barbara Armas and Nervin Coronado
These pictures were taken from Page 2 of this Internet Property Listing [Click here for PDF]

Husband and wife Coronado and Armas were co-owners of a company called Laffey & Associates, a branch of the realty company Coldwell Banker. Another co-conspirator, a mortgage broker whose name is redacted, worked together with Armas and Coronado to arrange to purchase properties at or below market price which were subsequently sold at inflated prices through the use of straw buyers. The defendant Gutierrez was one such straw buyer.

Details of the properties and other defendants are not known.

In a connected case a confidential informant approached the FBI and told them of the activities of another man called Hawer Carrero who was also involved in this scheme. Carrero pleaded guilty on October 10, 2008.

 the following press release Jeffrey H. Sloman, Acting United States Attorney for the Southern District of Florida, Michael K. Fithen, Special Agent in Charge, U.S. Secret Service, Antonio J. Gomez, Acting Inspector in Charge, U.S. Postal Inspection Service, Miami Division, Michael J. Folmar, Acting Special Agent in Charge, Federal Bureau of Investigation (FBI), Jon T. Rymer, Inspector General, Federal Deposit Insurance Corporation-Office of Inspector General (FDIC-OIG), Kenneth M. Donohue, Inspector General, U.S. Department of Housing and Urban Development-Office of Inspector General (HUD-OIG), Miami Field Office, Linda Charity, Acting Commissioner, State of Florida Office of Financial Regulation, and Robert Parker, Director, Miami-Dade Police Department, announced charges against 41 defendants in six separate cases, resulting in more than $40 million in fraudulent loans. Today’s cases reaffirm the joint federal and local commitment to crack-down on mortgage fraud perpetrators, first announced in September 2007.

[Editor Note - I am busy gathering all the related court docs for these matters.]

On September 27, 2007, the U.S. Attorney’s Office announced a joint Federal-State Mortgage Fraud Initiative, designed to combat the growing mortgage fraud epidemic in South Florida. The Mortgage Fraud Initiative brought together federal and state law enforcement to investigate and prosecute federally a myriad of mortgage fraud offenders, from straw purchasers, to mortgage brokers, to complicit bank employees, title agents, and attorneys. Thereafter, in June 2008, building upon the success of the Mortgage Fraud Initiative, the U.S. Attorney’s Office and its federal, state and local law enforcement partners, created a Mortgage Fraud Strike Force, comprised of experienced prosecutors, agents, and officers, dedicated exclusively to investigating and prosecuting mortgage fraud cases.

The Mortgage Fraud Strike Force has yielded substantial results. Since September 2007, 218 individuals have been charged for their involvement in mortgage fraud schemes that have resulted or were intended to result in nearly $300 million in mortgage loans.

Today, Acting U.S. Attorney Sloman, joined by members of the Federal-State Mortgage Fraud Initiative and Strike Force, announced the following additional mortgage fraud prosecutions:

1. United States v. Mayra Rodriguez, et al., Case No. 09-20628-CR-Graham.

On July 23, 2009, nineteen (19) defendants were charged in a 20-count Indictment for their participation in a mortgage fraud scheme that resulted in approximately $21 million in fraudulent loans. Charged in the Indictment were defendants Mayra Rodriguez, 31; Lucia Peluffo, 29; Nelson Bermudez, 36; Yamile Segurola, 24, all of Miami; Carlos Rodriguez, 29, of Homestead; Mayelin Salas, 36, of Miami Springs; Nelida Rodriguez, 48,of Opa Locka; Sonya Balmaseda, 35, of Hialeah; Jorge Egeraige, 38, of Hialeah; Jaime Rojas, 39, of North Miami Beach; Alejandro Rabelo,49, of Miami Beach; Pedro Huezo, 58, of Opa Locka; Jose Arriete, 53; Gerard Wenzel, 50; Elias Fleites, 55; Marcelo Fernandez, 41; Lucy Segurola, 51; Ricardo Segurola, 51; and Jorge Lugo, 46, all of Miami.

According to the Indictment, defendants Mayra Rodriguez, Mayelin Salas, Nelida Rodriguez, Yamile Segurola, and Lucia Peluffo were employed at companies owned by Magile Cruz (Cruz previously pled guilty and was sentenced in January 2009 to 120 months’ imprisonment for her participation in this scheme). Cruz’s companies included Star Lending Mortgage, State Mortgage Lending, Sherley Title Services, Doral Title Services, and Professional Title Express, all in Miami-Dade County. Star Lending Mortgage was a mortgage brokerage firm and State Mortgage Lending was a mortgage lender, both licensed in the State of Florida. Sherley Title Services, Doral Title Services and Professional Title Express were title agencies, but were not licensed by the State of Florida.

More specifically, the Indictment alleges that from 2005 through 2007, Cruz, through her companies, would identify residential properties that were for sale. Thereafter, Cruz, and defendants Mayra Rodriguez, Yamile Segurola and Lucia Peluffo would prepare mortgage loan applications on behalf of complicit straw borrowers. These applications included false employment verifications, pay stubs, income and funds on deposit, and IRS Forms W-2. Defendant Nelson Bermudez, an employee of Wachovia Bank during the fraud, assisted the fraud by creating false verifications of deposit for the purported Wachovia accounts of straw borrowers. Defendants Carlos Rodriguez, Mayelin Salas, and others recruited and paid individuals to pose as buyers and borrowers in the transactions. Defendants Sonya Balmaseda, Jorge Egeraige, Ricardo Segurola, Lucy Segurola, Marcelo Fernandez, Pedro Huezo, Jose Arriete, Gerard Wenzel, Alejandro Rabelo, Elias Fleites, Jorge Lugo, and Jaime Rojas, all acted as straw borrowers.

The Indictment describes three methods used by the defendants to execute their scheme. First, the defendants created and submitted to the lending institutions false duplicate HUD-Settlement Statement Forms, which grossly inflated the true purchase price of the properties. At other times, the defendants adopted a shotgun approach to mortgage fraud, through which they obtained near-simultaneous loans for the same piece of property from multiple lenders. Finally, the defendants concocted entirely false real estate sales by stealing the identities of unwitting home owners, forging the sales documents in their names, and using complicit straw purchasers to obtain mortgages, all without the real property owners’ knowledge or consent.

Once the mortgage applications were approved, the lenders wired the loan proceeds to the defendant’s title companies for closing. At closing, Cruz, Mayra Rodriguez and Yamile Segurola would keep the difference between the inflated mortgage loan proceeds and the actual selling price of the property. Moreover, to perpetuate the scheme and avoid detection, the defendants often filed change of address forms with the Postal Service to prevent unwitting home owners from discovering that their property had been sold without their knowledge or consent. The defendants would re-direct the mail to post office boxes opened and controlled by Cruz and Nelida Rodriguez. In addition, to keep the fraud afloat and undetected, the defendants would make payment on the loans until the properties could be resold, often to another straw borrower, repeating the cycle of fraud. When Cruz failed to make payment on the loans, some properties went into foreclosure, resulting in substantial losses to the lending institutions.

The Indictment charges the defendants with conspiracy to commit mail fraud and wire fraud, and substantive mail fraud and wire fraud. Mr. Sloman commended the investigative efforts of the Federal-State Mortgage Fraud Strike Force, with special commendation to the U.S. Postal Inspection Service, U.S. Secret Service, and the State of Florida Office of Financial Regulation. The case is being prosecuted by Assistant U.S. Attorney Lois Foster-Steers.

2. United States v. Bryan A. Guarch, et al., Case No. 09-20627-CR-Moreno.

On July 23, 2009, thirteen (13) defendants were charged in a 15-count Indictment for their participation in a mortgage fraud scheme that resulted in approximately $4 million in fraudulent loans. Charged in the Indictment were defendants Bryan A. Guarch, 29, Richard Pi, 27, Edwin Garcia, 30, Carlos Martinez, 29, Wayne Bermudez, 29, Oscar Quintero, 28, Sunsy Garcia, 29, Ryan Barouh, 27, Jason Cuza, 30, Anthony Silverio, 26, all of Miami, Rafael Jaramillo, 32, of Hialeah Gardens, Mario Estrada Mora, 25, of Miami Beach, and Vanessa Negron, 27, of Boiling Springs, South Carolina.

According to the Indictment, defendants Guarch and Pi organized the scheme and identified eight properties to be used to defraud mortgage lenders. Guarch and Pi used defendants Edwin Garcia, Rafael Jaramillo, Carlos Martinez, and Wayne Bermudez, to recruit straw buyers to submit fraudulent loan applications to mortgage lenders. Among the straw buyers recruited in this way were co-conspirators Oscar Quintero, Mario Estrada Mora, Sunsy Garcia, and Vanessa Negron.

After submitting fraudulent loan applications to the lenders, Pi and Guarch paid-off loan officers, defendants Ryan Barouh and Jason Cuza, to facilitate the approval of the loans. Guarch and Pi caused the title company closer, defendant Anthony Silverio, to approve and submit to the lender a fraudulent HUD-1 Settlement Statement with an inflated purchase price. In an effort to conceal the fraud, Silverio provided a second HUD-1 Settlement Statement to the sellers reflecting the actual, much lower purchase price of the property. At closing, Guarch and Pi kept more than $1 million in loan proceeds, representing the difference between the inflated purchase price and the price actually paid to the seller for the property. After closing, Guarch and Pi used those loan proceeds to pay off their co-conspirators and to fund their lavish life styles. After each of the closings, the straw buyers defaulted on the loans, causing each of the properties to go into foreclosure and resulting in possible losses to the lenders of more than $2.6 million.

The Indictment includes charges of conspiracy to commit wire fraud and substantive wire fraud. Mr. Sloman commended the investigative efforts of the Federal-State Mortgage Fraud Strike Force, with special commendation to the U.S. Secret Service, U.S. Postal Inspection Service, the Miami-Dade Police Department, and the State of Florida Office of Financial Regulation. The case is being prosecuted by Assistant U.S. Attorney Peter A. Forand.

3. United States v. Sixto Figueroa, Susy Figueroa, Rolando Herrera, Manuel Garcia, and Yolanda Garcia-Montes, Case No. 09-20610-CR-Lenard.

On July 21, 2008, five (5) defendants were charged in an eight-count Indictment for their participation in a mortgage fraud scheme that resulted in the issuance of more than $830,000 in mortgage loans. According to the Indictment, defendants Sixto Figueroa, 57, and his wife Susy Figueroa, 44, both of Miami, fraudulently sold residential lots in Port LaBelle, FL. To effectuate their scheme, the Figueroas recruited individuals to pose as buyers of the properties. Among the straw buyers recruited and paid by the Figueroas were co-conspirators Rolando Herrera, 63, and Manuel Garcia, 40, both of Miami.

As part of the scheme, the Figueroas submitted fraudulent loan applications to Wachovia Bank. The applications contained false information regarding the straw buyers’ financial condition, including fraudulent tax returns and fabricated bank statements, which falsely suggested that the straw buyers had greater income and assets than they actually did. Additionally, the HUD-1 Settlement Statements provided to Wachovia falsely stated that the straw buyers would use their own money to pay closing obligations. In fact, however, the Figueroas paid all of the straw buyers’ closing obligations.

After the loans were approved, the bank wired the loan proceeds to defendant Yolanda Garcia-Montes’s title company for closing. For three purported property sales, Garcia-Montes improperly released these funds to the Figueroas, who, in turn, used the money to pay the straw buyers’ cash to close obligations for those deals. After the closing, each of the Wachovia mortgage loans eventually went into default after the non-qualifying straw buyers failed to make the required mortgage payments, resulting in substantial losses to Wachovia.

The defendants were charged with conspiracy to commit bank fraud and bank fraud. Mr. Sloman commended the investigative efforts of the Federal State Mortgage Fraud Strike Force with special commendation to the United States Secret Service and Miami-Dade Police Department. The case is being prosecuted by Assistant U.S. Attorney Joseph B. Shumofsky.

4. United States v. Fielding Dameron, Case No. 09-20637-CR-Jordan.

On July 27, 2009, defendant Fielding Dameron, 60, of Miami, was charged in an Information for his role in a mortgage fraud conspiracy that resulted in the issuance of more than $9.8 million in mortgage loans from 2005 through 2007.

According to the Information, Dameron, working with other uncharged co-conspirators, participated in numerous fraudulent real estate transactions in Miami-Dade and Broward Counties. Dameron recruited individuals to serve as straw purchasers or otherwise obtained stolen identities for use in transactions. Using a fraudulent loan borrower, a mortgage broker working with Dameron submitted applications to various lending institutions. Once a lender would approve an application, often for an amount higher than what was negotiated with the seller, it would wire the loan proceeds to a title company in advance of the closing. The complicit title company would direct the funds in advance of the closing to Dameron, who would wire back the funds to the title company in the form of cashier’s checks to be used as the buyer’s contribution to the transaction. Following a transaction’s closing, the title company would wire Dameron money as his share of the profit.

The defendant was charged with conspiracy to commit mortgage fraud. Mr. Sloman commended the investigative efforts of the Federal-State Mortgage Fraud Strike Force, with special commendation to the U.S. Secret Service, Miami-Dade Police Department, and the FBI. The case is being prosecuted by Assistant U.S. Attorney Jeffrey E. Tsai.

5. United States v. Stephen LaLonde, Case No. 09-60181-CR-Cohn.

On July 13, 2009, defendant Stephen LaLonde, 42, of Fort Lauderdale, was charged in a two-count Information for his role in a mortgage fraud closing scheme that resulted in the theft of more than $1 million in loan proceeds.

According to the Information, LaLonde stole more than $1 million at real estate closings as part of a scheme to defraud legitimate borrowers, lenders, and a title insurance company in connection with six real estate closings, held at Spectrum Title Inc., in Oakland Park, FL. The legitimate borrowers in these transactions sought to re-finance and payoff existing mortgages. Unbeknownst to the borrowers, however, LaLonde, kept the loan proceeds for himself and did not use the funds to pay off the borrowers’ pre-exiting loans.

The defendant was charged with mail fraud and making false statements. Mr. Sloman commended the investigative efforts of the Federal-State Mortgage Fraud Strike Force, with special commendation U.S. Postal Inspection Service, the Florida Department of Law Enforcement, and the State of Florida Office of Financial Regulation. The case is being prosecuted by Assistant U.S. Attorneys Jeffrey Kay and Laurie Rucoba.

6. United States v. Milennys Foira and Richard Diaz, Case No. 09-20638-CR-Jordan.

On July 28, 2009, two defendants were charged in a three-count Indictment for their participation in a mortgage fraud scheme that resulted in the issuance of $450,000 in mortgage loans.

According to the Indictment, Milennys Foira, 35, of Doral, FL, a real estate agent, and Richard Diaz, 26, of Miami, FL, recruited Jean Claude Cahen, who was previously charged and convicted, to use his identity and credit to buy a selected property in Miami, Florida. Cahen agreed to be paid $10,000 for the use of his identity and credit. The applications, prepared by Foira, contained materially false information regarding Cahen’s purported employment, income, and rent payment history. As a result of the fraudulent mortgage applications, the lending company wire-transferred the loan proceeds to the closing agent. Without the lender’s knowledge, Diaz received a wire in the amount of $24,525 after the closing. Those proceeds were shared by Foira, Diaz and Cahen. After the closing, the parties failed to make the payments on the mortgage and the property fell into foreclosure.

The defendants were charged with conspiracy to commit wire fraud and two counts of substantive wire fraud. Mr. Sloman commended the investigative efforts of the Federal State Mortgage Fraud Strike Force, with special commendation to the U.S. Secret Service and Miami-Dade Police Department. The case is being prosecuted by Assistant U.S. Attorney Cristina Perez Soto.

In all cases, the defendants face the following possible maximum terms of imprisonment if convicted: conspiracy to commit wire fraud and substantive wire fraud: 20 years’ imprisonment; mail fraud: 20 years’ imprisonment; bank fraud: 30 years’ imprisonment; false loan application: 30 years’ imprisonment; and making a false statement to a government agency: 5 years’ imprisonment.

Acting U.S. Attorney Sloman stated, “The success of the Federal-State Mortgage Fraud Strike Force and our mortgage fraud crack-down is evident in the staggering number of prosecutions we have brought to date. Still, the battle against mortgage fraud is far from over. Mortgage fraud investigations and prosecutions will continue to be one of our top priorities.”

Michael Fithen, Special Agent in Charge of the U.S. Secret Service, noted, “To date, efforts dedicated to this particular anti-fraud initiative have yielded great success. Still, we recognize that mortgage fraud is a cancer that will continue to plague South Florida. The Secret Service will continue to stand shoulder to shoulder with our law enforcement partners to investigate these crimes, and help bring these criminals to justice.”

“The U.S. Postal Inspection Service will continue to work diligently with our partners in law enforcement and the banking industry to assure our Postal customers that the mail is not used as a conduit for these types of schemes. As the number of mortgage fraud cases continues to rise in South Florida, we will renew our efforts to revitalize public trust in the Postal Service,” said Antonio J. Gomez, Acting Inspector in Charge, U.S. Postal Inspection Service, Miami Division.

Michael J. Folmar, Acting Special Agent in Charge of the FBI’s Miami Office, stated, “With many homeowners fighting to stay afloat in a down economy, it is increasingly important for the mortgage industry to operate free of fraud. The Federal-State Mortgage Fraud Strike Force is part of that effort, combining law enforcement resources to combat fraud.”

Jon T. Rymer, Inspector General for the FDIC-OIG, said, “The FDIC-Office of Inspector General is committed to its partnerships with the law enforcement community to address mortgage fraud cases throughout the country. The American people need to know that we are working together to ensure integrity in the financial services and housing industries and that those involved in criminal activities that undermine that integrity will be held accountable.”

Acting Commissioner Linda Charity, from the State of Florida’s Office of Financial Regulation, said “I commend the efforts of the Office of the U.S. Attorney and the Mortgage Fraud Strike Force investigators in this huge mortgage fraud investigation.”

Miami-Dade Police Director Robert Parker added, “It is unfortunate that a criminal element has infiltrated the real estate and mortgage industry and negatively affected those who have worked hard to attain the American dream of owning a home. The Miami-Dade Police Department will continue to work diligently with our law enforcement partners to assist with the prosecution of those responsible for the grave economic harm inflicted upon our community.”

Mr. Sloman commended the investigative efforts of all the federal, state and local agencies participating in the Federal-State Mortgage Fraud Strike Force, including the Federal Bureau of Investigation, the U.S. Postal Inspection Service, the U.S. Secret Service, the Federal Deposit Insurance Corporation-Office of Inspector General, the U.S. Department of Housing and Urban Development - Office of Inspector General, the Internal Revenue Service, the State of Florida Department of Financial Regulation, the Miami-Dade Police Department, and the Broward County Sheriff’s Office.

An Indictment/Information is only a charge and is not evidence of guilt. A defendant is presumed innocent and is entitled to a fair trial at which the government must prove guilty beyond a reasonable doubt.

A copy of this press release may be found on the website of the United States Attorney’s Office for the Southern District of Florida at www.usdoj.gov/usao/fls. Related court documents and information may be found on the website of the District Court for the Southern District of Florida at www.flsd.uscourts.gov or on http://pacer.flsd.uscourts.gov.

In the following press release the Securities and Exchange Commission announced that today it charged four promoters and a Phoenix-based company with securities fraud for orchestrating a mortgage lending scheme that attracted hundreds of investors by making false and misleading statements about the safety and performance of the investments.

The SEC alleges that the foursome — which includes two certified public accountants, a pharmacist, and a grade school principal — raised more than $197 million from investors nationwide primarily through word of mouth between their friends and relatives. Through their company, Radical Bunny LLC, they pooled investor funds to make loans to Mortgages Ltd., a Phoenix-based originator of high-interest, short-term loans to real estate developers.

Additional Materials

• Press Release
• SEC Complaint
• Litigation Press Release

According to the SEC’s complaint, the four promoters misrepresented how Mortgages Ltd. could use money loaned by Radical Bunny LLC by falsely telling investors that their funds could only be used for commercial development when there were no such restrictions. They also misrepresented to investors that they were closely monitoring Mortgages Ltd.’s financial condition, but they were caught completely unaware of the circumstances that ultimately led to its bankruptcy. Furthermore, they misrepresented to investors that the offering was not subject to the federal securities laws when, in fact, legal counsel had advised them otherwise on at least three separate occasions.

“These promoters promised investors more than they could possibly deliver,” said Rosalind Tyson, Director of the SEC’s Los Angeles Regional Office. “Even to friends and family, they repeatedly overstated the safety of the investment and their knowledge of the underlying business to which they lent investor funds. Unbeknownst to investors, more and more of their money was being shifted into fewer and riskier loans.”

The SEC’s complaint, which was filed in federal court in Phoenix, charges Radical Bunny LLC and its four managing members: Tom Hirsch of Paradise Valley, Ariz.; Harish Shah of Phoenix; and Howard Walder and Berta “Bunny” Walder, both of Phoenix. Hirsch and Shah operate an accounting practice together and obtained many investors through their accounting firm. Husband and wife Howard and Berta Walder are by profession a pharmacist and grade school principal, respectively.,

According to the SEC’s complaint, the foursome primarily communicated with investors through semi-annual meetings held at a luxury golf resort in Scottsdale, Ariz. Investors were provided with presentations about the status of their investments, and they were permitted to invite their friends, family, and others to the meetings as potential investors. Shah particularly solicited investors of South Asian descent, raising approximately $40 million from about 150 families.

The SEC alleges that Hirsch, Shah, and the Walders each made false and misleading statements to persuade people to invest in Radical Bunny, and they falsely represented that Radical Bunny held a secured interest in Mortgages Ltd.’s assets even after their attorneys advised them that such documentation was either non-existent or defective. They also falsely represented that they (particularly Hirsch) had unfettered access to Mortgages Ltd.’s books and records, allowing them to monitor Mortgages Ltd.’s financial condition. However, they ignored the fact that most of Radical Bunny’s funds were being shifted into Mortgage Ltd.’s riskier projects to the detriment of the Radical Bunny investors.

The SEC’s complaint further alleges that Hirsch received at least $3 million, the Walders received at least $2 million, and Shah received at least $700,000 as part of a “vendor fee” that they claimed to have earned for maintaining accounts for the Radical Bunny investors and facilitating loans to Mortgages Ltd.

Radical Bunny was not registered with the SEC in any capacity and did not register any offering under the securities laws. Therefore, in addition to the securities fraud charges, Hirsch, Shah, and the Walders were charged by the SEC with offering and selling unregistered securities and for acting as unregistered broker-dealers in violation of the federal securities laws. Radical Bunny also was charged with offering and selling unregistered securities.

In its federal court action, the SEC seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and financial penalties against all of the defendants.

In the following press release Nora R. Dannehy, Acting United States Attorney for the District of Connecticut, today announced that a federal grand jury in New Haven has returned an Indictment charging GARY T. JOHNSON, 59, of Groton, with four counts of wire fraud and two counts of engaging in illegal monetary transactions while operating his former mortgage lending business. The Indictment was returned on July 22 and ordered unsealed today by United States Magistrate Judge Thomas P. Smith in Hartford during JOHNSON’s arraignment.
__________________________________________________________________________________

Additional Material

• Press Release
• Indictment

__________________________________________________________________________________

According to the Indictment, JOHNSON operated a family-run business known as Matrix Investment Corp. (“Matrix”), which was based in Groton. Matrix provided mortgage loans to interested borrowers either as a broker for other lenders or as a loan originator itself. JOHNSON was the Chairman of Matrix and oversaw lending activity at the Company.

The Indictment alleges that, during 2004 and 2005, Matrix and JOHNSON began to use monies disbursed for the benefit of borrowers for purposes other than the payoffs set forth in the relevant HUD settlement statements, including to pay Matrix’s ongoing operating expenses or to make payoffs to other lenders on unrelated refinancings.

The Indictment further alleges that, in the summer of 2004, JOHNSON informed some of his employees that he was seeking to refinance certain of his personal properties to put money into the business to fund Matrix. As part of that process, a Matrix employee began to explore refinancing options for JOHNSON from various lenders, including Greenpoint Mortgage Funding Inc., for approximately $640,000 and a line of credit for $80,000, both to be secured by JOHNSON’s personal residence. Several months later, JOHNSON sought refinancing for $563,500 with Flagstar Bank, to be secured by another house he purportedly owned in New London.

The Indictment alleges that JOHNSON caused fraudulent personal loan applications to be submitted to Greenpoint, Flagstar Bank, and other lenders. JOHNSON had input on the content of the applications, and he reviewed and signed preliminary applications and final applications, on or about the date of closing, and prior to any receipt of funds. The Indictment further alleges that, on the applications, JOHNSON misrepresented his ownership interest in his primary residence, misrepresented the occupancy status of the second residence, overstated his monthly income, and falsely represented that the monies would be used, in part, to repay preexisting debts, including existing liens on the relevant properties. The debts were not ultimately repaid.

Both the $640,000 and the $80,000 loans with Greenpoint closed on August 9, 2004. The Flagstar loan for $563,500 closed on October 9, 2004. The Indictment alleges that in the fall of 2005, JOHNSON ceased making payments on both the Greenpoint and Flagstar loans. The loans went into default, and the lenders have suffered substantial loss.

If convicted, JOHNSON faces a maximum term of imprisonment of 20 years on each of the first two wire fraud counts, a maximum term of imprisonment of 30 years on each of the next two counts of wire fraud, and a maximum term of imprisonment of 10 years on each of the two counts of engaging in an illegal monetary transaction.

Acting U.S. Attorney Dannehy stressed that an indictment is only a charge and is not evidence of guilt. The defendant is entitled to a fair trial at which it is the Government’s burden to prove guilt beyond a reasonable doubt.

This matter is being investigated by the Internal Revenue Service – Criminal Investigation Division and the Federal Bureau of Investigation. The case is being prosecuted by Senior Litigation Counsel Christopher W. Schmeisser.

In the following press release the DeKalb County Police Department Special Victims Unit announced that it has arrested Anthony Ray (pictured below) in connection with an on-going Real Estate Investment Ponzi Scheme that operated in various offices throughout the metro Atlanta area, including the Pinnacle Building located at 3455 Peachtree Road, Atlanta Ga. 30326, 830 Oakview Road, Decatur Ga. and 2801 Candler Road, Decatur Ga. 30032. Thus far, the investigation has revealed thirty victims with substantial losses in cash, and real estate investment properties. The approximate victim impact is 5 million dollars.


Anthony Ray’s business operated under the name: Key Funding Group for four years and listed are
some of the services advertised:
1. Accounts Receivable
2. Acquisition Loans
3. Agricultural Loans
4. Church Financing
5. Commercial Real Estate
6. Construction Loans
7. Machinery, Heavy Equipment (Lease)
8. Mezzanine Financing
9. Raw Land Loans
10. SBA Loans
11. Start-Up Loans
12. Working Capital Loans
13. Yacht Financing

Charges against Ray include operating a Ponzi scheme, financial identity fraud, theft by deception, and
mortgage fraud.

Attached is a photograph of the suspect. Additional victims and anyone with information pertaining to
this case should contact the DeKalb County Special Victims Unit at 770-724-7711.

The following case forms part of Operation Malicious Mortgage and was never the subject of any specific press release by the US Attorney or the FBI nor featured in this or other similar sites. The 9 defendants named below form part of the 36 people mentioned in a very general press release from the FBI and US Attorney. I found it while investigating something else!!.

On June 17, 2008 an indictment was filed in the United States District Court in Arizona charging 9 people with Conspiracy, Wire Fraud, Money Laundering and Aiding and Abetting in relation to allegations of a “cash-back” mortgage fraud scheme.

The alleged scheme involved at least 22 properties which were purchased by straw borrowers and at the closing of each one defendant Daniel Morar received cash-back from the loan funds even though he was not the borrower. The cash-back received from the transactions totaled some $1,515,000 which was shared amongst the defendants with the lions share going to Morar. The scheme was facilitated by an escrow officer, a mortgage broker and the owner of CI Custom Builders.

The properties that were to be part of the scheme were identified from those that were for sale for between $375,000 and $900,000. They then obtained appraisals that “substantially inflated” the fair market value of each one and identified title company’s that would falsify the HUD-1. The sales price in each transaction exceeded the sellers’ asking price by between $69,000 and $180,000.

The Uniform Residential Mortgage Applications (1003’s) used in the scheme misrepresented borrowers income and employment, assets, intent to occupy and other real estate that the borrowers owned. In addition the final HUD-1’s omitted details of the payments to Morar.
__________________________________________________________________________________

Additional Materials

Indictment
Original Press Release
Arizona DFI consent order against Smart Mortgage and Catherine Zebarth
Nevada Secretary of State records for D Contractor Invest, Inc
Arizona Secretary of State records for CI Custom Builders
__________________________________________________________________________________

Defendants

Daniel Morar – The sole owner of D. Contractor Invest, Inc
Gheorghe Babeti – buyer of 10 properties
Cosmina Bunea – buyer of 11 properties
Dorel Irimiciuc – buyer of 1 property
Samuel Dobos – associate of Morar
Brandon Azadegan – employee of CI Custom Builders and associate of Morar
Cipriano Ionutescu – owner of CI Custom Builders and associate of Bunea
Christina Mejia – escrow officer at Great American Title Agency in Phoenix
Catherine Zebrath – sole owner of Smart Mortgage

Properties mentioned in indictment

6325 E Sweetwater Ave, Scottsdale, AZ
18402 N 75^th Ave, Glendale, AZ
6518 W Molly Lane, Phoenix, AZ
6202 W Gambit Trail, Phoenix, AZ
4933 W Fallen Leaf, Glendale, AZ
27929 N 64^th Lane, Phoenix, AZ
6224 W Hedgehog Place, Phoenix, AZ
6802 W Briles Road, Peoria, AZ
27838 N 60^th Avenue, Phoenix, AZ
16942 E Monterrey Drive, Fountain Hills, AZ
38209 N 24^th Drive, Phoenix, AZ
26155 N 68^th Avenue, Phoenix, AZ
5639 E Thunderbird, Scottsdale, AZ

14858 N El Sobrante Avenue, Fountain Hills, AZ
1001 E Northview, Phoenix, AZ
5549 E Pershing, Phoenix, AZ
6809 W Cottontail, Peoria, AZ
606 W Los Corrales Drive, Desert Hills, AZ

I will update court dates and case progress asap.

In the following press release Indiana Secretary of State Todd Rokita announced that police in New Castle, IN arrested Christopher Meeks today on felony violations of Indiana’s Loan Broker Act. The arrest comes after a joint investigation conducted by Indiana Secretary of State Todd Rokita’s Prosecution Assistance Unit (PAU) and Henry County Prosecutor Kit Crane. The Henry County Prosecutor’s Office filed the criminal charges. PAU Senior Attorney Stephanie Caraway will serve as special prosecutor in the case. Meeks faces three felony counts and could face up to three years in prison for each charge.

“For many Hoosiers, buying a home is the biggest investment they will ever make,” said Secretary Rokita. “I cannot stress enough the importance of working with a licensed and registered loan broker.”
__________________________________________________________________________________

Additional Materials

• Press Release
• Information
• Affadavit of Probable Cause

__________________________________________________________________________________

The charges filed indicate that during late 2006 and early 2007, Meeks submitted a mortgage application on behalf of a couple seeking to purchase a house. Meeks included false employment and bank account information on the application and ultimately bilked the couple out of more than $14,000. He was not registered as a loan broker in the state of Indiana.

Specific charges against Meeks include Loan Broker Fraud and doing business as an unregistered loan broker– all Class D felonies. The charges described are merely an accusation. The defendant is presumed innocent until and unless proven guilty.

For more information on how to avoid becoming a victim of investment fraud, visit www.IndianaInvestmentWatch.com.

The Texas Department of Savings and Mortgage Lending (DSML) has issued two orders against loan officers accused of fraudulent activities in seperate cases.

• Catina Renee Young, Loan Officer License # LO56656 voluntarily surrendered her license in lieu of revocation and other disciplinary action after the DSML filed a complaint that accused her of Aiding and Abetting unlicensed and fraudulent activity by Tawanna Young.
  Click here for a copy of the Agreed Order of Surrender

• Ngozi Godson, Loan Officer License # LO53739 had her license revoked after she failed to attend a hearing in regards to her actions in a matter where mortgage broker Mr. Sanni Ibrahim was accused of defrauding a by taking the down payment and monthly payments from woman who thought she was buying a property, 2303 Cardinal Elm, Fresno, TX which had in fact been registered in another persons name.
  
  The victim lived in the property and was unaware that she did not own it and was eventually evicted and lost her money. Godson was the loan officer on the transction and another man, Noel Chukwueke acted as a sales person for Ibrahim and helped the victim choose the property.
  Click here for a copy of the Revocation Order

Over the past 5 years I have refrained from making personal comment on the entries I post and leave judgment of each article up to the reader. However I have been investigating mortgage fraud since 1987 in the UK and now the USA and have investigated my way through two major real estate bubbles the first of which was in late 1980’s to early 1990’s. At the end of the first bubble the fraud and misery were compounded by the actions of realtors selling foreclosed (repossessed) properties who were suppressing legitimate offers for properties only to submit their own, much lower bid, and then flip the property to someone who was either a straw buyer or a legitimate person who had submitted a much higher bid.

At the time I could not get anyone at bank I worked for to take this type of fraud seriously because even then they believed the hype that foreclosed properties are bound to be sold cheaply. I know that this cost the bank an awful lot of money in additional write-offs that could have been prevented and that local markets would not have collapsed as badly as they did because these properties were sold at such ridiculously low prices.

Since the recent(ish) collapse of the market I have been trying to tell anyone who would listen about the added danger to property values that would be caused by this type of fraud and in my job I have seen, but could not prove, this type of fraud numerous times.

Today I feel vindicated…….

In the following publication Fannie Mae is warning of Preforeclosure Sales Abuse

The original articles can be obtained here [PDF] [Direct Link]

Fannie Mae has become aware of a new variant of property flipping involving preforeclosure (short) sales.

The trend we have observed involves a perpetrator who submits a short sale offer to purchase a preforeclosure property at a price less than the current indebtedness. This perpetrator locates a second buyer, who may not be arms length, to purchase the property at a higher price simultaneous with the short sale or in rapid succession, concealing the second (higher) transaction from the lender approving the short sale. The second transaction may involve a new loan based on an inflated appraisal. In some cases, the perpetrator convinces the homeowner to deed the property into a land trust, with the perpetrator (or his accomplice) as trustee.

Example:
We have been advised of instances where the perpetrator is the listing agent, and the agent presents his/her short sale offer as the “best” offer, even though the agent has received other, higher, arms length offers.

As this trend has gained momentum, some title companies have begun to refuse to close the simultaneous transactions. As a result, a second version of this scheme has evolved in which the closing involves only one transaction: from the homeowner to (the perpetrator’s) ultimate purchaser. The perpetrator is paid out through or outside of closing. Some of the tactics observed include a second mortgage filed by the perpetrator against the property immediately before closing, and inflated real estate commissions.

These flips can potentially be identified and thwarted by either the pre-foreclosure lender or the lender financing the second (inflated) transaction. Fannie Mae recommends the following best practices in assessing preforeclosure sale activity:

• Confirm the ownership status of the property:
• Is the title held in trust? Was it an allowable transfer? (Servicing Guide, Section III, Chapter 4)
• Review marketing efforts such as the MLS listing
• Condition approval on disclosure of all contracts pending on the property prior to mortgage payoff
• Validate the purchaser’s loan approval, deposit and funds to close
• Condition approvals for preforeclosure sales on review of the final HUD-1 Settlement Statement
• Review the sales price and payouts against the purchase offer

Fannie Mae recommends the following best practices to avoid financing inappropriate property flips:

• Validate the purchaser’s deposit and funds to close
• Use reliable appraisal valuation sources
• Review the final HUD-1 and do not allow excessive seller concessions to be paid to the purchaser
• Question excessive sales commissions
• Validate that the seller holds clear marketable title to the property

Fannie Mae partners with a wide variety of industry groups, with law enforcement, and with our customers in mortgage fraud education and prevention efforts. If you have any questions or suggestions about this information, please contact Fannie Mae’s Mortgage Fraud Program or your Customer Account Manager.

The Financial Crimes Enforcement Network (FinCEN) [has] issued an advance notice of proposed rulemaking (ANPRM) to solicit public comment on a wide range of questions pertaining to the possible application of anti-money laundering (AML) program and suspicious activity report (SAR) regulations to non-bank residential mortgage lenders and originators.

“As primary providers of mortgage finance who generally deal directly with consumers, these lenders and originators are in a unique position to assess and identify money laundering risks and possible mortgage fraud while directly assisting consumers with their financial needs and protecting them from the abuses of financial crime,” said FinCEN Director James H. Freis, Jr.
__________________________________________________________________________________

Additional Materials

• Press Release
• Advance notice of proposed rulemaking

__________________________________________________________________________________

In April, the Department of the Treasury and FinCEN coordinated an inter-agency effort with the U.S. Department of Justice (DOJ), the Department of Housing and Urban Development (HUD), the Federal Trade Commission (FTC), and state officials to announce new initiatives to target foreclosure rescue scams and loan modification fraud. These initiatives are helping to coordinate information and resources across agencies to maximize targeting and efficiency in fraud investigations, alert financial institutions to emerging schemes, step up enforcement actions and educate consumers to help those in financial trouble avoid becoming the victims of a loan modification or foreclosure rescue scam. FinCEN is seeing the results of these efforts with banks already filing SARs under the guidance issued in April. Utilizing the initiative’s advanced targeting methods, FinCEN has so far made 10 case referrals, involving over 80 suspects, to law enforcement investigators. FinCEN, at the request of civil and criminal law enforcement, is also contributing to 35 ongoing investigations, involving multiple suspects and hundreds of Bank Secrecy Act reports.

This coordinated effort combined with today’s announcement that FinCEN is considering applying AML program and SAR regulations to non-bank residential mortgage lenders and originators comes when millions of vulnerable homeowners are seeking assistance under the Administration’s Making Home Affordable program. These initiatives will help prevent criminal actors from perpetrating predatory schemes.

In FinCEN’s recently issued mortgage fraud reports, SAR analysis showed non-bank mortgage lenders and originators initiated many of the mortgages that were associated with SAR filings. In addition, although its focus is limited to gathering information relevant to the possible AML responsibilities of this industry sector, this ANPRM is complementary to ongoing regulatory reform and consumer protection initiatives, as regulators and consumer protection agencies also benefit from the data provided by SARs.

SARs filed with FinCEN by financial institutions are a critical source of information for law enforcement in investigating and prosecuting mortgage fraud related crimes. FinCEN believes that new regulations requiring non-bank residential mortgage lenders and originators to adopt AML programs and report suspicious transactions could augment FinCEN’s initiatives in this area. In addition, in 2008, the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) became law. Among other things, the SAFE Act requires the development of a nationwide licensing system and registry for certain mortgage professionals that may serve to complement any related FinCEN efforts in the future.

“Broad public input through this ANPRM will aid policymakers seeking to ensure the appropriate regulatory regime for this industry sector,” noted Freis. “These financial professionals are ideally positioned to contribute to the promotion of safety and integrity in the U.S. mortgage marketplace.”

Under the Bank Secrecy Act, FinCEN can issue regulations requiring financial institutions to keep records and file reports determined to have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings, or in the conduct of intelligence or counterintelligence activities, including analysis, to protect against international terrorism. Federally regulated depository institutions are already required to have AML programs. This ANPRM considers adding companies that perform certain services with respect to residential mortgages, analogous requirements to those that currently apply to depository institutions performing those same services.

The ANPRM, as submitted to the Federal Register, is available on www.FinCEN.gov. Comments are due to FinCEN on or before August 20, 2009.

[Ed. Note - The press release does not contain information on how comments may be submitted so after a little research…..

You may submit comments, identified by Regulatory Identification Number (RIN) 1506–AB02, by any of the following methods:

• Federal E-rulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. Include 1506–AB02 in the submission. Refer to Docket Number TREAS–FinCen-2009–0002.

• Mail: FinCEN, P.O. Box 39, Vienna, VA 22183. Include 1506–AB02 in the body of the text.

Please submit comments by one method only. ]

Attorney General Bill McCollum today announced that his office has filed a lawsuit against four related South Florida companies that allegedly charge up-front fees for loan modification services to homeowners facing foreclosure. FHA All Day.Com and owner Jason Vitulano, as well as three other affiliated companies, purportedly collect up to $1 million in up-front fees on a monthly basis. The companies were allegedly soliciting hundreds of consumers nationwide via the internet and though telemarketing robo-calls which illegally used President Obama’s voice.
__________________________________________________________________________________

Additional Materials

• Press Release
• Lawsuit

__________________________________________________________________________________
An investigation conducted by members of the Attorney General’s Economic Crimes Division, working as part of the Attorney General’s Mortgage Fraud Task Force, indicated that Vitulano and his companies were charging up-front fees as high as $5,000 for foreclosure-related loan modification services. Vitulano also allegedly claimed to have an attorney on staff available to assist homeowners, but investigators believe no attorneys are currently working on any of the loan modification files. Consumers who complained to the Attorney General’s Office also reported that the companies have not performed the promised services and that they were unable to contact the companies or get refunds. The Attorney General’s Office has received over 300 complaints about Vitulano and his related companies.

The Attorney General’s lawsuit seeks a permanent injunction prohibiting Defendants from charging up-front fees, restitution on behalf of all victimized consumers, civil penalties of $15,000 for each violation of the Foreclosure Fraud Prevention Act, and reimbursement for fees and costs related to the investigation. The companies are currently located in Deerfield Beach, Florida, but were previously located in Boca Raton and Delray Beach, Florida.

Consumers may file a complaint or fill out an affidavit about FHA All Day.Com, Safety Financial Services, Inc., Housing Assistance Law Center, Housing Assistance Now by visiting the Attorney General’s website at http://www.myfloridalegal.com/mortgagefraud or by calling the fraud hotline at 1-866-966-7226. More information about that Attorney General’s efforts in combating mortgage fraud, along with helpful information for homeowners in distress, is also available on the mortgage fraud website.

The Attorney General’s Mortgage Fraud Task Force continues to review the practices of many companies providing foreclosure-related rescue services to ensure compliance with Florida law. The Foreclosure Rescue Fraud Prevention Act was one of the Attorney General’s top priorities during the 2008 Legislative Session and has provided the Attorney General’s Office, through the Mortgage Fraud Task Force, with better enforcement abilities on behalf of Florida’s homeowners.

In an opinion filed on July 21, 2009, the Maryland Court of Appeals has disbarred two lawyers for their part in an equtiy stripping scheme the closing for which was conducted at the office Apple Title International, LLV in Silver Spring, MD. The following is taken from that opinion. It has been dedacted to remain concise and the full opinion can be found by clicking here.

Facts of Case

At the time of the closing Renard D. Johnson was the owner and president of Apple Title International, LLC (“Apple Title”), and Will Purcell was an independent contractor who conducted real estate settlements for Apple Title.

At the beginning of 2005, Calvin and Christine Barnes the owners of 2345 Leyton Court, Waldorf, MD and they were in financial difficulties and wanted to refinance the home. They contacted Michal Johnson (no relation) who was then affiliated with Montgomery Capital Corporation, to obtain the refinance which they hoped would also consolidating some of their other debts. Without fully explaining to Mr. & Mrs. Barnes that he had been unable to obtain their desired refinancing, Michal Johnson brokered a deal by which an individual named Shreco Thompson-Burnett agreed to purchase the Barneses’ home.

Michal Johnson generated a Sales Contract, and an Addendum. The original Sales Contract provided for a sale price of $360,000.00 and contains the purported signatures of Mr. & Mrs. Barnes as Sellers and Shreco Thompson-Burnett as Purchaser. The Sales Contract Addendum provided for a reduction of the sale price to $352,000.00 and also provided that the settlement date was “extended to 4/4/05.” The addendum contains the purported signatures of Mr. & Mrs. Barnes but was not signed by Ms. Thompson-Burnett. Neither Mr. nor Mrs. Barnes actually signed either the Sales Contract or the Sales Contract Addendum.

Michal Johnson arranged one hundred percent (100%) financing for the purchase with first and second mortgage loans of $281,600.00 and $70,400.00, respectively, issued by Home Loan Corporation, dba Expanded Mortgage Credit. Michal Johnson referred the sale to Apple Title to conduct settlement. The settlement was scheduled for April 5, 2005 at Apple Title’s office in Silver Spring. On April 5, 2005, Mr. & Mrs. Barnes and Ms. Thompson-Burnett, along with Michal Johnson, appeared at the office of Apple Title. The Barneses were greeted by Respondent Renard Johnson upon arrival, expecting to refinance their home, but shortly after their arrival, Michal Johnson explained to the Barneses that he was not able to arrange refinancing for them and he explained to them that he had arranged for Mr. & Mrs. Barnes to remain in their home at 2345 Leyton Court under a “lease/buy-back” arrangement withMs. Thompson-Burnett, a buyer he had located. Though the Barnes had never met or had knowledge of Ms. Thompson-Burnett, or contracted with her, a settlement then ensued. The settlement was conducted by Will Purcell as Apple Title’s designated “settlement agent,” with Respondent Renard Johnson also present at the settlement.

The settlement was irregular in many respects. The parties were advised that the Barneses would remain in their house and that Apple Title would hold an escrow from the Barneses’ sales proceeds equal to one year of rent payments. The plan was for the Barneses’ monthly rent to be calculated in an amount equal to the combined amount of Ms. Thompson-Burnett’s monthly first and second mortgage payments. There was no documentation of the proposed “lease/buy-back” arrangement between Mr. & Mrs. Barnes and Ms. Thompson-Burnett or of the parties’ related rent escrow, nor was such an escrow identified or itemized on Apple Title’s HUD-1 settlement form.

Respondent Johnson signed a deed, dated April 5, 2005, by which the 2345 Leyton Court property was conveyed from Mr. & Mrs. Barnes to Ms. Thompson-Burnett. By his signature, Respondent Johnson certified that the deed had been prepared by or under his supervision.

As of April 5, 2005, Cheryl Bruce, a non-lawyer, was employed as Apple Title’s office manager. In that position, she participated in preparing settlement documents and handled the disbursement of settlement funds related to the sale. Apple Title generated a document titled “Assignment of Funds,” dated inconsistently as “Today’s Date: April 5, 2005” and “Executed this 4th day of April, 2005.” That document, purportedly signed by both Calvin Barnes and Christine Barnes, authorized the assignment of “all proceeds or, in the alternative $18,000” of the sellers’ proceeds at settlement to Michal Johnson.

Such a payment was presumptively improper as an illegal kickback or finders fee in violation of the Real Estate Settlement Procedures Act (“RESPA”) and was not identified or itemized on Apple title’s HUD-1 settlement sheet. As settlement agent, Respondent Purcell signed a HUD-1 settlement statement by which he acknowledged the document to be “a true and accurate account of the funds which were received and have been or will be disbursed by the undersigned as part of the settlement of this transaction,” i.e., the sale of 2345 Leyton Court. The settlement statement signed by Respondent Purcell includes a line item, at line 603, of cash due to the sellers (Mr. & Mrs. Barnes) in the amount of $68,203.90, but the only cash disbursement actually made to Calvin and Christine Barnes was in the amount of $21,286.90 by wire transfer on April 6, 2005.

A separate wire transfer in the amount of $18,000.00 was made to an account held by Michal Johnson on April 6, 2005, pursuant to the Assignment of Funds (infra). After deducting the sum ($39,286.90) of the two aforementioned wire transfers, the balance of cash due to the sellers was $28,917.00. Apple Title never disbursed that amount to Mr. & Mrs. Barnes, nor did they prepare any escrow agreement by which they or anyone else would hold any portion of the sellers’ proceeds to be applied toward rent payments under the contemplated “lease/buy-back” arrangement. Mr. & Mrs. Barnes understood that the remaining balance of their sellers’ proceeds would be held in escrow by Apple Title and applied toward the rent payments they believed were to be made on a monthly basis in an amount equal to Ms. Thompson-Burnett’s mortgage payments.

Although Apple Title did not have a signed authorization or other directive from Calvin and Christine Barnes to disburse the remaining balance of their sellers’ proceeds, or any portion thereof, to Michal Johnson, Shreco Thompson-Burnett or any other third party or entity, on April 25, 2005, Apple Title issued a check drawn on its real estate escrow account in the amount of $27,168.00, made payable jointly to Shreco Thompson-Burnett and Michal Johnson. Cheryl Bruce issued that check at the request of Michal Johnson and forwarded it to him. Such funds were never used to pay Ms. Thompson-Burnett’s monthly mortgage payments.

At the time of settlement on April 5, 2005, Mr. & Mrs. Barnes, Ms. Thompson-Burnett and Michal Johnson had an undocumented agreement whereby Ms. Thompson-Burnett was not going to occupy the property but instead would be “renting” the property back to Mr. & Mrs. Barnes. In dereliction of his fiduciary responsibilities to the mortgage lender, Respondent Purcell processed settlement documents containing false information, including an Occupancy Affidavit executed by Ms. Thompson-Burnett as the borrower. In a Closing Certification for the sale, Respondent Purcell inaccurately certified that “the HUD-1 Settlement Statement which I have prepared is a true and accurate account of the funds which were (i) received, or (ii) paid outside closing, and the funds received have been or will be disbursed by the undersigned as part of the settlement of this transaction.”

As previously stated, the settlement statement did not report the payment of $18,000.00 to Michal Johnson, nor did it report the withholding of $28,917.00 from the sellers’ proceeds and the subsequent disbursement of $27,168.00 made by Cheryl Bruce upon Michal Johnson’s instruction, nor was the HUD-1 settlement statement ever amended to reflect any such change.

Respondent Johnson had supervisory authority over Respondent Purcell when Purcell acted as Apple Title’s agent and over Cheryl Bruce, a non-lawyer employed by Respondent Johnson at Apple Title. Both Respondent Purcell and Respondent Johnson were present and had knowledge of the “lease/buy-back” agreement of the parties, which was nothing more than an equity stripping transaction, and knew that it was improper and in violation of the mortgage lender’s closing instructions pursuant to which they were entrusted monies by the lender.

Their acts and conduct in the subject transaction including, but not limited to, Respondent Purcell’s certifying false HUD-1 settlement statements, not amending them, submitting knowingly false Affidavits of Occupancy, and Respondent Johnson’s knowing acquiescence in and oversight of the same, and his authorization of disbursements which were illegal, unauthorized and/or inconsistent with the HUD-1 settlement statements were dishonest, fraudulent and deceitful.

The Barneses were not provided with copies of any of the settlement documents by Apple Title, and the deed of transfer was not recorded until many months later, in January of 2006.

Sanctions - Headnote

ATTORNEY DISCIPLINE – SANCTIONS – DISBARMENT

Respondents violated the Maryland Rules of Professional Conduct (“MRPC”) based on their involvement with a fraudulent, equity-stripping lease/buyback arrangement for homeowners Calvin and Christine Barnes. Respondent Purcell conducted a closing as an independent contractor with Apple Title, where he utilized a false occupancy statement and signed a HUD-1 that misrepresented the manner in which settlement funds for Mr. and Mrs. Barnes would be distributed. Johnson, in his management capacity at Apple Title, violated his fiduciary duties to distribute the funds to which Mr. and Mrs. Barnes were entitled in a manner consistent with the forms that Apple Title prepared. These fraudulent acts, as well as Johnson’s acts as a supervisor of Purcell and Apple Title’s staff, constituted clear misappropriation of Mr. and Mrs. Barnes’s funds as well as misrepresentations about the nature of the agreement and the way that money would be distributed. We hold that Johnson violated MRPC 1.15(b), 8.4(a) and (c), 5.1(c), and 5.3(c) and Purcell violated MRPC 1.15(b) and 8.4(a) and (c). Disbarment is warranted because of the dishonest and fraudulent nature of these violations.

In the following press release the San Jose Police Department announnced that on 1/29/09, employees of Legal Support Services, [of 2055 Junction Ave., Ste. 115, San Jose, CA] along with fifteen victims, reported to the San Jose Police Department that the suspects [Amir Rashidifar (below left) and Mary Delvecchio (below right) ] had been operating a fraudulent real estate loan modification business. Investigation revealed the suspects opened their business in September 2008 andofferedto modify real estateloans for homeowners facing default and forclosure. The suspects ran an elaborate operation and charged $3,000.00 to $4,000.00 to modify a loan; these fees were charged per property. The suspects convinced victims that Legal Support Services was working in tandem with real estate attorneys who were knowledgeable and experienced in the real estate loan modification business.

Pictures courtesy of San Jose Mercury News

Investigation revealed the suspects were not working with licensed attorneys. In February 2009, the suspects fled the San Jose area after learning they were being investigated by the San Jose Police Department for fraud. Further investigation revealed the suspects had fled into Canada on May 26, 2009. Once in Toronto, the suspects opened anew, fraudulent real estate loan modification businessunder new, fraudulent identities. The San Jose Police Department coordinated its investigative efforts with the Royal Canadian Mounted Police (RCMP), the RCMP Immigration Task Force, and the Canadian Border Services, who were able to locate and arrest both suspects at their residence in Toronto, Canada, on July 10, 2009.

The suspects are being held in Canada, pending extradition proceedings, where they will be returned to the United State of America to face criminal charges in San Jose, California. To date, the San Jose Police has identified 129 victims in this case, and it is believed the suspects may have defrauded many more victims. Anyone having been victimized in this case, or having information about this case, is urged to contact Detective Dave Solis of the San Jose Police Department’s Fraud Unit at (408) 277-4521. Persons wishing to remain anonymous may call Crime Stoppers at (408) 947-STOP (7867).

In the following press release Tim Johnson, United States Attorney for the Southern District of Texas announced that an 11-count sealed indictment charging conspiracy and wire fraud has been unsealed following the arrests of Claymon “Butch” Trammell, Michelle Trammell and Jeannettea Williams. Claymon Trammell operated real estate and home repair companies in the H