Charges Filed for $100 Million Loan Origination Fraud

Allison Tussey —  October 29, 2012 — Leave a comment

John Allen, 54, Laguna Hills, California, has been charged in a superseding indictment for submitting fraudulent loan applications to mortgage lenders on behalf of the straw buyers in the same scheme as Audrey Yeboah, 54, Los Angeles, California, an accountant.

As previously reported by Mortgage Fraud Blog, Yeboah was a participant in a nationwide loan origination and kickback scheme, and has pled guilty to the felony information charging her with wire fraud. Yeboah admitted participating in the scheme by creating fake W-2 forms, pay stubs, and other records for straw buyers so that her fellow conspirators could collect millions of dollars in kickbacks from fraudulently-obtained mortgage loans. In entering her guilty plea, Yeboah admitted reviewing payment records that showed over $14.5 million in kickbacks were collected from the fraudulent purchase of $100 million in properties. A sentencing hearing is scheduled for February 4, 2013, at 9:00 a.m.

According to the indictment, Allen generated false records, including doctored bank account statements purporting to show significant assets (e.g., $150,000) that the borrowers did not really possess. In addition, Allen allegedly maintained what he called a “pipeline” of additional properties to purchase as part of the scheme, each of which included an additional $100,000 or more in potential kickbacks that he described as “profit.”

Yeboah and Allen join defendants Mary Armstrong, 51, Las Vegas, Nevada, an unlicensed mortgage broker who was apprehended in Las Vegas, Nevada; Teresa Rose, 57, Ramona, California, a real estate agent; Armstrong‘s assistant William Fountain, 56, Los Angeles; and businessman Justin Mensen, 31, Seattle, Washington, each of whom is already charged for participation in the scheme. As alleged in the charging documents and court records, the defendants carried out their scheme by recruiting “investors” through the Internet and advertisements in the Los Angeles Times, and encouraging them to purchase homes located in Southern California, Washington state, and elsewhere.

In reality, these so-called investors were nothing more than straw buyers who were promised $10,000 for each property purchased as part of the scheme. The defendants were able to secure mortgages for the properties by falsifying loan applications for the straw buyers, falsely claiming exorbitant income from fake employers and using fake W-2s and pay stubs to support the claims. The defendants submitted these fraudulent loan applications to mortgage lenders to obtain 100 percent financing—and thus avoided having to make any down payment on the properties.

The indictment alleges that the defendants profited on these mortgages loans by inflating the purchase price of the properties by $100,000 or more. Although the conspirators claimed that the extra money would be used for construction to improve the properties, the indictment alleges that no construction work was ever performed; instead, the money was kicked back to the participants. United States Attorney Duffy commented that these latest charges exposing the wider extent of this loan origination fraud are the result of an active, ongoing criminal investigation. Mensen, Rose, and Yeboah have each pled guilty. Trial for Armstrong, Fountain, and Allen has not yet been scheduled.

The public is reminded that an indictment is not evidence that the defendants committed the crimes charged. The defendants are presumed innocent until the government meets its burden in court of proving guilt beyond a reasonable doubt.

United States Attorney Laura E. Duffy announced the charges.

United States Attorney Duffy explained that the American public is the very real victim of these types of widespread mortgage fraud that played such a significant role in destabilizing the country’s general financial situation. She emphasized that her office would aggressively prosecute such crimes and urged anyone in the community who has information relating to these charges to contact the San Diego Division of the Federal Bureau of Investigation at (858) 565-1255 or the Federal Housing Finance Agency-Office of Inspector General hotline at (800) 793-7724.

Allison Tussey

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