Attorney Arrested for Preparing False Settlement Statements

Allison Tussey —  January 9, 2013 — Leave a comment

Michael Rumore, 54, Lyndhurst, New Jersey, an attorney formerly licensed in New Jersey, was arrested on January 7, 2013, in connection with a long-running, large-scale mortgage fraud scheme that caused losses of more than $30 million.

The defendant is charged by complaint with conspiracy to commit bank fraud and with money laundering. Rumore and seven other co-conspirators were charged by complaint in September 2012. He made his initial appearance and had a bail hearing before U.S. Magistrate Judge Patty Shwartz in Newark.

According to the complaint:

From September 2006 to May 2008, the Rumore and the other defendants engaged in a long-running, large-scale mortgage fraud conspiracy through a mortgage company called Premier Mortgage Services (PMS). The conspirators targeted properties in low-income areas of New Jersey (the “subject properties”). After recruiting straw buyers, the defendants used a variety of fraudulent documents to make it appear as though the straw buyers possessed far more assets and earned far more income than they actually did. The defendants then submitted these fraudulent documents as part of mortgage loan applications to financial institutions.

Relying on these fraudulent documents, financial institutions provided mortgage loans for the subject properties. The defendants then split the proceeds from the mortgages among themselves and others by using fraudulent settlement statements (HUD-1s), which hid the true sources and destinations of the mortgage funds provided by financial institutions. Once the money was entered into accounts they controlled, the defendants shuttled funds among various other accounts, in amounts greater than $10,000 per transaction. In reality, as opposed to the defendants’ false representations and fraudulent documents, the straw buyers had no means of paying the mortgages on the subject properties, and many of the subject properties entered into foreclosure proceedings. In total, the conspirators and others defrauded financial institutions out of more than $30 million.

Rumore, an attorney licensed in the state of New Jersey, served as the settlement agent on mortgage loans brokered by other conspirators—Isaac DePaula, Adilson Silva, and Lester Soto—for various Subject Properties. Rumore used his status as an attorney to further the fraudulent scheme, including by convening closings, receiving funds from lenders, and preparing HUD-1s that purported to reflect the sources and destinations of funds for mortgages on subject properties, when, in fact, the HUD-1s were neither true nor accurate. At or following the closings, Rumore disbursed mortgage loan proceeds directly to PMS, Soto, DePaula, and Silva, including amounts not reflected on the HUD-1s. Rumore received a fee for each fraudulent loan in which he participated.

The criminal complaint charges Rumore with one count of bank fraud conspiracy. If convicted, he faces a maximum potential penalty of 30 years in prison and a fine of $1,000,000.

U.S. Attorney Paul J. Fishman announced the arrest.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge David Velazquez; and special agents of the IRS, under the direction of Acting Special Agent in Charge Shantelle P. Kitchen, for the investigation leading to the complaint. Fishman also thanked the Social Security Administration, under the direction of Special Agent in Charge Edward Ryan, for its role in the investigation.

The government is represented by Assistant U.S. Attorneys Rahul Agarwal of the U.S. Attorney’s Office General Crimes Unit and Zach Intrater of the Economic Crimes Unit in Newark.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

The charge and allegations contained in the complaint against each defendant are merely accusations, and the defendants are considered innocent unless and until proven guilty.

Allison Tussey

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