Some of the significant California federal prosecutions filed as part of Operation Stolen Dreams include the following:
Anthony G. Symmes pleaded guilty on May 28, 2010, to mail fraud conspiracy and money laundering in connection with a large-scale builder-buyout mortgage fraud scheme. For many years, Symmes was the largest homebuilder in Chico, California. In 2006, as the market cooled, Symmes had a significant amount of unsold new homes in inventory. Symmes established relationships with several unlicensed mortgage brokers to “sell” his homes to straw buyers at inflated prices. The entire reported purchase price was 100% financed on each home with various subprime lenders. Typically, the day after escrow closed, Symmes then rebated $40,000 to $60,000 of the reported purchase price per home to shell companies controlled by the buyers’ agents. The rebates were not disclosed to the lenders. Altogether, from 2006 through 2008, Symmes sold 62 homes with undisclosed sales rebates. The homes were financed in the aggregate amount of $21 million. To date, 38 of the homes have fallen into foreclosure and 10 more have been the subject of short sales, causing losses to date of $5 million. Symmes has pleaded guilty, is presently cooperating in an ongoing mortgage fraud investigation, and has already paid $4 million toward restitution/forfeiture. He is currently scheduled to be sentenced on September 3, 2010.
Garret Griffith Gililland and Nicole Magpusao who were originally charged in 2008 with mail fraud and other charges relating to a multimillion dollar “builder bailout” mortgage fraud scheme in Chico, are now the subject of new charges in a second superseding indictment. The new charges add eight defendants with participation in that scheme or related to it. Chico-area homebuilder William E. Baker; Nor Cal Innovative Investments Inc. president Shane Burreson; Leonard Williams, a licensed real estate professional; Christopher M. Chiavola, Brandon Resendez, Niche Fortune, and Kesha Haynie –all former employees of Gililland and Burreson; and Remy Heng. According to the new indictment, Gililland, Burreson, Chiavola, Resendez, and Williams recruited various individuals to purchase residential real properties. Gililland and his associates acted as the mortgage broker and real estate agent in connection with the transactions. Gililland, Burreson, and others assisted in obtaining residential loans for the transactions causing materially false loan applications to be prepared on behalf of the purchasers. Gililland, Burreson, Chiavola, and others arranged with the sellers of the properties to purchase the properties at a price above the true market price. The defendants also arranged to credit a percentage of the margin between the actual market price and the inflated purchase price of the properties after the close of escrow to various bank accounts controlled by defendants. At the same time, defendants caused the credits to be concealed from the lenders. As a result of the scheme to defraud, lenders issued loans in an aggregate amount of approximately $21 million. Bank accounts controlled by Gililland, Burreson, and others, received over $2 million in fraud proceeds, and defendants Gililland, Burreson, and others, ultimately caused losses to lenders of over $4 million.
The new indictment separately alleges that Chiavola, Resendez, Fortune, and Haynie, after leaving the employment of Gililland and Burreson, replicated the scheme on their own. Gililland, Burreson, and Chiavola are further charged with money laundering for bank transactions involving the proceeds of the fraud. Finally, Remy Heng is charged with bulk cash smuggling for attempting to ship $20,000 in cash in a Pringles potato chip can via Federal Express to Gililland in Spain while Gililland was a fugitive.
On June 10, 2010, a federal grand jury returned an indictment charging 10 individuals with 48 counts, including charges of conspiracy to commit mortgage fraud, mail fraud, and making false statements in mortgage applications. The indictment focuses on two Elk Grove businesses owned by defendant Hoda Samuel – Liberty Real Estate and Investment Company and Liberty Mortgage Company. From April of 2006 through February of 2007, Samuel and other Liberty employees are alleged to have been involved in at least thirty separate residential real estate transactions involving fraud. Specifically, the indictment alleges that loan applications contained misrepresentations concerning loan applicants’ employment and income. In addition, the indictment alleges that many of the transactions involved the payment of cash-back to buyers, often disguised as payments to contractors for repair and remodelling work, and usually not revealed to the lenders. As a result of these undisclosed payments, lenders were led to believe that the houses being purchased were worth more than the buyers were actually paying for them. Of the thirty transactions described in the indictment, at least twenty-eight have now gone into foreclosure, causing a collective loss to the lenders of more than $5.5 million.
William Bridge wilfully failed to report over $3.8 million dollars on his 2003 – 2006 federal tax returns that he had earned as a licensed real estate mortgage broker doing business as The Loan Center in San Francisco, California. In completing his tax returns, Bridge reported only the compensation he earned as part of the “yield spread premium” that was reported by the lending institutions themselves to the IRS. He did not report his full commission, which involved substantially more money. During the same time, Bridge was paying thousands of dollars in kickbacks to an employee of Long Beach Mortgage (formerly a subsidiary of Washington Mutual bank) to process what he knew were fraudulent loans application packages to be secured by residential properties located in the Sacramento and Stockton areas. Bridge pleaded guilty to multiple counts of filing false tax returns and paying kickbacks in connection with real estate loan transactions in 2008. On April 9, 2010, Bridge was sentenced to 21 months in prison, to be followed by one year of supervised release, $1,057,700.90 in restitution to the Internal Revenue Service, and a $60,000 fine. A co-conspirator, former Long Beach Mortgage employee Joel Blanford, is currently on trial in federal court in Sacramento.
Eric Ray Hernandez, Monica Marie Hernandez, and Evelyn Brigget Sanchez, all of Bakersfield, California, were charged with submitting loan applications to lenders containing false and fraudulent information that caused lenders to fund mortgage loans based on such fraudulent applications. The indictment alleges that the defendants caused false statements to be submitted to lenders concerning buyers’ income, assets, and liabilities, buyers’ employment status, and buyers’ intent to occupy the properties as their personal residences. Additionally, the defendants are alleged to have submitted false supporting documentation in support of mortgage loan applications, including false pay stubs, false letters purporting to be from the buyers’ tax accountant, false customer letters purporting to support the buyers’ self-employment status, and false verifications of the buyers’ bank funds on deposit. The indictment alleges that the defendants defrauded lenders of in excess of $2.5 million through this scheme.
Albert Lewis Ellis, 46, Fresno, California, Richard Keith Hanna, 42, Elk Grove, California, and Wrenl Burge, 38, Fresno, are charged with conspiracy to commit mail fraud, three counts of mail fraud, and one count of identity theft. The defendants used social security numbers belonging to another person to establish credit and then apply for a mortgage making materially false statements by listing the victim’s social security number, listing false and fraudulent employment information, including the false credit report. The defendants caused false and fraudulent loan applications to be submitted to seven different lending institutions and because of the conduct, the defendants defrauded lenders of in excess of $2 million.
Following an announcement by Attorney General Eric Holder in Washington, DC, representatives of the Financial Fraud Enforcement Task Force in the Eastern District of California, including U.S. Attorney Benjamin B. Wagner, FBI Assistant Special Agent in Charge Michelle Klimt, IRS-Criminal Investigation Special Agent in Charge Scott O’Briant, HUD-OIG Assistant Special Agent in Charge James Luu, California Department of Real Estate Commissioner Jeff Davi, Sacramento County District Attorney Jan Scully, and Butte County District Attorney Michael Ramsey announced the regional results of the nationwide takedown, Operation Stolen Dreams, which targeted mortgage fraudsters in the Eastern District of California and throughout the country.
The national takedown was organized by the Mortgage Fraud Working Group of President Obama’s interagency Financial Fraud Enforcement Task Force, which was established to lead an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. U.S. Attorney Wagner is a co-chair of the Mortgage Fraud Working Group. Starting on March 1, 2010, Operation Stolen Dreams resulted in the filing of 673 federal mortgage fraud cases in which 1,215 defendants were charged nationally. Operation Stolen Dreams cases were brought in every region of the United States. The FBI estimates that approximately $2.3 billion in losses were inflicted by the mortgage fraud schemes employed in these cases.
“Mortgage fraud ruins lives, destroys families, and devastates whole communities, so attacking the problem from every possible direction is vital,” said Attorney General Holder. “We will use every tool available to investigate, prosecute, and prevent mortgage fraud, and we will not rest until anyone preying on vulnerable American homeowners is brought to justice.”
During the takedown period for Operation Stolen Dreams, from March 1, 2010 to the present, charges were filed in 16 cases in the Eastern District of California, charging 46 defendants with felony mortgage-fraud offenses. During the three and a half month period of Operation Stolen Dreams, 11 federal felony guilty pleas were secured, and one defendant was sentenced. Additional federal mortgage fraud cases were filed prior to the commencement of Operation Stolen Dreams, and many mortgage fraud investigations are continuing, with future charges anticipated.
As part of Operation Stolen Dreams, the Tulare County District Attorney’s Office charged four defendants with mortgage-fraud offenses and arrested a fifth. In addition, three defendants pleaded guilty and five defendants were sentenced in mortgage fraud cases brought by the Tulare County District Attorney’s Office. In cases brought by the Sacramento County District Attorney’s Office, two defendants were charged in one case and two more pleaded guilty in another. In two cases brought by the Stanislaus District Attorney’s Office, one defendant was charged and another was convicted and sentenced in mortgage fraud cases. The Merced County District Attorney’s Office also charged a defendant in a mortgage fraud case, the San Joaquin County District Attorney’s Office secured a guilty plea in a mortgage fraud case, and the Fresno County District Attorney’s Office secured a guilty plea and a conviction in a mortgage fraud case as part of the operation. In total, six district attorneys’ offices filed seven new criminal mortgage fraud cases against at least nine defendants, secured eight guilty pleas in previously filed cases, and had nine defendants sentenced.
U.S. Attorney Wagner stated, “Operation Stolen Dreams was an unprecedented mobilization of federal, state, and local resources to combat mortgage fraud. The results announced today reflect months of hard work by investigators and prosecutors from many agencies, working side by side, and I want to thank all my partners in this effort.” Wagner continued, “While today marks the end of Operation Stolen Dreams, it is only the beginning of our common fight against mortgage fraud. The resources that we have dedicated to this problem, the alliances of federal, state, and local law enforcement officials that we have formed, the experience that we have gained, and the intelligence we have gathered will continue to be deployed in a sustained battle against mortgage fraud in California.”
“The last number of years have seen enormous and damaging developments in the mortgage and housing markets with an urgent reliance on the government to bolster unstable marketplaces and devastated communities,” said Kenneth M. Donohue, Inspector General of the Department of Housing and Urban Development. “The HUD OIG, in partnership with other federal agencies, is deeply committed to ensuring that scarce resources are not diverted to those who seek to enrich themselves at the expense of those who so desperately need assistance.”
“Mortgage fraud is an escalating problem that has quite literally stolen the American dream of owning a home for many people,” said Scott O’Briant, Special Agent in Charge, IRS-Criminal Investigation. “The impact on homeowners and communities is devastating. IRS-CI will continue to utilize its financial investigative expertise to aggressively investigate criminal activities that adversely affect our financial system and prey on unwitting victims.”
California Department of Real Estate Commissioner Jeff Davi remarked, “Mortgage fraud activities have reached an all time high in recent years as a result of the abuse of subprime lending, predators in the marketplace, and the economic recession. Because of the collaboration and cooperation of the Department of Justice and other law enforcement and administrative prosecutorial agencies, we have been able to combat mortgage fraud better than ever before. We must continue to be relentless when it comes to taking action against those who profit or benefit from the perpetration of illegal activities against our fellow citizens.”
“With Sacramento County among the highest nationwide in foreclosure rates, we are taking strategic action to protect our distressed homeowners from becoming victims of mortgage fraud,” said Sacramento County District Attorney Jan Scully. “Our partnership with the Financial Fraud Enforcement Task Force and Operation Stolen Dreams has undoubtedly strengthened efforts to crack down on mortgage fraud locally and across the entire Eastern District of California.”
Unlike previous mortgage fraud sweeps, Operation Stolen Dreams focused not only on federal criminal cases, but also on civil enforcement, restitution for victims, and increasing cooperation with state and local partners. As part of the national operation, almost 200 civil enforcement actions were filed by the U.S. Department of Justice, the FTC, and other federal agencies.
The President’s Financial Fraud Enforcement 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. For more information on the task force, visit StopFraud.gov.
In the Eastern District of California, the work of the Financial Fraud Enforcement Task Force is being carried out by two task forces, consisting of federal, state, and local investigators and prosecutors. The Sacramento Division task force includes the FBI, IRS-Criminal Investigation, the HUD Office of Inspector General, U.S. Secret Service, U.S. Postal Inspection Service, the Veterans Administration Office of Inspector General, the FDIC Office of Inspector General, the U.S. Department of Labor Office of Inspector General, the California Department of Real Estate, the California Department of Corporations, the California Department of Financial Institutions, the California Office of Real Estate Appraisers, and the District Attorneys’ Offices for Butte, El Dorado, Nevada, Placer, Sacramento, San Joaquin, Solano, and Yolo Counties. The Fresno Division task force includes the FBI, IRS-Criminal Investigations, the HUD Office of Inspector General, U.S. Secret Service, Social Security Office of Inspector General, USDA Office of Inspector General, the U.S. Trustee’s Office, the California Attorney General’s Office, the California Department of Real Estate, and the District Attorneys’ Offices for Fresno, Kings, Merced, San Joaquin, Stanislaus, and Tulare Counties.