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imageRachel Dollar, the editor of Mortgage Fraud Blog, is an attorney and Certified Mortgage Banker who handles litigation for lending institutions and secondary market investors. She is an author and a nationally recognized speaker on the topic of mortgage fraud. Ms. Dollar is a shareholder with the law firm of Smith Dollar, PC, is licensed to practice law in California and maintains offices in Santa Rosa, California. Email Ms. Dollar

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Friday, September 05, 2008

2 Former Credit Suisse Brokers Indicted For Fraud And Conspiracy

A superseding indictment was unsealed charging Julian Tzolov, 35, and Eric Butler, 36, former brokers at Credit Suisse Securities (USA) LLC, with conspiracy, securities fraud, and wire fraud. The superseding indictment alleges that the defendants schemed to obtain higher sales commissions by selling auction rate securities (“ARS”) backed by mortgages to Credit Suisse clients who, in fact, had placed orders to buy ARS backed by student loans. The defendants concealed their scheme by falsifying the names of the ARS the clients bought and otherwise misleading the clients into believing they had bought ARS backed by student loans. When the mortgage-backed ARS market failed, the clients lost their money.

According to the superseding indictment, Tzolov and Butler were, until September 2007, brokers who ran Credit Suisse’s Corporate Cash Management Group, a division that helped its clients manage excess corporate cash holdings. Beginning in November 2004, the defendants approached various companies (“the companies”) that had banking relationships with Credit Suisse to pitch the benefits of investing cash in ARS backed by student loans, typically Federal Family Education Loan Program loans guaranteed by the U.S. Department of Education. These ARS were sold, and the interest paid on the securities was set, at auctions that occurred every 28 days. In their sales presentations, the defendants represented that the student loanbacked ARS were very low-risk investments guaranteed by the United States government; that the market for the securities was very liquid; and that the risk of an auction failing was minimal because of the federal government guarantee. As a result, a number of the companies agreed to invest money in ARS backed by student loans.

Subsequently, without the knowledge or consent of the companies, the defendants began to use the companies’ funds to purchase higher-yield, mortgage-backed collateralized debt obligations, or “CDOs.” CDOs are asset-backed products built from a portfolio of fixed-income assets, including mortgages, subprime mortgages, and second mortgages. Mortgage-backed CDOs traded as auction rate securities (“CDO-ARS”) are purchased through an auction process on the same 28-day cycle as the ARS backed by student loans. However, because of their greater risk, CDO-ARS provided a higher yield and, as a result, the commissions paid to the defendants by Credit Suisse were far greater for sales of CDO-ARS.

In order to conceal their scheme, the defendants sent the companies e-mails in which they, or their assistants, falsified the names of the products bought, sold, and held by the companies, falsely creating the appearance that the companies had invested in student loanbacked ARS. In some instances, the fraudulent e-mails listed the CDO-ARS products with the term “CDO” removed from the name. In other instances, the e-mails included the term “student loan” or “SL” in the name of a CDO-ARS product, despite the fact that the CDO-ARS had no connection whatsoever to student loans.

In approximately August 2007, the defendants’ scheme was discovered when the market for the mortgage-backed CDOs purchased by the companies collapsed and various auctions for CDO-ARS began to fail, resulting in the defendants being unable to liquidate the companies’ investments and return their money.

“The defendants’ fraudulent misrepresentations and ‘bait-and-switch’ tactics saddled investors with unknown risks they did not bargain for,” stated United States Attorney Campbell.

“Those who engage in such schemes will be aggressively investigated, prosecuted, and held to account for their criminal activity.”

Mr. Campbell thanked the Securities and Exchange Commission for its assistance and added that the government’s investigation is continuing.

FBI Assistant Director-in-Charge Mershon stated, “Investors who were told they were purchasing relatively low-risk securities backed by student loans were unwittingly purchasing high-risk mortgage-backed securities. For a nearly three-year period, what Tzolov and Butler sold their clients was a bill of goods. The FBI remains committed to policing the securities industry to protect investors from all forms of unscrupulous and illegal conduct.”

The securities fraud count and the two counts of wire fraud each carry a maximum sentence of 20 years’ imprisonment and a $5 million fine. The conspiracy count carries a maximum sentence of five years’ imprisonment and a $250,000 fine.

The United States Securities and Exchange Commission announced that it has filed civil charges against both Tzolov and Butler.

The criminal case is being prosecuted by Assistant United States Attorneys Greg D. Andres, Christina Dugger, John P. Nowak, and Claire Kedeshian.

 mortgage fraud

   

Posted by Staff Reporter on 09/05/08 at 04:21 AM
Mortgage Fraud LocationsNew York • Total comments: (1) (0) Trackbacks
  1. credit, credit cards So you have borrowed up to your limit on your federally funded student loan offers. You applied for every scholarship imaginable, and accepted all the grants you received. Yet you still cannot afford all of the expensed related to your higher education. Now what? With all the talk of predatory lenders in the media, you may be scared away from getting a private student loan to cover the rest of the costs. There are many positive benefits to using private loans. Do not let media hype keep you from going to college – or convince you to avoid securing student credit card for your expenses.  The benefits to private student loans are individual to the student’s situation. Yet each student has some potential for a positive experience of using private loans and student credit cards. All it takes is a little information to make an educated choice.  Spotlight Student Card:  .  The first way to keep a private student loan a positive for yourself is to be sure you ask the loan company what their lowest offered fee and interest rate combination. Then be sure to note whether that combination applies to the life of the loan or just an introductory period. Do not be fooled by an incredibly low interest rate, or waived fee.

    Posted by  on  01/16  at  01:35 AM

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Today's News

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A judge didn't hold back when Shirley Matthews appeared before him Tuesday to be sentenced for stealing from a Monroe County man instead of helping him save his home from foreclosure, as she was hired to do.

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A New Jersey woman will be spending two to five years in state prison after she was sentenced on Tuesday for promising to help homeowners avoid foreclosure and then keeping the money she was given for their mortgages.

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Why did so many units go into foreclosure all at once? In some cases, the reason can be traced to mortgage fraud.

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Juan Carlos Alcala of Windsor pleaded no contest to nineteen felony counts and admitted three special allegations for defrauding real estate investors, money laundering and elder fraud.

Bedford Woman Sentenced to a Year in Prison for Mortgage Fraud
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Sharon Cox, 49, of Bedford, was sentenced today to a year in prison for mortgage fraud involving money laundering, theft and receiving stolen property from August 2008 through March.

CITIZEN JOURNALISM: Mortgage Fraud High in Area
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According to the FBI, Virginia, Maryland and the District are among the top 10 jurisdictions experiencing mortgage fraud.

Former Vegas Resident Charged with Mortgage Fraud in Nevada
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A former Las Vegas resident has been charged with federal conspiracy and fraud charges for his involvement in a Nevada mortgage fraud scheme involving straw buyers and falsified mortgage loan documents...

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A suburban St. Louis mortgage company operator has been sentenced to more than 11 years in prison for a mortgage fraud scheme.

12-Year Prison Term in Mortgage Swindle
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A Maryland woman who stole millions from Washington area homeowners trying to avoid foreclosure is a "vulture" whose case should serve as a warning to other con artists...

Previous Articles

TRIAL COVERAGE

Trial coverage provided by Anne Mitchell, Crazy Fish Realty.

F. Jeffrey Miller Update - October 20, 2009

A hearing was held in Topeka, Kansas in front of Judge Julie Robinson. Miller is currently being held pending his sentencing which is set for December 22nd, 2009 at 9:00 a.m.. Steve Vanatta and Hallie Irvin, Miller's codefendants, will be sentenced at that time also.

Several motions were heard this week. One was a motion for Miller to be released pending his sentencing. Miller's attorney, Jeff Morris, argued that the court had dismmissed with predjudice the matter involving Miller's purchase of a commercial lawnmower, violating the court ordered monitoring agreement. He also argued that Miller was not a flight risk and should be released. This motion was denied

Another motion heard by Judge Robinson was that of an escrow account containing proceeds from the sale of Miller's forfeited assets. This account has a balance of $143,000. Attorney Morris argued that his firm was due $100,000 for work done in the Miller matter, to date. The government argued that his 'un-itemized fees' were 'exhorbitant'. The balance of the funds, Morris argued, should be released to the Miller family to help pay for mounting household expenses.

The government argued that the 'Asset Forfeiture Provision' applies down to 'the last penny' and that 'the rights of the victims to made whole are of paramount immportance' and that no routine household expenses like Visa bills, are allowed.

Attorney Morris argues that there is more than enough assets to satisfy the jury's judgement of $2.65 million dollars. The government argues that the estimated value of his assets are only $1.4 million.

The government also stated that Miller has been paid dividends from a company Miller has an ownership interest in; Boreflex. From July, 2008 to present, Miller has been paid $330,509.30 from Boreflex, unbeknownst to the court appointed monitor.

Present in the courtroom was Todd Earnshaw. Earnshaw was indicted along with Miller and others in what is commonly referred to as 'Miller I'. That trial is scheduled to begin on January 11, 2010 in Topeka, Kansas.



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The information and notices contained on Mortgage Fraud Blog are intended to summarize recent developments in mortgage fraud cases and mortgage banking matters nationwide. The posts on this site are presented as general research and information and are expressly not intended, and should not be regarded, as legal advice. Much of the information on this site concerns allegations made in civil lawsuits and in criminal indictments. All persons are presumed innocent until convicted of a crime. Readers who have particular questions about mortgage banking, mortgage fraud matters or who believe they require legal counsel should seek the advice of an attorney. The creators, editors and sponsors of Mortgage Fraud Blog do not intend to create a confidential relationship or an attorney-client relationship by communication via or arising from this site.

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