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Rachel 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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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.
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.
Failed Mortgage Firm Trustee Allowed $50,000 in Fees Union Leader
U.S. Bankruptcy Court Judge J. Michael Deasy will approve $50,000 in legal fees for the trustee of failed mortgage brokerage businesses Financial Resources Mortgage Inc. and CL&M Inc.
Bend Oregon Event to Help Homeowners Prevent Foreclosures Oregon.Gov
As part of an ongoing effort to help homeowners avoid foreclosure, state agencies are organizing a foreclosure-prevention event in Bend on Saturday, March 27, 2010.
Shelbyville Man Gets 2-Year Sentence For Loan Fraud Chattanoogan.Com
Prosecutor Gary Humble said the lost was approximately $2.3 million in the mortgage fraud involving hundreds of homes in the Shelbyville area.
Lend America, VP Ashley Banned from FHA Housing Wire
Michael Ashley, the embattled former vice president of Federal Housing Administration (FHA)-backed mortgage originator Lend America, and the company he worked for, were permanently banned from doing business in the industry last week.
Countrywide Tries to Pin Blame on Insurer Court House News
Countrywide Home Loans demands $111 million from Triad Guaranty Insurance, claiming Triad is trying to blame mortgage lenders for the insurer's role in the housing bubble and collapse.
Investors Say They Were Swindled in Property Scheme Fox 13 Now
Utah Division of Consumer Protection is joining forces with a few investors who claim they have been cheated by an agency called "Utah Mini Ranches.
Greenfield Man Accused of Housing Scam The Republic
A former real estate agent conned at least eight people by renting them properties actually owned by a federal agency and then running off with their deposits, prosecutors said.
Appraisal Institute Opposes Obama Administration's Plan for Homeowner 'Short Sales' PR News Wire
Citing concerns about increased mortgage fraud, four organizations representing more than 35,000 real estate appraisers today voiced their opposition to changes to an Obama administration program that will encourage "short sales" of homes.
Ownership Rights to Get Another Look TBO.Com
State lawmakers may beef up protections of property owners' rights by rewriting a law this spring that is at the center of a case of alleged fraud in Pasco County.
Thursday, February 18, 2010 F. Jeffrey Miller Trial Continued Testimony
As reported by Anne Mitchell, who viewed the trial:
Angela Parenza worked for Jeff Miller as the office manager for 7 or 8 years beginning in 1998. Parenza was indicted along with Miller and pled guilty to conspiracy to commit bank fraud and money laundering. Parenza testified that Miller or his contractors allegedly preferred to build all the...
Wednesday, February 10, 2010 F. Jeffrey Miller Trial Coverage Continued - Witness Testimony
Steve Middleton Testimony - Coverage Provided by Anne Mitchell
The Government continued in its cross examination of Steve Middleton. He was shown several HUD-1 statements involving sales of homes located in Overland Park, KS, and Olathe, KS. The HUD statements each allegedly showed line items of payments to (James) Moser & Associates, LLC's...
Monday, February 01, 2010 F. Jeffrey Miller Trial Coverage - Continued Witness Examination
According to Anne Mitchell, who is present in court for the trial:
Next Witness: Kelly Sanford
Kelly Sanford of the Federal Reserve was a short witness for the Government. Sanford manages electronic payments between banks and member financial institutions. He was shown copies of wire transfers and asked whether they coincided with the counts in...
Wednesday, January 27, 2010 F. Jeffrey Miller Trial - Prosecution Witnesses Continued
According to Anne Mitchell, who is viewing the trial:
January 13, 2010
Witness: Rick Hayes
Rick Hayes testified that on the day that he closed on his Miller Enterprise home, he received a phone call from the Kansas Banking Commission informing him that his loan was fraudulent. After the Hayes responded to a classified ad, they met with John...
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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.
Rachel 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 
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