Mortgage Fraud Blog is the premier website for news and information on mortgage fraud and real estate fraud throughout the United States.
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
Mortgage Fraud Blog is co-sponsored by Interthinx the leading provider of fraud services and solutions for the mortgage industry.
4 Indicted in Los Angeles Property-Flipping Scheme
Joseph Babajian, 54, West Los Angeles, Kyle Grasso, 36, Santa Monica, Lila Rizk, 40, Trabuco Canyon, and Scott Robinson, 44, Dana Point, all of California, were charged in an 85-page indictment returned by a federal grand jury in Los Angeles, California . According to the indictment, the two real estate agents and two state-licensed real estate appraisers were indicted for allegedly participating in a massive mortgage fraud scam that caused more than $40 million in losses to federally insured banks.
During the alleged scheme, Babajian and Grasso worked at, and were part owners of, Prudential California Realty. Rizk and Robinson were appraisers licensed by the State of California. All four defendants were charged with conspiracy, bank fraud, and loan fraud. Additionally, Babajian and Grasso were charged with money laundering.
According to the 35-count indictment, the defendants and others previously charged in the case were involved in a wide-ranging and sophisticated conspiracy to defraud mortgage lenders by obtaining inflated mortgage loans on homes in some of California’s most expensive neighborhoods, including Beverly Hills, Bel Air, Holmby Hills and Malibu. Among those previously charged in the case are:
Charles Elliott Fitzgerald, 47, Newbury Park;
Mark Alan Abrams, 45, Los Angeles;
Nicole LaViolette, 37, Palm Springs;
Jamieson Matykowski, 33, Laguna Niguel; and
Timothy Holland, 35, Santa Ana.
Fitzgerald, who is in custody, is scheduled to go on trial on November 13 on a host of federal charges related to the alleged scheme. The other four have pleaded guilty to charges related to the scheme and are pending sentencing.
The indictment charges that the defendants and the previously-charged conspirators sent false documentation, including bogus purchase contracts and appraisals, to the victim banks to deceive them into unwittingly funding mortgage loans that were hundreds of thousands of dollars higher than the homes actually cost.
Allegedly, the scheme was executed through a series of acts:
Grasso, Fitzgerald and Abrams bought homes at their true market values, requiring the original sellers and their real estate agents to keep the true prices confidential;
Grasso, Fitzgerald, Abrams and others fabricated inflated purchase contracts to make it look like they were buying the homes for hundreds of thousands – or even millions – of dollars more than their true prices;
Rizk and Robinson inflated appraisals of the homes to justify the inflated prices;
Schemers sent false loan application packages – many in the names of “straw borrowers” – to victim banks at the inflated prices; and
In-house escrow companies were used to conceal the true prices of the homes and distribute the excess loan proceeds received from the victim banks.
After purchasing the homes at their lower, true market values, many of the homes were “flipped” by the conspirators, meaning that after they bought homes they staged second sales at inflated prices that were reported to the victim banks to justify the inflated loans. According to the indictment, Lehman Brothers Bank alone was deceived into funding more than 80 such inflated loans from 2000 into 2003, resulting in tens of millions of dollars in losses.
The indictment details the purchase of a Beverly Hills home by Fitzgerald and Abrams in 2000 for $2 million, which they reported to a victim bank as $4.395 million after Rizk and Robinson supplied inflated appraisals. Babajian and Grasso, who had the listing of the home, manipulated the Multiple Listing Service database to falsely report that it was listed and sold at $4.495 million. A bogus loan application package went to Lehman Brothers Bank in the name of a straw borrower, and the bank unwittingly funded a loan of more than $2.8 million on the property – more than $800,000 more than the true $2 million purchase price. The conspirators split the excess loan proceeds from the fraud, including more than $46,000 in commissions to Babajian and Grasso.
The indictment returned today alleges that Babajian and Grasso profited by collecting hundreds of thousands of dollars in commissions and concealed payments. Rizk and Robinson allegedly profited by collecting hundreds of thousands of dollars in inflated appraisal fees.
Lehman Brothers Bank sued Babajian, Grasso, Rizk, Robinson, and others in federal court in Los Angeles in 2003. The federal court appointed David J. Pasternak as receiver to recover assets acquired with proceeds of the fraud. The receiver, as well as his attorneys and forensic accountants, have cooperated extensively with the government’s ongoing criminal investigation.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty.
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...
Legal Disclaimer.
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 
mortgage fraud
