Tuesday, May 13, 2008

7th Defendant To Plead Guilty In Massive Mortgage Fraud Scheme

Charles Elliott Fitzgerald, 47, pleaded guilty to one count of conspiracy to commit bank fraud and loan fraud; three counts of bank fraud; one count of organizing, managing, and supervising a continuing financial crimes enterprise; one count of concealment money laundering; and one count of obstruction of justice.  Sentencing is scheduled for August 18 before Judge Pregerson.

The charges to which Fitzgerald pleaded guilty carry a total statutory maximum penalty of life imprisonment, a fine of $14,000,000, and restitution.  The continuing financial crimes enterprise count carries a statutory mandatory minimum penalty of 10 years imprisonment.

As previously reported by Mortgage Fraud Blog, Fitzgerald has been in federal custody since December 2006, when he was arrested and deported by authorities in the Independent State of Samoa, a Pacific island nation where he fled to in June 2003 after he was sued by a mortgage lender he allegedly defrauded.

Fitzgerald is the seventh defendant to plead guilty in the scheme.  Previous defendants who pleaded guilty are:

• Mark Alan Abrams, 45, Los Angeles;

• Nicole LaViolette, 37, Palm Springs;

• Jamieson Matykowski, 33, Laguna Niguel;

• Timothy Holland, 35, Santa Ana;

• Richard Maize, 53, Beverly Hills; and

• L. Scott Robinson, 44, Dana Point, all of California.

Charges are still pending against three other defendants allegedly involved in the scheme.  These are real estate agents Joseph Aram Babajian, 54, Beverly Hills and Kyle Grasso, 36, Paso Robles; and appraiser Lila Rizk, 40, Trabuco Canyon.  Trial for those defendants is set to begin on October 21 before Judge Pregerson.

According to the first superseding indictment against Fitzgerald and court documents in the related cases, Fitzgerald and the others were allegedly involved in a wide-ranging and sophisticated conspiracy to defraud federally insured mortgage lenders out of tens of millions of dollars. As part of the scam, the co-conspirators obtained inflated mortgage loans on expensive homes in some of California‘s most exclusive neighborhoods, including Beverly Hills, Bel Air, Holmby Hills, Malibu, Carmel, Mill Valley, Pebble Beach and La Jolla. According to the court documents, the conspiracy was spearheaded by Fitzgerald and Abrams.  The court documents charge that the co-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.  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.

Lehman Brothers Bank sued Fitzgerald, Abrams and others in federal court in Los Angeles in 2003 and obtained a receivership, temporary restraining orders, and preliminary injunctions against them. Judge Pregerson appointed David J. Pasternak as receiver to recover assets acquired with proceeds of the fraud. The receiver, as well as attorneys and forensic accountants employed by him, have cooperated extensively with the government’s ongoing criminal investigation.

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