Thursday, December 18, 2008

California Man Charged with Massive Investment Fraud Scheme

Milton Retana, 43, Norwalk, California was indicted on December 12, 2008, on seven counts of mail fraud, one count of wire fraud, and one count of making a false statement to federal law enforcement agents. Retana owned and operated Best Diamond Funding, a real estate brokerage and mortgage lending company, was arrested on federal charges for allegedly running an investment fraud scheme that lured more than 2,000 victims into investing more than $62 million. Retana made his initial appearance in United States District Court in Los Angeles.

According to the indictment, Retana began soliciting investors in late 2006 to invest with Best Diamond Funding by telling them that their money would be used to buy and sell real estate. Best Diamond Funding advertised in Spanish-language magazines, on the Internet, and held weekly investment seminars at several locations in Los Angeles.

The indictment alleges that in these advertisements, at investment seminars, and in personal meetings with potential investors, Retana, and others at Best Diamond Funding, told potential investors that the company’s success in buying, renovating, and selling properties allowed it to pay investors returns as high as seven percent of their invested principal each month, for a total guaranteed return of 84 percent each year. Potential investors were also encouraged to use the equity from their homes to fund their investment with the company. The indictment also alleges that investors were told that Best Diamond Funding employed as many as 60 real estate agents and often purchased as many as 50 to 60 properties at one time.

The indictment alleges that, in reality, Best Diamond Funding used only a fraction of the money that it received from investors to purchase and sell real estate. The indictment also alleges that most, if not all, of the monthly “profit” payments to investors did not come from real estate activity, but instead was siphoned from money invested by other investor victims, and in some cases, from the investor victims’ own principal. Finally, Best Diamond Funding is alleged to have employed fewer than five licensed real estate brokers and purchased fewer than 50 properties from late 2006 through October 2008.

The scheme was disrupted in October when inspectors from the United States Postal Inspection Service and agents from the Federal Bureau of Investigation executed a federal search warrant at the business offices of Best Diamond Funding Corporation in Huntington Park, as well as the religious bookstore Libreria del Exito Mundo, which was located in the adjacent building and was owned by Retana’s wife. During the search, agents seized nearly $4 million in cash. The FBI also froze approximately $8 million in funds from Best Diamond Funding and Retana’s bank accounts.

“Thousands of victims were lured by what appeared to be legitimate investments in the real estate market,” said Salvador Hernandez, Assistant Director in Charge of the FBI in Los Angeles. ”The FBI is increasingly concerned with alleged scam artists who prey on individuals affiliated with certain religious or community groups and exploit their trust.” The FBI and its partners, while committed to investigating fraud, encourage citizens to be cautious before investing their hard-earned money.”

“The devastation to one’s emotional well-being is immeasurable, when the trust they have placed in another is violated. The Postal Inspection Service is committed to these investigations to ensure public trust in the mail,” said B. Bernard Ferguson, Inspector in Charge of the Los Angeles Division of the United States Postal Inspection Service. Rentana faces a statutory maximum penalty of 165 years in federal prison.

mortgage fraud