Friday, October 10, 2008

Los Angeles Mortgage Fraud Mastermind Sentenced

Charles Elliott Fitzgerald, 48, formerly of Newbury Park and Beverly Hills, California, was sentenced to 14 years in federal prison by United States District Judge Dean D. Pregerson, who also ordered Fitzgerald to pay $42,676,269 in restitution to two of the victim banks that he defrauded.  Fitzgerald, a former Los Angeles-based real estate developer, admitted playing a key role in a $50 million mortgage fraud scheme that defrauded banks by deceiving them into funding inflated mortgages.

At the sentencing hearing, Judge Pregerson said, “This is not a case about deregulation or exploiting loopholes. This is a case of good old-fashioned lying and cheating.”

A representative of one of the victim banks, RBC Mortgage Company, told Judge Pregerson that the fraud scheme caused not only the direct financial loss, but also millions of dollars of indirect costs and loss of jobs at the bank.

Fitzgerald pleaded guilty in May 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.

Fitzgerald has been in federal custody since December 2006, when he wasarrested and deported by authorities in the Independent State of Samoa, a Pacific island nation to which he fled in June 2003 after he was sued by the two victim banks.

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

• Mark Alan Abrams, 47, Los Angeles, California, who along with Fitzgerald orchestrated the scheme;

• Nicole LaViolette, 38, Palm Springs, California;

• Jamieson Matykowski, 35, Laguna Niguel, California;

• Timothy Holland, 37, Santa Ana, California;

• Richard Maize, 54, Beverly Hills, California; and

• L. Scott Robinson, 46, Dana Point, California.

Charges are still pending against three other defendants allegedly involved in the scheme. These are real estate agents Joseph Aram Babajian, 55, Beverly Hills, California, and Kyle Grasso, 37, Paso Robles, California; and appraiser Lila Rizk, 41, Trabuco Canyon, California. Trial for those defendants is currently set to begin on October 21, 2008, before Judge Pregerson.

In another development in this investigation, prosecutors on Tuesday filed a criminal information against mortgage banker Thomas R. Schiff, 47, Brentwood, California. Schiff was charged with, and has agreed to plead guilty to, making a false statement on his 2001 federal income tax return. Schiff, along with Maize, was a co-owner of the mortgage brokering company Americorp Funding. In his plea agreement, Schiff admitted that in 2001 he received more than $170,000 in payments from Fitzgerald, Abrams and their companies. He further admitted that he willfully failed to report this income on his 2001 federal income tax return.

The case against Schiff marks the 11th defendant charged, and he will become the 8th defendant to plead guilty.

According to court documents, Fitzgerald and the others were 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. 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 and RBC Mortgage Company 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.

The charges against Fitzgerald and the others are part of an ongoing investigation being conducted by the Federal Bureau of Investigation and IRS-Criminal Investigation.

mortgage fraud

1. These persons are organized crime which is worse than all the Italans being prosecuted for mere shakedowns and where were the feds and others for years and a rico only gets 14 yrs Italians get life its all about the money 42 mil restitution yeah good luck with that I guess well file a money judgement against his commeracy

   Posted by  on  10/10  at  01:12 PM

2. I say give them all the Electric Chair!

   Posted by  on  10/10  at  01:12 PM