Tuesday, May 29, 2007

Mortgage Banker Agrees To Plead Guilty In Property Flipping Fraud Scheme

Richard A. Maize, 53, Beverly Hills, a West Los Angeles, California mortgage banker, was charged by information and agreed to plead guilty to federal criminal charges in a massive mortgage fraud scam that caused more than $18.5 million in losses to banks, including his former employer.

Maize, a co-founder of Americorp Funding, a mortgage banking company with offices in West Los Angeles and Pasadena, was charged with one count of conspiracy to commit bank fraud and loan fraud, three counts of bank fraud and one count of making a false statement on a federal tax return.

In a plea agreement, Maize agreed to plead guilty to the five felony counts and to cooperate in the government’s ongoing probe of the scheme.

Americorp originated, brokered, funded and sold mortgage loans. Maize was Americorp‘s top-producing mortgage banker, closing more than $192 million in loans in 2001 and more than $245 million in loans in 2002. Maize owned 45 percent of Americorp until about December 2000, when he and his partners sold Americorp to Prism Mortgage Company (later known as RBC Mortgage Company). At that time, Maize became the president of the Americorp division of a Prism/RBC subsidiary.

According to court documents, Maize and five others previously charged in the case 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 conspirators obtained inflated mortgage loans on expensive homes in some of California’s most exclusive neighborhoods, including Beverly Hills, Bel Air, Holmby Hills and Malibu.

Five people have previously been charged in the scam:

Charles Elliott Fitzgerald, 47, Newbury Park, California;

Mark Alan Abrams, 45, Long Beach, California;

Nicole LaViolette, 37, Palm Springs, California;

Jamieson Matykowski, 33, Laguna Niguel, California; and

Timothy Holland, 35, Santa Ana, California.

Fitzgerald, who is in custody, is scheduled to go on trial on July 31, 2007 on a host of federal charges related to the alleged scheme under a First Superseding Indictment. The other four previously charged have pleaded guilty to charges related to the fraud scheme and are pending sentencing. 

According to court documents, in late 1999 or early 2000, Fitzgerald and Abrams started a mortgage brokering company called Desert Pacific Financial, Inc. (DPF). The company sent mortgage loan applications to lenders for review and funding, and received commissions from those lenders when the loans closed. In late 2001, Fitzgerald and Abrams renamed the company Beverly Hills Estates Funding, Inc. (BHEF).

Fitzgerald and Abrams purchased homes at their real market values.  Abrams and his associates then recruited “straw borrowers” to obtain the inflated loans that were used to purchase homes from Fitzgerald and Abrams. The straw borrowers allowed the conspirators to use their names and credit to obtain mortgages as part of this “property-flipping” process. Armed with inflated appraisals and other false documentation, the conspirators submitted false and inflated loan application packages. As president of Americorp, Maize had contacts and business relationships with the victim lenders, which he exploited to deceive the victim lenders into approving and funding the inflated loans. He also abused his position as president and defrauded his employer, Prism/RBC, by deceiving the company into funding the inflated loans.

As one example, the case against Maize details the purchase by Fitzgerald and Abrams of a Bel Air home for $735,000. When they flipped the property, they “sold” the residence to a straw borrower for $2.37 million. A bogus loan application package went to Lehman Brothers Bank, and the bank unwittingly funded a loan of more than $1.4 million on the property – nearly double the true $735,000 purchase price – almost all of which ended up in one of the in-house escrow companies controlled by Fitzgerald and Abrams. According to the Maize charges, Lehman Brothers Bank alone was deceived into funding about 40 such inflated loans from March 2000 through July 2002. These 40 loans were for more than $28 million over the true prices of the homes. According to court documents, Maize received hundreds of thousands of dollars in kickbacks for his assistance in getting the loans approved. In 2001, he failed to report more than $175,000 of these kickbacks on his federal tax return.

mortgage fraud