Tuesday, October 21, 2008
Agent Pleads Guilty To $12M Phony Home Loan Scam
David Kostelec, 53 Leawood, Kansas, has pleaded guilty to charges he and other conspirators fraudulently obtained more than $12 million in home loans.
In his plea, Kostelec admitted that from July 20, 2002, through Oct. 14, 2005, he and others conspired to defraud lenders by submitting fraudulent loan applications and false real estate appraisals and attempted to conceal the crimes by laundering the money through accounts at various banks.
Kostelec submitted false and fraudulent appraisal reports to lenders containing inflated property values and forged signatures of licensed appraisers. Conspirators stole the identities of licensed appraisers by searching the Internet for information including the appraisers’ state license numbers.
After closing, the conspirators used straw entities including Alexandra Enterprises and Hyde Park Development to receive the money from escrow companies. Then they moved the money to personal accounts.
Kostelec admitted:
– In July 2002, he submitted a fraudulent appraisal inflating the value of a house in the 1800 block, Timber Valley Drive, Linn Valley, Kansas.
– In April 2003, he submitted a false loan application in his son’s name claiming his son was the owner of a house in the 1600 block, N. 24th Street, Kansas City, Kansas. In fact, Andrew Kostelec lived with David Kostelec at another address.
– In July 2004, he fraudulently caused a lender to deposit $57,101 into an escrow account in Kansas for the purchase of a house in the 2000 block, Cypress, Kansas City, Kansas.
– In October 2005, he submitted a loan application falsely stating that the borrower had an income $15,221 a month. In fact, the borrower made significantly less and lived mainly on Social Security retirement benefits.
– In January 2008 he falsely stated he had power of attorney to obtain a loan in his son’s name for $575,000 for the purchase of real estate properties in Kansas City, Missouri, and Miami, Florida.
Sentencing is set for February 2, 2009. The crimes to which he pleaded guilty carry the following penalties:
– Conspiracy: A maximum penalty of 5 years in federal prison and a fine up to $250,000.
– Wire fraud: A maximum penalty of 20 years and a fine up to $250,000.
– False statements on a loan application: A maximum penalty of 30 years and a fine up to $1 million.
– Identity theft: A mandatory 2 years in federal prison consecutive to other terms of imprisonment.
The Internal Revenue Service - Criminal Investigation and Housing and Urban Development - Office of Inspector General worked on the case. Acting U.S. Attorney Marietta Parker prosecuted the case.
mortgage fraud
I have a question, rather than a comment. Who were the other conspirators and were they charged and found guilty?
Posted by on 02/18 at 06:49 AM
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Trial coverage provided by Anne Mitchell, Crazy Fish Realty.
F. Jeffrey Miller Update - October 20, 2009
A hearing was held in Topeka, Kansas in front of Judge Julie Robinson. Miller is currently being held pending his sentencing which is set for December 22nd, 2009 at 9:00 a.m.. Steve Vanatta and Hallie Irvin, Miller's codefendants, will be sentenced at that time also.
Several motions were heard this week. One was a motion for Miller to be released pending his sentencing. Miller's attorney, Jeff Morris, argued that the court had dismmissed with predjudice the matter involving Miller's purchase of a commercial lawnmower, violating the court ordered monitoring agreement. He also argued that Miller was not a flight risk and should be released. This motion was denied.
Another motion heard by Judge Robinson was that of an escrow account containing proceeds from the sale of Miller's forfeited assets. This account has a balance of $143,000. Attorney Morris argued that his firm was due $100,000 for work done in the Miller matter, to date. The government argued that his 'un-itemized fees' were 'exhorbitant'. The balance of the funds, Morris argued, should be released to the Miller family to help pay for mounting household expenses.
The government argued that the 'Asset Forfeiture Provision' applies down to 'the last penny' and that 'the rights of the victims to made whole are of paramount immportance' and that no routine household expenses like Visa bills, are allowed.
Attorney Morris argues that there is more than enough assets to satisfy the jury's judgement of $2.65 million dollars. The government argues that the estimated value of his assets are only $1.4 million.
The government also stated that Miller has been paid dividends from a company Miller has an ownership interest in; Boreflex. From July, 2008 to present, Miller has been paid $330,509.30 from Boreflex, unbeknownst to the court appointed monitor.
Present in the courtroom was Todd Earnshaw. Earnshaw was indicted along with Miller and others in what is commonly referred to as 'Miller I'. That trial is scheduled to begin on January 11, 2010 in Topeka, Kansas.
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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 
