The Georgia Department of Banking and Finance ("Department") referred this matter to the State Attorney General's Office after learning that in violation of a final Order to Cease and Desist, she continued to work a as mortgage loan processor for a residential mortgage licensee. In conjunction with doing so, Melvin used a false document purportedly written by the Commissioner of the Department that provided that she was not prohibited from engaging in residential mortgage activities.
Pursuant to the plea entered by Melvin to these two felonies, she has been placed on probation for a period of three years and must pay a fine in the amount of $2,000.00. Further, while she is on probation, Melvin is prohibited from obtaining employment in any real estate or mortgage business and cannot apply for or obtain professional licenses in either of these industries.
]]>Farley was charged in a criminal Information on October 15, 2009 with bank fraud and conspiracy, which included the bankruptcy fraud. He pleaded guilty to those charges. He could receive a maximum sentence of up to 60 years in prison and a fine of up to $2,000,000, plus full restitution to all victims. In determining the actual sentence, the Court will consider the United States Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders.
According to Acting United States Attorney Sally Quillian Yates and the information presented in court: Farley, a former mortgage broker, operated through "Creative Home Search," "Southern Land Partners," "Georgia Land Group," and "Global Mortgage" in Dunwoody and Norcross, Georgia, to defraud mortgage lenders through same-day "flips" of properties located in Buford, College Park, Conyers, Cumming, Dacula, Grayson, Lawrenceville, Lithonia, Norcross, Marietta, Roswell, Snellville, and Suwanee.
Farley paid an appraiser to fraudulently inflate the value of each property by $50,000 to $100,000, and recruited often unqualified investor/borrowers to purchase them from one of his companies. The loan applications of these investor/borrowers who were purchasing the properties were often supported by false income, employment, bank deposits, bank statements, W-2s, and/or leases. However, as is common with "flips," Farley did not purchase the properties he was selling to the investor/borrowers until after the fraudulently obtained loan proceeds on the "second" purchase had been disbursed. At that time he purchased the properties for up to $100,000 less than the amount of the inflated mortgage loans he had arranged for the investor/borrowers in the "second" purchase, thereby causing lenders to lose millions of dollars.
In the real estate investment-Ponzi part of the scheme, Farley then began to operate under the name of "Alliance Resource Management" ("ARM") in Lawrenceville, Georgia, to conceal his new source of income from prior victims. He falsely represented that ARM was in the business of purchasing primarily residential properties which were being renovated and sold at a profit, when ARM had insufficient equity and income to do so. Real estate investors and lenders, including private investors, corporate lenders, and banks, were induced through false promises that their investments and loans were fully secured by a first security position in property, plus a personal guarantee, and sometimes title insurance. Farley also provided promissory notes falsely promising ARM investors an interest rate between 14% and 60%. The same property was used to "fully secure" multiple investors and lenders, causing losses in excess of $20 million, with any victim repayments made from scheme proceeds generated from new investors and lenders in what is commonly known as a "Ponzi" scheme.
Farley also received $1.2 million from Washington Mutual Bank in a check-kiting scheme by transferring funds he did not have among several ARM bank accounts, and withdrawing scheme proceeds before the "insufficient funds" checks were returned. He then used $400,000 in investor funds solicited for property refinance loans to address the check-kiting problem.
Near the end of the scheme, Farley diverted assets of ARM to himself after a bankruptcy petition was filed, and concealed that diversion from the United States Bankruptcy Court and ARM creditors.
There is no parole in the federal system.
Sentencing is scheduled for February 3, 2010, at 10:30 a.m., before United States District Judge Timothy C. Batten, Sr.
This case is being investigated by Special Agents of the Federal Bureau of Investigation, assisted by the Office of the United States Trustee.
Assistant United States Attorney Gale McKenzie is prosecuting the case.
]]>During the plea hearing, Canty admitted that the intended loss to victims of the scheme was over $1,000,000. Canty agreed to a forfeiture Order requiring her to pay the government $342,572, which represents the amount of commissions she received from lenders on the fraudulent transactions. Canty faces up to 30 years in prison under the federal fraud statute when sentenced next year, but likely will face 41-51 months of imprisonment under the Federal Sentencing Guidelines.
According to the Statement of Offense filed by the government, to which Canty agreed, at all relevant times Canty was a mortgage broker with an office in Lanham, Maryland. As part of her job duties, Canty completed and filed, often by mail or interstate wire transactions, loan applications to financial institutions on behalf of individuals involved in real estate transactions.
Starting in approximately June of 2005, Canty and others conspired to defraud financial institutions whose deposits were insured by the FDIC for the purpose of influencing the financial institutions to approve mortgage loans. Canty and other conspirators perpetrated this scheme by identifying distressed homeowners whose properties in Washington, D.C. and Maryland were facing imminent foreclosure and offering to purchase their properties. The conspirators told some of the homeowners that they could repurchase their properties within one year.
Canty prepared fraudulent letters to have derogatory information deleted from the sellers' credit reports so that their credit scores would be increased, thus allowing the sellers to qualify for the repurchase of their properties. The conspirators would then seek out unsophisticated individuals, with good credit scores or credit scores that could be fraudulently raised, to act as "straw purchasers," also known as "credit partners," for these transactions, often in exchange for a $5,000 to $10,000 fee to the straw purchaser for the use of his or her personal information to purchase the respective property. The straw purchasers understood that one of the conspirators would make the monthly mortgage payments, and the straw purchaser would not be otherwise financially responsible for the property or required to live there. On some occasions, the conspirators would use the identification of innocent, unknowing victims to make these purchases.
In furtherance of the conspiracy, Canty obtained financial information from the straw purchasers which she then falsified in order to qualify the applicants for their mortgage loans. Primarily, Canty inflated the straw purchaser's income, so it would decrease the debt-to-income ratio for a more favorable rate and loan approval. Based upon her experience, Canty knew the significance of debt to income ratio on a borrower's ability to obtain high mortgage loans. Canty knowingly falsified the loan applications in a number of ways, including, among others:
In the course of this scheme, Canty obtained loans from at least eleven lenders to which she had knowingly submitted fraudulent information. Canty benefitted from these transactions by charging a large fee, usually five percentage points of the purchase price, on these transactions. Her commissions from lenders to which she had
submitted fraudulent information were approximately $342,572.00. The conspirators benefitted from this scheme, in among other ways, by skimming equity from the properties, often after inflating the appraisals, and charging excessive brokerage fees. As a result of these transactions, several of the properties have gone into foreclosure.
In response to Canty's plea, Joseph Persichini, Jr., Assistant Director in Charge of the FBI's Washington Field Office, stated that:
"The successful conclusion of this important investigation should send a clear message to bad actors in the District's real estate and mortgage business community that law enforcement has united to address the crime problem of mortgage fraud. There is no safe harbor for criminals in this business. Federal agencies have joined with the Metropolitan Police Department to form a regional mortgage fraud task force and step up efforts to eradicate fraud within the region's real estate and mortgage industries. Today's result is emblematic of the impact this collaboration will have in our community."
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According to information presented in court, in September 2007, Elrod devised a scheme to defraud mortgage financing companies by submitting false documents in order to qualify for mortgages for the purchase of a residential property. Elrod falsely inflated levels of earned income and forged signatures on a Request for Verification of Employment form as part of a loan application package. Elrod faces up to 5 years in federal prison at sentencing. A sentencing date has not yet been set.
This case is being investigated by the Federal Bureau of Investigation and prosecuted by Assistant U.S. Attorney Frank Coan.
]]>Franks Hernandez is accused of stealing her sister's identity between December 2003 and February 2004 to fraudulently obtain an $83,000 mortgage through MSHDA. She then defaulted on the mortgage, leaving taxpayers with a balance of more that $76,000. Franks Hernandez's sister resides in Mexico.
Franks Hernandez is charged with one count of false pretenses over $20,000, a 10-year felony, as well as one count of identity theft, a 5-year felony. Franks Hernandez was arraigned Friday in the 61st District Court in Grand Rapids before Judge Donald Passenger. The court imposed a $5,000 bond and Franks Hernandez is next due in court for a preliminary examination before Judge Jeanine LaVille on November 10.
"Mortgage fraud is making it harder for people who play by the rules to achieve the American dream of home ownership," said Michigan Attorney General Mike Cox.
The charges are the result of a joint effort by the Michigan Attorney General's office, the Michigan State Police and the U.S. Department of Housing and Urban Development.
A criminal charge is merely an accusation and the Defendants are presumed innocent unless proven guilty.
]]>There are currently mortgage fraud-related charges pending against approximately 500 defendants in federal mortgage fraud cases around the nation. The cases concern both mortgage schemes designed to defraud mortgage lenders and "foreclosure rescue schemes" which prey on distressed homeowners.
"This initiative sends a clear message that mortgage fraud will not be tolerated. We must protect the integrity of the real estate market in our communities, which is a major contributor to the health of our economy, here and throughout the country," said U.S. Attorney Albritton.
Florida's Mortgage Fraud Surge was launched in late January 2009 in response to the epidemic of mortgage fraud throughout the state, which began during Florida's real estate boom earlier this decade. To address this wide scale problem, the U.S. Attorney's Office for the Middle District of Florida, along with the Federal Bureau of Investigation (FBI) in both its Tampa and Jacksonville Divisions, began a nine-month intensive effort to identify, investigate, and prosecute mortgage fraud in all of its forms.
To accomplish the Surge, the FBI and the U.S. Attorney's Office for the Middle District of Florida devoted significant additional personnel and resources to investigating and prosecuting mortgage fraud cases. All of the Assistant U.S. Attorneys in the Ft. Myers, Orlando, and Jacksonville offices responsible for criminal matters handled mortgage fraud investigations, and in the District's largest office, Tampa, over half of the Criminal Division Assistant U.S. Attorneys were assigned mortgage fraud matters. In addition, FBI Special Agent in Charge Steven E. Ibison of the Tampa Division and FBI Special Agent in Charge Jim Casey of the Jacksonville Division established mortgage fraud task forces in their respective jurisdictions. A number of state and federal law enforcement agencies joined these mortgage fraud task forces, and the agents, investigators, and other law enforcement personnel from these participating agencies conducted an intensive and wide-ranging investigation into hundreds of mortgage fraud leads during this Surge phase. Along with the FBI, the agencies that joined in the Surge and who participated in the mortgage fraud task forces are: the Internal Revenue Service-Criminal Investigation, U.S. Secret Service, U.S. Housing and Urban Development Office of Inspector General, U.S. Postal Inspection Service, Florida Department of Law Enforcement, Florida Department of Financial Services/Division of Insurance Fraud, Florida Office of Financial Regulation, Florida Department of Business and Professional Regulation, Lee County Sheriff's Office (Ft. Myers Division only), Collier County Sheriff's Office (Ft. Myers Division only) and Brevard County Sheriff's Office (Orlando Division only).
The U.S. Attorney's Office charged mortgage fraud defendants throughout the Middle District of Florida. The number of defendants charged by office breaks down as follows: Ft. Myers-32; Tampa-30; Orlando-19; and Jacksonville-24. Of these defendants, 7 are related to cases under seal and not in the public record at this juncture.
An indictment or complaint is merely a formal charge that a defendant has committed a violation of the federal criminal laws, and every defendant is presumed innocent unless, and until, proven guilty.
The surge investigation completed on October 31, 2009, and announced today is the first phase of a continuing effort to investigate and prosecute not only mortgage fraud professionals and other individuals who have engaged in multiple fraudulent mortgage transactions, but also larger organizations and even financial institutions.
]]>According to the criminal Information previously filed against Kovachev, other documents filed in this case, and statements made during Kovachev's plea proceeding:
During 2006 and 2007, Marc Dreier, the founder and managing partner of the law firm Dreier LLP, sold to a New York City hedge fund various promissory notes with a face value of approximately $115 million. The notes were purportedly issued by a New York City real estate development company (the "Developer"). In September 2008, after the notes were not repaid
on time, an employee of the hedge fund asked to meet with representatives of the Developer at the Developer's offices.
Dreier agreed, and on October 15, 2008, when employees of the hedge fund went to the Developer's offices, Dreier brought them into a conference room and introduced Kovachev, who pretended that he worked in the finance department of the Developer and falsely answered questions about the Developer's finances.
That same month, Kovachev directly contacted the founder of another hedge fund to tell him about notes that Dreier had for sale. Kovachev thereafter introduced DREIER to employees
of that hedge fund, which ultimately purchased for $13.5 million fictitious promissory notes purportedly issued by the Developer.
Also in October 2008, Dreier informed a third hedge fund that it could buy the Developer's notes at a discount. When employees of the fund asked to speak with someone at the Developer about financial statements Dreier had supplied, Dreier arranged a conference call among himself, the hedge fund employees, and Kovachev, who falsely pretended to be the Developer's CEO. During the call, Kovachev discussed the financial statements, which were fictitious, and falsely answered questions about the Developer's finances. That third hedge fund subsequently bought fictitious notes from Dreier for approximately $100 million.
During October and November 2008, Dreier paid Kovachev a total of approximately $215,000 for engaging in the impersonations and assisting in the sale of fictitious promissory notes.
Kovachev pleaded guilty to Count One of the Information, which charged him with conspiracy to commit securities fraud and wire fraud, and to Count Three of the Information, which charged him with wire fraud. He is scheduled to be sentenced by Judge Buchwald on March 5, 2010, at 2:30 p.m.
Following a guilty plea, DREIER was sentenced in July to 20 years in prison by Judge JED S. RAKOFF, and ordered to pay $387,675,303.32 in restitution and to forfeit $746,460,000 in
proceeds of his offenses.
Kovachev faces a maximum sentence of 5 years in prison on the conspiracy charge and a maximum sentence of 20 years in prison on the wire fraud charge. Each of those charges also carries a maximum fine of $250,000 or twice the gross gain or loss from the offense. Kovachev agreed as part of his plea to forfeit the funds he received from DREIER as payment for his
fraudulent activities.
Preet Bharara, the United States Attorney for the Southern District of New York, announced the guilty plea.
United States Attorney Bharara stated: "Kosta Kovachev flagrantly disregarded the law when he impersonated others to induce purchases of fictitious notes. Unfortunately, Kovachev's
play-acting caused millions of dollars of real losses to real victims."
Mr. BHARARA praised the work of the Criminal Investigators of the United States Attorney's Office and thanked the United States Securities and Exchange Commission for its assistance in the case.
]]>The department's complaint alleges that the defendant:
* misrepresented to investors that their investment proceeds would be secured by real estate loans
* misrepresented to investors that not less than 75 percent of the fund portfolio balance would be invested in first lien position real estate loans
* misrepresented to investors that the fund would be reconciled by a CPA on a monthly basis
* misrepresented to investors that a CPA would perform an annual audit of the fund
* failed to advise investors that some investor money would be used for Jones' personal benefit
* failed to advise investors that the only way the fund could be successful would be to continue to bring new investor money into the fund
The State's suit seeks a Court order permanently enjoining Jones from further violations of the Idaho Securities Act and the Idaho Financial Fraud Prevention Act and seeks to place restrictions on future business activities. Additionally, the Department seeks restitution of $3.7 million and civil penalties.
]]>As previously reported by Mortgage Fraud Blog, an Adams County jury convicted Essien in July 2009 on four felony charges all related to the use of shell corporations and false invoices to skim money off the top of nearly three-dozen real estate transactions. The charges were violating the Colorado Organized Crime Control Act, a class-two felony; two counts of forgery, both class-five felonies; and theft by receiving, a class-four felony. His conviction followed a seven-day trial.
Essien's conviction stemmed from an indictment the Office of the Attorney General obtained from the Statewide Grand Jury in March 2008. The indictment alleged that Essien and his colleagues fraudulently obtained $10.9 million in mortgages to buy 34 properties in Adams, Arapahoe, Denver and Jefferson counties between April 28, 2004 and Dec. 29, 2006. Essien and his colleagues then skimmed $1.1 million from the transactions to pay for repairs to the properties that the defendants' shell corporations never completed.
According to the indictment, Essien, while acting as a real estate broker, negotiated the property acquisitions and directed the buyers to create the shell corporations.
Colorado Attorney General John Suthers announced the sentencing.
The Office of the Attorney General also has successfully prosecuted nine of Essien's codefendants in the mortgage fraud ring. Each defendant has either pleaded guilty or been convicted following a jury trial.
Scott Hinkley (DOB: 2/21/1970) pleaded guilty on Dec. 12, 2008 to violating the Colorado Organized Crime Control Act, a class-two felony, and forgery, a class-five felony. He was sentenced Feb. 12, 2009 to 10 years in community corrections.
Bradly Decker (DOB: 12/7/1980) pleaded guilty on July 24, 2009 to theft by receiving, a class-three felony. He is scheduled to be sentenced on Sept. 24, 2009.
Idara Ekiko (DOB: 2/28/1978) pleaded guilty on Aug. 5, 2009 to computer crime, a class-three felony. She is scheduled to be sentenced on Sept. 30, 2009.
Cheri Decker (DOB: 4/4/1976) pleaded guilty Aug. 26, 2009 to violating the Colorado Organized Crime Control Act, a class-two felony, theft, a class-three felony, and forgery, a class-five felony. She is scheduled to be sentenced on Oct. 22, 2009.
Jennifer Wosley (DOB: 4/11/1975) pleaded guilty on June 16, 2008 to computer crime, a class-three felony. She was sentenced on Aug. 4, 2008 to eight years probation, to 200 hours community service, and drug and alcohol evaluation and treatment.
Jessica Caplan (DOB: 8/11/1969) was convicted of forgery, a class-five felony, during a jury trial. She is scheduled to be sentenced Oct. 17, 2009.
Heather Etuk (DOB: 4/29/1977) pleaded guilty on Aug. 4, 2008 to forgery, a class-five felony. She was sentenced Sept. 29, 2008 to five years probation, $30,900 restitution, a 90-day suspended jail sentence and 100 hours of community service.
Jessica Decker (DOB: 3/26/1978) pleaded guilty on Oct. 7, 2008 to obtaining a financial device with a false statement, a class-one misdemeanor. She was sentenced Oct. 7, 2008 to two years probation and $88,000 restitution.
Enoh Etuk (DOB:11/28/1953) pleaded guilty on July 24, 2009 to theft, a class-one misdemeanor. She was sentenced on July 24, 2009 to two years probation, and ordered to pay $133,781 restitution.
]]>Department of finance director, Gavin Gee, said that the department received complaints from three Idaho homeowners who had paid International Co-op LLC $1,500 to $2,000 on the company's representation that it would assist the homeowners obtain mortgage loan modifications. "On top of the company's failure to obtain a license, the affected Idaho homeowners received nothing for their money and are worse off than they were before," Gee said.
Companies offering mortgage loan modification services in Idaho are required to be licensed and, other than a reasonable application fee, are prohibited from charging any upfront fees, said Gee. "International Co-op LLC failed on both counts." During difficult economic times there are those who seek to prey on distressed homeowners, Gee warned. "The department of finance will continue to take action against mortgage loan modification companies that ignore Idaho's licensing laws and victimize Idaho homeowners in this way."
The department provides information on a variety of FREE foreclosure prevention resources that are available to distressed homeowners. That information can be accessed at the following website address: http://finance.idaho.gov/Mortgage/ForeclosureResources.aspx.
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