Chester Peggese, 59, Los Angeles, California was sentenced to serve one year and one day in federal prison yesterday in connection with recruiting churches into a $4.2 million mortgage scheme that defrauded Broadway Federal Bank. Peggese was also ordered to pay restitution of $4.2 million to Broadway Federal Bank and $38,609 to the Internal Revenue Service.
Peggese pleaded guilty in 2015 to one count of bank fraud and one count of subscribing to a false tax return.
According to the plea agreement filed in the case, Peggese acted as a “consultant” who targeted Los Angeles-area churches with promises of new mortgages to purchase property or refinanced mortgages from Broadway Federal Bank. Between 2007 and 2009, Peggese met with representatives of churches and obtained financial information required for the loan applications. Others involved in the scheme altered the financial information to make it appear the churches were more financially sound than they actually were, and Peggese caused these false loan applications to be submitted to Broadway Federal Bank.
A bank insider, Paul Ryan, 48, Los Angeles, California, provided a template for presenting financial information for the churches that ensured the loan applications would be approved. Based on the false information concerning the financial status of the churches, Broadway Federal Bank issued loans to the churches. Peggese received his payment from the escrow accounts and paid kickbacks to Ryan.
Ryan pleaded guilty in 2014 to one count of receiving bribes and rewards as a bank employee. Ryan is scheduled to be sentenced by United States District Judge S. James Otero on May 9, at which time he will face a statutory maximum sentence of 30 years in federal prison. Ryan has agreed to pay restitution of $353,925 to Broadway Federal Bank.
When Peggese pleaded guilty, he admitted submitting false financial information for an unidentified church to Broadway Federal Bank in 2007. As a result of this false information, Broadway Federal Bank issued a $1.33 million loan. When the church defaulted on the loan, Broadway Federal Bank suffered a $403,010 loss.
In relation to the tax count, Peggese admitted he failed to report $106,325 of business income that he received in 2008, at least a portion of which was derived from the scheme to defraud Broadway Federal Bank. In addition, for calendar years 2007 and 2009, Peggese had additional gross business receipts not reported on his tax returns of $39,900 and $13,536, respectively. As a result of this unreported income, the total taxes owed by Peggese for the years 2007 through 2009 is $38,609.
“It is beyond dispute that mortgage fraud does significant harm to the country,” said United States Attorney Eileen M. Decker. “Crimes like these in the aggregate place financial institutions in jeopardy, which in turn places the entire economy in jeopardy.”
Peggese was sentenced by United States District Judge Manuel L. Real. The investigation into Peggese and Ryan was conducted by the Federal Bureau of Investigation, IRS Criminal Investigation, the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), and the Federal Deposit Insurance Corporation’s Office of Inspector General.