Cedric Lipsey, 35, and Philip A. Martinez, 34, both from Denver, Colorado, were indicted by a federal grand jury last week on charges of wire fraud as part of a mortgage fraud scheme. Lipsey was arrested by federal agents without incident. He appeared in U.S. District Court in Denver on August 31, 2009 for an initial appearance, where he was advised of the charges pending against him. He appeared in court again, where U.S. District Court Magistrate Judge Kristen L. Mix authorized his release on a $50,000 property bond.
According to the indictment, beginning in April 2004, and continuing thereafter until about March 2006, in the District of Colorado and elsewhere, Cedric Lipsey, aided and abetted by defendant Philip A. Martinez, did knowingly devise and intend to devise a scheme to defraud lending companies that funded residential mortgage loans and to obtain money from them by means of materially false and fraudulent pretenses, representations, and promises.
Cedric Lipsey, a licensed real estate agent, held himself out as a successful real estate agent and investor. Philip A. Martinez was a loan officer and mortgage broker.
Lipsey orchestrated the purchase and resale or refinancing of numerous residential properties, including the sale of one of his own homes, by paying individuals to participate as “investors” in what he referred to as an investment “opportunity.” Lipsey and Martinez arranged for these so-called “investors” to use their good credit to obtain mortgage loans to purchase the properties. Shortly after the first set of loans that helped these individuals purchase properties, Lipsey caused them to sell the properties to a second set of buyers at substantially higher prices, with Lipsey and Martinez taking a combination of commissions, fees, and proceeds from the first and second transactions.
Lipsey falsely represented that the first buyers would be purchasing and had purchased the properties for less than their actual market value. The first sales were not “distressed”, as the defendants sometimes represented to facilitate their fraud. In fact, the first buyers purchased the properties at or near their market value, and there was no legitimate reason for the substantial increase in price when the same properties were resold shortly thereafter.
Lipsey and Martinez arranged to have a variety of fraudulent documents submitted to the lenders in support of the loan applications. These consisted primarily of documents purporting to show proof of the borrowers’ employment, proof of the borrowers’ assets, and sources of the borrowers’ asset, and incomes. The defendants also used forged signatures where necessary to facilitate the scheme. Furthermore, Lipsey enabled certain appraisers to create false reports which reflected that the subject properties were “comparable” to the higher quality or otherwise more valuable properties, when they were not.
U.S. Attorney David Gaouette, FBI Special Agent in Charge James Davis, and IRS Criminal Investigation Special Agent in Charge Christopher M. Sigerson announced the indictments.
“Mortgage fraud weakens our economy, threatens the recovery of the housing market, and makes it more difficult for law-abiding folks to purchase a home,” said United States Attorney David Gaouette.
“Mortgage fraud hurts borrowers, financial institutions, and legitimate homeowners,” said FBI Denver Division Special Agent in Charge James Davis. “The FBI, in conjunction with our law enforcement, regulatory, and industry partners, will continue to diligently pursue perpetrators of mortgage fraud schemes.”
“Mortgage fraud creates a significant loss of tax revenue, drives buyers into foreclosure, leave lenders burdened with bad loans and neighborhoods with abandoned and deteriorating properties,” said Christopher M. Sigerson, Special Agent in Charge, IRS Criminal Investigation, Denver Field Office.
If convicted of wire fraud, which are counts one through 27, the penalty is not more than 20 years in federal prison, and up to a $250,000 fine, per count. If convicted of count 28, monetary transaction in property derived from unlawful activity, the defendant faces not more than 10 years in federal prison, and up to a $250,000 fine.
The case was investigated by the Federal Bureau of Investigation (FBI), and the Internal Revenue Service – Criminal Investigation (IRS CI).
The case is being prosecuted by Assistant U.S. Attorney Linda Kaufman.
The charges contained in the indictment are allegations, and the defendant is presumed innocent unless and until proven guilty.