Archives For False Documents

Daniel Cardenas, 37, Tampa, Florida, was sentenced today to 18 months in federal prison for conspiracy to commit wire fraud.

According to court documents, from as early as October 2007 through May 2008, Cardenas and others conspired to execute a wire fraud scheme affecting financial institutions. The goal of the scheme was to sell condominium units at The Preserve at Temple Terrace, a 392-unit condominium complex in Tampa, Florida. To entice buyers to purchase the units, the conspirators offered cash payments to buyers, either before or after closing. Payment of the funds to the individual buyers was neither known to nor approved by the mortgage lenders.

The conspirators made material false statements on loan documents, such as purchase and sale agreements, loan applications, and HUD-1 settlement statements, to induce mortgage lenders to approve loans for otherwise unqualified borrowers. The conspirators used several entities to conceal the payments to buyers from the mortgage lenders.

Cardenas’s role in the conspiracy, as a loan officer at Transcontinental Lending Group’s branch in Tampa, Florida included but was not limited to preparing, signing, and certifying false and fraudulent loan applications submitted to lenders in order to induce the institutions to provide funding for buyers. The false representations submitted to and relied upon by the mortgage lenders included representations concerning occupancy, income, source of funds, and assets.  Cardenas’s participation in the mortgage fraud conspiracy caused approximately $710,000 in losses to the victim mortgage lenders.

Cardenas pleaded guilty on April 24, 2018.

This case was investigated by the Federal Housing Finance Agency, Office of Inspector General and Federal Bureau of Investigation. It was prosecuted by Special Assistant United States Attorney Chris Poor and Assistant United States Attorney Jay Hoffer.

 

Greisy Jimenez, 50, Methuen, Massachusetts, a real estate broker, was sentenced today in connection with a sweeping conspiracy to defraud banks and mortgage companies by engaging in sham “short” sales of residential properties in Merrimack Valley, Massachusetts.

Three co-conspirators involved in the scheme have been sentenced after pleading guilty to conspiracy to commit bank fraud. In June 2018, Jasmin Polanco, 37, Methuen, Massachusetts, a real estate closing attorney, was sentenced to 15 months in prison, three years of supervised release and ordered to pay $1,224,489 in restitution. In May 2018, Vanessa Ricci, 41, Methuen, Massachusetts, a mortgage loan officer, was sentenced to six months in prison, three years of supervised release and ordered to pay restitution of $963,730. In March 2017, Hyacinth Bellerose, 51, Dunstable, Massachusetts, a real estate closing attorney, was sentenced to time served and one year of supervised release to be served in home detention. http://www.mortgagefraudblog.com/?s=Greisy+Jimenez

The charges arose out of a scheme to defraud various banks via bogus short sales of homes in Haverhill, Lawrence and Methuen, Massachusetts in which the purported sellers remained in their homes with their debt substantially reduced. A short sale is a sale of real estate for less than the value of any existing mortgage debt on the property. Short sales are an alternative to foreclosure that typically occur only with the consent of the mortgage lender. Generally, the lender absorbs a loss on the loan and releases the borrower from the unpaid balance. By their very nature, short sales are intended to be arms-length transactions in which the buyers and sellers are unrelated, and in which the sellers cede their control of the subject properties in exchange for the short-selling bank’s agreement to release them from their unpaid debt.

The conspiracy began in approximately August 2007 and continued through June 2010, a period that included the height of the financial crisis and its aftermath. Home values in Massachusetts and across the nation declined precipitously, and many homeowners found themselves suddenly “underwater” with homes worth less than the mortgage debt they owed. As part of the scheme, Jimenez, Polanco, Ricci, Bellerose and others submitted materially false and misleading documents to numerous banks in an effort to induce them to permit the short-sales, thereby releasing the purported sellers from their unpaid mortgage debts, while simultaneously inducing the purported buyers’ banks to provide financing for the deals. In fact, the purported sellers simply stayed in their homes, with their debt substantially reduced.

The conspirators falsely led banks to believe that the sales were arms-length transactions between unrelated parties; in fact, the buyers and sellers were frequently related, and the sellers retained control of (and frequently continued to live in) the properties after the sale. The conspirators also submitted phony earnings statements in support of loan applications that were submitted to banks in order to obtain new financing for the purported sales. In addition, the defendants submitted phony “HUD-1 Settlement Statements” to banks that did not accurately reflect the disbursement of funds in the transactions. HUD-1 Settlement Statements are standard forms that are used to document the flow of funds in real estate transactions. They are required for all transactions involving federally related mortgage loans, including all mortgages insured by the Federal Housing Administration.

Jimenez was sentenced by U.S. Senior District Court Judge Mark L. Wolf, to three years in prison, four years of supervised release, and ordered to pay a fine of $12,500. The court will determine issues of restitution and forfeiture on Aug. 29, 2018. In January 2018, Jimenez pleaded guilty to two counts of bank fraud and one count of conspiracy to commit bank fraud.

United States Attorney Andrew E. Lelling; Christina Scaringi, Special Agent in Charge of the Department of Housing and Urban Development, Office of Inspector General, New York Field Office; and Christy Goldsmith Romero, Special Inspector General of the Troubled Asset Relief Program, made the announcement. Assistant U.S. Attorney Stephen E. Frank, Chief of Lelling’s Economic Crimes Unit, and Assistant U.S. Attorneys Sara Miron Bloom and Victor A. Wild, also of the Economic Crimes Unit, prosecuted the cases.

Momoud Aref Abaji, 37, Huntington Beach, California was sentenced to federal prison for his leadership role in a “builder bailout” mortgage fraud scheme.

The scheme Abaji operated resulted in the fraudulent purchase of more than 100 condominium units around the country, causing more than $10 million in losses when the properties went into foreclosure.

Abaji, along with several co-conspirators, operated the scheme through Excel Investments and related companies based in Santa Ana and Irvine, California. The scheme involved kickbacks from condominium builders during the 2008 financial crisis, that Abaji and his co-conspirators hid from lenders to convince them to fund loans in excess of the actual purchase price. http://www.mortgagefraudblog.com/?s=Maher+Obagi

During the course of the scheme, co-conspirators identified condominium developments around the country where the builders were struggling to sell units and arranged to purchase multiple units at a discount. The builders benefited by making it appear that their condos were selling and maintaining their value, while members of the conspiracy obtained the kickbacks.

The co-conspirators negotiated with condominium builders in California, Florida and Arizona for discount units. The defendants bought units for themselves, their relatives, and on behalf of “straw buyers” whom they brought into the scheme. They identified straw buyers by looking for individuals with good credit scores and then recruited them into the scheme by giving them an upfront payment for their participation and by presenting the scheme as an investment opportunity that required no down payment and would generate income through rental payments.

To obtain mortgages for the properties, Abaji and other co-conspirators prepared loan applications with false information about the straw buyers – including fake employment, income and assets, as well as fabricated W2s, pay stubs and bank statements. The mortgage applications also included false information about the terms of the transactions, such as concealing the large kickbacks from builders through false and misleading HUD-1 forms. As a result of the false statements in the fraudulent loan applications, mortgage lenders provided over $21 million in financing to purchase more than 100 properties.

Many of these loans went into default, and mortgage lenders lost more than $10 million after foreclosing on the properties. The Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae) purchased dozens of these loans on the secondary mortgage market and suffered losses of at least $1.3 million as a result of defaults and foreclosures on the properties.

Abaji was sentenced to 108 months in prison by United States District Judge Andrew Guilford and ordered to pay more than $10 million in restitution to the financial institutions that were victims of the fraud.

Several other defendants were charged in connection with the same scheme.

  • Abaji’s brother, Maher Obagi, 32, Huntington Beach, California who was sentenced in June 2018 to 78 months in prison and ordered to pay just over $10 million in restitution.
  • Mohamed Salah, 43, Mission Viejo, California who was sentenced in June 2018 to 57 months in prison and ordered to pay just over $7 million in restitution.
  • Ali Khatib, 53, Newport Coast, California pleaded guilty in a related case and is scheduled to be sentenced on September 10th;
  • Jacqueline Burchell, 57, Orange, California pleaded guilty in June 2013 and is scheduled to be sentenced on October 1st;
  • Wajieh Tbakhi, 53, who is currently a fugitive; and
  • Mohamed El Tahir, now deceased.

This matter was investigated by the Federal Bureau of Investigation; the Federal Housing Finance Agency, Office of the Inspector General; and IRS Criminal Investigation.

The case is being prosecuted by Assistant United States Attorney Kerry L. Quinn of the Major Frauds Section.

Garth Anthony Gardner, 49, a citizen of the Republic of Trinidad & Tobago, pled guilty yesterday to charges involving a scheme in which he made misrepresentations to apply for and obtain more than $3 million in multiple home equity line of credit loans.

According to the government’s evidence, in October 2003, Gardner purchased a property in the 5100 block of 13th Street NW, Washington, DC, using the Social Security number of another person and falsely representing himself as a U.S. citizen.  In May 2005, he used a corporation that he owned to purchase a second property in the 1300 block of Dexter Terrace SE, Washington, DC.  Gardner transferred ownership of the second property from the company to himself for $10.  Next, Gardner applied for a series of home equity line of credit loans using the two properties as collateral.

By settling these loans in close proximity to each other, Gardner minimized the banks’ ability to learn about the other loans.  From August to October 2004, Gardner obtained 12 home equity line of credit loans from 12 different banks secured by the 13th Street property, totaling approximately $1.4 million.  Between March and April 2006, Gardner applied for 13, and obtained 12, such loans from 12 banks, secured by the Dexter Terrace property, totaling approximately $1.9 million.

In approximately February 2008, Gardner stopped making payments and defaulted on all of the loans.  The banks discovered Gardner’s fraudulent conduct after initiating foreclosure proceedings on the properties.

Gardner admitted that he used a portion of the proceeds from the fraudulent scheme to purchase 15 silver bars, which the government recovered and liquidated for about $1.1 million.

Gardner was arrested in Frankfurt, Germany in May 2017, and was extradited to the District of Columbia in February 2018, to face the charges that had been pending since 2014.  He remains in custody pending his sentencing.

Gardner pled guilty on July 2, 2018, in the U.S. District Court for the District of Columbia, to two counts of bank fraud. Each charge carries a statutory maximum of 30 years in prison and potential financial penalties. Under federal sentencing guidelines, he faces an estimated range of 51 to 63 months in prison and a fine of up to $100,000. The plea agreement calls for him to pay $3,165,294 in restitution to 24 financial institutions. It also calls for him to pay a forfeiture money judgment in the amount of $2,048,446. The Honorable Christopher R. Cooper scheduled sentencing for Sept. 24, 2018.

The announcement was made by U.S. Attorney Jessie K. Liu and Acting Special Agent in Charge Kelly R. Jackson of the Internal Revenue Service Criminal Investigation (IRS-CI) Washington D.C. Field Office.

In announcing the plea, U.S. Attorney Liu and Acting Special Agent in Charge Jackson commended the work performed by those who investigated the case from the Internal Revenue Service-Criminal Investigation. They also expressed appreciation for the assistance provided by the Washington Field Office of the U.S. Secret Service and the Office of the Inspector General of the Social Security Administration. They acknowledged the efforts of those who worked on the case from the U.S. Attorney’s Office, including Assistant U.S. Attorneys Michelle Bradford, David A. Last, Diane Lucas and Denise A. Simmonds, and Paralegal Specialist Aisha Keys.

Robert McCloud, 39, Warrenville, South Carolina, pled guilty today to a federal wire fraud charge stemming from a real estate scheme in which he and others used forged deeds and fake driver’s licenses to fraudulently transfer ownership of District of Columbia homes from the rightful owners.

According to the government’s evidence, McCloud and others identified vacant or seemingly abandoned residential properties in the District of Columbia, and then prepared and filed forged deeds with the District of Columbia’s Recorder of Deeds transferring the properties into fictitious names. Next, they agreed to sell these properties to legitimate purchasers and arranged with unsuspecting title and escrow companies to finalize the sale and transfer ownership. Finally, they shared the fraudulently-obtained sales proceeds amongst themselves.

In his guilty plea, McCloud admitted taking part in two such fraudulent transactions within a two-month period of 2015, which generated a total of $580,482 in proceeds.

In the first, in April 2015, McCloud filed a forged Intra-Family deed with the District of Columbia’s Recorder of Deeds purporting to show that a home in the unit block of K Street NW, Washington, DC was transferred from the true owners to a fictitious person.  The true owners, who owned the home outright without any mortgage liens, did not sign the deed and did not give anyone permission to transfer their home. McCloud then appeared at the title company pretending to be the owner in order to close the transaction, presenting a California driver’s license with his photograph but in the name of the fictitious person, signing the settlement documents and selling the property. The title company sent by wire transfer $195,527 to a bank account opened in the name of the fictitious person. McCloud withdrew approximately $43,000 of the funds before the crime was discovered; the rest of the funds were returned to the title company.

In the second transaction, in May 2015, a conspirator arranged for a forged deed with respect to another home, in the 6400 block of 16th Street NW, Washington, DC, to be filed with the Recorder of Deeds. As with the other property, the true owners, who owned the home outright without any mortgage liens, did not sign the deed and did not give anyone permission to sell the residence. In June 2015, McCloud appeared at the title company pretending to be the owner and using another fake California driver’s license with his photograph.  He again signed the settlement documents in the fictitious name. The title company sent by wire transfer $384,955 to a bank account opened in the name of the fictitious person. McCloud was arrested the following day.

Although McCloud received $580,482 in proceeds from his wire fraud scheme regarding both real properties, law enforcement seized a total of $369,990, which was later administratively forfeited.  These forfeited funds, and the partial return of funds to the title company from the K Street transaction, reduced the amount owed in forfeiture to $57,965, which is the amount of the forfeiture money judgment.

The harm caused to the owners, buyers, and title companies was covered by title insurance; the restitution amount of $200,488 is the amount due and owing to the title insurance companies after giving credit to the forfeited funds, which were returned to the victims.

McCloud pled guilty in the U.S. District Court for the District of Columbia. The charge carries a statutory maximum of 20 years in prison and potential financial penalties. Under federal sentencing guidelines, McCloud faces a likely range of 27 to 33 months in prison and a fine of up to $60,000. He also has agreed to pay $200,488 in restitution to two title insurance companies, as well as a forfeiture money judgment of $57,965. The Honorable Amit P. Mehta scheduled sentencing for Oct. 19, 2018.

The announcement was made by U.S. Attorney Jessie K. Liu, Nancy McNamara, Assistant Director in Charge of the FBI’s Washington Field Office, and Peter Newsham, Chief of the Metropolitan Police Department (MPD).

In announcing the plea, U.S. Attorney Liu, Assistant Director in Charge McNamara, and Chief Newsham commended the work performed by those who investigated the case from the FBI’s Washington Field Office and the Metropolitan Police Department. They acknowledged the efforts of those who worked on the case from the U.S. Attorney’s Office, including Assistant U.S. Attorneys Diane Lucas and Stephanie Miller, former Paralegal Specialist Christopher Toms, Paralegal Specialist Aisha Keys, and Litigation Technology Specialist Leif Hickling. Finally, they commended the work of Assistant U.S. Attorney Virginia Cheatham, who is prosecuting the case.

Jasmin Polanco, 37, Methuen, Massachusetts, a real estate attorney was sentenced today in connection with a sweeping conspiracy to defraud banks and mortgage companies by engaging in sham “short” sales of residential properties in Merrimack Valley, Massachusetts.

Co-defendants Vanessa Ricci, 41, Methuen, Massachusetts , a  mortgage loan officer, pleaded guilty in March 2018 to one count of conspiracy to commit bank fraud and was sentenced to six months in prison, three years of supervised release and ordered to pay restitution of $963,730 http://www.mortgagefraudblog.com/?s=Jasmin+Polanco; Greisy Jimenez, 50, Methuen, Massachusetts , a real estate broker, pleaded guilty to two counts of bank fraud and one count of conspiracy to commit bank fraud and is awaiting sentencing; Hyacinth Bellerose, 51, Dunstable, Massachusetts,  a real estate closing attorney, was sentenced in March 2017 to time served and one year of supervised release to be served in home detention after pleading guilty to conspiracy to commit bank fraud.  Polanco was sentenced by U.S. Senior District Court Judge Douglas P. Woodlock to 15 months in prison, three year of supervised release and ordered to pay $1,224,489 in restitution. In March 2018, Polanco pleaded guilty to one count of conspiracy to commit bank fraud.

The charges arose out of a scheme to defraud various banks via bogus short sales of homes in Haverhill, Lawrence and Methuen, Massachusetts, in which the purported sellers remained in their homes with their debt substantially reduced. A short sale is a sale of real estate for less than the value of any existing mortgage debt on the property. Short sales are an alternative to foreclosure that typically occur only with the consent of the mortgage lender. Generally, the lender absorbs a loss on the loan and releases the borrower from the unpaid balance. By their very nature, short sales are intended to be arms-length transactions in which the buyers and sellers are unrelated, and in which the sellers cede their control of the subject properties in exchange for the short-selling bank’s agreement to release them from their unpaid debt.

The conspiracy began in approximately August 2007 and continued through June 2010, a period that included the height of the financial crisis and its aftermath. Home values in Massachusetts and across the nation declined precipitously, and many homeowners found themselves suddenly “underwater” with homes worth less than the mortgage debt they owed. As part of the scheme, Polanco, Jimenez, Ricci, Bellerose and others submitted materially false and misleading documents to numerous banks in an effort to induce them to permit the short-sales, thereby releasing the purported sellers from their unpaid mortgage debts, while simultaneously inducing the purported buyers’ banks to provide financing for the deals. In fact, the purported sellers simply stayed in their homes, with their debt substantially reduced.

The conspirators falsely led banks to believe that the sales were arms-length transactions between unrelated parties; in fact, the buyers and sellers were frequently related, and the sellers retained control of (and frequently continued to live in) the properties after the sale. The conspirators also submitted phony earnings statements in support of loan applications that were submitted to banks in order to obtain new financing for the purported sales. In addition, the defendants submitted phony “HUD-1 Settlement Statements” to banks that did not accurately reflect the disbursement of funds in the transactions. (HUD-1 Settlement Statements are standard forms that are used to document the flow of funds in real estate transactions. They are required for all transactions involving federally related mortgage loans, including all mortgages insured by the Federal Housing Administration.)

United States Attorney Andrew E. Lelling; Christina Scaringi, Special Agent in Charge of the Department of Housing and Urban Development, Office of Inspector General, New York Field Office; and Christy Goldsmith Romero, Special Inspector General of the Troubled Asset Relief Program, made the announcement. Assistant U.S. Attorney Stephen E. Frank, Chief of Lelling’s Economic Crimes Unit, and Assistant U.S. Attorneys Sara Miron Bloom and Victor A. Wild, also of the Economic Crimes Unit, prosecuted the cases.

Lyndon Chin, 54, Northport, New York was indicted today for using a 91-year-old man’s real estate properties to fraudulently obtain $8.5 million in unauthorized mortgage loans.

According to the indictment, documents filed in court, and statements made on the record, Chin had acted as a real estate broker for the 91-year-old victim in prior real estate transactions. In that capacity, the defendant helped the victim with the purchase and sale of residential and commercial real estate and had knowledge of the victim’s properties and the corporation through which he owned them.

In October 2015, Chin used his knowledge of the victim’s real estate holdings to falsify documents in the name of the victim’s company and obtain $5 million in mortgage loans on four of the victim’s Lower Manhattan, New York properties without his knowledge. Chin then opened a bank account in the name of the victim’s corporation and deposited approximately $4.4 million of the fraudulently obtained funds into that account. A large portion of the funds was paid to at least 20 personal and corporate bank accounts, including accounts belonging to members of the defendant’s family, and the remainder was used to cover personal expenses such as car payments, insurance payments, and jewelry.

From March through May 2016, Chin secured another $3.5 million in mortgage loans using similar means and deposited approximately $1.9 million into a bank account that he had opened specifically to receive the funds, before transferring the funds into a different account that he controlled.

The defendant is charged in a New York State Supreme Court indictment with two counts of Grand Larceny in the First Degree. [1]

The conduct was uncovered and the matter was referred to the Manhattan District Attorney’s Office after the victim was rejected for a mortgage loan on an unrelated business opportunity due to the existing mortgages that the defendant had fraudulently obtained on his properties. This indictment is the result of a 16-month-long, ongoing investigation by the Office’s Financial Frauds Bureau.

Manhattan District Attorney Cyrus R. Vance, Jr. made the announcement.

Frauds against seniors and other vulnerable residents of Manhattan will be met with the full force of our laws,” said District Attorney Vance. “As alleged in the indictment, the defendant is charged with exploiting his access to a 91-year-old victim’s business in order to falsify corporate documents and secure more than $8 million in fraudulent mortgage loans in just two years. I encourage all victims of financial crime to call our Financial Frauds Bureau at (212) 335-8900.”

Assistant D.A. Caitlin Naun is handling the prosecution of the case under the supervision of Assistant D.A.s Gloria Garcia, Deputy Chief of the Financial Frauds Bureau, and Archana Rao, Chief of the Financial Frauds Bureau, as well as Executive Assistant D.A. Michael Sachs, Chief of the Investigation Division. Trial Preparation Assistant Kelly Lai, Investigator Michael O’Brien, Financial Investigator Elaine Li, and Chief of the Forensic Accounting and Financial Investigations Bureau Robert Demarest also provided valuable assistance on the case.

[1] The charges contained in the indictment are merely allegations, and the defendant is presumed innocent unless and until proven guilty. All factual recitations are derived from documents filed in court and statements made on the record in court.

Maher Obagi, 32, Huntington Beach, California was sentenced on Tuesday to 78 months in prison and ordered to pay just over $10 million in restitution.  A second defendant, Mohamed Salah, 43, Mission Viejo, California was sentenced to 57 months in prison and was ordered to pay just over $7 million in restitution.    Obagi and Salah were sentenced to federal prison for participating in a “builder bailout” mortgage fraud scheme that resulted in the fraudulent purchase of more than 100 condominium units around the country, causing more than $10 million in losses when the properties went into foreclosure.

Obagi and Salah, along with several co-conspirators http://www.mortgagefraudblog.com/?s=Maher+Obagi , operated the scheme through Excel Investments and related companies that were based in Santa Ana and then Irvine, California. The scheme involved kickbacks from condominium builders during the 2008 financial crisis, kickbacks that were hidden from lenders to convince them to fund loans in excess of actual purchase price.

During the course of the scheme, co-conspirators identified condominium developments around the country in which the builders were struggling to sell units and then arranged with the builders to purchase multiple units at a discount. The builders benefited by making it appear that their condos were selling and maintaining their value, while members of the conspiracy obtained the kickbacks.

The co-conspirators negotiated with condominium builders in California, Florida and Arizona for discount units. The defendants bought units for themselves, their relatives, and on behalf of “straw buyers” whom they brought into the scheme. They identified straw buyers by looking for individuals with good credit scores and then recruited them into the scheme by giving them an upfront payment for their participation and by presenting the scheme as an investment opportunity that required no down payment and would generate income through rental payments.

To obtain mortgages for the properties, Obagi and other co-conspirators prepared loan applications with false information about the straw buyers – including fake employment, income and assets, as well as fabricated W2s, pay stubs and bank statements. The mortgage applications also included false information about the terms of the transactions, such as concealing the large kickbacks from lenders through false and misleading HUD-1 forms. As a result of the false statements in the fraudulent loan applications, mortgage lenders provided over $21 million in financing to purchase more than 100 properties.

Many of these loans went into default, and mortgage lenders lost more than $10 million after foreclosing on the properties. The Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae) purchased dozens of these loans on the secondary mortgage market and suffered losses of at least $1.3 million as a result of defaults and foreclosures on the properties.

Both defendants were sentenced by United States District Judge Andrew Guilford.

Following a trial in 2015, Obagi was found guilty of one count of conspiracy and three counts of wire fraud. Salah was found guilty by the same federal jury of one count of conspiracy.

Several other defendants were charged in connection with the same scheme. They are:

  • Ali Khatib, 53, Newport Coast, California who pleaded guilty in a related case and is scheduled to be sentenced on July 16;
  • Momoud Aref Abaji, 37, Huntington Beach, California who was convicted at trial and is scheduled to be sentenced on June 14;
  • Jacqueline Burchell, 57, Orange, California who pleaded guilty and is scheduled to be sentenced on July 16;
  • Wajieh Tbakhi, 53, who is a fugitive; and
  • Mohamed El Tahir, who is now deceased.

This matter was investigated by the Federal Bureau of Investigation; the Federal Housing Finance Agency, Office of the Inspector General; and IRS Criminal Investigation.

The case is being prosecuted by Assistant United States Attorney Kerry L. Quinn of the Major Frauds Section.

Jesse Wells Haug, 33, Rosemount, Minnesota, pled guilty yesterday to one count of wire fraud.

According to the defendant’s guilty plea and documents filed in court, Haug is the owner of a Twin Cities-based construction company called 7-10 Services, LLC. From 2015 through the end of 2016, Haug executed a scheme to defraud investors by falsely representing to them that he would use their money to purchase and renovate residential real estate, and, in exchange, he would share the profits when the properties were re-sold, or “flipped.”

According to the defendant’s guilty plea and documents filed in court, during the course of the scheme, Haug obtained $880,000 from two victim-investors to purchase and renovate residential properties located throughout the Twin Cities. During the course of Haug’s interactions with the victim-investors, Haug used false documentation showing how the investment money was being used, false information about upcoming real estate closings and re-sales of properties Haug claimed to have flipped, as well as fictional documents showing “returns” from the so-called investment properties. In reality, Haug spent the investment money on personal expenses and never purchased or sold any of the properties.

United States Attorney Gregory G. Brooker made the announcement.

This case is the result of an investigation conducted by the FBI and the Minnesota Commerce Fraud Bureau.

Assistant United States Attorneys Kimberly A. Svendsen and Charles J. Kovats are prosecuting this case.

Abolghasseni “Abe” Alizadeh, 59, Granite Bay, California was sentenced today to four years and eight months in prison.  Alizadeh pleaded guilty on January 12, 2018 to wire fraud, bank fraud and making false statements to a federally insured financial institution.

According to court documents, Alizadeh, a Sacramento-area commercial real estate developer, restaurateur and owner of Kobra Properties, came up with a scheme to fraudulently purchase land that he planned to develop. Banks usually loan up to 60 to 65 percent of the loan to-value ratio (LTV) on undeveloped commercial property. (LTV ratio is the comparison between the amount of the loan and the value of the property.) To circumvent the banks and fraudulently get a higher level of financing, Alizadeh submitted altered purchase contracts to the banks that greatly inflated the purported purchase price. The banks, which competed for Alizadeh’s business, were unaware that the purchase prices were inflated and sometimes loaned well in excess of the loan-to-value ratio. By concealing the true purchase price from the banks, Alizadeh received substantial amounts of cash, sometimes millions of dollars, at the close of escrow and avoided making the full down payment or, in some instances, any down payment.

Alizadeh was assisted in this scheme by co-defendant Mary Sue Weaver, 64, currently of Scottsdale, Arizona and formerly of Lincoln, California, who was employed at a local title company. According to the plea agreement, Alizadeh would write checks for the down payment, but because he lacked funds to cover the checks, he would call Weaver and ask her to delay depositing the checks until after escrow closed. Once escrow closed, Weaver disbursed funds from the title company’s escrow trust account to Kobra Properties. Kobra Properties then used those funds to cover its down payment and other costs. In this way, it appeared as though Alizadeh was making a substantial down payment when in fact he was not.

On April 29, 2005, Alizadeh submitted a fraudulent purchase contract to Central Pacific Bank, which induced the bank to lend him nearly $4 million for the purchase of 10.3 acres of property. This loan represented over 96 percent loan-to-value ratio. Similarly, on October 21, 2005, Alizadeh received over $22 million in funding and loans to purchase the Turtle Island property, when in actuality, the original purchase price was $10 million. In March 2006, Alizadeh also falsely claimed to Bank of Sacramento that he was paying $36 per square foot for a piece of property where he intended to build a TGI Friday’s restaurant. In reality, Alizadeh was paying only $21 per square foot. This resulted in a $650,000 inflation of the true purchase price. Alizadeh’s entire scheme, involving no fewer than six properties in the Sacramento area, resulted in a loss to various financial institutions of over $22 million.

U.S. District Judge Garland E. Burrell Jr. also ordered Alizadeh to pay $15,879,945 in restitution to the victims of his crimes.

On December 15, 2017, Weaver pleaded guilty to one count of wire fraud and one count of bank fraud and is scheduled for sentencing on June 22, 2018. She faces a maximum statutory penalty of 30 years in prison on each count and a $1 million fine. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

The announcement was made by U.S. Attorney McGregor W. Scott.

The defendant used his reputation as a local business leader to perpetrate a complex fraud scheme to enrich himself at the expense of others,” stated U.S. Attorney Scott. “The U.S. Attorney’s Office will continue to work diligently with its law enforcement partners to expose schemes like this and bring criminals like the defendant to justice.

The scope of the fraud is staggering,” said Michael T. Batdorf, Special Agent in Charge, IRS Criminal Investigation. “As a well-known real-estate developer, title companies and banks competed for Mr. Alizadeh’s business. He submitted altered purchase contracts that greatly inflated the purchase price. This scheme cost financial institutions over $22 million. While this sentence cannot reverse the damage caused by Alizadeh and his co-defendant, it highlights the ongoing commitment of IRS-CI to hold accountable those involved in these types of crimes.

Today’s sentencing holds defendant Alizadeh accountable for causing more than $22 million in losses to the financial institutions, by corruptly inflating the value of property to obtain millions of dollars in fraudulent bank loans,” stated FDIC Inspector General Jay N. Lerner. “This case is a powerful example of law enforcement cooperation to combat fraud and bring such swindlers to justice.”

This case is the product of an investigation by the Federal Bureau of Investigation, the IRS Criminal Investigation, and the Federal Deposit Insurance Corporation, Office of Inspector General. Assistant U.S. Attorneys Michael D. Anderson and Heiko P. Coppola are prosecuting the case.