Archives For Flipping

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.

Dirk Hall, 42, Queens, New York was sentenced today to 41 months’ imprisonment, to be followed by five years of supervised release, after having pleaded guilty to conspiracy to commit bank fraud and wire fraud in connection with a multi-million dollar mortgage fraud scheme.

According to court filings and facts presented at the sentencing hearing, between September 2008 and May 2011, Hall, together with others, caused mortgage loan applications with false information to be submitted to lending institutions in connection with the purchase of residential properties located within the Eastern District of New York. http://www.mortgagefraudblog.com/5-charged-with-defrauding-mortgage-lending-institutions/#more-20083  These applications contained fraudulently inflated purchase prices, as well as false information about the assets and income of the purchasers of the properties, many of whom were being compensated as part of the scheme to act as straw purchasers.  The defendant and his co-conspirators also provided false down payment checks to make it appear as if the straw purchasers and the other borrowers had made down payments in connection with the purchase of the properties, which was a condition of the lending institutions for issuing the mortgage loans.

To carry out their scheme, the defendant and his co-conspirators conducted simultaneous purchases and sales of the properties, sometimes called “flips,” in an effort to conceal their criminal involvement and to inflate the value of the properties.  To that end, the defendant and his co-conspirators, through the use of backdated and falsified documents, concealed from the lending institutions the fact that the purchase and sale had occurred on the same day and made it appear as if the transaction between the homeowner and the co-conspirator had occurred over 60 days prior to the sale from the co-conspirator to the straw purchaser.

As a result of the false applications and appraisals, the lending institutions were fraudulently induced to issue millions of dollars of mortgage loans secured by properties that had inflated appraisal values to individuals who had insufficient income and assets to qualify for the mortgage loans.  In many instances, the straw purchasers and the other borrowers failed to make required mortgage payments to the lending institutions, which caused the mortgage loans to be placed into default status.

The announcement was made by United States District Judge Eric N. Vitaliano.

Richard P. Donoghue, United States Attorney for the Eastern District of New York, announced the sentencing.  Mr. Donoghue thanked the Federal Bureau of Investigation (FBI); the Federal Housing Finance Agency, Office of Inspector General (FHFA-OIG); the U.S. Department of Housing and Urban Development, Office of Inspector General (HUD-OIG); the Federal Deposit Insurance Corporation, Office of Inspector General (FDIC-OIG); and the New York State Department of Financial Services (DFS) for their hard work and dedication over the course of this multi-year investigation and prosecution.

The government’s case is being handled by the Office’s Business and Securities Fraud Section.  Assistant United States Attorneys David C. Pitluck, Mark E. Bini and Michael T. Keilty are in charge of the prosecution.

Christopher Goodson, 44, Newark, New Jersey, a New Jersey attorney and Anthony Garvin, 47, Jersey City, New Jersey, are charged by complaint with one count of conspiracy to commit bank fraud. They were charged with running a large-scale mortgage fraud scheme that involved dozens of properties in Jersey City, Clifton, Union, and elsewhere in New Jersey and caused losses of more than $30 million.

According to the Complaint:

From January 2011 through August 2017, Goodson, Garvin, and others engaged in a short sale mortgage fraud conspiracy targeting various New Jersey properties with mortgages that were in default.

As part of the scheme, the conspirators arranged simultaneous fraudulent transactions on the same target property. In the first transaction, which involved the sale by the current owner, the conspirators convinced the financial institution holding the mortgage to accept the sale of the target property at a loss, usually to a buyer who was secretly a conspirator or an entity controlled by the conspiracy.

In the second transaction, the conspirators flipped the same target property from the first buyer to a second buyer, who typically obtained a mortgage from another financial institution using false loan applications, pay stubs, bank account statements and title reports provided by members of the conspiracy. As a result, the second transaction frequently closed for significantly more or even double the price of the first transaction.

Goodson, Garvin, and others allegedly rigged the short sale process at each step in order to maximize the difference in price between the two transactions and keep the victim financial institutions from detecting the fraud.

For instance, Goodson, an attorney, concealed the fact that he played multiple-roles in the short sale transactions, including allegedly generating false preapproval letters from a New Jersey corporation he owned that purported to be a short-term lending company operating out of California. These letters were used to deceive banks into believing that the purchaser – typically a conspirator or entity controlled by Goodson – had the credit necessary for the transaction. Goodson also negotiated the fraudulent short sales with the banks, generated phony deeds that backdated the closing date of the first transactions, and even served as the closing attorney during some of the short sales.

Garvin was a real estate agent and investor who allegedly coordinated fraudulent transactions as part of the scheme.

The conspirators disbursed the funds into various accounts they controlled to conceal their illegal activities and split the profits. In total, the conspiracy defrauded financial institutions out of more than approximately $30 million.

The conspiracy to commit bank fraud count is punishable by a maximum potential penalty of 30 years in prison and a $1 million fine.

Both defendants were arrested this morning and are expected to appear this afternoon before U.S. Magistrate Judge Leda Dunn Wettre in Newark federal court.

Acting U.S. Attorney Fitzpatrick made the announcement and credited special agents of the FBI, under the direction of Special Agent in Charge Timothy Gallagher in Newark, postal inspectors of the U.S. Postal Inspection Service, under the direction of Acting Inspector in Charge Joseph W. Cronin, and special agents of the Federal Housing Finance Agency (FHFA) – Office of Inspector General, under the direction of Special Agent in Charge Steven Perez in Newark, with the investigation

The government is represented by Assistant U.S. Attorneys David Feder and Zach Intrater of the U.S. Attorney’s Office Economic Crimes Unit in Newark.

The charge and allegations contained in the complaint are merely accusations, and the defendants are considered innocent unless and until proven guilty.

 

James Bayfield, 44, Queens, New York, a self-described mortgage specialist, was convicted by a federal jury in Brooklyn, New York, on all four counts charging bank fraud and conspiracy to commit wire fraud and bank fraud for his role in defrauding mortgage lending institutions and large financial institutions, including Amtrust Bank (Amtrust), Bank of America N.A. (BOA) and J.P. Morgan Chase & Co. (Chase), in a multi-million-dollar mortgage fraud scheme. The jury’s verdict followed a two-week trial before United States District Judge Eric N. Vitaliano. Bayfield is the sixth and final defendant convicted in the case.

The evidence at trial established that Bayfield, together with others, caused mortgage loan applications with false information to be submitted to lending institutions in connection with the purchase of residential properties located within the Eastern District of New York. These applications contained fraudulently inflated purchase prices, as well as false information about the assets and income of the purchasers of the properties, many of whom were being compensated as part of the scheme to act as straw purchasers. The defendant and his co-conspirators also provided false down payment checks to make it appear as if the straw purchasers and the other borrowers had made down payments in connection with the purchase of the properties, which was a condition of the lending institutions for issuing the mortgage loans.

To carry out their scheme, the defendant conducted simultaneous purchases and sales of the properties, sometimes called “flips,” in an effort to conceal their criminal involvement and to inflate the value of the properties. For example, a conspirator would purchase a property from a homeowner. That same day, the conspirator would sell the property to a straw purchaser at an inflated value. The defendant and his conspirators, through the use of backdated and falsified documents, concealed from the lending institutions the fact that the purchase and sale had occurred on the same day and made it appear as if the transaction between the homeowner and the conspirator had occurred over 60 days prior to the sale from the conspirator to the straw purchaser.

As a result of the false applications and appraisals, the lending institutions were fraudulently induced to issue millions of dollars of mortgage loans secured by properties that had inflated appraisal values to individuals who had insufficient income and assets to qualify for the mortgage loan. In many instances, the straw purchasers and the other borrowers failed to make required mortgage payments to the lending institutions, which caused the mortgage loans to be placed into default status.

When sentenced by United States District Judge Eric N. Vitaliano, Bayfield faces a sentence of up to 20 years in prison.

The guilty verdict was announced by Robert L. Capers, United States Attorney for the Eastern District of New York. Mr. Capers thanked the Federal Bureau of Investigation (FBI); the Federal Housing Finance Agency, Office of Inspector General (FHFA-OIG); the U.S. Department of Housing and Urban Development, Office of Inspector General (HUD-OIG); the Federal Deposit Insurance Corporation, Office of Inspector General (FDIC-OIG); and the New York State Department of Financial Services (DFS) for their hard work and dedication over the course of this multi-year investigation and prosecution.The government’s case was prosecuted by the Office’s Business and Securities Fraud Section. Assistant United States Attorneys David Pitluck, Mark Bini and Michael Keilty are in charge of the prosecution.

 

Sergio Garcia, Sr., 46, Chicago, Illinois and Sergio Garcia, Jr., 27, Lowell, Indiana were indicted by a federal grand jury and charged with conspiracy to commit mail fraud and ten substantive counts of mail fraud.  The indictment also charges Timothy D. Greene, 29, Lansing,Illinois with submitting fraudulent information to HUD. All three were charged in connection with their part in a house flipping scheme involving HUD properties.

The indictment alleges that between January 1, 2011 and May 31, 2014,  Sergio Garcia, Sr. and Sergio Garcia, Jr. conspired with others known and unknown to the Grand Jury to engage in a scheme to defraud and to obtain money by means of false pretenses, representations and promises.

The alleged scheme involved offering to buy more than 40 HUD homes situated in the following cities or towns in Indiana:  Gary, Hammond, Merrillville, Whiting, East Chicago, Hobart, St. John, Valparaiso, and Lake Village; as well as the following cities or towns in Illinois:  Cicero, Chicago, Maywood, Alsip, Stone Park, Riverdale, Chicago Heights, Berwyn, Lansing, Stickney, and Evergreen Park.  The conspirators sought to purchase the homes from HUD and sell them the same day or soon thereafter for a profit to subsequent buyers.

The purchase contracts provided to HUD to purchase the properties stated that the conspirators or one of their businesses were purchasing the properties as investors and would pay with cash or use other financing not involving FHA.  To support their claimed financial ability to pay for the homes, the conspirators mailed fraudulent letters purporting to show that they or their company had access to the funds needed to complete each purchase.  Many of the letters purported to be written by a private venture capital business and falsely stated that a conspirator or their business held a line of credit of up to $500,000.00, when in fact, as the conspirators well knew: these letters were altered, forged and counterfeited; the lines of credit referenced therein did not exist; and the signatures thereon were forged and unauthorized.

The alleged scheme further involved the conspirators placing their own “for sale” signs at the HUD homes before their purchase from HUD had occurred.

When the conspirators could not find a subsequent purchaser to buy the homes, they allowed their purchase contracts with HUD to expire.  The conspirators filed false liens on many of the HUD homes after their purchase contracts expired.  The false liens hindered HUD from selling the homes to subsequent purchasers.  The conspirators requested money from subsequent purchasers to release the false liens.

The indictment also alleges that on or about February 13, 2012, Timothy Daniel Greene provided a fraudulent letter to HUD stating he held an approved line of credit with a venture capital business and that he did so for the purpose of influencing HUD to approve a purchase offer he had submitted for a property in Chicago, IL.

The indictment was announced by United States Attorney David A. Capp.  The case is being investigated by the Federal Bureau of Investigation and the Department of Housing and Urban Development, Office of Inspector General.  The case is being prosecuted by Assistant United States Attorney Jill R. Koster.

ChieduGeorge” Chukwuka , 47, Stone Mountain, Georgia, was sentenced to serve nine years in prison to be followed by three years of supervised release, and ordered to pay restitution in the amount of $5,868,243.80 in connection with his lead role in a mortgage fraud ring that spanned five years and caused millions in losses.  Chukwuka, along with his co-defendants and other co-conspirators, engaged in a massive property-flipping scheme resulting in over $5.8 million in actual losses to financial institutions between 2006 and 2011. Chukwuka pled guilty to conspiracy to commit wire fraud on August 10, 2015.

“At the height of the recent mortgage-fraud crisis, this property-flipping scheme caused scores of homes to fall into foreclosure, costing financial institutions millions of dollars in losses,” said U. S. Attorney John Horn.  “Many communities in our district have been decimated by mortgage fraud during the last 15 years and even now struggle to recover from the effects of these schemes.”

According to U.S.A. Horn, the charges and other information presented in court:  Chukwuka, along with his co-defendants and co-conspirators, recruited straw buyers to purchase homes at a discounted price, typically a bank-owned or distressed property.  The group then recruited a second straw buyer to purchase the same home at a dramatically inflated price. In turn, Chukwuka, his co-defendants and co-conspirators applied for an acquisition loan for the second straw buyer, supporting the loan application with false income, fake employment, and fraudulent net worth data.

The group profited from their scheme by pocketing the acquisition loan proceeds paid by the victim bank to the straw seller (who was the straw purchaser in the first transaction). The amount of profit was the difference between the price paid by the straw purchaser in the first transaction and the price paid by the straw purchaser in the second transaction, less transaction costs.  Since none of the straw purchasers made any significant loan payments, the targeted properties usually went into foreclosure, resulting in over $5.8 million in actual losses to financial institutions between 2006 and 2011.

The sentencing of Mr. Chukwuka brings to a close a lengthy investigation and prosecution of a criminal enterprise that targeted the banking industry through their prolific mortgage fraud schemes.  Mr. Chukwuka, considered by law enforcement and prosecution to be head of this enterprise, caused extensive damage with high loss amounts to those victim banks involved.  The FBI is pleased with the role it played in bringing about this sentencing to federal prison of Mr. Chukwuka as well as the previous sentencings of his co-defendants in this matter,” said J. Britt Johnson, Special Agent in Charge, FBI Atlanta Field Office.

The following five defendants also pleaded guilty for their roles in the scheme, and were previously sentenced as follows:

  • Shelly Gee, a/k/a Shelly Baker, 48, Atlanta, Georgia, was sentenced on November 10, 2015, to one year, six months in prison, to be followed by three years of supervised release, and ordered to pay restitution in the amount of $2,243,909.99. Gee pled guilty on June 17, 2015.
  • Sandra Petgrave, 43, Stone Mountain, Georgia, was sentenced on December 4, 2015, to one year, six months in prison, to be followed by three years of supervised release, and ordered to pay restitution in the amount of $1,051,970.77. Petgrave pled guilty on August 18, 2015.
  • Kennedy Simmonds, 54, Snellville, Georgia, was sentenced on December 17, 2015, to three years, ten months in prison, to be followed by three years of supervised release, and ordered to pay restitution in the amount of $5,868,243.80. Simmonds pled guilty on July 6, 2015.
  • Marcelle Welch, 37, Stone Mountain, Georgia, was sentenced on December 17, 2015, to two years, three months in prison, followed by three years of supervised release, and ordered to pay restitution in the amount of $2,554,189.25. Welch pled guilty on July 29, 2015.
  • Leah Freeman, 43, Atlanta, Georgia, was sentenced on December 17, 2015, to two years in prison, to be followed by three years of supervised release, and ordered to pay restitution in the amount of $1,828.532.94. Freeman pled guilty on June 19, 2015.

The defendants were sentenced by U.S. District Court Judge Timothy C. Batten, Sr.

In a related case, Chinedum Oli, 42, Snellville, Georgia, was sentenced on February 19, 2013, by Senior U.S. District Court Judge Marvin H. Shoob to five years in prison, followed by five years of supervised release, and ordered to pay restitution in the amount of $4,373,281.63. Oli pled guilty on October 9, 2012.

The cases were investigated by the Federal Bureau of Investigation.

Assistant United States Attorneys Jamie L. Mickelson and Steven D. Grimberg prosecuted the cases.

 

Charles Wooden, 48, Stone Mountain, Georgia, was sentenced to seven years in prison to be followed by three years of supervised release, and to pay restitution of $2.4 million. Hendrickx H. Toussaint, 44, a now disbarred lawyer, Decatur, Georgia, was sentenced to three years, ten months in prison to be followed by three years of supervised release, and to pay restitution of $1.2 million.  The sentenced arise out of a real estate-based Ponzi scheme that took in almost $5 million dollars from out-of-state and foreign investors.

According to U.S. Attorney John Horn, the charges, and other information presented in court: In or about 2009, Charles Wooden, doing business as Aeon Capital Management, LLC, held himself out to the public as a real estate broker who could locate and oversee the purchase of residential properties and apartment buildings for or on behalf of real estate investors.  Wooden purported to find properties that could be flipped in a short period for a profit, and also properties that he would manage for the investors.  Continue Reading…

Cecil Sylvester Chester, 68, accountant, Mitchellville, Maryland; Michael Gerard Camphor, 59, real estate agent, Baltimore, Maryland; and Christopher Andy Kwegan, 58, real estate agent, Randallstown, Maryland were indicted by a federal grand jury on charges arising from the fraudulent purchase of seven properties in Baltimore, Maryland, using fraudulent loan documentation and straw purchasers, resulting in losses of over $1.7 million. Continue Reading…

Stephen Mayer, 51, Miami, Florida, was sentenced by U.S. District Judge Susan C. Bucklew to 11 years and 3 months in federal prison for his role in a real estate flipping and equity skimming conspiracy. The Court also ordered him to pay more than $3.1 million in restitution to the affected lenders, and more than $4 million in forfeiture, which were proceeds traceable to the scheme.

Continue Reading…

Benny Chetcuti, Jr., 60, Walnut Creek. California, was sentenced to 51 months in prison, and ordered to pay $21,823,526.10 in restitution, as well as forfeit $3,968,995 in proceeds obtained from a multi-year real estate investment fraud scheme. Continue Reading…