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Federal Jury Convicts Illinois Attorney in Mortgage Fraud Scheme

Stephanie Abbott —  February 15, 2018 — Leave a comment

Jessica Arong O’Brien, 50, Chicago, Illinois was convicted after trial of fraudulently obtaining loans related to the purchase, maintenance and sale of properties on Chicago’s South Side by causing lenders to issue and refinance approximately $1.4 million in mortgage and commercial loans by making false representations and concealing material facts in documents submitted to the lenders.  O’Brien used the fraudulently obtained mortgage loan proceeds to purchase an investment property in the 600 block of West 46th Street, Chicago, Illinois.  She fraudulently refinanced the mortgage on the property, as well as on a second investment property in the 800 block of West 54th Street, Chicago, Illinois.  O’Brien then fraudulently obtained a commercial line of credit to maintain the properties, before selling them to a loan officer – co-defendant Maria Bartko and a straw buyer whom O’Brien knew would fraudulently obtain mortgage loans.

Evidence at trial revealed that O’Brien carried out the fraud scheme from 2004 to 2007.  At the time, O’Brien was employed as a Special Assistant Attorney General for the Illinois Department of Revenue, while also owning a real estate company, O’Brien Realty LLC, and working part time as a loan officer for Amronbanc Mortgage Corp. in Lincolnwood, Illinois.  At the time, Bartko was employed at Amronbanc as a loan officer.

The jury convicted O’Brien on both counts against her, including one count of mail fraud affecting a financial institution, and one count of bank fraud.  Each count is punishable by a maximum sentence of 30 years in prison.  U.S. District Judge Thomas M. Durkin set sentencing for July 6, 2018.

Bartko, Chicago, Illinois pleaded guilty before trial to one count of mail fraud affecting a financial institution.  Judge Durkin will schedule Bartko’s sentencing hearing at a later date.

The conviction was announced by John R. Lausch, Jr., United States Attorney for the Northern District of Illinois; Jeffrey S. Sallet, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Catherine Huber, Special Agent-in-Charge of the Central Region of the Federal Housing Finance Agency, Office of Inspector General.  The government is represented by Assistant U.S. Attorneys Matthew F. Madden and Tyler C. Murray.

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Brothers Charged with Fraud for Allegedly Controlling Property Appraisals

Stephanie Abbott —  December 14, 2017 — 1 Comment

Steven Garcia, 45, Schaumburg, Illinois and his brother, Michael R. Garcia, 43, Streamwood, Illinois, two suburban mortgage brokers, have been charged with fraudulently operating a purportedly independent appraisal management company to control property valuations, and brokering fraudulent loans to finance real estate transactions between themselves and nominees.

The brothers operated American Financial Mortgage Services Inc., a licensed mortgage brokerage in Schaumburg, Illinois.  According to a criminal information filed Wednesday in federal court in Chicago, the brothers fraudulently caused lenders to make mortgage loans brokered by American Financial by falsely representing that the supporting property appraisals were performed by independent appraisers, when, in fact, the Garcias and American Financial employees selected the appraisers, managed the appraisal process, influenced property valuation and paid the appraisers.

According to the charges, the Garcias bypassed FHA regulations by controlling a purportedly independent appraisal firm, Residential Appraisal Management Company Inc., through a nominee.  The Garcias fraudulently used RAMCI to steer appraisals to hand-picked appraisers, including a relative of the Garcias, who would provide an appraised value sufficient to support a proposed loan, while falsely representing to lenders that RAMCI selected appraisers based on experience and skill, the information states.

The Garcias also fraudulently caused lenders to make mortgage loans to finance fraudulent real estate transactions in which the Garcias and their nominees purchased and re-sold residences at inflated prices to unqualified nominees who then defaulted on the loans, the information states.  The Garcias furnished lenders with false employment and income information to support the nominees’ loan applications, and then provided the nominees with the money to make the purchases, the information states.  The Garcias fraudulently obtained approximately $1.9 million that was disbursed at the closings of the fraudulent real estate transactions, and another $274,000 in commissions from those deals, the information states.

Each are charged with one count of mail fraud and one count of wire fraud.  Arraignments in federal court in Chicago have not yet been scheduled.

Each count in the information is punishable by up to 30 years in prison.  If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory U.S. Sentencing Guidelines.

The government is represented by Assistant U.S. Attorneys Brian Netols and Matthew Ebert.

The charges were announced by John R. Lausch, Jr., United States Attorney for the Northern District of Illinois; Brad Geary, Special Agent-in-Charge of the U.S. Department of Housing and Urban Development’s Office of Inspector General in Chicago; and Jeffrey S. Sallet, Special Agent-in-Charge of the Chicago office of the Federal Bureau of Investigation.

Federal Housing Administration regulations prohibit mortgage brokers from having substantive communications with appraisers relating to valuation of properties, including ordering or managing an appraisal assignment, and from paying appraisers.  Lenders rely on independent appraisals conducted within FHA regulations.

The public is reminded that an information is not evidence of guilt.  The defendants are presumed innocent and entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

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Mortgage Fraud Tactics in Bridge Financing Case

Rachel Dollar —  October 16, 2017 — Leave a comment

David T. Odom, 53, Chicago, Illinois, was sentenced to 30 months in prison, followed by three years of supervised release for a wire fraud conspiracy arising from a scheme to defraud lenders in order to obtain bridge financing for a movie. United States District Judge George L. Russell III also ordered Odom to forfeit up to $821,000 after the sale of the property and pay $700,000 in restitution.

Co-conspirator Darryl Wesley Clements, 50, Detroit, Michigan, previously pleaded guilty to wire fraud conspiracy.  Rodney Patrick Dunn, 40, Elkridge, Maryland, pleaded guilty in a related case to receipt of a bribe by a bank official.

David Odom owned CityScope Productions, LLC, and was seeking financing to produce the movie “Season Tickets.”   Odom met Darryl Clements through an attorney in New York. Clements created documents falsely stating that CityScope had permanent financing of $13 million for the movie from Bridge Capital and The Shah Group, and that the funds were held in escrow at a bank in Baltimore, where Dunn worked as a bank officer.  Dunn had agreed with Clements that when prospective lenders attempted to verify the existence of the escrow accounts, Dunn would text or telephone Clements with the caller’s information and permit Clements to return the telephone call posing as “Rodney Dunn, bank officer.”  Dunn believed he would obtain from Clements valuable contacts with professional athletes that would catapult his career change into sports agency.  Clements also promised to pay Dunn for his assistance.

In order to carry out the fraud scheme, Clements also created email accounts which appeared to belong to Dunn and The Shah Group, but which Clements actually controlled.  In February 2011, Dunn purchased five cashiers’ checks from his employer bank, each for $20 and made payable to Clements. Clements then altered the checks so that they totaled $4 million, the payees were individuals and entities affiliated with the movie, and “The Shah Group,” was the remitter.  Clements provided the altered checks to Odom/CityScope.  Odom knew that the checks were fraudulent since in fact, no one had been paid.  Clements also fraudulently placed Dunn’s forged signature on escrow agreements and proof of funds statements, which Clements emailed to Odom, so that Odom could furnish those fraudulent documents to prospective lenders.

Odom sought financing from multiple lenders including an unsuccessful attempt thwarted by the prospective lender’s local counsel in Baltimore.  Among other things, Clements created a fictitious bank statement for a purported escrow account, which Odom admitted he sent to a prospective lender.

In a telephone call on May 9, 2011, Clements posed as Dunn and fraudulently verified the account numbers and balances of the phony escrow accounts to an official of a California company which specialized in providing bridge financing for movies (California finance company).  On the same day, the California finance company loaned $2.5 million to CityScope and transmitted the funds by wire, specifying that the funds were to be used solely for movie expenses.

In early 2011, Odom’s house was sold in a foreclosure proceeding to the mortgage lender, and Odom was faced with moving or eviction. Odom admitted that he used the bridge loan funds to spend $821,000 to purchase his home back from the lender, approximately $60,000 to buy two cars, approximately $6,000 to take his family on the “Exotic Western Caribbean Cruise” by Carnival Cruise, approximately $90,000 in transfers to family members, and another approximately $75,000 in personal expenses.  Odom also paid some pre-production movie expenses.  Clements received $200,000 from the bridge loan proceeds.  Dunn received only the promise of money.

Odom did not repay the bridge loan.  The California finance company prepared to have the bank repay the loan from the purported escrow account, leaving messages for Dunn at the bank, which he then passed on to Clements.  Clements, posing as Dunn, falsely told the company that the loan repayment had been sent to CityScope, and Odom said that CityScope had not received the funds and sent a demand letter to the Baltimore bank.  When the California finance company was not repaid the loan, it sued Odom and others to recover its loan. Because of the allegations contained in the civil suit, Odom believed that criminal charges would be brought against Clements, and he told Clements his fears. Clements was engaged in another loan fraud and received proceeds of $4 million. In August 2011, Clements transferred $2 million to CityScope, which Odom used to partially repay the California finance company.

On April 28, 2017, Clements was sentenced to 18 months in the custody of the Bureau of Prisons, and on September 8, 2017, Dunn was sentenced to 30 weekends of incarceration and a fine of $2,000.

The sentence was announced by Acting United States Attorney for the District of Maryland Stephen M. Schenning; Special Agent in Charge Gordon B. Johnson of the Federal Bureau of Investigation, Baltimore Field Office; Christy Goldsmith Romero, Special Inspector General for the Troubled Asset Relief Program (SIGTARP); and Eric M. Thorson, Inspector General for the Department of the Treasury.

 

Acting United States Attorney Stephen M. Schenning commended the FBI, SIGTARP, and the Treasury Inspector General for their work in the investigation.  Mr. Schenning thanked Assistant U.S. Attorneys Joyce K. McDonald and Rachel M. Yasser, who prosecuted the case.

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Jury Convicts Attorney in Foreclosure Fraud

Rachel Dollar —  October 16, 2017 — Leave a comment

Robert Jon Schlyer, 47, Portage, Indiana, a lawyer licensed to practice in Illinois, was convicted on federal fraud charges for scheming to provide falsified documents to prevent foreclosure on a nearly $2 million parcel of land in Aurora.  The fraud left an elderly couple out of $300,000.  The jury in federal court in Chicago convicted Schlyer of two counts of wire fraud affecting a financial institution, and one count of bank fraud.

Schlyer’s fraud scheme occurred while representing two clients, co-schemers Kevin Lebeau and Brian Bodie, in connection with a foreclosure lawsuit.  Evidence at trial revealed that Schlyer provided false and fraudulent documents to an elderly couple and Amcore Bank in order to postpone foreclosure on the Aurora property.

The jury returned the guilty verdicts on October 6, 2017, after a four-day trial.  U.S. District Judge Amy J. St. Eve set sentencing for January 31, 2018, at 9:15 a.m.  Each count carries a maximum sentence of 30 years in prison.

According to evidence at trial, in 2004 Amcore Bank received a mortgage on the 10.4-acre property in Aurora after issuing a $1.9 million loan for the refinancing and redevelopment of the property.  Lebeau and Bodie executed a full personal guarantee for the loan.  By the fall of 2005, Lebeau and Bodie had failed to make the required payments, the loan was in default, and the bank filed a foreclosure lawsuit to seize the property.

During the scheme, Schlyer, who acted as Lebeau’s and Bodie’s attorney in the foreclosure suit, obtained $300,000 from an elderly retired couple by providing them with fake documents that made it seem like they were making a safe investment in the redevelopment and that it would be secured by a trust.  Schlyer also claimed to be the trustee of the purported trust.  In reality, there was no trust and Schlyer was not a trustee.  Schlyer and his co-schemers also concealed from the elderly couple the foreclosure suit and LeBeau’s and Bodie’s inability to pay the bank debt.  A portion of funds obtained from the elderly couple through the fraud was used to pay down the bank loan.

Together with his co-schemers, Schlyer furnished fraudulent and fabricated documents to the bank, including forged documents that made it appear that investors had committed approximately $1.5 million to the redevelopment of the property.  Eventually the foreclosure occurred, and the property was sold in 2010 at a significant loss to the bank.

LeBeau, of Aurora, and Bodie, of Chicago, were previously convicted in the case and are awaiting sentencing before U.S. District Judge Robert W. Gettleman.

The conviction was announced by Joel R. Levin, Acting United States Attorney for the Northern District of Illinois; and John P. Selleck, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.The government is represented by Assistant U.S. Attorneys Kartik K. Raman and Amarjeet S. Bhachu.

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Chicago Real Estate Developer Sentenced to 3 Years

Rachel Dollar —  August 30, 2017 — Leave a comment

Laurance H. Freed, 54, Chicago, Illinois, a real estate developer and the president of Joseph Freed & Associates LLC, was sentenced to three years in prison in connection with a fraud scheme related to a $105 million line of credit secured by city and suburban properties, including the Streets of Woodfield Mall in Schaumburg, Illinois.  The scheme also involved the theft of millions of dollars from his business partner, Kimco Realty Corp. Freed also fraudulently obtained more than $575,000 in publicly funded loans from the city of Chicago, and attempted to fraudulently obtain an additional $1 million from the city.

A federal jury last year convicted Freed on three counts of bank fraud, one count of mail fraud, and four counts of making a false statement to a financial institution. In addition to the 36-month prison term, U.S. District Judge Robert M. Dow also fined Freed $250,000, and ordered him to pay $575,759 in restitution to a victim bank.

 

The investigation also resulted in the conviction of JFA’s vice president, CAROLINE WALTERS. Walters, of Palatine, pleaded guilty last year to one count of making a false statement to a financial institution. Judge Dow previously sentenced Walters to six months in prison.

According to evidence at Freed’s trial, the city of Chicago in 2002 issued two Tax Increment Financing notes to Uptown Goldblatts Venture LLC, a company formed by JFA to redevelop the former Goldblatt’s store in the Chicago’s Uptown neighborhood. The TIF notes had a combined principal of $6.7 million, and Freed pledged one of the notes to Cole Taylor Bank as collateral.

Four years later, JFA-affiliated entities entered into agreements with a bank consortium for a revolving line of credit worth up to $105 million. Uptown Goldblatts became a borrower under the revolving loan agreement through a subsequent deal with LaSalle Bank, which was one of the banks in the consortium and had recently been acquired by Bank of America. In the LaSalle deal, Uptown Goldblatts pledged the two TIF notes as collateral and also represented that the notes were owned free of other secured interests. The deal did not mention that one of the notes had already been pledged to Cole Taylor.

Evidence at trial also revealed that in 2009 and 2010 Freed signed false affidavits seeking to obtain more than $1.5 million in TIF payments from the city, knowing that he was not entitled to the payments.

As Freed’s business experienced financial difficulties, he withdrew more than $7 million from the Streets of Woodfield partnership without the knowledge and consent of his business partner Kimco, which owned 45% of the venture. Freed fraudulently recorded the money as “loans.”

“These were serious offenses that merit serious punishment,” Assistant U.S. Attorney Matthew F. Madden argued in the government’s sentencing memorandum. “The defendant was at the heart of this scheme to defraud and the lies told in furtherance of it.”

The sentence was announced by Joel R. Levin, Acting United States Attorney for the Northern District of Illinois; Michael J. Anderson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Joseph M. Ferguson, Inspector General for the City of Chicago.

 

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Reverse Mortgage Schemers Charged

Rachel Dollar —  June 27, 2017 — Leave a comment

Mark Steven Diamond, 60, Chicago, Illinois, a mortgage loan originator with offices in Chicago and Calumet City, was indicted and arraigned on federal fraud charges for his alleged role in a scheme to bilk elderly homeowners out of millions of dollars.  According to the indictment, he engaged in a home repair and loan fraud scheme that targeted elderly homeowners and lenders. Diamond fraudulently caused lenders to make reverse-mortgage loans to homeowners who either did not sign up for the loans or did so unwittingly after Diamond intentionally misrepresented the terms, the indictment states. Diamond fraudulently pocketed the loan checks by causing title company representatives, including an unindicted co-schemer, to provide the checks to Diamond rather than the homeowners. The indictment seeks forfeiture of $7 million from Diamond.

Diamond pleaded not guilty at his arraignment to seven counts of wire fraud. U.S. District Judge Robert M. Dow Jr. scheduled a status hearing for August 28, 2017, at 9:00 a.m.

According to the indictment, Diamond targeted his victims, who ranged in age from 62 to 97, based on the equity in their homes and their relative lack of financial sophistication. If a victim’s relative questioned Diamond on the need for a reverse mortgage, Diamond would schedule a time to visit the victim’s home when he knew the relative would not be there, the indictment states.

Also charged in the indictment is Cynthia Wallace, 47, Chicago, Illinois. Wallace solicited homeowners to have home repairs performed by Diamond, knowing that Diamond would not actually perform the work, the indictment states. Wallace, who used the aliases “Shree Box,” “Regina Johnson,” and “Sherry Rice,” also posed as a representative of the U.S. Department of Housing and Urban Development to fraudulently obtain money from victims, the indictment states.

Wallace has pleaded not guilty to nine counts of wire fraud and two counts of falsely pretending to be an employee of the United States.

The indictment was announced by Joel R. Levin, Acting United States Attorney for the Northern District of Illinois; Brad Geary, Special Agent-in-Charge of the U.S. Department of Housing and Urban Development’s Office of Inspector General in Chicago; and Michael J. Anderson, Special Agent-in-Charge of the Chicago office of the Federal Bureau of Investigation.

The government is represented by Assistant U.S. Attorneys Brian Netols and Matthew Ebert.

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Indictment in Fake Rental Ponzi Scheme

Rachel Dollar —  August 27, 2015 — 2 Comments

A father and son schemed with a Chicago attorney and a Lincolnwood businessman to sell $2.9 million in phony mortgages to more than a dozen duped investors, according to a federal indictment.

Albert Rossini, 67, the owner of Devon Street Investments Ltd., Lincolnwood, Illinois plotted with Babajan Khoshabe, 74, Chicago, Illinois, and Khoshabe’s son, Anthony Khoshabe, 33, Skokie, Illinois, to fraudulently induce at least 15 victims into purchasing purported mortgage notes on apartment buildings in foreclosure, according to the indictment. The trio promised that investors would receive rental income from occupants of the buildings, followed by title to the properties at the conclusion of the foreclosure process, the indictment states. In reality, it was a ponzi scheme.  the trio did not own the mortgage notes, and instead used the victims’ funds to make Ponzi-type payments to other investors and pocket the rest, according to the indictment. Continue Reading…

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Townsend Petition to Vacate Sentence Denied

Rachel Dollar —  August 13, 2015 — Leave a comment

Calvin A. Townsend was indicted in a twenty-six count indictment, along with twenty other co-defendants, for participation in a mortgage fraud scheme headed by ringleader Bobbie Brown. Townsend, a licensed real estate agent and owner of Custom Home Service Corporation, was charged with bank fraud and mail fraud. He pled not guilty and, along with five other co-defendants, was tried before a jury. On July 8, 2011, the jury found Townsend guilty on all counts.

Townsend filed a petition with the District Court for the Northern Division of Illinois seeking to vacate, set aside, or correct the resulting 118 month sentence. He argued that he had ineffective assistance of counsel, exculpatory evidence was excluded, and argued further that there was a conspiracy to obstruct justice between his attorneys, the prosecutors, and the trial judge (the same judge hearing the petition to vacate.) The judge recused himself on the claims that he (the judge) had personally engaged in a conspiracy to obstruct justice and considered the remaining requests for relief. Continue Reading…

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Pair charged in ‘squatter scheme’ back in jail after judge sets higher bonds

Two men suspected of running a scam in which they took over and rented out abandoned properties are behind bars Wednesday after prosecutors lobbied a judge to raise their bonds, the Sun-Times is reporting.

Chicagoans Torrez Moore and David Farr were released on their own recognizance, with home monitoring, July 1 after allegedly living in and renting out over two dozen foreclosed homes in a scheme Cook County State’s Attorney Anita Alvarez described as “disturbing” and “bold and brazen.”

 Posted by Rachel Dollar  onJuly 23, 2015 In Mortgage Fraud on the web
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Former Eagle Fryar’s fraud trial begins

Former Eagles wide receiver Irving Fryar and his mother went on trial Tuesday on charges they conspired to defraud six banks in South Jersey and Philadelphia as part of a $1 million mortgage scheme.

If they are convicted of the conspiracy and theft-by-deception charges lodged against them, they could face five to 10 years in prison and up to $150,000 in fines, according to the state attorney general, whose office is handling the contentious case in Mount Holly.

 Posted by Rachel Dollar  onJuly 22, 2015 In Mortgage Fraud on the web ,
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