Archives For inflated purchase prices

Kirk Lawrence Brannan, 65, Lake Jackson, Texas pleaded guilty today for his role in a mortgage fraud scheme, admitting he conspired with others from 2005 to 2009 to execute a scheme to defraud Wells Fargo Bank and other lenders.

At the hearing, the court held that, in committing the crime, Brannan had used sophisticated means and had employed his special skills as an attorney and real estate agent. The court noted that Brannan had created false HUD-1 settlement forms and title documents that purported to show the sale of three of his properties to his children at grossly inflated prices. These HUD-1 forms then became the three comparable sales that appraisers relied upon in over-valuing the rest of Brannan’s beach home properties which Brannan then sold through the fraud scheme at inflated prices.

Brannan sold 10 beach homes in the Freeport/Surfside, Texas area to “straw buyers” at exorbitant prices. Other co-conspirators recruited straw buyers who created loan applications with misrepresentations that lenders relied upon in deciding to make the mortgage loans. The applications contained misrepresentations of the buyer’s address, employer, income and expenses. The applications also suggested the buyers were much better credit risks than they actually were. Brannan admitted he paid kickbacks to co-conspirators each time one of the beach homes was sold to a straw buyer.

The beach properties were sold at two to three times the appraised values. The mortgage lenders, including Wells Fargo Bank, were induced to lend the inflated amounts for the purchases through flawed or fraudulent appraisals which were based on comparisons Brannan manufactured to further the scheme.

Brannan created settlement statements that suggested he sold three of his properties to his children at exorbitant prices. Appraisers relied upon these “sales” as comparable sales in appraising Brannan’s remaining properties sold to straw buyers. As a result of the fraudulent appraisals, he and his co-conspirators were able to inflate the values for his properties and deceive the lenders into approving home loans at those exorbitant amounts.

All of the straw buyers defaulted on the mortgages, and all 10 of the beach properties ended up in foreclosure.

The fraudulent mortgage loan scheme resulted in a loss of $5,317,350 to Wells Fargo Bank and the other lenders. Brannan paid $2,401,368 to his co-conspirators as part of the scheme.

Previously released on bond, Brannan was permitted to remain on bond and voluntarily surrender to a U.S. Bureau of Prisons facility to be determined in the near future.

Co-conspirators Chucoboie Lanier, 42, David Lee Morris, 56, and Derwin Jerome Blackshear, 52, all of Houston, Texas previously pleaded guilty for their roles in the scheme. Lanier received a sentenced of 36 months while Morris was ordered to serve a 42-month prison term. Blackshear is set for sentencing April 9, 2019.

Chief U.S. District Judge Lee Rosenthal handed Brannan a 36-month sentence to be immediately followed by three years of supervised release.

In imposing the sentence, Judge Rosenthal balanced Brannan’s honorable military service and other aspects of what, up to the time of the fraud, had been an exemplary life, with the tremendous damage mortgage fraud had done to the U.S. financial system and economy and the fact that Brannan had been a knowing and willing participant in such a scheme. She also pointed out that some individuals much less sophisticated than Brannan had suffered severe economic harm as a result of Brannan’s scheme.

Brannan was further ordered to pay $5,317,350 in restitution. A money judgement was previously entered in the amount of $2,401,368.

The announcement was made by U.S. Attorney Ryan K. Patrick.

The Texas Department of Public Safety and the FBI conducted the investigation. Assistant U.S. Attorneys Robert Johnson and Michael Day are prosecuting the case.

 

Abolghasseni “Abe” Alizadeh, 59, Granite Bay, California, pleaded guilty  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 60–65 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.

Alizadeh is scheduled to be sentenced by U.S. District Judge Garland E. Burrell Jr. on March 30, 2018. Co-defendant Weaver pleaded guilty to one count of wire fraud and one count of bank fraud on December 15, 2017, and is scheduled for sentencing on March 23, 2018. Alizadeh and Weaver face a maximum statutory penalty of thirty years in prison on each count and a $1 million fine.

U.S. Attorney McGregor W. Scott announced the plea. The case is the product of an investigation by the Federal Bureau of Investigation, the Internal Revenue Service, Criminal Investigation, and the Federal Deposit Insurance Corporation, Office of Inspector General. Assistant U.S. Attorney Michael D. Anderson and Heiko P. Coppola are prosecuting the case.

Karim Akil, also known as Scott Kinney, 50, Vallejo, California, was sentenced to 120 months in prison for conspiracy to commit mortgage fraud and money laundering.  Akil pled guilty on July 10, 2012, admitting his role as the organizer and leader of a mortgage fraud scheme.

According to Akil’s plea agreement, he knowingly conspired with others to commit wire fraud, involving the purchase of properties located in the Northern and Eastern Districts of California.  Akil acknowledged he directed co-defendants to create and submit loan applications that contained materially false information to financial institutions.  Akil acknowledged that the conspiracy involved using the names of fictitious persons and straw buyers, the creation of purchase contracts that reflected inflated sale properties above the original sales price, and the submission of fraudulent loan applications for 100 percent financing based upon the properties’ inflated purchase prices.  Akil agreed that more than 18 properties were involved in the conspiracy to defraud, and agreed that he was an organizer and leader of five or more participants in the conspiracy.  Akil directed an escrow officer to distribute “profits” to co-conspirators and to businesses that he owned or controlled, including Hiddenbrooke Mortgage and Marsh Group.

Mr. Akil enjoyed a lavish lifestyle, with outrageous expenditures,” said Michael T. Batdorf, Special Agent in Charge, IRS-CI. “Akil left a path of destruction, from properties that went into default and foreclosure, to straw buyers whose credit was ruined, to an escrow company that went out of business.  Although this sentence cannot reverse the damage caused by Akil and his co-conspirators, it highlights the ongoing commitment of IRS-CI and our law enforcement partners to hold accountable those involved in these types of crimes.”

On October 29, 2009, a federal grand jury indicted Akil and six co-conspirators, for their alleged roles in this extensive scheme.  For his part, Akil was charged with one count of conspiracy to commit mail fraud, in violation of 18 U.S.C. § 1349, 34 counts of wire fraud, in violation of 18 U.S.C. § 1343, and 16 counts of money laundering, in violation of 18. U.S.C. § 1957(a).  On July 10, 2012, Akil pleaded guilty to the conspiracy charge and one count of money laundering.

While out on pretrial release, between late 2012 and early 2013, Akil became involved in a series of new acts, which involved violating the terms of his plea agreement.  During the sentencing hearing, the Honorable Phyllis J. Hamilton, Chief U.S. District Judge, found that Akil breached his plea agreement in seven different ways.  These acts constituting breaches of the plea agreement included convincing a San Francisco property owner to take out a loan against a valuable property she had inherited.  The lender foreclosed on the property after Akil received $493,514 in net proceeds from the loan and loan payments were not made.  In a second alleged scheme, Akil also defrauded a victim in Southern California by promising to provide a $1.1 million stand-by letter of credit.  Akil received $197,600 in fraudulent proceeds from that victim.  That victim never received a legitimate letter of credit and never got his money back from Akil or anyone else involved in the alleged scheme.  In a third alleged scheme, Akil also forged numerous documents to gain control of a Southern California property and did a cash-out finance without the owner’s knowledge or permission.  Akil channeled almost $270,000 in net proceeds from the alleged fraudulent activity in that scheme through his other financial accounts, and spent all the money.

Judge Hamilton emphasized at the sentencing hearing that “individuals’ lives [  ] are ruined or significantly impacted by people who are gaming the system in some way, who are gaming the individuals.” Judge Hamilton found Akil’s “behavior to be entirely disturbing and suggestive of not only a failure to accept responsibility for his criminal conduct but a level of incorrigibility.”   The judge also stated, “I ponder whether or not any sentence will deter Mr. Akil.”  Judge Hamilton voice her concern that Akil’s statements to the Court during the sentencing hearing did not reflect true remorse for having ruined people’s financial lives.

In additional to the prison term, Judge Hamilton ordered Akil to serve a three-year period of supervised release, and ordered him to submit his person, residence and any property under his control to a search by Probation Officers or law enforcement officers at any time, with or without cause.  Akil will begin serving the sentence immediately.  The restitution hearing, scheduled for July 12, 2017, will determine the amounts Akil will be ordered to pay to the victims of his crimes.

Co-defendants Amy Schloemann (Akil’s former wife), Darnell Thomas, and Louisa Wonda Kidd each pleaded guilty to related crimes and were sentenced for their respective roles in the scheme.  On June 12, 2013, Schloeman was sentenced to 36 months for her role in the scheme and on November 7, 2012, Thomas was sentenced to 36 months of imprisonment for his role in the scheme.  On November 20, 2013, Kidd received a sentence of 36 months of probation for her role.  Co-defendants Michelle McGuire and Kashka Clay have entered guilty pleas and are scheduled to be sentenced on June 28, 2017.

U.S. Attorney Brian J. Stretch and Internal Revenue Service, Criminal Investigation (“IRS-CI”), Special Agent in Charge Michael T. Batdorf made the investigation. Assistant U.S. Attorney Christina McCall prosecuted the case with the assistance of Allen Williams, Noble Hughes, Vanessa Vargas, and Kathleen Turner.  The prosecution is the result of an investigation by IRS-CI with the assistance of the Alameda County District Attorney’s Office.

Kevin Campbell, 53, Pyesville, Maryland, was sentenced to 19 months in prison followed by five years of supervised release for conspiring to commit mail, wire and bank fraud arising from mortgage fraud schemes resulting in losses totaling approximately $1.2 million and was ordered to pay restitution of $1,182,822.

Jonathan L. Miles, 45, Perry Hall, Maryland to 18 months in prison followed by five years of supervised release for conspiring to commit bank fraud, and entered an order that Miles pay restitution of $1,182,822.

Campbell invested in Baltimore residential real estate, and controlled four companies that bought and sold residential real estate: KMJ Realty LLC; E&W Realty LLC; C Realty LLC; and City Realty LLC. Miles was a loan officer for a mortgage brokerage company formerly located in Reisterstown, Maryland. Continue Reading…

Nathan Shane Wolf, 44, Charlotte, North Carolina and John Wayne Perry, Jr., 34, Charlotte, North Carolina, and Purnell Wood, 44, were sentenced on federal racketeering charges in connection with their roles in the Operation Wax House fraud scheme.

Wolf, a licensed real estate agent, was sentenced to seven years in prison followed by three years of supervised release. Wolf was convicted by a jury in October 2013. According to trial evidence, Wolf was a participant in the enterprise’s mortgage fraud operations, accounting for over $13 million in fraudulently-obtained loans, with losses of more than $7 million. Witnesses testified that Wolf arranged for builders of luxury real estate to pretend to sell such real estate at an inflated price – what Wolf called the “gross price” – in order to get an inflated mortgage loans from a bank. In reality, the builders accepted the true, lower, price – what Wolf called the “strike price” – while Wolf arranged for the difference between the inflated price and the true price to be paid from the loan proceeds as kickbacks. Such kickbacks were funneled through sham companies and disguised to look like payments for work actually done on the real estate. Trial evidence established that the work was never done, but instead these kickbacks were payments to the buyers and promoters who helped bring the parties to the fraud together. According to the evidence at trial, the kickbacks generally ranged from approximately $50,000 to almost $600,000. According to the sentencing hearing, Wolf received more than $200,000 in commissions on the fraudulent transactions, which represented the vast majority of his income during the years he was committing fraud. Continue Reading…

Alberic Okou Agodio, 30, Bethesda, Maryland, pleaded guilty to conspiracy, wire fraud, and aggravated identity theft, arising from a mortgage fraud scheme.  He used the names of immigrants and students, along with false financial information, to obtain approximately $3.8 million in home mortgage loans.  He bought approximately three dozen row houses in Baltimore, all of which are in default or foreclosure. Continue Reading…