Archives For Loan Modification

Jeffrey Halpern, 62, Hewlett, New York, pleaded guilty before U.S. District Judge Peter G. Sheridan in Trenton federal court to an information charging him with one count of wire fraud. Halpern was the sole proprietor of a purported loan modification consulting company and admitted that he fraudulently billed clients more than $400,000 for services that were never performed,

According to documents filed in the case and statements made in court:

Between 2009 and 2016, Halpern operated JCK Marketing and solicited business from individuals who were seeking home loan modifications on their residential mortgages. Halpern told these individuals that, for a fee, he would negotiate loan modifications on their behalf.

In actuality, Halpern pocketed the funds but performed little or no actual services in connection with the purported loan modifications. Halpern also repeatedly demanded money for “bank fees” from his victims, even though none of the related financial institutions charged fees for loan modifications. During the relevant time period, Halpern defrauded at least 26 victims of over $400,000.

The wire fraud charge carries a maximum potential penalty of 20 years in prison and a $250,000 fine. As part of his plea agreement, Halpern must also pay restitution to the victims. Sentencing is scheduled for November 22, 2017.

Acting U.S. Attorney William E. Fitzpatrick announced the guilty plea and credited investigators with the U.S. Attorney’s Office and special agents of the FBI, under the direction of Special Agent in Charge Timothy Gallagher in Newark, with the investigation. He also thanked the New York State Department of Financial Services, under the direction of Superintendent Maria T. Vullo; the Federal Housing Finance Agency Office of the Inspector General, under the direction of Special Agent in Charge Steven Perez; and the Nassau County District Attorney’s office, under the direction of District Attorney Madeline Singas, for their assistance.

The government is represented by Assistant U.S. Attorney Sammi Malek of the U.S. Attorney’s Office Criminal Division in Newark. Defense counsel is Mitchell C. Elman Esq., Port Washington, New York

Ronald Rodis, 52, Long Beach, California was sentenced to 41 months in prison, and Charles Wayne Farris, 56, Aliso Viejo, California, was sentenced to serve 47 months in prison for their roles in a multi-million dollar fraudulent mortgage modification scheme posing as a successful law firm.  Each of the men previously pleaded guilty to one count of conspiracy to commit mail and wire fraud. In addition to the terms of prison imposed by U.S. District Judge David O. Carter, Judge Carter ordered Farris to pay $3,534,927.43 in restitution and ordered Rodis to pay $3,826,947.95 in restitution.

Both defendants previously admitted that, between October 2008 and June 2009, they participated in a scheme to induce homeowners to pay between $3,500 and $5,500 for the services of the Rodis Law Group. These defendants and their co-conspirators made numerous misrepresentations regarding RLG’s ability to negotiate loan modifications from the homeowners’ mortgage lenders. They hid the involvement of Bryan D’Antonio, the true owner of the scheme. D’Antonio was a convicted felon and subject to a permanent injunction prohibiting him from having any involvement with any business that engaged in telemarketing or misrepresented the services it would provide.

These defendants played key roles in a scheme that victimized homeowners facing foreclosure during the mortgage crisis,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “The defendants promised homeowners assistance saving their homes and modifying their mortgages, yet took their money knowing the promised benefits would never be realized.”

These two defendants used their legal knowledge and expertise to coerce and victimize vulnerable homeowners,” said Acting U.S. Attorney Sandra R. Brown of the Central District of California. “Rather than help these individuals as promised, their fraudulent scheme cost the victims millions of dollars.”

Rodis was a licensed California attorney who allowed his name to be used to lend legitimacy to the scheme. He recorded radio advertisements encouraging struggling homeowners to call RLG. In the ads, Rodis falsely claimed that RLG consisted of “a team of experienced attorneys” who were “highly skilled in negotiating lower interest rates and even lowering your principal balance.” In fact, RLG was a telemarketing operation that never had a team of experienced attorneys and rarely achieved any of the promised results for homeowners. During much of the scheme, Rodis was the only attorney at RLG. After his involvement with the RLG scheme, Rodis surrendered his law license.

Farris supervised a sales force of dozens of telemarketers who fielded calls from struggling homeowners. At Farris’s direction and using scripts that he helped create, the telemarketers made numerous misrepresentations regarding the companies’ ability to negotiate loan modifications from the homeowners’ mortgage lenders. For example, the telemarketers stated that RLG and America’s Law Group – a successor to RLG – had been in business for 11 years when in fact the company had only opened in October 2008. They falsely stated that RLG and ALG routinely obtained positive results for homeowners, including lower monthly payments, reductions in principal balance and lower interest rates. In fact, positive results were rarely achieved for any RLG or ALG clients. Telemarketers also falsely reiterated that homeowners would have a team of attorneys and real estate professionals assigned to their case.

On April 10, Bryan D’Antonio, the leader of the scheme, was sentenced to 97 months in prison followed by 12 months in a halfway house and was ordered to pay $3,826,977.95 in restitution.

This case was investigated by the FBI Los Angeles Field Office and prosecuted by Trial Attorney John W. Burke of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorney Joseph T. McNally of the Central District of California.

Sammy Araya, 41, Santa Ana, California was sentenced to 20 years, Michael Henderson, 49, Costa Mesa, California was sentenced to 12 years, and Jen Seko, 36, Anaheim, California was sentenced to 7 years in prison, all for their roles in a nationwide, multi-year “home mortgage modification” fraud that scammed thousands of vulnerable victims out of at least $11 million.  All three defendants were convicted by a federal jury on April 21, of multiple counts of mail fraud, wire fraud, and conspiracy to commit mail and wire fraud.

For Sammy Araya, Michael Henderson, and Jen Seko, the financial struggles of more than 3,000 homeowners were an opportunity for theft,” said Special Inspector General Christy Goldsmith Romero. “Home Affordable Modification Program (HAMP) crime is particularly despicable because it targets vulnerable homeowners at risk of foreclosure. The scheme of ringleader Araya and his co-conspirators Henderson and Seko involved mailing to homeowners that faced foreclosure hundreds of thousands of deceptive and misleading mass mailers that touted help with the HAMP program. They took more than $11 million, yet only provided empty promises of admission into HAMP.  Araya bragged about obstructing the criminal investigation and when caught, all showed no remorse or contrition for the crimes they committed and the victims they defrauded. I thank U.S. Attorney Boente and his team for their hard work and commitment in ensuring these defendants got the justice they deserved.”

According to court documents, from at least March 2011 through September 2014, Araya and his co-conspirators targeted struggling homeowners and made a series of misrepresentations to induce them to make payments of thousands of dollars each in exchange for supposed “mortgage modification” assistance. The conspirators lured vulnerable victims into the scam through targeted mass mailers sent to homeowners facing foreclosure through Seko’s company, Seko Direct Marketing. In the mailers and in subsequent phone calls, the defendants and their co-conspirators falsely held themselves out as a non-profit organization or as affiliated with a real government program, the Home Affordable Modification Program, designed to help homeowners at risk of foreclosure. Henderson and other “customer service representatives” in the scam convinced victims to send “reinstatement fees” and “trial mortgage payments” to the conspiracy, based on the false representations that the funds would be used to modify their mortgages. In reality, however, the defendants did nothing to help modify any mortgages. Instead, they used the victims’ payments for their own personal benefit and to further the fraud scheme. Araya, the ringleader of the scam, used the fraud proceeds to purchase expensive vehicles, a racehorse, and a variety of luxury goods, as well as to fund his personal travel and a reality television show he produced called “Make It Rain.TV.”

This scheme had devastating consequences for the victim homeowners, all of whom were already in a precarious financial position. Many victims suffered substantially greater financial hardship after falling victim to this conspiracy than they were already facing when they entered into the bogus agreements with the conspirators. In many cases, the lenders ultimately foreclosed on the victims’ homes, after the victims had been induced to make their “trial mortgage payments” to the members of the conspiracy rather than to their lenders.

Twelve defendants have been convicted in the Eastern District of Virginia in this case and a related case in connection with this same scam. They include the following individuals:

Name, Age  HometownConvictionSentence
Sammy Araya, 41

Santa Ana, California

Convicted on Counts 1-11 of superseding indictment on April 2Sentenced to 20 years
Michael Henderson, 49

Costa Mesa, California

Convicted on Counts 1-6 and 9-11 of superseding indictment on April 21Sentenced to 12 years
Jen Seko, 36

Anaheim, California

Convicted on Counts 1-6 and 9-11 of superseding indictment on April 21Sentenced to 7 years
Roscoe Umali, 38

Santa Ana, California

Pleaded guilty March 22, 2016220 months in prison on Aug. 18, 2016
Joshua Sanchez, 37

Las Vegas, Nevada

Pleaded guilty July 8, 2015151 months in prison on Oct. 29, 2015
Kristen Ayala, 32

Las Vegas, Nevada

Pleaded guilty August 4, 2015135 months in prison on Oct. 29, 2015
Isaac Perez, 33

Los Angeles

Pleaded guilty March 30, 2016130 months in prison on Sept. 1, 2016
Joshua Johnson, 36

Huntington Beach, California

Pleaded guilty March 30, 2016121 months in prison on July 7, 2016
Jefferson Maniscan, 34

Los Angeles

Pleaded guilty March 29, 2016120 months in prison on Aug. 18, 2016
Nicholas Estilow, 34

Mission Viejo, California

Pleaded guilty January 1880 months in prison on June 1, 2017

 

Raymund Dacanay, 47

Newport Beach, California

Pleaded guilty March 29, 201660 months in prison on July 21, 2016
Sabrina Rafo, 24

Garden Grove, California

Pleaded guilty January 1960 months in prison on June 1, 2017

 

 

Ana Maritza Gomez, 44, Hyattsville, Maryland, was convicted by a federal jury of one count of conspiracy to commit mail and wire fraud and five counts of mail fraud arising from a scheme to defraud victims through a foreclosure rescue fraud scam.

Two co-defendants, Rene De Jesus De Leon, 48, Silver Spring, Maryland, and Pedrina Rodriguez Bonilla, 38, Silver Spring, Maryland, have also pleaded guilty to conspiracy to commit mail and wire fraud for their involvement in the same scheme.

According to evidence presented at the six-day trial, from at least late 2011 to August 2015, Gomez and her co-conspirators claimed that they could help homeowners who wanted to modify their mortgage loans and prevent foreclosure of their homes. The conspirators sold the victims on a “principal reduction” program that included an upfront fee, typically between $3,000 and monthly payments for 10 to 15 years. Gomez and her co-conspirators told the victims to make monthly payments to the conspirators and to companies they controlled, in lieu of to the homeowners’ lenders, as part of the conspirators program. The companies controlled by Gomez’s co-conspirators were named Marketing Multiservices LLC and Innovative Solutions Services LLC.

According to the indictment and court documents, the conspirators mailed monthly invoices to the homeowner victims that falsely indicated that the “principal balance” was being paid down. Some of the victims paid Gomez in person each month at her residence; or some of the victims deposited their payments directly into bank accounts controlled by Gomez’s co-conspirators. The conspirators told the victims not to open any mail from their lenders and instead provide it to the conspirators. The conspirators did not, however, negotiate with lenders of behalf of the homeowners. Many of the victims lost their homes.

Sentencing for Ana Maritza Gomez is scheduled for October 12, 2017 , at 10:00 a.m. Sentencing for Rene De Leon is scheduled for September 7, 2017, at 1:00 p.m., and Pedrina Bonilla is scheduled for sentencing on September 7, 2017, at 10:00 a.m.

Each defendant faces a maximum sentence of 20 years in prison, 3 years of supervised release, and a $250,000 fine for each count.

The conviction was announced by Acting United States Attorney for the District of Maryland Stephen M. Schenning, Deputy Inspector General for Investigations Rene Febles of the Federal Housing Finance Agency Office of Inspector General (FHFA-OIG); Special Agent in Charge Cary A. Rubenstein of the U.S. Department of Housing and Urban Development Office of Inspector General (HUD-OIG); Chief Henry P. Stawinski of the Prince George’s County Police Department; Postal Inspector in Charge Robert B. Wemyss of the U.S. Postal Inspection Service – Washington Division; and Chief J. Thomas Manger of the Montgomery County Police Department.

Acting United States Attorney Stephen M. Schenning commended the FHFA-OIG, HUD-OIG, U.S. Postal Inspection Service, Prince George’s County and Montgomery County Police Departments, U.S. Postal Inspection Service and the Prince George’s County State’s Attorney’s Office for their work in the investigation. Mr. Schenning thanked Assistant United States Attorney Kristi N. O’Malley and Special Assistant United States Attorney Jolie F. Zimmerman, who are prosecuted the case.

Kevin Frank Rasher, 45, Coto de Caza, California, plead guilty to 12 counts of mail fraud relating to his operation of a fraud scheme that took $2.2 million from distressed homeowners through false promises that he could help them avoid foreclosure by obtaining modifications to their mortgages. Rasher has been in custody since his arrest one year ago.

In a plea agreement filed in federal court, Rasher admitted that, between 2011 and March 2016, he falsely told distressed homeowners that he was an employee of HUD and/or an attorney, and that the homeowners had been approved for a reduced mortgage payment or interest rate. Rasher then instructed the homeowners to mail their mortgage payments to one of his businesses, claiming that he would forward the money to the homeowners’ mortgage lenders. Instead of forwarding the money to the mortgage lenders, Rasher deposited the money into his bank accounts and used it for his own personal expenses.

Rasher admitted that he fraudulently obtained approximately $2.24 million from more than 500 victims.

Rasher pleaded guilty before United States District Judge Josephine L. Staton, who is scheduled to sentence the defendant on September 29. Rasher faces a statutory maximum sentence of 240 years in federal prison.

This case was investigated by the U.S. Department of Housing and Urban Development, Office of the Inspector General; the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP); the United States Postal Inspection Service; the Federal Housing Finance Agency’s Office of the Inspector General; and the Federal Bureau of Investigation.

The case against Rasher is being prosecuted by Assistant United States Attorneys Rosalind Wang and Robert J. Keenan of the Santa Ana Branch Office.

Kwame Insaidoo 60, Bay Shore, Long Island, New York, the former executive director of United Block Association (“UBA”), a New York-based non-profit organization, and his wife Roxanna Insaidoo, 63, Bay Shore, Long Island, New York, were found guilty in Manhattan federal court of embezzlement from a federally funded program, money laundering, and defrauding their mortgage lender. Kwame Insaidoo was also found guilty of defrauding the City of New York in connection with UBA’s contracts to operate senior centers in Upper Manhattan. The jury convicted Kwame and Roxanna Insaidoo on all counts in the superseding indictment following a one-week trial before U.S. District Judge Valerie E. Caproni.

In 2011, Kwame and Roxanna Insaidoo engaged in a scheme to defraud their mortgage lender, in connection with a modification of their mortgage under the federally sponsored Home Affordable Modification Program, by underreporting their income and assets. This scheme led to a write-off of almost $200,000 from Kwame and Roxanna Insaidoo’s home mortgage.

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced the verdict and praised the outstanding investigative work of the New York City Department of Investigation and the Criminal Investigators of the United States Attorney’s Office for the Southern District of New York.

The case is being prosecuted by the Office’s Public Corruption Unit. Assistant U.S. Attorneys Eli J. Mark, David Zhou, and Tatiana Martins are in charge of the prosecution.

Oscar Cantalicio Ortiz, 53, Kingwood, Texas, a Houston-area contractor, failed to appear for sentencing in a $16 million loan fraud scheme, and has been charged with failing to appear. Ortiz pleaded guilty June 30, 2016, to conspiring to commit bank, mail and wire fraud. He was set for sentencing in that case Monday, April 24, 2017, but failed to appear at the hearing. A federal grand jury returned a new indictment against him for failure to appear.

He is considered a fugitive and a warrant remains outstanding for his arrest. Anyone with information about his whereabouts is asked to contact the FBI at 713-693-5000.

His codefendant – Houston realtor Seung Min Santillan, aka Suzy, 57, Houston, Texas – pleaded guilty to the conspiracy and making false statements on a loan application in September 2016. She was sentenced to 168 months in federal prison and ordered to pay $5,299,500 in restitution.

Ortiz and Santillan operated a mortgage fraud scheme in which they recruited straw borrowers to purchase residential properties in the Houston area. Loans were obtained from lending institutions to purchase these properties in the names and using the credit of the straw borrowers. The lenders were provided materially false information to induce them to fund these residential loans. The loans were funded and ultimately fell into default when Ortiz and Santillan failed to make all the mortgage payments as promised.

Ortiz and Santillan utilized several business entities during the execution of the scheme to defraud including Uptown Builders LLC, Americorp Builders LLC, Luxury Quality Homes LLC and Santi Investments. In recruiting straw borrowers during the scheme, the borrowers were told the residential property would be in their name for a short period while Ortiz made modifications to the property prior to reselling the house. Ortiz and Santillan promised the straw borrowers that they would handle all the costs associated with purchasing and holding these properties.

Once the loans to purchase the residence funded, one or more of the business entities Ortiz utilized would receive a large portion of the loan proceeds. This occurred even when the same property was purchased for the second time in the name of a new straw borrower. The defendants were able to take a large portion of the loan proceeds since the value of the residence was inflated with fraudulent appraisal reports.

The announcement was made by Acting U.S. Attorney Abe Martinez. The FBI conducted the investigation. Assistant U.S. Attorney Melissa Annis is prosecuting the case.

Sammy Araya, 41, Santa Ana, California, Michael Henderson, 49,Costa Mesa, California, and Jen Seko, 36, Anaheim, California, were convicted by a federal jury in connection with their operation of a nationwide, multi-year “home mortgage modification” fraud that scammed hundreds of victims out of at least $10 million.

This is the same scheme that Kristen Ayala, whose sentence I wrote about in Comment on Sentencing of Kristen Ayala was involved with.

According to court records and evidence presented at trial, Araya, Henderson, and Seko operated a large-scale “home mortgage modification” scam that victimized vulnerable individuals and families across the country for several years. The conspirators sent targeted mass mailers to homeowners facing foreclosure through Seko’s company, Seko Direct Marketing. The mailers referenced real federal programs designed to help struggling homeowners, such as the Home Affordable Modification Program (HAMP), and were titled “Notice of HUD Relief,” “Notice of Mortgage Relief,” and “New HAMP Benefits,” among other misleading titles. The mailers listed various toll-free telephone numbers for the homeowners to call for assistance. When a victim homeowner who had been solicited via a mass mailing called the toll-free number listed on the mailer, a member of the conspiracy posing as a “customer service representative” would answer the phone and collect financial information from the victim, as well as inquire about the victim’s mortgage and how far behind the victim was on his or her mortgage payments. The victims were told the information would be reviewed to determine if they qualified for a mortgage modification. Instead, the information was used by the conspirators to determine how much money could be stolen from the victim. Henderson served as one of the purported “customer service representatives” and helped to distribute the money collected by the scam, while Araya was the mastermind and principal beneficiary of the entire fraudulent operation.

According to court records and evidence presented at trial, after being contacted by another member of the conspiracy and told that their mortgage modification had been approved, the victim homeowner would be told that their lender required a “reinstatement fee,” usually in the amount of thousands of dollars. Victims were also told that they were required to make several “trial” mortgage modification payments. After these so-called “trial payments” were completed, their modification would be complete and their new lower mortgage payment would become permanent for the life of the loan.

Throughout this process, the members of the conspiracy represented themselves to homeowners in mass mailings, phone calls, emails, and other communications using a laundry list of aliases and fictitious entity names. Some of those fictitious entities included “Equity Restoration Group,” “Neighborhood Counseling Services of America,” and “Home Retention Center,” among many others. The conspirators changed their aliases and entity names regularly, in an effort to evade detection by law enforcement. The conspirators also falsely represented themselves as a “non-profit” organization or as affiliated with the federal government or the victims’ lenders, and they directed the victims to make their checks and money orders payable to other fake entities, such as “Payment Processing Services,” “Default Servicing,” and “Trust Funding.” They then opened bank accounts using those false entity names, and used those bank accounts to briefly deposit victim payments before withdrawing the funds and distributing the proceeds among the members of the conspiracy.

The victims of this scheme dutifully sent their payments to the fraudulent entities as instructed by the conspirators, only to discover that they had not been granted a mortgage modification by their lenders. When victims confronted the members of the conspiracy about this fact, the conspirators would make lulling statements designed to reassure the victims, such as telling them that the mortgage modification process takes time, and that they were dealing with individuals at a higher level at the bank than the lender representatives with whom the victims had spoken. In reality, however, the members of the conspiracy were simply diverting the victims’ payments for their own personal benefit, without doing anything to assist in modifying the victims’ mortgages. Araya, the ringleader of the scheme, used the proceeds of the fraud to purchase expensive vehicles, a racehorse, and a variety of luxury goods, as well as to fund his personal travel and a reality television show he produced called “Make It Rain.TV.”

This scheme had devastating consequences for the victim homeowners, all of whom were already in a precarious financial position. Many victims suffered substantially greater financial hardship after falling victim to this conspiracy than they were already facing when they entered into the bogus agreements with the conspirators. In many cases, the lenders ultimately foreclosed on the victims’ homes, after the victims had been induced to make their “trial” mortgage payments to the members of the conspiracy rather than to their lenders.

These defendants scammed hundreds of individuals and families who were trying desperately to save their homes,” said Dana J. Boente, U.S. Attorney for the Eastern District of Virginia. “Their crimes were rooted in dishonesty and greed, and they shamelessly enriched themselves at their victims’ expense. I am very pleased with the convictions and want to commend the efforts of the Assistant United States Attorneys and our investigative partners for their terrific work on this important and complex case.”

Twelve defendants have been convicted in the Eastern District of Virginia in this case and a related case. They include the following individuals:

Name, Age

Hometown

Result

Sentencing

Sammy Araya, 41

Santa Ana, California

Convicted on Counts 1-11 of superseding indictment at trial todayFaces maximum penalty of 20 years in prison on each count of conviction
Michael Henderson, 49

Costa Mesa, California

Convicted on Counts 1-6 and 9-11 of superseding indictment at trial todayFaces maximum penalty of 20 years in prison on each count of conviction
Jen Seko, 36

Anaheim, California

Convicted on Counts 1-6 and 9-11 of superseding indictment at trial todayFaces maximum penalty of 20 years in prison on each count of conviction
Roscoe Umali, 38

Santa Ana, California

Pleaded guilty March 22, 2016220 months in prison on Aug. 18, 2016
Joshua Sanchez, 37

Las Vegas, Nevada

Pleaded guilty July 8, 2015 in case 1:15cr147151 months in prison on Oct. 29, 2015
Kristen Ayala, 32

Las Vegas, Nevada

Pleaded guilty August 4, 2015 in case 1:15cr147135 months in prison on Oct. 29, 2015
Isaac Perez, 33

Los Angeles

Pleaded guilty March 30, 2016130 months in prison on Sept. 1, 2016
Joshua Johnson, 36

Huntington Beach, California

Pleaded guilty March 30, 2016121 months in prison on July 7, 2016
Jefferson Maniscan, 34

Los Angeles

Pleaded guilty March 29, 2016120 months in prison on Aug. 18, 2016
Raymund Dacanay, 47

Newport Beach, California

Pleaded guilty March 29, 201660 months in prison on July 21, 2016
Nicholas Estilow, 34

Mission Viejo, California

Pleaded guilty January 18, 2017Faces maximum penalty of 20 years in prison on June 1.
Sabrina Rafo, 24

Garden Grove, California

Pleaded guilty January 19, 2017Faces maximum penalty of 20 years in prison on June 1.

 

Araya faces a maximum penalty of 220 years in prison, and Henderson and Seko each faces a maximum penalty of 180 years in prison when sentenced on July 19.

Today justice was served to three scam artists who preyed upon hundreds of desperate homeowners taking money in exchange for empty promises of admission into the HAMP program,” said Christy Goldsmith Romero, Special Inspector for the Troubled Asset Relief Program (TARP). “This was a scheme of deception and thievery: the defendants pocketed the homeowner dollars but did nothing to help their victims. I thank U.S. Attorney Boente and his team for their hard work and commitment protecting homeowners getting help through HAMP.”

“These defendants preyed upon innocent homeowners when they were at their most vulnerable, and simply trying to save their homes,” said Leslie DeMarco, Special Agent in Charge, Western Region, Federal Housing Finance Agency – Office of Inspector General. “These egregious schemes victimize homeowners and entire communities, and today a jury held them accountable for their actions. We are proud to work with our law enforcement partners on this case, and will continue to work with them to bring to justice all individuals who attempt to defraud unwitting victims.”

Dana J. Boente, U.S. Attorney for the Eastern District of Virginia; Christy Goldsmith Romero, Special Inspector General for the Troubled Asset Relief Program (SIGTARP); William Hedrick, Acting Inspector in Charge of the Los Angeles Division of the U.S. Postal Inspection Service; Leslie DeMarco, Special Agent in Charge for the Federal Housing Finance Agency (FHFA-OIG); and James Todak, Special Agent in Charge, U.S. Housing and Urban Development, Office of Inspector General, Los Angeles Field Office, made the announcement after Senior U.S. District Judge James C. Cacheris accepted the verdict. Assistant U.S. Attorneys Samantha P. Bateman and Ryan S. Faulconer are prosecuting the case. Assistant U.S. Attorneys Zach Terwilliger and James Gillis formerly prosecuted the case.

Jason J. Keating, 38, Toledo, Ohio, was sentenced to nine years in prison and Christopher J. Howder, 40, Perrysburg, Ohio, was sentenced to seven years in prison in after  stealing more than $1.1 million from hundreds of people through a fraudulent loan-modification scheme,

Keating was ordered to pay $1.1 million in restitution while Howder was ordered to pay $561,000 in restitution.

Both pleaded guilty last year to charges of conspiracy to commit mail and wire fraud and multiple counts of mail fraud and wire fraud.

Keating and Howder worked at Making Home Affordable USA (MHAUSA) from 120 10th Street, Toledo, Ohio where Keating was self-described president and Howder was the self-described underwriting manager.

According to court documents filed in the case:

The company used various names but homeowners were told MHAUSA had a very high rate of success and that customers could achieve modified interest rates as low as 2 percent.

Prospective participants were told there was a flat fee for service, generally between $495 and $795. Participants were told to stop making monthly mortgage payments to their lenders and instead to pay a percentage of their mortgage to MHAUSA.

Participants were told MHAUSA would hold these payments in a “stimulus reserve” account to demonstrate the participants could reliably make payments, and that once the loans were modified, the money would be turned over to the lenders.

The money obtained through the fraud was spent on concessions at professional sports venues, restaurants, cash withdrawals, gentlemen’s clubs, a tanning salon, a Las Vegas hotel, a jewelry store and a lingerie store.

These defendants took more than $1 million from people struggling to hold onto their homes,” said Acting U.S. Attorney David A. Sierleja for Ohio.

They used money obtained through fraud to pay for expensive restaurants and vacations,” said Stephen D. Anthony, Special Agent in Charge of the FBI’s Cleveland office.

The investigating agency in this case is the Federal Bureau of Investigation and the Department of Housing and Urban Development – Office of Inspector General. The case was handled by Assistant United States Attorney Gene Crawford.

A recent comment from Brandon on the blog post Mortgage Mod Case Results in 10+ Year Sentences stated:

“Couple of small pawns in a much larger game.kristen is a 32 year old first time,non violent offender mother of three.sentanced to over 12 years.not sure how these so called heros sleep at night .Wake The @%*&  Up !!!”

Kristen Michelle Ayala was sentenced to 135 months – 11 years and 3 months –  in prison in connection with a mortgage modification scheme. She is not currently in the custody of the Bureau of Prisons but that site does confirm that she is 32 years old and that her anticipated release date is March 9, 2025.  In the federal prison system, a defendant must serve at least 85% of their sentence which means that Ms. Ayala will serve at least 114 months, over 9 years, in prison.

So, what is it about this particular “white collar” crime that resulted in such a long prison sentence?  I have been writing about these cases for many years and there are a number of factors that influence sentencing that may not be readily apparent to readers.  So, let’s look at Ms. Ayala’s case.

Ms. Ayala pled guilty to one count of conspiracy to commit wire fraud which carries a maximum potential sentence of 30 years in prison. The maximum sentence is not, however, what the defendant will actually receive at sentencing.  The court works off sentencing guidelines which are advisory, not mandatory.  It uses these guidelines to add or subtract from the “base level” of the offense and then comes up with a “guideline range” and the sentence is generally within that range.

Many of the defendants that I have written about have either been convicted of or pled guilty to a significant number of counts and have been sentenced to less than ten years.  Ms. Ayala only pled guilty to one count so, again, what makes this situation different from those?

The sentencing process starts with a Presentence Investigation Report which is prepared by a probation officer.  The defendant is generally interviewed as part of this process. The Presentence Investigation report identifies the potentially applicable guidelines, calculates the offense level and criminal history category, identifies factors relevant to the appropriate kind of sentence or appropriate sentence within the guideline range and identifies any basis for departing from the applicable range (Federal Rule of Criminal Procedure 32).  It may also address the defendant’s history and characteristics along with the impact of the crime on the victim. The Presentence Investigation Report is generally sealed by the Court – which means we do not have access to it to review what the probation officer found or recommended.  In Ms. Ayala’s case, the Presentence Investigation Report was sealed and we do not have access to it.

The defendant can then submit an objection to the Presentence Investigation Report.  The objection might include arguments that the Presentence Investigation Report is incorrect, bring up items of information that were not included and that might reflect positively on the defendant or might argue with the recommended departures or guideline range conclusions or contain letters from character witnesses.  Ms. Ayala filed an objection to the Presentence Report but that document was sealed by the court so it is not possible for us to review the issues and arguments that she raised.

In this case, the government filed a “Position on Sentencing” which laid out its position on the sentence that should be imposed.  It is the only document that gives some insight into the sentence which is not sealed.  Although we cannot view the Presentence Investigation Report or Ms. Ayala’s objections, the Position on Sentencing addresses issues raised in both.

In its Position, the government refers to Ms. Ayala’s plea as related to a “ruthless and pervasive home mortgage modification scheme.” And goes on to state that Ms. Ayala’s actions “targeted extremely vulnerable individuals” and that the victims were “selected for the sole reason that they were in dire financial straits, desperate and literally on the verge of losing their homes.”   The Position states that the government had, at the time it filed the Position, identified 405 victims with a loss amount of approximately $3.8 million.  According to the Position, the victim impact statements showed that the scheme destroyed the lives of the victims, causing divorce, serious health issues and extreme despair to children, parents, combat veterans and people who were struggling.

The Position goes to state that Ayala and her co-conspirators analyzed the victims finances and arrived at a number that was designed to take their very last dollars. According to the Statement of Facts filed with the plea agreement, after the victim responded to a mass mailing that purported to be from a government related entity by calling a toll free telephone number and providing their financial information, another representative would call the homeowner back and tell them that their application for mortgage modification had been approved and that they needed to pay a “reinstatement fee” of thousands of dollars along with three trial payments.  These payments were diverted to the defendants.  No work was ever done to modify the mortgages.  The defendants also impersonated a legitimate federal program – HAMP, which was part of TARP and designed to help distressed homeowners. By doing so, they duped homeowners into thinking the program was legitimate.

The Position states “[w]e know from the investigation that Defendant and the co-conspirators would congratulate one another and demean the recently defrauded victims for their naiveté and stupidity in parting with their money.”

As to the history and characteristics of the defendant, the Position states that Ms. Ayala made poor choices in her early years but got her life together, gained an employable skill, started a family and lived a law abiding life.  However, when her marriage started to deteriorate, she started an affair with her co-defendant, Joshua Sanchez.  Once she was introduced to the scheme, she came on board as a full participant and was extremely helpful in convincing distressed homeowners that the scheme was legitimate.

The Position states that Ms. Ayala’s lack of a criminal history should be taken into account and therefore recommended a sentence of 160 months in prison – at the lower end of the guideline range.

Because the fraud scheme had a devastating effect on the lives of the victims, the Position also includes outtakes from some of the victim impact statements, some of which follow:

“My husband fought in two wars protecting all U.S. Citizens and assuring freedom remains in these United States, including for [Defendant]. He sacrificed his sight, most of his hearing and the ability to walk for this great Nation. I can’t find the words for the atrocities and the pain and suffering that [Defendant] have caused a man who already gave so much for all, even [Defendant].”

“They stole my money [and] I am 83 years old. I cannot many (sic) anymore income. My son & his family became homeless as a result of their actions & we lost the family property.”

“As a result of this crime, me and my children were homeless for a while…My daughter had to be admitted to a pediatric psychiatric unit for two weeks because she was affected when her friends saw all our belongings on the front lawn and we had no place to go….”

“Because of their actions, I went into a deep depression. I had to quit my job because of the stress I was going through….My marriage is not a marriage anymore, because my husband cannot forgive me for this. My family fell apart….The damage they did is unforgivable, I hope justice is done.”

The minute entry from the sentencing hearing indicates that Ms. Ayala requested a reduction for her minor role in the offense, requested a variance sentence of 12 months and 1 day, and requested the court take into account her background and history. The court rejected the request for a reduction based on a minor role and adopted the Presentence Investigation Report.  While Sanchez was sentenced to 151 months, Ms. Ayala received a sentence of 135 months.

In my years of reporting on mortgage fraud, I have discovered a few factors that really impact sentencing.  The first and probably most significant is the existence of real human victims whose lives were destroyed.  When the victim is a financial institution, unless the dollar amount is very high, there is a pattern of convictions or a wide-ranging scheme involving a lot of conspirators, the sentence is generally in the one to five year range.  And it seems, in those cases, that personal difficulties faced by the defendant have a significant impact on the sentence. Cooperation with authorities (pleading guilty, testifying against co-conspirators) also weighs heavily.

But where, as here, lives are permanently and irrevocably impacted as a result of an abuse of trust and confidence and the victims selected are vulnerable and in need of protection, the personal issues and prior ‘good character’ of the defendant seem to be given less weight.  Is it heartbreaking that a 32-year old mother of 3 will spend twelve and a half years in prison?  Yes.  But it is also heartbreaking to the victims.  In the end, it was Ms. Ayala’s decision to enrich herself by engaging with others to take over a million dollars from vulnerable homeowners who thought that they were applying for government assistance through HAMP.

When you stay with a company after you figure out that they are, in fact, a fraudulent scheme and are essentially stealing money from vulnerable people, you make a choice. At that point, you become part of a conspiracy to defraud and you become responsible for the results. It was this decision that ruined the lives of hundreds of people, whether she was doing it for the money, to impress her new boyfriend, because her “success” at her “job” felt good to her, because she needed her paycheck to live, or for any one of a hundred other reasons that people use to justify the purposeful decision to defraud others.  In the end, crime is a choice and Ms. Ayala made that choice.

What is the result when you place, on one side of the scales of justice, the weight of the result of her voluntary choice on her own life and, on the other side of the scales of justice, the weight of the effect of that choice on the 405 victims of her conduct?  Unfortunately for Ms. Ayala, the scales tip rather significantly toward eleven years.

*Ms. Ayala was also ordered to pay $1,217,411.45 in restitution to 404 victims.