Archives For Loan Modification

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.

 

Herzel Meiri, who was indicted on March 16, 2016, on fraud and money laundering charges in connection with a scheme to fraudulently induce distressed homeowners to sell their homes to a company he owned and controlled, was extradited from Ukraine. Meiri had been arrested by Ukrainian authorities on October 27, 2016. He will be arraigned in front of Magistrate Judge Ronald L. Ellis. The case is assigned to United States District Judge Edgardo Ramos. Meiri was the seventh defendant to be indicted in connection with the scheme.

According to the allegations in the Fourth Superseding Indictment, which was unsealed in November 2016, as well as the Complaints previously filed in this action:

Since at least 2013, Meiri and his co-defendants defrauded distressed homeowners throughout the Bronx, Brooklyn, and Queens, New York. Meiri and others falsely represented to the homeowners – some of whom were elderly or in poor health – that they could assist them with a loan modification or similar relief from foreclosure that would allow the homeowners to save their homes. But rather than actually assisting the homeowners, the defendants deceived them into selling their homes to Launch Development LLC (“Launch Development”), a for-profit real estate company owned and controlled by Meiri.

Meiri and others lured victims through Homeowners Assistance Service of New York (“HASNY”), which purported to provide assistance to homeowners who were seeking to avoid foreclosure of their homes. As part of the scheme, Meiri directed employees of Launch Development to solicit owners of distressed properties and invite them to meet with HASNY representatives so that they could learn more about avoiding foreclosure and saving their homes.

When a homeowner arrived at the HASNY office, he or she met with a co-conspirator, who typically advised the homeowner that HASNY could assist him or her with a loan modification. In other cases, the homeowner was advised that a loan modification could not be completed, but that the homeowner could engage in a type of short sale in which the homeowner would sell the property to a third party, Launch Development, and then within approximately 90 days arrange for a relative of the homeowner to repurchase the property from Launch Development. Homeowners were typically advised that they could remain in their homes throughout the entire process. At the closing that followed, a homeowner who had been led to believe that he or she was about to receive a loan modification or transfer the property to a trusted relative was encouraged to sign documents presented by another co-conspirator, which in some cases were blank. Unbeknownst to the homeowners, by signing the documents, they were selling to Launch Development the homes they had hoped to save. Homeowners often were then forced to vacate their homes soon thereafter, and Launch Development re-sold many of the homes, which were purchased at fraudulently deflated prices, for an enormous profit.

In addition, Meiri and a co-conspirator transferred the proceeds of the home sales from Launch Development to other companies Meiri owned and controlled, falsely describing the transfers as, among other things, rent payments. The proceeds were ultimately transferred back to Launch Development or spent on luxury items for Meiri.

Meiri is charged with one count of conspiracy to commit wire fraud and bank fraud and one count of conspiracy to commit bank fraud, each of which carries a maximum term of 30 years in prison. In addition, Meiri is charged with two counts of money laundering, one of which carries a maximum term of 20 years in prison and one of which carries a maximum term of 10 years in prison, and one count of conspiracy to commit money laundering, which carries a maximum term of 20 years in prison.

Meiri will be arraigned in front of Magistrate Judge Ronald L. Ellis. The case is assigned to United States District Judge Edgardo Ramos.

Preet Bharara, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Division of the Federal Bureau of Investigation (“FBI”), Christy Goldsmith Romero, Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”), and Maria T. Vullo, Financial Services Superintendent for the New York State Department of Financial Services (“DFS”), announced the extradition.

U.S. Attorney Preet Bharara said: “Herzel Meiri allegedly concocted a callous scheme to swindle desperate homeowners out of their homes. As alleged, Meiri lied to his victims, who thought that they were getting the financial help they needed but instead were being tricked into signing over their homes. Thanks to our law enforcement partners – the FBI, SIGTARP, and DFS – Meiri is now in U.S. custody and will have to answer for his alleged crimes.”

Assistant Director-in-Charge William F. Sweeney Jr. said: “When desperate homeowners fall prey to false relief schemes, their vulnerabilities are often exploited by those who seek to benefit from their misfortune. As alleged, Meiri’s behavior caused serious damage to struggling families who unknowingly funded his extravagant scheme. The FBI continues to support partnerships within the financial industry and law enforcement as we work together to combat this serious crime.”

Special Inspector General for TARP Christy Goldsmith Romero said: “Herzel Meiri is charged with preying on struggling homeowners trying to avoid foreclosure. Meiri and his co-conspirators allegedly promised victims mortgage modifications when in fact they were swindling them out of their homes. SIGTARP thanks U.S. Attorney Bharara, Superintendent Vullo, and the FBI for their commitment to protecting taxpayers from TARP-related crime.”

DFS Financial Services Superintendent Maria T. Vullo said: “These allegations paint the portrait of a con artist who cold-heartedly preyed on financially distressed homeowners – some of whom are among our most vulnerable – to satisfy his selfish greed. The Department of Financial Services is proud to have worked with our fellow law enforcement partners in helping to bring this defendant to justice.”

Mr. Bharara praised the outstanding work of the FBI, SIGTARP, and DFS for their investigative efforts and ongoing support and assistance with the case.

The prosecution of this case is being overseen by the Office’s General Crimes Unit. Assistant U.S. Attorneys Jaimie L. Nawaday and Andrew Thomas are in charge of the case.

 

David Gotterup, 37, Oceanside, New York, was sentenced at the federal courthouse in Brooklyn, New York, to 15 years in prison for leading a loan modification scheme that defrauded distressed homeowners. Gotterup pleaded guilty on June 16, 2016, to conspiring to commit wire, mail and bank fraud. In addition, as part of the sentence, the Court ordered Gotterup to pay $2,500,050 in forfeiture.

According to public filings, from 2008 to 2012, Gotterup and his co-conspirators made a series of false promises to convince more than a thousand distressed homeowners seeking relief through government mortgage modification programs to pay thousands of dollars each in advance fees to numerous companies owned or controlled by Gotterup, including Express Modifications, Express Home Solutions, True Credit Empire, LLC, Green Group Today, Inc., The Green Law Group, Inc., and JG Group. Among other things, Gotterup directed telemarketers and salespeople to lie to distressed homeowner victims by telling them that they were “preapproved” for loan modifications and that they were retaining a “law firm” and an “attorney” who would complete their mortgage relief applications and negotiate with the banks to modify the terms of their mortgages. Contrary to these representations, Gotterup and his co-conspirators did little or no work in connection with these fraudulently induced advanced fees. Gotterup was arrested in October 2015 and has been incarcerated since then.

The sentence was announced by Robert L. Capers, United States Attorney for the Eastern District of New York; William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); David Montoya, Inspector General, U.S. Department of Housing and Urban Development (HUD); and Christy Goldsmith Romero, Special Inspector General for the Troubled Asset Relief Program (SIGTARP).

In announcing the sentence, Mr. Capers extended his appreciation to the agencies that led the government’s investigation and thanked the U.S. Small Business Administration and the Staten Island District Attorney’s Office for its assistance in the case.

The proceeding took place before United States District Judge Nicholas G. Garaufis.

The government’s case is being prosecuted by the Office’s Business and Securities Fraud Unit. Assistant United States Attorneys Sylvia Shweder and Bonni Perlin are in charge of the prosecution.

 

Michelle Lefaoseu, also known as “Michelle Bennett,” “Michelle Lee” and “Michelle Page,” 42, Huntington Beach, California, was sentenced to 12 months and one day of imprisonment, followed by one year of supervised release, for participating in an extensive mortgage loan modification scheme.

According to court documents and statements made in court, Lefaoseu worked at a California-based company that falsely purported to provide home mortgage loan modifications and other consumer debt relief services to numerous homeowners in Connecticut and across the United States in exchange for upfront fees. The company did business, at various times, as “First Choice Financial Group, Inc.,” “First Choice Financial,” “First Choice Debt,” “Legal Modification Firm,” “National Freedom Group,” “Home Care Alliance Group,” “Home Protection Firm,” “Hardship Center,” “Network Solutions Center, Inc.,” “Premiere Financial Center,” “Premiere Financial,” “Rescue Firm,” “International Research Group LLC,” “Hardship Solutions,” “American Loan Center,” “Loan Retention Firm,” “Clear Vision Financial,” “Green Tree Financial Group,” “Green Tree Financial,” “Enigma Fund, Inc.,” “National Aid Group,” “Southern Chapman Group LLC,” “Save Point Financial,” “Best Rate Financial Solutions,” “Best Rate Financial Solution,” “Best Rate Financial,” “Best Rate Finance Group,” and “Nation Star Financial.”

Aria Maleki presided over the entire structure of this scheme, and Lefaoseu was head of the processing department. Acting as representatives of the above-named entities, members of Maleki’s sales team cold-called homeowners and offered to provide mortgage loan modification services to those who were having difficulty repaying their home mortgage loans. Homeowners were charged fees that typically ranged from approximately $2,500 to $4,300 for the services. To induce homeowners to pay these fees, scheme participants falsely represented that the homeowners already had been approved for mortgage loan modifications on extremely favorable terms; the mortgage loan modifications already had been negotiated with the homeowners’ lenders; the homeowners qualified for and would receive financial assistance under various government mortgage relief programs, including the Troubled Asset Relief Program and the Home Affordable Modification Program; and if for some reason the mortgage loan modifications fell through, the homeowners would be entitled to a full refund of their fees.

In fact, the homeowners had not been preapproved for mortgage loan modifications with lenders, mortgage loan modifications had not been negotiated with the lenders, homeowners had not qualified for and did not receive any financial assistance through government mortgage relief programs, and homeowners did not receive a refund of their fees upon request. Few homeowners ever received any type of mortgage loan modification through the defendants’ company, and few homeowners received refunds of their fees.

Participants in the scheme used pseudonyms and periodically changed their business and operating names to evade detection. They also directed homeowners to mail their checks to addresses and mail boxes that Maleki and others had set up in states other than California.

After members of the sales team fraudulently induced homeowners to pay for the company’s services, the homeowners’ files were transferred to Lefaoseu and the junior processors working under her supervision. Lefaoseu was fully aware of her co-workers’ lies and, during her contact with victims, repeatedly helped to cover up those lies.

As a result of this scheme, more than 1,000 homeowners suffered losses totaling more than $3 million.

On January 21, 2016, a grand jury in New Haven returned an indictment charging Maleki, Lefaoseu and five other California residents with conspiracy and fraud offenses related to this scheme. The defendants were arrested on January 26.

On July 11, 2016, Lefaoseu pleaded guilty to one count of misprision of a felony.

On March 22, 2016, Maleki pleaded guilty to one count of conspiracy to commit mail and wire fraud and, on July 18, 2016, he was sentenced to 112 months of imprisonment. He also forfeited approximately $350,000 that investigators seized from various bank accounts, approximately $362,000 sized from a Bitcoin account, a $100,000 cashier’s check, and a 2013 Ferrari 458 Italia.

The other five defendants, all of whom were members of Maleki’s sales team, pleaded guilty and were sentenced to prison terms ranging from 18 months to 58 months.

All seven defendants have been ordered to pay restitution in the amount of $2,390,496.59.

U.S. District Judge Stefan R. Underhill in Bridgeport, Connecticut, sentenced Lefaoseu and Deirdre M. Daly, United States Attorney for the District of Connecticut made the announcement. The matter was investigated by the U.S. Department of Homeland Security – Homeland Security Investigations, U.S. Postal Inspection Service, Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), U.S. Department of Housing and Urban Development – Office of Inspector General, Federal Housing Finance Agency – Office of Inspector General, and Federal Bureau of Investigation, with assistance from the Oklahoma Attorney General’s Office.

The case was prosecuted by Assistant U.S. Attorney Avi M.

Kowit Yuktanon, also known as “Eric Cannon” and “Aaron Brock,” 32, Huntington Beach, California, and Cuong Huy King, also known as “James Nolan” and “Jimmy“, 32, Westminster, California, have each been sentenced by U.S. District Judge Stefan R. Underhill in Bridgeport, Connecticut, to 18 months of imprisonment, followed by one year of supervised release, for participating in an extensive mortgage loan modification scheme.  Judge Underhill also ordered both defendants to pay restitution in the amount of $2,390,496.59.

According to court documents and statements made in court, Yuktanon and King worked at a California-based company that falsely purported to provide home mortgage loan modifications and other consumer debt relief services to numerous homeowners in Connecticut and across the United States in exchange for upfront fees.  The company did business, at various times, as “First Choice Financial Group, Inc.,”  “First Choice Financial,” “First Choice Debt,” “Legal Modification Firm,” “National Freedom Group,” “Home Care Alliance Group,” “Home Protection Firm,” “Hardship Center,” “Network Solutions Center, Inc.,” “Premiere Financial Center,” “Premiere Financial,” “Rescue Firm,” “International Research Group LLC,” “Hardship Solutions,” “American Loan Center,” “Loan Retention Firm,” “Clear Vision Financial,” “Green Tree Financial Group,” “Green Tree Financial,” “Enigma Fund, Inc.,” “National Aid Group,” “Southern Chapman Group LLC,” “Save Point Financial,” “Best Rate Financial Solutions,” “Best Rate Financial Solution,” “Best Rate Financial,” “Best Rate Finance Group,” and “Nation Star Financial.”

Aria Maleki presided over the entire structure of this scheme, and Yuktanon and King were junior members of the sales team.  Acting as representatives of the above-named entities, Yuktanon, King and others cold-called homeowners and offered to provide mortgage loan modification services to those who were having difficulty repaying their home mortgage loans.  The defendants charged homeowners fees that typically ranged from approximately $2,500 to $4,300 for their services.  To induce homeowners to pay these fees, the defendants falsely represented that the homeowners already had been approved for mortgage loan modifications on extremely favorable terms; the mortgage loan modifications already had been negotiated with the homeowners’ lenders; the homeowners qualified for and would receive financial assistance under various government mortgage relief programs, including the Troubled Asset Relief Program and the Home Affordable Modification Program; and if for some reason the mortgage loan modifications fell through, the homeowners would be entitled to a full refund of their fees.

In fact, the homeowners had not been preapproved for mortgage loan modifications with lenders, mortgage loan modifications had not been negotiated with the lenders, homeowners had not qualified for and did not receive any financial assistance through government mortgage relief programs, and homeowners did not receive a refund of their fees upon request.  Few homeowners ever received any type of mortgage loan modification through the defendants’ company, and few homeowners received refunds of their fees.

Participants in the scheme used pseudonyms and periodically changed their business and operating names to evade detection.  The defendants also directed homeowners to mail their checks to addresses and mail boxes that Maleki and others had set up in states other than California.

As a result of this scheme, more than 1,000 homeowners suffered losses totaling more than $3 million.

On January 21, 2016, a grand jury in New Haven returned an indictment charging Maleki, Yuktanon, King and four other California residents with conspiracy and fraud offenses related to this scheme.  The defendants were arrested on January 26.

YUKATANON and KING each pleaded guilty to one count of misprision of a felony.

Maleki pleaded guilty to one count of conspiracy to commit mail and wire fraud and, on July 18, 2016, he was sentenced to 112 months of imprisonment.  He also forfeited approximately $350,000 that investigators seized from various bank accounts, approximately $362,000 sized from a Bitcoin account, a $100,000 cashier’s check, and a 2013 Ferrari 458 Italia.

The sentence was announced by Deirdre M. Daly, United States Attorney for the District of Connecticut.  The matter was been investigated by the U.S. Department of Homeland Security – Homeland Security Investigations, U.S. Postal Inspection Service, Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), U.S. Department of Housing and Urban Development – Office of Inspector General, Federal Housing Finance Agency – Office of Inspector General, and Federal Bureau of Investigation, with assistance from the Oklahoma Attorney General’s Office.

The case is being prosecuted by Assistant U.S. Attorney Avi M. Perry.

John Vescera, 60, Dana Point, California, was to 12 months and one day of imprisonment, followed by three years of supervised release, for false advertising and misusing a government seal in connection with the provision of mortgage modification services. On May 3, 2016, Vescera pleaded guilty to one count of misuse of a government seal and one count of false advertising.

According to court documents and statements made in court, Vescera was the President of First One Lending Corporation (“First One”) in San Juan Capistrano, California.  During the peak of the national mortgage crisis, Vescera and First One offered home mortgage loan modification assistance to homeowners across the United States, including in Connecticut, who were having difficulty repaying their mortgage loans.

From approximately February 2010 until approximately February 2012, Vescera and First One solicited clients through television advertisements and infomercials produced by National Media Connection of New London, Connecticut.  These advertisements touted the mortgage modification services of an entity known as the National Mortgage Help Center (“NMHC”).

Matthew Goldreich, of East Lyme, Connecticut, had incorporated NMHC approximately two months after the U.S. Treasury Department announced that it would partner with financial institutions to reduce struggling homeowners’ monthly mortgage payments through a program called the Home Affordable Modification Program (“HAMP”).  HAMP consisted of a number of incentives to encourage homeowners and financial institutions to modify existing loans on owner-occupied primary residences in order to help keep these properties out of foreclosure.

NMHC advertisements misrepresented NMHC as being affiliated with or regulated by the U.S. government and falsely stated that NMHC “help[ed] thousands of homeowners every day.”  When viewers called the advertised telephone number, they were connected not to NMHC, which operated only as a front and did not provide mortgage modification services for any homeowners, but to clients of National Media Connection, including First One.

Vescera and First One used NMHC’s name and logo in First One’s promotional materials, application package and other documents.  Vescera also instructed First One employees to introduce themselves to prospective clients as “with the National Mortgage Help Center.”

First One also misrepresented its status with the U.S. Department of Housing and Urban Development (“HUD”).  First One employees were instructed to inform homeowners that “[w]e’re a HUD approved lender and we represent the government loan modification programs.”  In addition, certain of First One’s forms claimed that the company provided “HUD . . . Housing Counseling assistance” and bore HUD’s seal.  In truth, First One had no affiliation with the government mortgage loan assistance programs and was not licensed or approved by HUD for housing counseling or home mortgage loan modification services.

Through this scheme, 302 victims lost a total of $374,622.  Many of these victims were previously compensated after Vescera and First One paid approximately $1.5 million to the Neighborhood Assistance Corporation of America in March 2013 to resolve a federal lawsuit in the Central District of California.  As part of this criminal case, Vescera paid restitution of $30,320 to 24 of the victims who were not identified at the time the federal lawsuit was settled.

Goldreich previously pleaded guilty to one count of false advertising.  On November 5, 2015, he was sentenced to two years of probation, including three months of home confinement.  He also was ordered to pay a $100,000 fine and $75,794 in restitution.

Vescera was sentenced by Chief U.S. District Judge Janet C. Hall in New Haven, Connecticut.  Deirdre M. Daly, United States Attorney for the District of Connecticut announced the sentence. The investigation was conducted by the U.S. Postal Inspection Service, Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), U.S. Department of Housing and Urban Development – Office of Inspector General, and Federal Bureau of Investigation.  The case was prosecuted by Assistant U.S. Attorneys Avi Perry and Liam Brennan.