Archives For Wire Fraud

Hollie Darlene Dustin, 60, Punta Gorda, Florida, was sentenced today to six months in federal prison for committing wire fraud against the Federal National Mortgage Association (Fannie Mae).

According to court documents, Dustin, a licensed real estate broker, owned Home Choice Real Estate (HCRE), a company that contracted with Fannie Mae to manage and perform preservation services on various Fannie Mae foreclosed properties. As part of a Master Listing Agreement with Fannie Mae, Dustin’s company was prohibited from using any vendors that she controlled to perform preservation services on Fannie Mae properties. Dustin fraudulently used ProPreserve, a company that she controlled, to perform preservation services on the properties without Fannie Mae’s knowledge or consent. She then submitted approximately 550 fraudulent ProPreserve invoices for HCRE, which Fannie Mae paid.

Dustin also created inflated ProPreserve invoices for work already performed by other vendors, then submitted those false invoices to Fannie Mae for payment.

Dustin used interstate wires to fraudulently submit the invoices to Fannie Mae.

The court also ordered Dustin to serve a term of three years of supervised release, 100 hours of community service, and to pay restitution in the amount of $34,001.25. As part of her sentence, the court also entered a forfeiture money judgment in the amount of $34,001.25, the proceeds of the wire fraud. Dustin had pleaded guilty on June 19, 2018. http://www.mortgagefraudblog.com/?s=Hollie+Darlene+Dustin

This case was investigated by the Federal Housing Finance Agency – Office of Inspector General. It was prosecuted by Assistant United States Attorney Jeffrey F. Michelland.

Jeffrey Halpern, 63, Hewlett, New York, a sole proprietor of a purported loan modification consulting company was sentenced today to 57 months in prison for fraudulently billing clients more than $400,000 for services that were never performed.

According to documents filed in this 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 more than $400,000.

Halpern previously pleaded guilty before U.S. District Judge Peter G. Sheridan to an information charging him with one count of wire fraud. Judge Sheridan imposed the sentence today in Trenton federal court. http://www.mortgagefraudblog.com/?s=Jeffrey+Halpern

In addition to the prison term, Judge Sheridan sentenced Halpern to three years of supervised release and ordered to pay $411,000 in restitution.

U.S. Attorney Craig Carpenito made the announcement.

U.S. Attorney Carpenito credited investigators with the U.S. Attorney’s Office and special agents of the FBI, under the direction of Special Agent in Charge Gregory W. Ehrie in Newark, with the investigation leading to today’s sentencing. 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 Mark Higgins; 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: Mitchell C. Elman Esq., Port Washington, New York

Daniel Cardenas, 37, Tampa, Florida, was sentenced today to 18 months in federal prison for conspiracy to commit wire fraud.

According to court documents, from as early as October 2007 through May 2008, Cardenas and others conspired to execute a wire fraud scheme affecting financial institutions. The goal of the scheme was to sell condominium units at The Preserve at Temple Terrace, a 392-unit condominium complex in Tampa, Florida. To entice buyers to purchase the units, the conspirators offered cash payments to buyers, either before or after closing. Payment of the funds to the individual buyers was neither known to nor approved by the mortgage lenders.

The conspirators made material false statements on loan documents, such as purchase and sale agreements, loan applications, and HUD-1 settlement statements, to induce mortgage lenders to approve loans for otherwise unqualified borrowers. The conspirators used several entities to conceal the payments to buyers from the mortgage lenders.

Cardenas’s role in the conspiracy, as a loan officer at Transcontinental Lending Group’s branch in Tampa, Florida included but was not limited to preparing, signing, and certifying false and fraudulent loan applications submitted to lenders in order to induce the institutions to provide funding for buyers. The false representations submitted to and relied upon by the mortgage lenders included representations concerning occupancy, income, source of funds, and assets.  Cardenas’s participation in the mortgage fraud conspiracy caused approximately $710,000 in losses to the victim mortgage lenders.

Cardenas pleaded guilty on April 24, 2018.

This case was investigated by the Federal Housing Finance Agency, Office of Inspector General and Federal Bureau of Investigation. It was prosecuted by Special Assistant United States Attorney Chris Poor and Assistant United States Attorney Jay Hoffer.

 

Wells Fargo Bank, N.A. and several of its affiliates (Wells Fargo) will pay a civil penalty of $2.09 billion under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) based on the bank’s alleged origination and sale of residential mortgage loans that it knew contained misstated income information and did not meet the quality that Wells Fargo represented. Investors, including federally insured financial institutions, suffered billions of dollars in losses from investing in residential mortgage-backed securities (RMBS) containing loans originated by Wells Fargo.

FIRREA authorizes the federal government to seek civil penalties against financial institutions that violate various predicate criminal offenses, including wire and mail fraud. The United States alleged that, in 2005, Wells Fargo began an initiative to double its production of subprime and Alt-A loans. As part of that initiative, Wells Fargo loosened its requirements for originating stated income loans – loans where a borrower simply states his or her income without providing any supporting income documentation.

To evaluate the integrity of its increasing volume of stated income loans, Wells Fargo subjected a sample of these loans to “4506-T testing.” A 4506-T form is a government document signed by the borrower during the loan approval process that allows the lender to obtain the borrower’s tax transcripts from the Internal Revenue Service (IRS). 4506-T testing involves comparing the tax transcripts of the borrower with the income stated on the loan application. Wells Fargo implemented 4506-T testing on two of its programs. This testing revealed that more than 70% of the loans that Wells Fargo sampled had an “unacceptable” variance (greater than 20% discrepancy between the borrower’s stated income and the income information reflected in the borrower’s most recent tax returns filed with the IRS), and the average variance was approximately 65%. After receiving these results, Wells Fargo conducted further internal testing. This additional testing, performed by quality assurance analysts, was designed to determine if “plausible” explanations existed for the “unacceptable” variances over 20%. This additional step revealed that nearly half of the stated income loans that Wells Fargo tested had both an unacceptable variance and the absence of a plausible explanation for that variance.

The results of Wells Fargo’s 4506-T testing were disclosed in internal monthly reports, which were widely distributed among Wells Fargo employees. One Wells Fargo employee in risk management observed that the “4506-T results are astounding” yet “instead of reacting in a way consistent with what is being reported WF [Wells Fargo] is expanding stated [income loan] programs in all business lines.”

The United States alleged that, despite its knowledge that a substantial portion of its stated income loans contained misstated income, Wells Fargo failed to disclose this information, and instead reported to investors false debt-to-income ratios in connection with the loans it sold. Wells Fargo also allegedly heralded its fraud controls while failing to disclose the income discrepancies its controls had identified. The United States further alleged that Wells Fargo took steps to insulate itself from the risks of its stated income loans, by screening out many of these loans from its own loan portfolio held for investment and by limiting its liability to third parties for the accuracy of its stated income loans. Wells Fargo sold at least 73,539 stated income loans that were included in RMBS between 2005 to 2007, and nearly half of those loans have defaulted, resulting in billions of dollars in losses to investors.

The Justice Department made the announcement today .

This settlement holds Wells Fargo accountable for actions that contributed to the financial crisis,” said Acting Associate Attorney General Jesse Panuccio. “It sends a strong message that the Department is committed to protecting the nation’s economy and financial markets against fraud.

Abuses in the mortgage-backed securities industry led to a financial crisis that devastated millions of Americans,” said Acting U.S. Attorney for the Northern District of California, Alex G. Tse. “Today’s agreement holds Wells Fargo responsible for originating and selling tens of thousands of loans that were packaged into securities and subsequently defaulted. Our office is steadfast in pursuing those who engage in wrongful conduct that hurts the public.

The settlement was the result of a coordinated effort between the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office for the Northern District of California, with investigative support from the Federal Housing Finance Agency, Office of Inspector General.

The claims resolved by this settlement are allegations only, and there has been no admission of liability.

Dorothy Matsuba, 67, her daughter Jamie Matsuba, 33, and her husband, Thomas Matsuba, 67, all of Chatsworth, California, owners and/or managers of Los Angeles, California-area foreclosure rescue companies were sentenced to 240, 135, and 168 months in prison today for their roles in a foreclosure rescue scheme, respectively.

According to evidence presented at trial, from January 2005 to August 2014, Dorothy Matsuba, Jamie Matsuba, Thomas Matsuba and others engaged in a scheme to defraud financially distressed homeowners by offering to prevent foreclosure on their properties through short sales.  Instead, the conspirators rented out the properties to third parties, did not pay the mortgages on the properties, and submitted false and fraudulent documents to mortgage lenders and servicers to delay foreclosure.  The evidence further established that the conspirators obtained mortgages in the names of stolen identities.  The defendants also used additional tactics, including filing bankruptcy in the names of distressed homeowners without their knowledge and fabricating liens on the distressed properties, the evidence showed. http://www.mortgagefraudblog.com/?s=Dorothy+Matsuba

Two other defendants have been charged in this matter.  Defendant Jane Matsuba-Garcia, 42, Camarillo, California, previously pleaded guilty and is awaiting sentencing.  Defendant Young Park Los Angeles, California, is a fugitive.  In addition, in related cases, Jason Hong, 36, Chatsworth, California and Ryu Goeku, 48,  Canoga Park, California, previously pleaded guilty and are awaiting sentencing.

All three Matsubas were sentenced by U.S. District Judge R. Gary Klausner of the Central District of California.  Judge Klausner also ordered the defendants to serve three years of supervised release. Restitution and forfeiture will be decided at a hearing on Aug. 13.  All three defendants were remanded into custody. Dorothy Matsuba pleaded guilty on Dec. 4, 2017, to one count conspiracy to commit wire fraud, false statements to a federally insured bank or mortgage lending business, and identity theft, five counts of wire fraud, six counts of false statements to federally insured banks, and six counts of aggravated identity theft.  On Dec. 13, 2017, after a one-week trial, Jamie Matsuba and Thomas Matsuba were both convicted of one count of conspiracy to commit wire fraud, making false statements to federally insured banks, and committing identity theft and one count of making false statements to federally insured banks.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Nicola T. Hanna for the Central District of California, Assistant Director in Charge Paul D. Delacourt of the FBI’s Los Angeles Division, Acting Deputy Inspector General for Investigations Paul Conlon of the Federal Housing Finance Agency-Office of Inspector General (FHFA-OIG), Special Agent in Charge R. Damon Rowe of Internal Revenue Service Criminal Investigation’s (IRS-CI) Los Angeles Field Office, and Sheriff Jim McDonnell of the Los Angeles County Sheriff’s Department made the announcement.

This case was investigated by the FBI, FHFA-OIG, IRS-CI, the U.S. Attorney’s Office for the Central District of California, and the Los Angeles County Sheriff’s Department.  Trial Attorney Niall M. O’Donnell, Senior Litigation Counsel David A. Bybee and Trial Attorney Jennifer L. Farer of the Criminal Division’s Fraud Section are prosecuting the case.  Senior Trial Attorney Nicholas Acker previously worked on the investigation.

Individuals who believe that they may be a victim in this case should visit the Fraud Section’s Victim Witness website for more information.

James Ignatius Diamond, 68, Riverside, California and Tricia Mae Gruber, 42, Riverside, California were named on July 12, 2018 in a thirty-count indictment for operating a fraudulent debt-elimination scheme to target distressed homeowners.

The indictment outlines how Diamond and his co-defendant Gruber and their co-schemers operated the scheme and highlights thirty instances of wire and mail fraud affecting a financial institution throughout the scheme.

Around 2010 and continuing to about September 2014, defendants Diamond and Gruber, and other co-schemers, knowingly participated in a scheme to defraud distressed homeowners, which also affected financial institutions to which they were indebted.

When targeting victim homeowners with at least one of his pitches, Diamond described a loophole in the Uniform Commercial Code regarding real estate ownership in which the homeowner could become the creditor and the financial institution creditor/lender would become the debtor, according to investigators. The programs purported to eliminate the victims debts altogether. After enrolling in the programs, Diamond and his co-schemers would collect from victims an advance-fee, followed by periodic program fees, and notary fees totaling hundreds of dollars. The average victim paid thousands of dollars, and some victims paid tens of thousands of dollars. Many victims lost their homes, were evicted from their homes, or suffered other adverse economic consequences. The investigation uncovered hundreds of victims with collective losses of more than $1.5 million.

According to the indictment:

Diamond owned and operated businesses with offices located in Riverside County, Californa including Transmitting Assets, Inc., Operation Save Haven, Citizen Beware, and Unlimited Logistics Corporation (collectively known as TAI/UCL). TAI/ULC purported to offer debt-elimination services to homeowners who were behind on their mortgage payments and other debtors who were behind on their debt payments, including car and student loans, in exchange for substantial fees, including an advance fee, periodic program fees, and notary fees.

Diamond, Gruber, and co-schemers induced victims to pay the TAI/ULC fees for services that defendants Diamond and Gruber falsely represented would eliminate the homeowners’ and debtors’ financial obligations to their financial institution creditors.

Defendants Diamond and Gruber recruited victim customers, many of whom did not speak English well or at all, through various means, including live seminars and presentations, as well as written marketing materials.

Defendants Diamond and Gruber and their co-schemers offered two primary methods of purported debt-elimination:

  1. The Diamond Home Claim Reclamation Method, also known as the Free & Clear Method, which targeted financially distressed homeowners; and
  2. The Electronic Funds Transfer Program, which targeted financially-distressed homeowners and victims with other debts including car and student loans.

The defendants and their co-schemers falsely told victim customers that they did not have to continue paying their mortgages after entering into the programs and should instead pay TAI/ULC. Defendant Diamond also falsely told victim customers that if they ceased making mortgage payments to their banks, the banks would be forced to settle with the victim customers.

At least as early as 2010, defendants Diamond and Gruber ignored correspondence they received from various financial institutions and government entities informing them that documents created by the defendants and their co-schemers, which they submitted or directed victim customers to submit to financial institutions (or other creditors) had no legal effect, that they would not discharge any outstanding debts owing, and/or that they were fraudulent.

When victim customers received similar correspondence from financial institutions and government entities and confronted defendants and their co-schemers with this correspondence or requested refunds, defendants Diamond and Gruber ignored them, claimed that the correspondence was part of the debt-elimination process, encouraged the victim customers to pay purported outstanding fees to TAI/ULC so that their debts would be successfully eliminated, or offered to enroll the victim customers in other services for additional fees.

After paying TAI/ULC for services, some victim customers received unlawful detainer notices, notices of trustee sale, and other foreclosure-related documents. Some victim customers lost their properties. When victim customers complained to defendants Diamond and Gruber about these foreclosure-related developments, defendants Diamond and Gruber would ignore them or offer to enroll the victim customers in other services for additional fees.

The defendants and their co-schemers did not comply with state laws and regulations that govern, and in some cases, prohibit the operation of advance-fee loan modification businesses.

Diamond Home Reclamation Method:

In order to participate in the scheme, the defendants and their co-schemers generally required victim customers to pay an advance fee ranging from $3,500 to $8,000 per property, plus additional fees per lien on the property, periodic program fees, and notary fees.

After victim customers paid an advance fee, the defendants and their co-schemers directed the victim customers to travel to the TAI/ULC office in Riverside, California, to provide TAI/ULC employees with information relating to the victim customers’ debt obligations. At the TAI/ULC office, defendants and their co-schemers directed the victim customers to sign various documents that purported to eliminate the victim customers’ debts when sent to financial institutions, including banks and mortgage companies, and government agencies, entities and officials (the Documents).

Defendant Gruber generally notarized the Documents and charged a fee for each document that she notarized, typically between $50 and $300 per document, which was well above the prevailing rate.

The defendants and their co-schemers provided some of the Documents to the victim customers and instructed them to mail the Documents to various entities. The defendants and their co-schemers also filed some of the Documents with county recorders’ offices for additional fees.

In furtherance of this part of the scheme, the defendants and their co-schemers made and caused others to make the following material false and fraudulent pretenses, representations and promises:

  • That victim customers who paid for the Diamond Home Reclamation Method would eliminate their mortgages entirely and own their residences free and clear when in truth and in fact, as defendants and their co-schemers then well knew, the Diamond Home Reclamation Method would not eliminate victim customers’ mortgages entirely or allow them to own their residences free and clear.
  • That the Diamond Home Reclamation Method had successfully eliminated debt obligations, when in truth and in fact, as the defendants and their co-schemers well knew, the method had not eliminated debt obligations.
  • That the Documents that the defendants and their co-schemers had the victim customers sign and send to financial institutions and government agencies would result in the elimination of the victim customers’ debts, when, in truth and in fact, as the defendants and their co-schemers then knew, the Documents would not eliminate any debt obligations and had no legal effect at all.
  • That victim customers were not legally obligated to continue to pay their mortgages, when in truth and fact, the DHRM did not relieve the victim customers of their obligations to pay their mortgages.
  • That correspondence received from various financial institutions stating that the Documents created by the defendants and their co-schemers had no legal effect, would not discharge outstanding debts owing, and/or were fraudulent actually were part of the debt-elimination process, when in reality, the letters were not part of a process that would eliminate any debt obligations.

The indictment alleges that the defendants knowingly concealed from victims the fact that the Documents had no legal effect and that their Diamond Home Reclamation Method had never succeeded in eliminating a customer’s mortgage obligation.

Diamond Electronic Fund Transfer (Diamond EFT):

In order to participate in the Diamond EFT Program, defendants Diamond and Gruber and their co-schemers generally required victim customers to pay a fee, which they calculated as a percentage, typically 13% of the amount of the debt to be discharged, plus additional program fees and notary fees. The victim customers were required to pay an advance fee, typically several thousand dollars, followed by monthly payments and notary fees. Defendant Diamond sometimes also recorded liens on the victim customers’ properties in the amount of the fee.

After victim customers paid the advance fee, defendants Diamond and Gruber and their co-schemers directed the victim customers to provide the TAI/ULC employees with information relating to the victim customers’ debt obligations.

After victim customers paid the advance fee, defendant Diamond prepared and directed to be prepared, among other documents, documents that appeared to be checks in the name of James I. Diamond, made payable to the victims’ financial institution creditors in the amounts of the balances owed on the victim customer debt obligations (the EFT Checks). The memoranda lines on the EFT Checks bore the words, FOR EFT ONLY FOR THE DISCHARGE OF DEBT, or similar words. Defendant Diamond and Gruber and their co-schemers then provided the EFT Checks to the victim customers and instructed the victim customers to mail the EFT Checks to their financial institution creditors and other entities as purported payments satisfying the outstanding balances owed by the victim customers.

Defendant Gruber generally notarized documents relating to the EFT process and charged a fee for each document that she notarized, typically between $50 and $300 per document, which was well above the prevailing market rate.

When victim customers advised defendants Diamond and Gruber that their financial institutions had rejected the EFT checks, defendant Diamond falsely told the victim customers that this was part of the debt-elimination process and that customer victims were required to continue making monthly payments to TAI/ULC in the amount of 13% of the amount of the debt obligation.

If a victim customer stopped paying the monthly payments, defendant Diamond would:

  • advise the victim customer that the debt-elimination process would not work until she/he had completed all payments;
  • threaten to foreclose on the victim customer’s property or other assets; and
  • threaten to assess late fees

In furtherance of this part of the scheme, defendants Diamond and Gruber and their co-schemers made and caused others to make the following material and false and fraudulent pretenses, representations and promises:

  • That victim customers who paid for the Diamond EFT Program would be able to discharge or entirely eliminate their debt obligations, including home mortgages, car loans, and student loans, when in truth and fact, as defendants and their co-schemers then well knew, the Diamond EFT Program would not discharge or entirely eliminate victim customers’ debt obligations.
  • That EFT Checks were valid, legal tender, drawn on open bank account, when in truth and in fact, as the defendants and their co-schemers then well knew, the EFT Checks were not valid, legal tender, and were not drawn on open bank accounts.
  • That EFT Checks would pay off the victim customers’ debts when in truth and fact, as defendants and their co-schemers then well knew, the EFT Checks would not pay off the victim customers’ debts.
  • That the financial institutions’ rejection of the EFT checks was part of the debt-elimination process, when in truth and in fact, as the defendants and their co-schemers well knew, the financial institutions’ rejection of the EFT Checks was not part of a process that would eliminate any debt obligations.
  • Also in furtherance of this part of the scheme, defendants Diamond and Gruber knowingly concealed the following material facts from the victim customers:
    • That the EFT Checks were not valid, legal tender and instead contained account numbers belonging to closed bank accounts.
    • That the EFT Checks had never succeeded in eliminating a customer’s debt obligations.

As a result of the fraudulent scheme, defendants Diamond and Gruber induced hundreds of distressed homeowners and other debtors to pay more than $1.5 million in fees to TAI/ULC.

Diamond was arrested Thursday at his residence without incident. Gruber, a notary public and office manager, will be summonsed to federal court at a future date.

Diamond appeared in federal court in Los Angeles Thursday afternoon for an initial appearance. If convicted of the charges in the indictment, Diamond and Gruber face a statutory maximum sentence of 30 years in prison each.

Investigators believe there may be other victims of this scheme not yet identified. If you believe you may have been victimized in this scheme, or have information about someone who has, you are encouraged to contact your nearest FBI office. In Los Angeles, the FBI can be reached 24/7 at (310) 477-6565.

Nicola T. Hanna, the United States Attorney in Los Angeles, and Paul D. Delacourt, the Assistant Director in Charge of the FBI’s Los Angeles Field Office made the announcement.

This case was investigated by the FBI’s Los Angeles Division, Riverside Resident Agency, the Riverside County Sheriff’s Department, and the Drug Enforcement Administration. This case is being prosecuted by Assistant United States Attorney Cassie D. Palmer of the Major Frauds Section.

An indictment merely contains allegations that a defendant has committed a crime. Every defendant is presumed innocent unless and until proven guilty at trial.

 

Mary Sue Weaver, 65, Scottsdale, Arizona and formerly of Lincoln, California, was sentenced today to four years and two months in prison and ordered to pay $15,387,945 in restitution for her participation in a $22 million fraud scheme.

On December 15, 2017, Weaver pleaded guilty to one count of wire fraud and one count of bank fraud.  On June 1, 2018, co-defendant Abolghasseni “Abe” Alizadeh, 59, Granite Bay, California, was sentenced to four years and eight months in prison and ordered to pay $15,879,945 in restitution to the victims of his crimes.

According to court documents, Weaver was employed at a local title company and assisted Alizadeh, a Sacramento area commercial real estate developer, restaurateur and owner of Kobra Properties, in a scheme to fraudulently purchase land that he planned to develop.  http://www.mortgagefraudblog.com/?s=Abolghasseni+%E2%80%9CAbe%E2%80%9D+Alizadeh Alizadeh would write checks for the down payment on a commercial property, but because he lacked funds to cover the checks, he would call Weaver and ask her to delay depositing the checks until after escrow closed. Once escrow closed, Weaver disbursed funds from the title company’s escrow trust account to Kobra Properties. Kobra Properties then used those funds to cover its down payment and other costs. In this way, it appeared as though Alizadeh was making a substantial down payment when in fact he was not. Alizadeh’s entire scheme, involving no fewer than six properties in the Sacramento area, resulted in a loss to various financial institutions of over $22 million.

U.S. Attorney McGregor W. Scott made the announcement.

This case was the product of an investigation by the Federal Bureau of Investigation, the IRS Criminal Investigation, and the Federal Deposit Insurance Corporation, Office of Inspector General. Assistant U.S. Attorneys Michael D. Anderson and Heiko P. Coppola are prosecuting the case.

Hollie Darlene Dustin, 60, Punta Gorda, Florida has pleaded guilty to wire fraud. She faces a maximum penalty of 20 years in federal prison.

According to the plea agreement, Dustin, a licensed real estate broker, owned Home Choice Real Estate (HCRE), a company that contracted with the Federal National Mortgage Association (Fannie Mae) to manage and perform preservation services on various Fannie Mae foreclosed properties and potentially list those properties for sale. As part of a Master Listing Agreement with Fannie Mae, Dustin’s company was prohibited from using any vendors that she controlled or with which she had a conflict of interest to perform preservation services on Fannie Mae properties. Dustin fraudulently used ProPreserve, a company that she controlled, to perform preservation services on the properties without Fannie Mae’s knowledge or consent. Dustin submitted approximately 550 fraudulent ProPreserve invoices to Fannie Mae requesting approximately $146,280.46, which Fannie Mae paid to HCRE.

Dustin also created inflated ProPreserve invoices for work already performed by other vendors, then submitted those false invoices to Fannie Mae for payment.  Dustin used interstate wires to submit the fraudulent invoices to Fannie Mae.

Dustin’s sentencing hearing is scheduled for September 17, 2018.

This case was investigated by the Federal Housing Finance Agency – Office of Inspector General. It is being prosecuted by Assistant United States Attorney Jeffrey F. Michelland.

Abolghasseni “Abe” Alizadeh, 59, Granite Bay, California was sentenced today to four years and eight months in prison.  Alizadeh pleaded guilty on January 12, 2018 to wire fraud, bank fraud and making false statements to a federally insured financial institution.

According to court documents, Alizadeh, a Sacramento-area commercial real estate developer, restaurateur and owner of Kobra Properties, came up with a scheme to fraudulently purchase land that he planned to develop. Banks usually loan up to 60 to 65 percent of the loan to-value ratio (LTV) on undeveloped commercial property. (LTV ratio is the comparison between the amount of the loan and the value of the property.) To circumvent the banks and fraudulently get a higher level of financing, Alizadeh submitted altered purchase contracts to the banks that greatly inflated the purported purchase price. The banks, which competed for Alizadeh’s business, were unaware that the purchase prices were inflated and sometimes loaned well in excess of the loan-to-value ratio. By concealing the true purchase price from the banks, Alizadeh received substantial amounts of cash, sometimes millions of dollars, at the close of escrow and avoided making the full down payment or, in some instances, any down payment.

Alizadeh was assisted in this scheme by co-defendant Mary Sue Weaver, 64, currently of Scottsdale, Arizona and formerly of Lincoln, California, who was employed at a local title company. According to the plea agreement, Alizadeh would write checks for the down payment, but because he lacked funds to cover the checks, he would call Weaver and ask her to delay depositing the checks until after escrow closed. Once escrow closed, Weaver disbursed funds from the title company’s escrow trust account to Kobra Properties. Kobra Properties then used those funds to cover its down payment and other costs. In this way, it appeared as though Alizadeh was making a substantial down payment when in fact he was not.

On April 29, 2005, Alizadeh submitted a fraudulent purchase contract to Central Pacific Bank, which induced the bank to lend him nearly $4 million for the purchase of 10.3 acres of property. This loan represented over 96 percent loan-to-value ratio. Similarly, on October 21, 2005, Alizadeh received over $22 million in funding and loans to purchase the Turtle Island property, when in actuality, the original purchase price was $10 million. In March 2006, Alizadeh also falsely claimed to Bank of Sacramento that he was paying $36 per square foot for a piece of property where he intended to build a TGI Friday’s restaurant. In reality, Alizadeh was paying only $21 per square foot. This resulted in a $650,000 inflation of the true purchase price. Alizadeh’s entire scheme, involving no fewer than six properties in the Sacramento area, resulted in a loss to various financial institutions of over $22 million.

U.S. District Judge Garland E. Burrell Jr. also ordered Alizadeh to pay $15,879,945 in restitution to the victims of his crimes.

On December 15, 2017, Weaver pleaded guilty to one count of wire fraud and one count of bank fraud and is scheduled for sentencing on June 22, 2018. She faces a maximum statutory penalty of 30 years in prison on each count and a $1 million fine. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

The announcement was made by U.S. Attorney McGregor W. Scott.

The defendant used his reputation as a local business leader to perpetrate a complex fraud scheme to enrich himself at the expense of others,” stated U.S. Attorney Scott. “The U.S. Attorney’s Office will continue to work diligently with its law enforcement partners to expose schemes like this and bring criminals like the defendant to justice.

The scope of the fraud is staggering,” said Michael T. Batdorf, Special Agent in Charge, IRS Criminal Investigation. “As a well-known real-estate developer, title companies and banks competed for Mr. Alizadeh’s business. He submitted altered purchase contracts that greatly inflated the purchase price. This scheme cost financial institutions over $22 million. While this sentence cannot reverse the damage caused by Alizadeh and his co-defendant, it highlights the ongoing commitment of IRS-CI to hold accountable those involved in these types of crimes.

Today’s sentencing holds defendant Alizadeh accountable for causing more than $22 million in losses to the financial institutions, by corruptly inflating the value of property to obtain millions of dollars in fraudulent bank loans,” stated FDIC Inspector General Jay N. Lerner. “This case is a powerful example of law enforcement cooperation to combat fraud and bring such swindlers to justice.”

This case is the product of an investigation by the Federal Bureau of Investigation, the IRS Criminal Investigation, and the Federal Deposit Insurance Corporation, Office of Inspector General. Assistant U.S. Attorneys Michael D. Anderson and Heiko P. Coppola are prosecuting the case.

Frank Giacobbe, 43, East Amherst, New York; Patrick Ogiony, 34, Buffalo, New York; Kevin Morgan, 42, Pittsford, New York; and Todd Morgan, 29, Rochester, New York, have been charged in a  62-count indictment with conspiracy to commit wire fraud and bank fraud, and substantive wire fraud and bank fraud charges. The charges carry a maximum penalty of 30 years in prison and a $1,000,000 fine.

According to the indictment, between March 2011 and June 2017, the defendants conspired to defraud financial institutions, such as Arbor Commercial Mortgage, LLC and Berkadia Commericial Mortgage, LLC, and government sponsored enterprises, including Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal National Mortgage Association (Fannie Mae). The indictment alleges that the defendants conspired to engage in a variety of conduct to induce mortgage lenders to issue loans for residential apartment complexes (1) for greater amounts than they would have issued had they known the truth; and (2) that the lenders would not have issued at the time of issuance had they known the truth.

The defendants are accused of:

  • Conspiring to provide lending institutions with false rent rolls suggesting that properties had more occupied units, at higher rental rates, and generated more income than they, in fact, did;
  •  Conspiring to provide false information about other income received at the complexes. On one occasion, when one defendant asked another where storage space income figures came from, another defendant replied, “Magic;”
  • Conspiring to provide lenders with fraudulently altered leases; and
  • Conspiring to prevent inspectors touring the properties from discovering vacant units by, among other things, turning on radios inside vacant units, placing mats and shoes outside apartment doors, and, on at least one occasion, hiring someone to stage an apartment as lived in and pretend to be a tenant of an inspected unit.

The indictment alleges fraud at seven different properties, not all of which involved all charged defendants, but which resulted in total loans issued of $167,591,000. The properties are Morgan Ellicott Apartments and Amherst Garden, both in Buffalo, New York; Rugby Square in Syracuse, New York; Avon Commons, in Avon, New York; Rochester Village, Southpointe, and Eden Square, all in the Pittsburgh, Pennsylvania area.

U.S. Attorney James P. Kennedy, Jr. made the announcement today.

The defendants are charged with fraudulently obtaining over $167.5 million worth of loans relating to seven residential apartment complexes located here in New York and in Pennsylvania,” noted U.S. Attorney Kennedy. “Most of those loans were in turn sold to Fannie Mae or Freddie Mac, entities which were created by Congress to perform and an important role in our country’s housing finance system. As a result of the fraudulent conduct alleged in this indictment, defendants’ conduct not only unjustly enriched them but threatened to undercut the very foundations upon which our mortgage banking and investment systems are based.”

We must protect the tens of thousands of investors who own mortgage backed securities,” said Gary Loeffert, Special Agent-in-Charge of the Buffalo Division. “This investigation is focused on stopping people from undermining the residential and commercial financing industry. Fraud for profit aims to misuse the mortgage lending process to steal cash.”

Some of the defendants are scheduled to be arraigned on May 23, 2018, at 2:00 p.m. before U.S Magistrate Judge H. Kenneth Schroeder.

The indictment is the result of an investigation by the Federal Bureau of Investigation, under the direction of Special Agent-in-Charge Gary Loeffert, and the Federal Housing Finance Agency, Office of Inspector General, under the direction of Special Agent-in-Charge Mark P. Higgins.

The fact that a defendant has been charged with a crime is merely an accusation and the defendant is presumed innocent until and unless proven guilty.