Lee Loomis, aka Lawrence Leland Loomis, 54, Granite Bay, California, was arrested and a 50-count indictment was unsealed, charging him and six others with mail fraud and wire fraud.
The indictment alleges that Loomis and his father-in-law, John Hagener, 76, Granite Bay, California, operated a Ponzi scheme in 2007 and 2008 that victimized more than 100 people and caused more than $7 million of losses related to the sale of shares in an investment program called the Naras Funds. Loomis is also charged in the same indictment with five other defendants in two related mortgage fraud schemes that caused more than $10 million in losses to mortgage lenders and others.
The three frauds are connected to a wealth-building program offered to the public through Loomis Wealth Solutions (LWS) in California, Illinois, Washington, and elsewhere from 2006 through 2008. According to the indictment, Loomis encouraged members who joined LWS: (1) to purchase whole life insurance; (2) to “harvest” home equity and retirement accounts to buy shares in the Naras Funds; and (3) to serve as “nominees” in the purchase of residential real estate controlled by Loomis. Loomis promised members of Loomis Wealth Solutions that they could acquire real estate at no cost to themselves. Moreover, he said he would pay them more than $300 per month for each home they agreed to acquire and those payments could be applied to the life insurance premiums. He marketed his plan as “simply the best financial plan ever created.”
In the Naras Funds Ponzi scheme, Loomis and Hagener are charged with falsely promising 12 percent annual returns in two investment funds: (1) Naras Secured Fund #1 and (2) Naras Secured Fund #2. According to the indictment, to induce people to invest in the Naras Funds, Loomis and Hagener falsely promised that the Naras Funds were invested in junior mortgages paying 14 percent annual returns. The two men also claimed that the Naras Funds were guaranteed by secured deeds of trust in residential real estate and by backing from a third-party company. According to the indictment, those statements were false. In fact, Loomis and Hagener used the money to pay operating expenses of various Loomis-controlled companies, to pay themselves, and to pay earlier investors. Loomis and Hagener are charged with mailing false monthly investment reports to victims and arranging wire transfers of victims’ home equity and retirement accounts to the failing Naras Funds in 2008.
Loomis and an appraiser, Darren Fehst, 44, Halifax, Nova Scotia, are also charged with mail fraud related to a property flipping mortgage fraud scheme that operated in 2007. In this scheme, Loomis is accused of orchestrating secret payments of thousands of dollars to Fehst to inflate appraisals for properties acquired by Advantage Financial Plan of California LLC, a Loomis-controlled entity. AFP-CA bought properties at market prices and flipped them to members of Loomis Wealth Solutions, often just days later, at substantially inflated prices. According to the indictment, Fehst inflated home values and falsely certified to lenders that he had no financial stake in the property transactions he was appraising. Loomis is also accused of misleading lenders into believing his “nominees” were making their own down payments of approximately 20 percent per home when, in fact, Loomis was reimbursing the down payments to nominees outside of escrow. According to the indictment, the nominees had little to no financial stake in the properties. Jay Grivette, 37, Magalia, California, the former manager of AFP-CA, pleaded guilty to this scheme on July 10, 2012 before United States District Court Judge John A. Mendez.
Loomis is further charged in a second mortgage fraud scheme related to acquiring approximately 200 properties in California, Arizona, Florida, and elsewhere, for members of Loomis Wealth Solutions to buy. The indictment charges Loomis and five others with falsifying the sales prices on homes from late 2007 through August 2008, causing approximately $10 million in losses.
According to the indictment, Loomis used Michael Llamas, 27, Tracy, California and Peter Woodard, 54, Ventura, California to approach builders of new homes and developers of condominiums to purchase investment homes in bulk at substantial price discounts ranging from 30 to 50 percent off under the terms of an “option contract.” Llamas and Woodard had no financial ability and no intention of purchasing the homes; rather, the homes were to be sold to Loomis’s nominee members at full price. Loomis then arranged for his mortgage company, Nationwide Lending Group (NLG), to sell mortgage loans for the nominees with banks and other lenders at the full price of the homes without disclosing the large price discount. Lenders were thereby misled into advancing loans that far exceeded their lending guidelines. Also, the large option contract price discount was used to conceal the lack of required down payments by nominee buyers. Loomis, Llamas, and Woodard split what remained of the price discount after subtraction of the fake down payments and certain fees.
Joseph A. Gekko, 43, Yorba Linda, California controlled an escrow company called Lender Services Direct (LSD ), in Mission Viejo, California and Tulsa, Oklahoma. He is accused of preparing Form HUD-1 Final Settlement Statements to reflect the false sales price and to indicate down payments had been made by the nominee buyers when there were no down payments. According to the indictment, Gekko concealed the lack of down payments in a series of sham financial transactions whereby, before he closed escrow, he wired large amounts of lender money to entities associated with Loomis, Llamas, and Woodard. According to court documents Llamas and Woodard induced at least one home builder to record false liens in favor of their entity, Cobalt One LLC, for millions of dollars in bogus loans to cover up large payments from LSD to Cobalt One.
In furtherance of this second mortgage fraud scheme, Loomis and others also charged with causing NLG to provide fraudulent loan applications to lenders on behalf of nominees by means of inflating incomes and falsifying Naras Fund balances on the asset portion of the loan forms. Dawn C. Powers, 40, Lincoln,California an employee of LWS who reported directly to Loomis, is charged with providing false verifications of Naras Fund deposits to lenders in connection with the loans for nominees. Former LWS and NLG employee Christopher Jared Warren, 30, formerly of Sacramento, California and currently in federal custody at the Sacramento County Jail, operated NLG on a daily basis from late 2007 through part of 2008. Warren pleaded guilty to the loan fraud aspect of the scheme on January 10, 2012. Warren was sentenced to more than 14 years in prison by U.S. District Court Judge John A. Mendez on September 11, 2012 for his role in the fraud.
Loomis and Hagener are scheduled to appear in federal court in Sacramento before U.S. Magistrate Judge Kendall J. Newman.
United States Attorney Benjamin B. Wagner made the announcement.
“This large fraud scheme is the type of case that the President’s Financial Fraud Enforcement Task Force was designed to combat,” said U.S. Attorney Wagner. “In this indictment, the grand jury charged the people responsible for running a mortgage lending company and an escrow company in a fraud scheme that spanned many states and cost lenders and investors tens of millions in losses. With the sentencing of Mr. Warren on Tuesday and these charges unsealed today, we are bringing to justice some of those who are responsible for the mortgage crisis in this district and elsewhere.”
This case is the product of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation. Assistant United States Attorneys Russell L. Carlberg, Todd D. Leras, and Paul A. Hemesath are prosecuting the case.
If convicted, the defendants face a maximum statutory penalty for each violation of mail and wire fraud of 20 years in prison, a $250,000 fine, and a three-year term of supervised release. The actual sentences, if convicted, 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 charges in the indictment are only allegations, and the defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.