Man Sentenced Orchestrating $1.5 Million Mortgage Fraud Scheme

Stephanie Abbott —  January 14, 2025 — Leave a comment

Lee Holliday, 66, of Schererville, Indiana, has been sentenced to more than three years in federal prison for orchestrating a mortgage fraud scheme in Chicago that bilked multiple financial institutions out of more than $1.5 million.

Holliday admitted in a plea agreement that he engaged in mortgage fraud in 2011 and 2012 in connection with the purchase of multiple properties on the West and South Sides of Chicago, Illinois. Holliday recruited buyers and provided them with funds for the down payments, which were only 3.5% of the purchase price since the loans were insured by the Federal Housing Authority. Holliday worked with the buyers to purchase homes at inflated prices and then split the proceeds with both the buyers and sellers.  Although Holliday promised the buyers that the properties would provide rental income, the promises proved to be false and most buyers eventually fell behind on their mortgage payments.  Seven properties went into foreclosure proceedings. In all, Holliday caused the lenders to lose a total of approximately $1.53 million through the submission of false and fraudulent loan applications.

In addition to the mortgage fraud scheme, Holliday also admitted in his plea agreement that he engaged in Covid-relief fraud in 2020 and 2021, fraudulently obtaining $391,869 in Paycheck Protection Program funds to which he was not entitled.

Holliday pleaded guilty last year to a federal bank fraud charge.  U.S. District Judge Sara L. Ellis on Friday sentenced Holliday to three years and three months in federal prison.

The sentence was announced by Morris Pasqual, Acting United States Attorney for the Northern District of Illinois, and Machelle L. Jindra, Special Agent-in-Charge of the U.S. Department of Housing and Urban Development’s Office of Inspector General in Chicago. Valuable assistance was provided by the FBI Chicago Field Office.  The government was represented by Assistant U.S. Attorney Stephanie C. Stern and former Assistant U.S. Attorney Charles W. Mulaney.

“FHA loans are intended to help people who could not otherwise afford a home,” said Acting U.S. Attorney Pasqual.  “In this case, the money that was supposed to help those people and improve their neighborhoods instead went into the defendant’s pockets.”

“Lee Holliday repeatedly engaged in an egregious mortgage fraud scheme causing borrowers to falsely represent critical income and asset information to qualify them for loans they would not have otherwise qualified for,” said HUD-OIG SAC Jindra.  “When people take advantage of HUD-insured mortgage programs, it limits opportunities for hard-working individuals trying to achieve the American dream of homeownership.  HUD-OIG will continue to work with the U.S. Attorney’s Office and our law enforcement partners to investigate individuals who jeopardize the integrity of FHA mortgage programs.”

 

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Woman Pleads Guilty to $161 Million Mortgage Fraud Scheme

Stephanie Abbott —  January 10, 2025 — Leave a comment

Kimberly Johnson, 55, Hampton, Georgia, has pleaded guilty for her role in a mortgage fraud scheme spanning more than three years and resulting in the approval of approximately 450 mortgage loans based on fabricated documents and false information. Many of the loans are insured by the Federal Housing Administration (FHA), resulting in claims being paid for mortgages that have defaulted.

The charges and other information presented in court: Kimberly Johnson participated in a conspiracy in which homebuyers and mortgage brokers submitted fraudulent loan applications to induce mortgage lenders to fund mortgages. Johnson’s role in the scheme was to alter or fabricate the supporting documents for the loans, including bank statements, pay stubs and Forms W-2. Over the course of more than three years, Johnson helped approximately 450 homebuyers to commit mortgage fraud by obtaining loans for which they were unqualified. The fraudulent loan applications were submitted to numerous mortgage lenders, and some of the mortgage brokers who worked on obtaining the loans were part of the conspiracy. These fraudulent loans totaled approximately $161 million. Many of those loans have already defaulted.

The announcement was made by U.S. Attorney Buchanan.

“The defendant and her co-conspirators brazenly manipulated the real estate lending process out of sheer greed,” said U.S. Attorney Ryan Buchanan. “Criminals like Johnson, who engage in mortgage fraud, threaten the soundness of the real estate market in our communities. Our office is committed to prosecuting these bad actors who abuse the system for their personal gain and to safeguard the mortgage lending system for those who rely on this financial support.”

“Kimberly Johnson engaged in a massive mortgage fraud scheme, fabricating material documents on over 450 loans to falsely qualify individuals for loans they would not have otherwise qualified for,” said Special Agent-in-Charge Jerome Winkle with the U.S. Department of Housing and Urban Development (HUD), Office of Inspector General (OIG).  “When individuals commit fraud against federally funded programs, it creates significant risks to the programs and limits the financial resources available to assist hard working individuals realize the American dream of homeownership. HUD OIG will continue to work with its prosecutorial and law enforcement partners to vigorously pursue those who seek to profit by abusing HUD-funded programs.”

“Ms. Johnson’s guilty plea is the result of our commitment to hold anyone who exploits the mortgage lending system for personal gain fully accountable,” said Edwin S. Bonano, Special Agent in Charge of FHFA-OIG’s Southeast Region. “This case highlights the importance of collaboration between our law enforcement partners to protect the integrity of the housing market and prevent fraud that undermines public trust.”

“The defendant in this case pleaded guilty for her role in altering and fabricating supporting documents in fraudulent mortgage loan applications, as part of a scheme that resulted in the approval of approximately 450 mortgage loans,” said Kyle A. Myles, Special Agent in Charge of the Federal Deposit Insurance Corporation Office of Inspector General (FDIC OIG), Atlanta Region. “The FDIC OIG remains committed to working with our law enforcement colleagues to investigate those who commit fraudulent acts and threaten to undermine the safety and soundness of our nation’s financial system.”

“The FBI will vigorously investigate criminal offenses that impact the integrity of the residential mortgage market. In this case, Johnson had the duty to conduct business honestly but instead chose to engage in mortgage fraud, securing mortgages for individuals who otherwise would not have qualified for one,” said Sean Burke, Acting Special Agent in Charge of FBI Atlanta. “We are proud to have worked with our law enforcement partners and the U.S. Attorney’s Office in the effort to prosecute anyone who engages in this type of misconduct.”

Johnson pleaded guilty to one count of conspiracy to defraud the United States in a mortgage fraud scheme and, as part of her plea, has agreed to pay restitution to the victims of the conspiracy, including the U.S. Department of Housing and Urban Development, which insures many of the residential mortgages in the United States. Johnson is scheduled to be sentenced on April 11, 2025, before U.S. District Judge Sarah E. Geraghty.

This case is being investigated by the U.S. Department of Housing and Urban Development Office of Inspector General, the Federal Housing Finance Agency Office of Inspector General, the Federal Deposit Insurance Corporation Office of Inspector General and the Federal Bureau of Investigation.

Assistant U.S. Attorney Alison Prout is prosecuting the case.

For further information please contact the U.S. Attorney’s Public Affairs Office at USAGAN.PressEmails@usdoj.gov or (404) 581-6016. The Internet address for the U.S. Attorney’s Office for the Northern District of Georgia is http://www.justice.gov/usao-ndga.

 

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Business Owner Sentenced for Stealing Money Intended for Mortgage Payments

Stephanie Abbott —  January 7, 2025 — Leave a comment

Marat Lerner, 42, Brooklyn, New York, the former president of a debt relief services business was sentenced today for stealing approximately $2.5 Million intended for mortgage payments from vulnerable victims who were in financial distress.

According to court documents and facts presented at Lerner’s sentencing, the defendant was the owner of the Lerner Group, a business that claimed to provide debt relief services, including mortgage modifications, principally to the Eastern European immigrant community in Brooklyn, New York. Many of the victims Lerner defrauded were already experiencing financial hardship and had specifically sought Lerner’s assistance to help reduce their monthly mortgage payments.  Lerner, in turn, promised that he could help them lower their monthly mortgage payments by working with their mortgage lenders to secure a mortgage loan modification or federal homeowner assistance.  To carry out his fraud, Lerner obtained access to the victims’ bank accounts, which he claimed he would use to pay the mortgage banks on their behalf.

Lerner used his access to his victims’ bank accounts to steal approximately $2.5 million – money that the 19 victims believed was being used to pay their mortgages.  Once Lerner gained access to the victims’ bank accounts, he transmitted funds from their accounts to companies and/or bank accounts that he controlled.  Lerner covered up his fraud by claiming the money was being held in escrow or by affiliates of the mortgage banks.  In truth, Lerner kept most of the victims’ money and spent it on personal and business expenses, including a BMW, luxury goods and expensive meals.  Lerner caused several of his clients to file bankruptcy petitions to stave off foreclosure to continue his fraud, and as a result of his scheme, several of his victims are facing foreclosure proceedings.

Lerner was sentenced by United States District Judge Nicholas G. Garaufis to 135 months in prison for conspiracy to commit wire fraud and wire fraud.  Lerner was also convicted of continuing his criminal scheme while on pre-trial release.  Lerner was ordered to forfeit approximately $2,340,154 to the government. Restitution to the victims will be determined at a later date. Lerner pleaded guilty to the charges in February 2024.

Breon Peace, United States Attorney for the Eastern District of New York, James E. Dennehy, Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office (FBI) and Harry T. Chavis, Jr., Special Agent in Charge, Internal Revenue Service Criminal Investigation, New York (IRS-CI), announced the sentence.

“Today the defendant learned there are serious consequences for stealing his clients’ money, even after he was arrested, and ruthlessly spending it on a luxury car for himself, on-line dating and expensive meals,” stated United States Attorney Peace.  “His victims were hard-working people, many from the Eastern European community, who went to him for help saving their homes and livelihoods.  Instead of helping them, Lerner took advantage of their trust and vulnerability to steal their money.  Lerner continued his crimes even when he knew that his actions had directly caused his victims to lose their homes and-or to declare bankruptcy.  My Office is committed to protecting the public from unscrupulous advisors like Lerner.”

“Marat Lerner stole $2.5 million from fiscally vulnerable clients and forced several into bankruptcy after funneling their money to fund his personal luxury purchases rather than providing the promised reduced mortgage payments,” stated FBI Assistant Director in Charge Dennehy.  “Lerner betrayed his victims’ trust, remorselessly continuing to perpetuate this fraudulent scheme even after his initial arrest. With the continued support from NYPD and CBP, the FBI remains dedicated to investigating those who employ empty promises to prey upon disadvantaged communities to satisfy their own greed.”

“Lerner lived a glamourous life by taking money out of the pockets of people in his own community.  His underground brokerage was not just a simple money scam; it led to victims defaulting on their mortgage payments and some falling into foreclosure,” stated IRS-CI Special Agent in Charge Chavis.  “Today’s sentencing should stand as a reminder to those preying on others to fulfill their own greedy desires—you will get caught; you will be prosecuted; and you will go to prison for your criminal acts.”

In January 2023, Lerner was arrested in connection with the fraud and released on bail.  He was instructed not to commit additional crimes.  However, Lerner promptly opened new bank accounts and continued his criminal scheme.  After his arrest in this case, Lerner stole at least an additional $50,000 from his clients.  In September 2023, Lerner’s bail was revoked after a grand jury returned a superseding indictment charging Lerner with additional crimes.

The government’s case is being handled by the Office’s Business and Securities Fraud Section.   Assistant U.S.  Attorney Nick M. Axelrod and former Assistant U.S. Attorney Genny Ngai prosecuted the case.

 

 

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Self-proclaimed “Short Sale Queen” Indicted in Mortgage Fraud Scheme

Stephanie Abbott —  December 3, 2024 — Leave a comment

Nicole Espinosa, also known as Short Sale Queen, 35, Plano, Texas; Stephanie Smith, also known as Stephanie Parks, 44, Midlothian, Texas; and Selena Baltazar-Hill, 28, Dallas, Texas, were indicted by a federal grand jury on November 20, 2024, and charged with federal violations related to a mortgage fraud scheme in the Eastern District of Texas.

According to information presented in court, beginning in 2017, Espinosa, Smith, and Baltazar, along with others, are alleged to have operated a mortgage fraud scheme using various companies, including Short Sale Queen, L.L.C.  The defendants researched and located properties that were in the pre-foreclosure short sale process and approached the homeowners about listing the properties for sale.  After signing a listing agreement with the homeowners, the defendants submitted various fraudulent documents to financial institutions and mortgage companies for the purpose of freezing or halting the foreclosure process.  Such documents included falsified purchase agreements from purported “buyers,” as well as altered “proof of funds” letters showing the “buyers” had the means to purchase the property.  Based on these representations, the financial institutions halted foreclosure proceedings, waived fees collection, and unknowingly allowed the defendants time to find a real buyer, or in other instances, cancel the deal when they could not locate a legitimate buyer.  All told, the defendants are alleged to have fraudulently submitted documents for at least 88 properties totaling over $8 million in sales, obtained at least $390,000 in commissions and processing fees, and caused at least $2.5 million in losses to these financial institutions.

The two-count indictment charges them with conspiracy to commit wire fraud affecting a financial institution and conspiracy to submit false statements to a federally insured financial institution.  The defendants have been arrested and are scheduled to appear before U.S. Magistrate Judge Aileen Goldman Durrett on December 4, 2024.

If convicted, the defendants each face up to 30 years in federal prison.

This case is being investigated by the Department of Housing and Urban Development, Federal Housing Finance Agency, and Department of Veterans Affairs.  This case is being prosecuted by Assistant U.S. Attorney Anand Varadarajan.

A federal indictment is not evidence of guilt.  All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

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Brooklyn Business Owner Convicted of Fraud Scheme

Stephanie Abbott —  November 22, 2024 — Leave a comment

Avraham Tarshish (also known as “Avi Tarshish”), 45, Queens Village, New York was found guilty yesterday for conspiracy to commit wire fraud and bank fraud, and related wire fraud counts, in connection with a scheme to defraud mortgage loan holders, including the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) and other mortgage lending businesses.

The defendant was an employee of My Ideal Property Inc. and an owner of Exclusive Homes Realty Group, Inc., Exclusive Homes NY, LLC and Homeowners Solutions Group LTD, Queens- and Brooklyn, New York based companies formed to buy and sell real property.  As proven at trial, between March 2013 and November 2018, the defendant and others conspired to defraud mortgage lenders, misleading them into approving short sale transactions at fraudulently depressed prices.  In a short sale, with the approval of the mortgage lender or servicer, a mortgage loan borrower sells his or her property for less than the outstanding balance of the mortgage loan.  The proceeds from the short sale, less approved closing costs, are applied to the outstanding mortgage loan balance owed to the lender, who typically agrees to forgive the borrower’s remaining mortgage loan balance.  Here, the defendant fraudulently manipulated the short sale process and immediately flipped properties for prices well above the short sale prices.

Among other things, the defendant and his co-conspirators paid homeowners in foreclosure to lock them in to conducting short sales with them; took steps to preclude other prospective purchasers from making higher offers for properties by failing to market properties as required by the lenders; placed fraudulent liens on properties; and further depressed the properties’ values by removing toilets and plumbing, and causing other forms of property damage—a process that the defendant and his co-conspirators referred to as making the homes “pretty.”  In furtherance of the scheme, the defendant and his co-conspirators also provided the mortgage lenders and servicers with false and misleading information in transaction documents and failed to disclose either payments made to the borrower and others related to short sale or contemporaneous agreements to transfer the properties at inflated prices.  Many of the affected mortgage loans were insured by the Federal Housing Administration or owned or guaranteed by Fannie Mae or Freddie Mac.

At trial, the government introduced evidence that the defendant participated in a conspiracy spanning years that involved dozens of fraudulent short sale transactions.  From among those dozens of transactions, the government introduced specific evidence relating to eleven examples of Brooklyn short sales through which the defendant and his co-conspirators defrauded lenders and servicers of more than $2.4 million.

The verdict followed a 12-day trial before Chief United States District Judge Margo K. Brodie.  When sentenced, the defendant faces up to 30 years in prison.

Breon Peace, United States Attorney for the Eastern District of New York, Robert Manchak, Special Agent in Charge, Federal Housing Finance Agency, Office of Inspector General, Northeast Region (FHFA-OIG), Vicky Vazquez, Special Agent in Charge, U.S. Department of Housing and Urban Development, Office of Inspector General, Northeast Region (HUD-OIG) and Thomas M. Fattorusso, Special Agent in Charge, Internal Revenue Service-Criminal Investigation, New York (IRS-CI) announced the verdict.

“The defendant defrauded taxpayer-funded mortgage loan holders out of millions of dollars and took advantage of programs designed to help distressed property owners in need,” stated United States Attorney Peace.  “Short sale mortgage fraud not only harms lending intuitions, it also depresses real estate values throughout our neighborhoods and prevents community members from gaining fair access to housing.  Today’s guilty verdict should serve as a reminder that my Office, together with our law enforcement partners, will continue to vigorously prosecute those who corruptly line their pockets at the expense of mortgage lenders and borrowers.”

Mr. Peace expressed his appreciation to the United States Department of Homeland Security, Homeland Security Investigations, New York Field Office (HSI), and the HSI El Dorado Financial Crimes Task Force for their work on the case.

“The defendant and his co-conspirators corrupted a process meant to assist homeowners facing foreclosure. By undermining the integrity of this process, Fannie Mae, Freddie Mac, and other lenders were deprived of millions of dollars,” said Robert Manchak, Special Agent-in-Charge of FHFA-OIG’s Northeast Region. “Today’s verdict demonstrates the resolve of the Federal Housing Finance Agency Office of Inspector General and its law enforcement partners to pursue those who defraud the government-sponsored enterprises.”

“Tarshish and other co-conspirators engaged in a $2.4 million scheme to cause FHA-insured mortgage lenders to approve short sale transactions at fraudulently depressed prices by misrepresenting material information for his own enrichment,” said Special Agent-in-Charge Vicky Vazquez with the U.S. Department of Housing and Urban Development (HUD), Office of Inspector General (OIG). “No one is above the law. HUD OIG will continue to work with the U.S. Attorney’s Office and our law enforcement partners to investigate individuals who jeopardize the integrity of FHA mortgage programs.”

“In this elaborate scheme to prey on people facing foreclosure and manipulating the mortgage loan system, Tarshish’s fraud resulted in a multi-million dollar loss to his victims.  With this conviction, Tarshish now faces time behind bars where he can longer line his pockets at the expense of his community and their lenders,” said Thomas M. Fattorusso, Special Agent in Charge of IRS-CI New York.

Co-Defendants Who Previously Pleaded Guilty:

  • Iskyo Aronov (also known as “Isaac Aronov”), 37, Miami, Florida
  • Michael Konstantinovskiy (also known as “Michael Kay”), 38, Rego Park, Queens
  • Tomer Dafna, 53, Great Neck, New York
  • Michael Herskowitz, 45, Brooklyn, New York

When sentenced, Aronov, Konstantinovskiy and Dafna face up to a 30-year max sentence. Herskowitz faces up to a 5-year sentence.

Anyone with information concerning similar mortgage-related fraud can report it by contacting the Federal Housing Finance Agency Office of Inspector General Hotline at 800-793-7724 or via the web at: https://www.fhfaoig.gov/ReportFraud#hotlineform.

In July 2022, Mr. Peace was selected as the Chairperson of the White Collar Fraud subcommittee for the Attorney General’s Advisory Committee (AGAC).  As the leader of the subcommittee, Mr. Peace plays a key role in making recommendations to the AGAC to facilitate the prevention, investigation and prosecution of various financially motivated, non-violent crimes including bank fraud and wire fraud.

The government’s case is being handled by the Office’s Business and Securities Fraud Section.  Assistant United States  Attorneys Shannon C. Jones, John Vagelatos, Joshua B. Dugan and Russell Noble are in charge of the prosecution, with the assistance of Paralegal Specialist Liam McNett.  Assistant United States Attorney Tanisha Payne of the Office’s Asset Recovery Section is handling forfeiture matters.

E.D.N.Y. Docket No. 19-CR-408 (MKB)

 

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Former Employees of Mortgage Lending Business Indicted for Roles in Mortgage Fraud Scheme

Stephanie Abbott —  November 13, 2024 — Leave a comment

Christopher J. Gallo, 44, Old Tappan, New Jersey, and Mehmet Ali Elmas, 32, a U.S. citizen who resided in Turkey until the time of his arrest, were indicted by a federal grand jury on Oct. 24, 2024, on charges related to their roles in a large-scale mortgage fraud scheme.

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

Gallo and Elmas were previously employed by a New Jersey-based, privately owned licensed residential mortgage lending business. Gallo was a senior loan officer and Elmas was a mortgage loan officer and Gallo’s assistant. From 2018 through October 2023, Gallo and Elmas used their positions to conspire and engage in a fraudulent scheme to falsify loan origination documents sent to mortgage lenders in New Jersey and elsewhere, including their former employer, to fraudulently obtain mortgage loans. Gallo and Elmas routinely mislead mortgage lenders about the intended use of properties to fraudulently secure lower mortgage interest rates.  Gallo and Elmas often submitted loan applications falsely stating that the listed borrowers were the primary residents of certain proprieties when, in fact, those properties were intended to be used as rental or investment properties. By fraudulently misleading lenders about the true intended use of the properties, Gallo and Elmas secured and profited from mortgage loans that were approved at lower interest rates.

The conspiracy also included falsifying property records, including building safety and financial information of prospective borrowers to facilitate mortgage loan approval. Between 2018 through October 2023, Gallo originated more than approximately $3 billion in loans.

They appeared today before U.S. District Judge Brian R. Martinotti in Newark federal court and each pleaded not guilty to on one count of conspiracy to commit bank fraud, eight counts of bank fraud, eight counts of false statements to a financial institution; and one count of aggravated identity theft.

 The charges of conspiracy to commit bank fraud, bank fraud, and false statements to a financial institution each carry a maximum potential penalty of 30 years in prison and a $1 million fine, or twice the gross gain or loss from the offense, whichever is greatest. The aggravated identity theft charge carries an additional consecutive mandatory minimum term of two years in prison and a maximum fine of up to $250,000, or twice the gross gain or loss from the offense, whichever is greatest.

U.S. Attorney Philip R. Sellinger made the announcement today.

U.S. Attorney Sellinger credited special agents of the FBI, under the direction of Acting Special Agent in Charge Nelson I. Delgado, and special agents of the Federal Housing Finance Agency, Office of Inspector General, under the direction of Special Agent in Charge Robert Manchak, with the investigation leading to the indictment.

The government is represented by Assistant U.S. Attorney Shontae D. Gray of the Economic Crimes Unit in Newark.

The charges and allegations contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

galloelmas.indictment.pdf

 

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Man Pleads Guilty to Fraud Scheme Involving Mortgage Fraud

Stephanie Abbott —  October 3, 2024 — Leave a comment

Nicholas Espinosa, 38, Randolph, Massachusetts, pleaded guilty today to two counts of wire fraud conspiracy; one count of conspiracy to make false statements to a mortgage lending business (mortgage fraud conspiracy); 16 counts of wire fraud; six counts of unlawful monetary transactions (money laundering); and one count of making false statements to a mortgage lending business.

Espinosa was arrested and charged in March 2023 along with alleged co-conspirator Daniel Cleggett.

According to the charging documents, Cleggett was the founder of the sober home business, A Vision From God LLC (AVFG), with locations in in Boston, Wakefield, Quincy and Weymouth under trade names including Brady’s Place, Lakeshore Retreat and Lambert House. Espinosa managed the day-to-day affairs of Cleggett’s business.

Espinosa, and allegedly Cleggett, along with a sober home client entered into a conspiracy to defraud a New York-based family trust that was paying for the client’s room and board at Brady’s Place in Quincy. Specifically, Espinosa, and allegedly Cleggett, overcharged the family trust for room and board by up to $12,500 per month by submitting false and fraudulent invoices to the family trust. Espinosa, and allegedly Cleggett, would then issue “refund” checks to the client in furtherance of the fraud scheme.

According to the charging documents, from approximately October 2019 to December 2021, Cleggett personally, and through straw purchasers including Espinosa, purchased the three residential properties in Weymouth and Boston to use as sober homes. Espinosa falsely represented that one of these properties was intended to be purchased as a primary residence for himself when, in reality, it was intended to be a sober home.

In addition to the sober home business, Cleggett operated numerous insulation contracting companies that participated in the Mass Save Program: Green Save Energy Corporation; Environmental Construction Objective Inc. (ECO); Green Giants, LLC; and Insulation Situation, LLC. Mass Save is a Massachusetts public/private partnership sponsored by gas and electric utility companies that funds energy conservation projects and improvements via energy efficiency funds charged to Massachusetts residents’ utility bills.

Specifically, Green Save and ECO received millions of dollars for residential insulation work from a lead vendor company under the Mass Save program. It is alleged that, from 2018 through mid-2021, Green Save and ECO fraudulently billed the vendor company for required permits that were not actually obtained. Green Save and ECO were ultimately terminated from participating in the company’s program in June 2021, and Cleggett was banned from participating in the Mass Save program. In response to this, Espinosa, and allegedly Cleggett and others, formed Green Giants as a new lead vendor with the same company under a straw owner. As a result, Espinosa, and allegedly Cleggett, obtained a total of $509,326 in payments from the company to Green Giants, despite a ban from participating in the Mass Save program.

The charges of wire fraud and wire fraud conspiracy provide for a sentence of up to 20 years in prison, three years of supervised release and a fine of up to $250,000. The charge of making false statements to a mortgage lending business provides for a sentence of up to 30 years in prison, five years of supervised release and a fine of up to $1 million. The charge of unlawful monetary transactions provides for a sentence of up to 10 years in prison, three years of supervised release and a fine of up to $250,000. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and statutes which govern the determination of a sentence in a criminal case.

U.S. Senior District Court Judge William G. Young scheduled sentencing for March 11, 2025. Espinosa was arrested and charged in March 2023 along with alleged co-conspirator Daniel Cleggett

Acting United States Attorney Joshua S. Levy; Jodi Cohen, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division; and Harry Chavis, Jr., Special Agent in Charge of Internal Revenue Service’s Criminal Investigations in Boston made the announcement today. Valuable assistance was provided by the Kingston, Randolph and Quincy Police Departments. Assistant U.S. Attorneys John T. Mulcahy and Dustin Chao of the Public Corruption & Special Prosecutions Unit are prosecuting the case.

The details contained in the charging documents are allegations. The remaining defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

 

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Scheme to Defraud Distressed Homeowners Gets Man Sentenced

Stephanie Abbott —  October 3, 2024 — Leave a comment

Terrylle Blackstone, 37, Woodbridge, Virginia, was sentenced today for participating in a conspiracy that fraudulently promised thousands of homeowners across the U.S. legal help in avoiding foreclosure. The scheme generated at least $15 million for the conspirators but never provided any legal services to the client-victims.

According to court documents, from January 2018 until February 2021, Blackstone worked with attorneys David Maresca of Virginia, Scott Marinelli of New Jersey, and Sam Babbs of Florida. The co-conspirators told homeowners that they operated a “national law firm” based in Washington, D.C.; that attorneys would review the homeowner’s file and provide legal representation to the homeowners; that an attorney in the homeowner’s local area would be assigned to assist them; that the homeowner could meet and consult with those attorneys about the case; and that attorneys in their law firm could help the homeowner, if necessary, file for bankruptcy.

From 2016 until 2019, the conspirators marketed Synergy Law with telephone, television, and internet advertising which told homeowners that attorneys at Maresca and Marinelli’s Synergy Law (Synergy) in Manassas could help them avoid foreclosure. During 2018 and 2019, bankruptcy judges, Synergy clients, and the U.S. Trustee’s Program raised concerns about Synergy’s practices in bankruptcy matters. Blackstone attended court hearings on behalf of Synergy where he made false statements to the court about the firm’s operations. In early 2019, Marinelli was incarcerated in Pennsylvania. Yet Blackstone, Maresca, Marinelli, and others continued to operate Synergy and collect monthly payments purportedly for legal services. During this time, there was no attorney who was a member of Synergy who could practice law. Synergy never had attorneys review all homeowner files and Synergy never had attorneys contact a client’s lender to discuss a mortgage resolution. They also continued to use the interstate wires to operate their “law firm” in ways that were essential to the scheme, such as soliciting clients by telephone.

From 2019 until at least 2022, the conspirators marketed another firm, Themis Law, with television and website advertising which told homeowners that attorneys with Themis could help them avoid foreclosure. Themis operated a call center at an office in Manassas, Virginia. Call center workers used scripts during their phone calls with homeowners in which Themis falsely promised that an attorney would review the homeowner’s case file; that this attorney knew their lender’s “internal guidelines” for a “mortgage resolution”; and that an assigned “legal team” would contact the homeowner’s lender to negotiate a resolution. Themis required homeowner-clients to pay an initial retainer amount followed by a monthly recurring amount for as long as the firm represented the homeowner. When Themis clients faced imminent foreclosure, Themis advised those clients to consider filing for bankruptcy to save their home and referred the clients to Babbs at the Babbs Law Firm. Those clients then signed a new retainer agreement and paid additional fees to Babbs.

During his dates of employment at Synergy Law and Themis Law, Blackstone received no less than $159,145.35 in direct payments from the companies. Judge Moss ordered that Blackstone pay a forfeiture money judgment in that amount.

The sentence was announced U.S. Attorney Matthew M. Graves, Special Agent in Charge David Geist of the FBI Washington Field Office Criminal and Cyber Division, and Special Agent in Charge Kareem Carter of the Internal Revenue Service – Criminal Investigation (IRS-CI) Washington, D.C. Field Office.

Blackstone pleaded guilty on June 6, 2024, to a count of conspiracy to commit mail fraud and wire fraud before U.S District Court Judge Randolph D. Moss. In addition to the prison term, Judge Moss ordered Blackstone to serve three years of supervised release and pay $159,145.35 in restitution.

This case was investigated by the FBI Washington Field Office and the Washington, D.C. Field Office of IRS-CI.

It is being prosecuted by Assistant United States Attorney John Borchert.

 

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Loan Originator Convicted in Mortgage Fraud Scheme

Stephanie Abbott —  September 20, 2024 — Leave a comment

Kevin Smith, 52, of Melrose Park, Illinois, a loan originator was found guilty on September. 6, 2024, of orchestrating a mortgage fraud scheme that bilked multiple financial institutions out of $2.6 million.

Smith was a loan originator for mortgage lending businesses that originated and processed loans for real estate purchases in the Chicago area.  Evidence at the two-week trial revealed that Smith engaged in a scheme to fraudulently obtain approximately $2.6 million in federally guaranteed mortgage loans in connection with the purchase of 14 properties in Chicago.  Smith recruited buyers at real estate investment seminars held in Chicago-area churches and hotels and caused them to make false representations to lenders about, among other things, the source of their down payments and their intention to occupy the properties as their primary residences.  Smith provided or caused others to provide funds to the buyers for use as down payments, knowing that the lenders would be falsely led to believe that the money belonged to the buyers.  After a closing and the issuance of the government-insured mortgage loans, Smith made payments to the buyers – describing them as “grants” – and then pocketed payments from the sellers without notifying the lenders.

Each count is punishable by up to 30 years in federal prison.  U.S. District Judge John F. Kness set sentencing for Dec. 17, 2024.

The conviction was announced by Morris Pasqual, Acting United States Attorney for the Northern District of Illinois, Machelle L. Jindra, Special Agent-in-Charge of the U.S. Department of Housing and Urban Development’s Office of Inspector General in Chicago, and Gregory Billingsley, Special Agent-in-Charge of the Department of Veterans Affairs, Office of Inspector General, Central Field Office.  The government is represented by Assistant U.S. Attorneys Rick D. Young and Misty N. Wright.

“Loan originators and other mortgage professionals are entrusted with protecting the integrity of the government-backed mortgage program,” said Acting U.S. Attorney Pasqual. “Our office will continue to hold accountable any individual who violates that trust to line their own pockets.”

“Smith abused his position of trust as a gatekeeper of FHA-insured mortgage loans and used his real estate knowledge to circumvent the rules to secure his own self-interest,” said HUD-OIG SAC Jindra.  “HUD-OIG will continue to work with its prosecutorial and law enforcement partners to aggressively pursue and bring to justice those who seek to profit by abusing HUD’s mortgage insurance and housing programs.”

“This guilty verdict demonstrates the VA Office of Inspector General’s commitment to protecting vulnerable veterans from fraudulent lending practices,” said VA-OIG SAC Billingsley.  “The VA-OIG thanks the U.S. Attorney’s Office and our law enforcement partners for their efforts in this investigation.”

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Restaurant Owner Sentenced For Role in Submitting Fraudulent Loan Applications

Stephanie Abbott —  August 29, 2024 — Leave a comment

Omar Hernandez-Lopez, 39, Springfield, Illinois as sentenced today to 18 months’ imprisonment for concealment of a felony in connection with wire fraud and false statements on loan applications.

At Hernandez-Lopez’s sentencing hearing, Senior U.S. District Judge Sue E. Myerscough, found that starting around June 2018 and continuing until at least June 2019, Hernandez-Lopez was aware of and acted to conceal the fraudulent nature of several falsified documents that were submitted to loan providers. Two fraudulent loan packages were submitted in an unsuccessful attempt to obtain a business loan for Hernandez-Lopez’s Springfield restaurant, La Fiesta Grande. The other two fraudulent loan packages were submitted in a successful attempt to obtain a home mortgage loan. Hernandez-Lopez was aware of the submission of fraudulent documents and took steps to conceal their fraudulent nature from the loan companies and law enforcement.

At the sentencing hearing, the government presented evidence showing that Hernandez-Lopez’s name is on the deed of the house for the fraudulently obtained mortgage and he operated the restaurant.

The sentencing follows Hernandez-Lopez’s guilty plea in April 2024. The statutory penalties for misprision of a felony are up to three years’ imprisonment, one year of supervised release, and a fine of up to $250,000.

Following his prison sentence, he will serve a 12-month term of supervised release.

The charges were investigated by the Federal Deposit Insurance Corporation Office of Inspector General, Chicago Region. Assistant U.S. Attorneys Sierra Senor-Moore and Tanner Jacobs represented the government in the prosecution.

 

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