A.G. Files Consumer Fraud Lawsuit for Wrap Mortgage Fraud

Stephanie Abbott —  July 15, 2021 — Leave a comment

Deed and Note Traders, LLC and 881 Home, LLC and the manager, David Kinas, Tucson, Arizona had a consumer lawsuit filed against them today alleging that they deceived consumers in real estate transactions.

The Attorney General’s Office (AGO) lawsuit alleges that Kinas and his companies sold homes under a “wrap mortgage” arrangement and then failed to make payments on the underlying mortgages. Wrap mortgages are arrangements where the primary mortgage holder (the Defendants in this case) makes a second loan to consumers who purchase the home. In these types of real estate transactions, the holder must continue to make payments on their underlying mortgage or risk a foreclosure that causes the consumer to lose their home. The AGO alleges that the Defendants failed to make their loan payments, despite taking thousands of dollars of down payments from consumers and promising to apply consumers’ monthly payments to the underlying mortgage.

In addition, the lawsuit alleges that by failing to provide consumers a title report and a minimum 15-year loan repayment term, the Defendants violated Deed and Note Traders’ 2006 Consent Decree with the State.

Arizona Attorney General Mark Brnovich made the announcement.

“Owning a home is part of the American Dream but, sadly, that didn’t happen in this case,” said Attorney General Mark Brnovich. “Consumers made a down payment and monthly mortgage payments thinking they were getting closer to owning their home. Instead, they got foreclosure notices.”

The AGO’s lawsuit seeks consumer restitution, up to $10,000 in civil penalties for each violation of the Arizona Consumer Fraud Act, $25,000 for each violation of the Consent Decree, injunctive relief, disgorgement, and attorneys’ fees and costs, plus the amount Deed and Note Traders owes on the 2006 Consent Decree.

David Kinas is not a licensed real estate agent nor a mortgage broker. Consumers can protect themselves from mortgage fraud by conducting research before entering into a real estate contract. Contact the Arizona Department of Insurance Financial Institutions to determine whether the loan company is a licensed mortgage lender and whether it has a disciplinary record. Contact the Arizona Department of Real Estate to determine whether a sales person or broker is licensed and has any disciplinary actions against them.

This case is being handled by Assistant Attorney General Jennifer Bonham. Senior Litigation Counsel Rebecca Salisbury, and Senior Litigation Counsel Kristin Schriner.

If you believe you have been the victim of consumer fraud, you can file a consumer complaint by visiting the Attorney General’s website. If you need a complaint form sent to you, you can contact the AGO’s in Phoenix at (602) 542-5763, in Tucson at (520) 628-6648, or outside the Phoenix and Tucson metro areas at (800) 352-8431.

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Man Pleads Guilty to Theft Charge in Unemployment Mortgage Assistance Program

Stephanie Abbott —  July 9, 2021 — Leave a comment

Robert Charles Sneed, 56, Indio, California, pleaded guilty today to one count of theft of government property for stealing tens of thousands of dollars from the U.S. Department of the Treasury’s Hardest Hit Fund in California, a program that provides mortgage payment assistance for unemployed or underemployed homeowners.

According to his plea agreement, in February 2016, Sneed lied under penalty of perjury when he signed an affidavit saying that he was unemployed, when in fact he was employed, to receive Hardest Hit Funds administered by Keep Your Home California. Based on his statement and continuing concealment of his employment, he received 18 monthly payments of unemployment mortgage assistance payments of approximately $2,279. He received more than $41,000 from March 2016 through July 2017. He then became delinquent on his mortgage and deeded his house to his 18-year old stepson, who filed a Chapter 13 bankruptcy petition based on Sneed’s request.

United States District Judge John F. Walter has scheduled an October 25, 2021 sentencing hearing, at which time Sneed will face a statutory maximum sentence of 10 years in federal prison.

“Anyone who steals from or defrauds the Hardest Hit Fund will be investigated and prosecuted,” said Christy Goldsmith Romero, Special Inspector General. “I thank the United States Attorney’s Office and FBI for standing with SIGTARP to bring justice.”

Keep Your Home California provided these funds under the U.S. Department of Treasury’s Hardest Hit Fund that provided mortgage payment assistance program that provided eligible low or moderate income homeowners who were involuntarily unemployed with temporary mortgage assistance so that they could avoid foreclosure and stay in their homes. SIGTARP investigated the case with the FBI. Assistant United States Attorney Benjamin J. Weir of the United States Attorney’s Office for the Central District of California is prosecuting this case.

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Man Indicted for Deed Theft and Mortgage Fraud

Stephanie Abbott —  July 8, 2021 — Leave a comment

Joseph Makhani, 58, Kings Point, Long Island was arrested and indicted today for stealing two brownstones in a complex scheme to defraud owners by using forged deeds and other falsified real estate documents

Makhani targeted the two Harlem brownstones located at 107 West 118th Street and 135 West 131st Street, Harlem, New York, using forged and falsified documents, numerous limited liability corporations under his control, multiple property transfers, an unethical attorney, and abused court processes. Makhani stole the two Harlem brownstones in 2012, and, according to New York state real estate tax filings, he claimed to have only paid $10 for each. Today, the two brownstones have an estimated value of $2.29 million and $1.9 million, respectively. After illegally taking over the two properties, Makhani used forged and falsified documents to cover up his fraud and maintain control of the properties from the true owners’ claims. To this day, Makhani still fraudulently possesses the West 118th Street brownstone, but he lost possession of the West 131st Street brownstone in December 2018 due to unpaid tax liens.

West 118th Street Property

Makhani allegedly used forged deeds and other falsified documents to steal the brownstone located on West 118th Street from an elderly disabled owner. In a New York state tax filing used to further his scheme, a Makhani-controlled corporation claimed to have paid only $10 for the brownstone in 2012. Makhani also falsely claimed that he paid $975,000 for the brownstone when he obtained a $650,000 construction line of credit on the property. Additionally, Makhani fraudulently received a $1.2 million mortgage loan by claiming he had a legitimate title to the stolen brownstone. The elderly and disabled owner of the brownstone never received any money from Makhani for the brownstone, which is now valued at approximately $2.29 million. In 2016 — after renovating the apartments from single room occupancy units to full apartments — Makhani rented each unit out for between $3,000 and $3,400 per month, allowing him to collect a monthly rent income of more than $12,000.

West 131st Street Property

Makhani allegedly illegally transferred ownership of the West 131st Street property in Harlem through the use of fraudulent deeds, shell companies, and strawmen, and by abusing court processes. Prior to Makhani’s fraudulent take over, the last true deed recorded on this property was in the name of an elderly owner who died soon after the deed was recorded in 1975. Allegedly, a beneficiary of the estate looked after the building until his death in 2010. Soon after, a tenant of the building was approached by Makhani, who later returned and told the tenant he had purchased the brownstone. Makhani, through the guise of offering the tenant a job, fraudulently obtained the tenant’s signature in order to misrepresent the tenant as the owner. The tenant, who had not purchased the property and was never the owner of the brownstone, later learned that his signature was forged on a fraudulent deed that had been filed with the City Register’s Office, transferring the brownstone to Makhani’s company, One 35 West Corporation. The Real Property Transfer Report filed along with the fraudulent deed created by Makhani  falsely listed the sale price of the brownstone as $10. When the tenant questioned the validity of the deed in a housing court case, Makhani filed a new forged deed showing that the purported heirs of the last recorded owner from 1975 had transferred the property to Makhani’s One 35 West Corporation. In 2013, the transfer tax documents filed with this deed contained a fake social security number listed for a man who was one of the purported heirs and the seller of the brownstone to Makhani. That social security number, however, belonged to a woman born in 1902. In 2015, Makhani’s One 35 West Corporation and Makhani were fined over $1 million for their failure to install a roof, upgrade the electrical wiring system, and implement an extermination plan for the rodents and cockroaches in the Harlem brownstone. In early 2015, Makhani eventually abandoned the property after the New York City Department of Housing Preservation & Development issued a $1 million judgment. The property was later transferred to a not-for-profit after a tax foreclosure action. Today, the value of the property is estimated at $1.9 million.

Makhani was yesterday charged with one count of Criminal Possession of Stolen Property in the first degree with respect to the brownstone located at 107 West 118th Street; one count of Criminal Possession of Stolen Property in the second degree with respect to the brownstone located at 135 West 131st Street; one count of Residential Mortgage Fraud in the First Degree and one count of Residential Mortgage Fraud in the Second Degree, both with respect to the two residential mortgage loans he obtained for the West 118th Street brownstone; two counts of Falsifying Business Records submitted to a New York bank; and one count of Scheme to Defraud in the First Degree between August 7, 2012 and June 28, 2021 for engaging in a scheme constituting a systematic and ongoing course of conduct to obtain property from more than one person by false or fraudulent pretenses.

The charges are merely accusations and the defendant is presumed innocent unless and until proven guilty in a court of law.

In 1998, Makhani pleaded guilty in federal court to taking part in a scheme involving the bid rigging of foreclosed properties in Queens, New York, and for submission of a false tax return, for which he was fined and sentenced to two months in prison. In 2008, Queens LLC, HPD LLC, and Floor One, LLC, three companies allegedly owned by Joseph Makhani, pled guilty to Falsifying Business Records in the First Degree, a class “E” felony. The criminal complaint alleged that Makhani, personally or through one of his corporations, forged signatures on deeds filed with the New York City Department of Finance to unlawfully gain control of three properties in Queens from their legal owners.

New York Attorney General Letitia James made the announcement.

“Homeownership is a critical part of every community, but far too often, individuals like Joseph Makhani conduct elaborate schemes designed to steal New Yorkers’ homes,” said Attorney General James. “Deed theft continues to be a crime that permeates our neighborhoods, and preys upon our most vulnerable, leading to a cycle of displacement and grief. New Yorkers should never have to fear that their homes will be targeted by predatory individuals. My office will continue to collaborate with our government and community partners to bring these schemers to justice and protect these homes.”

“The Sheriff’s Office is strongly committed to investigating criminal activity concerning real property fraud,” said New York City Sheriff Joe Fucitto. “These crimes are financially devastating to the victims and their families, many of whom are elderly and have spent a lifetime working hard and saving to buy a home. The Sheriff’s Office looks forward to working collaboratively with Attorney General Letitia James and her team.”

The Office of the Attorney General (OAG) wishes to thank the Social Security Administration, the Office of the Inspector General, and Special Agent Gilberto Camilo for their assistance on this case.

The OAG also wishes to thank the New York City Sheriff’s Office and the New York City Register’s Office for their assistance.

Deed theft has become a common tool of career criminals and unscrupulous real estate developers to illegally obtain real estate so they can sell it at a huge profit in high-demand housing markets. This illegal scheme especially affects people of color, the elderly, and other vulnerable homeowners who are scammed into signing over the deeds to their homes to con artists. Deed theft usually happens when scammers forge deeds to look like they purchased the home, or when homeowners are tricked into signing their homes over to a scammer without knowing what they are doing. Scammers then seek to evict the homeowner and sell the house to a third party at a significant profit.

In January 2020, Attorney General James launched the office’s “Protect Our Homes” initiative, a program that uses prevention and enforcement actions to combat deed theft in New York City. The OAG also formed an interagency deed theft taskforce with members that include the district attorneys from all five boroughs in New York City and the Office of the Sheriff of the City of New York. The anti-displacement program builds off these efforts by focusing on the neighborhoods most at-risk of deed fraud, enlisting community members to talk about deed theft with their neighbors, and educating community members about how to spot deed fraud scams.

Those who believe they have experienced deed theft are encouraged to contact the OAG by calling the office’s help line at 1-800-771-7755, emailing deedtheft@ag.ny.gov, or filling out the online complaint form.

This investigation was conducted by Investigator Angel LaPorte, under the supervision of Supervisors of the Major Case Unit Michael Leahy and Mario Rivera and Deputy Bureau Chief Antoine Karam. The Investigations Bureau is led by Chief Investigator Oliver Pu-Folkes.

The case is being prosecuted by Assistant Attorney General Nazy Modiri of the Real Estate Enforcement Unit, with additional assistance from Assistant Attorney General Gregory Morril and Legal Support Analyst Grace Koh — all under the supervision of Real Estate Enforcement Unit and Public Integrity Bureau Chief Gerard Murphy. Financial analysis was conducted by Audit Investigator Karishma Tukrel, under the supervision of Deputy Chief Auditor Sandy Bizzarro and Chief Auditor Kristen Fabbri of the Forensic Audit Section. The Investigations Bureau, the Real Estate Enforcement Unit, and the Public Integrity Bureau are all part of the Division for Criminal Justice, which is led by Chief Deputy Attorney General José Maldonado and overseen by First Deputy Attorney General Jennifer Levy.

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Businessman Sentenced For and Mortgage Fraud

Stephanie Abbott —  July 1, 2021 — Leave a comment

Casey David Crowther, 35, Fort Myers, Florida has been sentenced to three years and one month in federal prison for two counts of bank fraud, two counts of making a false statement to a lending institution, and two counts of money laundering.

At trial, a federal jury had found Crowther guilty of committing bank fraud, making a false statement to a lending institution, and two counts of money laundering on March 26, 2021, which were related to a PPP fraud scheme. Before the trial started, Crowther pleaded guilty to one count of bank fraud and one count of making a false statement to a financial institution, which were related to a mortgage fraud scheme. As part of the mortgage fraud scheme, Crowther created false bank statements to justify a loan he had used to purchase a nearly $1.3 million waterfront house in St. James City, Florida.

According to evidence at the trial, Crowther obtained a $2.1 million PPP loan by falsely stating that he had intended to use the money to make payroll and pay rent and utilities for his company Target Roofing and Sheet Metal, Inc. However, Crowther intended to use the money to enrich himself and, once the loan was obtained, quickly used the proceeds to make a series of personal purchases including a nearly $700,000 boat and a $100,000 payment to a former business partner. Crowther concealed the scheme by providing false explanations for the expenditures to his bank, calling the boat “equipment” and the payment to his former partner “payroll.” Under the terms of the PPP program, Crowther did not have to pay back the loan if he used at least 60% of the proceeds on payroll. To falsely make it appear he met that threshold, Crowther created dozens of fake employees to whom he purportedly paid wages: by adding multiple family members to his company’s payroll, even though they did not actually perform work; and, separately, by creating 39 other fake employees, for whom he obtained fake identification documents — including Social Security cards — that he provided to his company’s Human Resources to be placed in the files of the “employees.”

The court also ordered Crowther to forfeit $2,739,081.21, $630,482.37, and a 40’ catamaran boat, which were the proceeds of the Paycheck Protection Program (PPP) fraud and the mortgage fraud offenses.

This case was investigated by the United States Secret Service. It was prosecuted by Assistant United States Attorneys Trent Reichling and Michael V. Leeman. Assistant United States Attorney Suzanne Nebesky obtained the forfeitures.

Anyone with information about allegations of attempted fraud involving COVID-19 can report it by calling the Department of Justice’s National Center for Disaster Fraud (NCDF) Hotline at 866-720-5721 or via the NCDF Web Complaint Form at: https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form

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Man Sentenced for Role in Defrauding Banks in Shotgun Loan Scheme

Stephanie Abbott —  June 28, 2021 — Leave a comment

Yorce Yotagri, 54, Freeport, New York, was sentenced today to 12 months and one day in prison for participating in a conspiracy to carry out a $9 million scheme to use bogus information and simultaneous loan applications at multiple banks to fraudulently obtain home equity lines of credit, a scheme known as “shotgunning”.

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

Yotagri was a business partner of Jorge Flores of Oakdale, New York, and Jose Piedrahita of Freeport, New York two conspirators also charged in the indictment. From 2010 through February 2018, Yotagri, Flores, Piedrahita, and others conspired to fraudulently obtain multiple home equity lines of credit (HELOC) from banks on residential properties in New Jersey and New York.

In August 2016, Yotagri lived at a property in Freeport, New York. A quitclaim deed was prepared that facilitated the transfer of ownership of the property to Yotagri and Piedrahita even though Piedrahita did not own the property.

In September 2016, with the Freeport, New York property now in the names of Yotagri and Piedrahita, the conspirators applied for a $290,000 HELOC from a victim bank in Yotagri’s and Piedrahita’s names using the property as collateral. Piedrahita’s contact information appeared on the HELOC application on the Freeport property, which also contained inflated income and assets for Piedrahita. On Dec. 2, 2016, based on the false representations contained in the application, the victim bank issued a HELOC to Piedrahita for $290,000. Piedrahita then disbursed the $290,000 to himself, Yotagri, and Flores. The HELOC funds were never repaid.

In January 2017, Flores called another victim bank and applied for a second HELOC in Piedrahita’s name for $250,000 – again using the Freeport property as collateral. This time Flores’ email address and phone number appeared on the HELOC application on the Freeport property. To demonstrate to the second victim bank that the property was unencumbered by any senior mortgages, Flores and Piedrahita sent several fraudulent documents to the victim bank to conceal the existence of or amounts owed on senior mortgages. The false documents the defendants submitted included a series of false payoff letters and fake checks from other banks, all submitted to deceive the victim bank into believing that the remaining value of the senior mortgages on the Freeport property was far less than what was actually owed.

On March 22, 2017, the second victim bank issued a HELOC to Piedrahita for $250,000.  Piedrahita then disbursed nearly the entirety of the HELOC funds to himself and Yotagri. The funds obtained by Piedrahita and Yotagri from the HELOC were not repaid and were overdrawn, causing losses to the second victim bank totaling approximately $290,000.

At the time the applications for the two HELOCS were made, there was not sufficient equity in the Freeport property to support the $540,000 in HELOC applications made by Flores, Piedrahita, and Yotagri.

The overall scheme, which included HELOC loans for approximately 17 different properties, resulted in over $9 million in losses to the victim banks.

Yotagri, previously pleaded guilty before U.S. District Judge John Michael Vazquez to an indictment charging him with one count of conspiracy to commit bank fraud. Judge Vazquez imposed the sentence today in Newark federal court.

In addition to the prison term, Judge Vazquez sentenced Yotagri to three years of supervised release and ordered him to pay restitution of $580,048.

Acting U.S. Attorney Rachael A. Honig made the announcement.

Acting U.S. Attorney Honig credited special agents of the Federal Housing Finance Agency – Office of Inspector General (FHFA-OIG), Northeast Region, under the direction of Special Agent in Charge Robert W. Manchak; and special agents of the FBI, under the direction of Special Agent in Charge George M. Crouch Jr. in Newark, with the investigation leading to today’s sentencing.

The government is represented by Assistant U.S. Attorney Jason S. Gould of the U.S. Attorney’s Office Criminal Division in Newark and Special Assistant U.S. Attorney Kevin DiGregory of the FHFA-OIG.

The charges and allegations against Yotagri’s co-defendants contained in the indictment are merely accusations, and they are presumed innocent unless and until proven guilty.

 

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Husband and Wife Indicted in Alleged Mortgage Fraud Scheme

Stephanie Abbott —  June 23, 2021 — Leave a comment

Marco Lurigio, also known as “Demetrio Cardone,” 45 and Sandy Lurigio, also known as “Janette Chavez,” 39, Downers Grove, Illinois,  a husband and his wife, have been charged in federal court in Chicago with participating in a mortgage fraud scheme that defrauded financial institutions out of at least $2.5 million.

The Lurigio’s owned several Illinois-based companies, including S&G Technologies Inc., O.C. Management Group Inc., Riverview Financial Inc., and Toro Management, Inc.  According to the indictment, the Lurigios recruited buyers to fraudulently obtain mortgage loans for properties on Chicago’s South Side by making and causing to be made materially false representations in documents submitted to financial institutions.  The false representations included documents and statements regarding, among other things, the buyers’ employment, income, assets, source of down payment, and intention to occupy the property as a primary residence, the indictment states.  In some instances, the Lurigios fraudulently claimed to lenders that the buyers were employed by one of the Lurigios’ companies, even though they knew that was untrue, the indictment states.  The alleged fraud scheme lasted from 2011 to 2014, the indictment states.

The indictment was returned Tuesday in U.S. District Court in Chicago.  It charges Marco Lurigio, and Sandy Lurigio with eight counts of financial institution fraud.  Arraignments have not yet been scheduled.

The indictment was announced by John R. Lausch, Jr., United States Attorney for the Northern District of Illinois; and Michael Powell, Special Agent-in-Charge of the Chicago office of the U.S. Department of Housing and Urban Development, Office of Inspector General.  The government is represented by Assistant U.S. Attorneys Jason Yonan and Alejandro Ortega.

The public is reminded that an indictment is not evidence of guilt.  The defendants are presumed innocent and entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.  Each count of financial institution fraud is punishable by up to 30 years in federal prison.  If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory U.S. Sentencing Guidelines.

 

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Man Sentenced to Two Years in Prison for Shotgunning

Stephanie Abbott —  June 15, 2021 — Leave a comment

Simon Curanaj, 67, Yonkers, New York, was sentenced today to 24 months in prison for his role in a $3.5 million scheme to use false information and simultaneous loan applications at multiple banks to fraudulently obtain home equity lines of credit, a practice known as “shotgunning.”

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

From 2012 through January 2014, Curanaj, Michael Arroyo, and others conspired to fraudulently obtain multiple home equity lines of credit (HELOCs) from banks on residential properties in New Jersey and New York, including a residential property on Havermeyer Avenue, Bronx, New York. In 2013, Curanaj, Arroyo, and others transferred ownership of the property to an individual living at the property and his family friend.

Curanaj, Arroyo, and others then applied, in the family friend’s name, for two HELOCs from two banks using the Havermeyer Avenue property as collateral. They hid from the lenders the fact that the property was either already subject to senior liens that had not yet been recorded, or that the same property was offered as collateral for a line of credit from another lender. The applications also falsely inflated the family friend’s income without his knowledge. In addition, the equity in the property was far less than the amount of the HELOC loans Curanaj, Arroyo, and others applied for.

The victim banks eventually issued loans to the family friend in excess of $500,000. After the victim banks deposited money into the family friend’s bank accounts, portions of the funds were disbursed to Curanaj, Arroyo, and others. Eventually, the family friend defaulted on the two HELOC loans. The overall scheme resulted in $2.2 million in losses to the victim banks.

In addition to the prison term, Judge Vazquez sentenced Curanaj to five years of supervised release and ordered him to pay $2.1 million in restitution. Arroyo was sentenced in September 2018 to 21 months in prison for his role in the scheme.

Curanaj previously pleaded guilty to an information charging him with conspiracy to commit bank fraud. Judge Vazquez imposed the sentence by videoconference today.

Acting U.S. Attorney Rachael A. Honig made the announcement.

Acting U.S. Attorney Honig credited special agents of the Federal Housing Finance Agency (FHFA) – Office of Inspector General, under the direction of Special Agent in Charge Robert Manchak in Newark, and special agents of the FBI, under the direction of Special Agent in Charge George M. Crouch in Newark, with the investigation leading to today’s sentencing.

The government is represented by Assistant U.S. Attorney Jason S. Gould of the U.S. Attorney’s Office Criminal Division in Newark and Special Assistant U.S. Attorney Kevin DiGregory of the FHFA, Office of the Inspector General.

 

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Man Sentenced to Prison for Short Sale Fraud Scheme

Stephanie Abbott —  June 3, 2021 — Leave a comment

Steve Young Kang, aka “Steven Young Kang” and “Young Tae Kang,” 66, Ridgefield, New Jersey, was sentenced today to 18 months in prison for his role in a multi-year scheme to defraud financial institutions and others for a Short Sale Fraud Scheme.

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

Kang and others fraudulently induced mortgage lenders to participate in “short sale” transactions, in which, typically, a financial institution agrees to allow a homeowner in financial distress to sell his or her home for less than the homeowner owes on the mortgage. Such transactions are called short sales because the market value of the house is less than the amount owed by the homeowner and the lender agrees to accept a payment “short” of the amount owed by the owner.

From June 2013 to January 2017, Kang, who owned and controlled two real estate brokerages, sold his own properties and recruited others to sell properties in fraudulent short sales to a co-schemer, Mehdi Kassai. The co-schemers convinced financial institutions to agree to short sales and to accept less than the properties were worth through false documents, straw buyers, and cosmetic damage to properties. Kang, as a listing broker, also prevented legitimate and higher offers from being made by artificially limiting the ability of others to bid on and buy properties. Kassai then sold the properties to third-parties at a substantial profit. Kang defrauded financial institutions and others of at least $2.7 million.

In addition to the prison term, Kang was sentenced to three years of supervised release and ordered him to forfeit $835,248 in proceeds of the scheme. Restitution will be determined at a later date.

Kang previously pleaded guilty before U.S. District Judge William J. Martini to an information charging him with one count of bank fraud and one count of wire fraud. Judge Martini imposed the sentence today in Newark federal court.

Rahul Agarwal, Attorney for the United States in this matter, announced.

Attorney for the United States Agarwal credited special agents of the Federal Housing Finance Agency, Office of Inspector General, under the direction of Special Agent in Charge Robert Manchak, special agents of the U.S. Department of Homeland Security Investigations, under the direction of Special Agent in Charge Jason J. Molina, and the Bergen County Prosecutor’s Office, under the direction of Prosecutor Mark Musella, with the investigation leading to today’s sentencing.

The government is represented by Special Assistant U.S. Attorneys Charlie L. Divine and Kevin V. Di Gregory of the Federal Housing Finance Agency, Office of Inspector General.

 

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Former President of First Mortgage Co. Pleads Guilty to False Statements to a Financial Institution

Stephanie Abbott —  May 11, 2021 — Leave a comment

Ronald J. Mccord, 70, Oklahoma City, Oklahoma pleaded guilty yesterday to defrauding two locally-based banks, Fannie Mae, and others through a broad range of fraudulent conduct over the course of three years.

McCord was the Chairman and founder of First Mortgage Company, LLC (“FMC”), an Oklahoma City, Oklahoma based mortgage lending and loan servicing company.

According to court documents and yesterday’s plea hearing, McCord admitted to defrauding Spirit Bank (“Spirit”) and Citizens State Bank (“Citizens”)—two state-chartered financial institutions—as well as their respective residential mortgage subsidiaries, American Southwest Mortgage Corporation (“Mortgage Corp.”) and American Southwest Mortgage Funding Corporation (“Funding Corp.”).  An independent audit discovered that McCord had sold more than $14,100,000.00 in Spirit/Mortgage Corp. and Citizens/Funding Corp. loans “out of trust” by failing to repay Spirit/Mortgage Corp. when certain Spirit/Mortgage Corp.-initiated loans were refinanced or otherwise paid off.  At the time of this discovery, FMC carried outstanding balances of about $200,000,000.00 and $140,000,000.00 on the Spirit/Mortgage Corp. and Citizens/Funding Corp. lines of credit, respectively.

Upon learning of McCord’s conduct, Spirit/Mortgage Corp. and Citizens/Funding Corp. terminated future warehouse lending to FMC, and instituted new notification requirements that required McCord to assign FMC-funded mortgages to Spirit/Mortgage Corp. and Citizens/Funding Corp., to ensure the title companies handling those mortgages sent payoffs directly to the banks.  McCord admitted at yesterday’s plea hearing that he filed the assignments as required, but then caused the mortgages to be released on two properties—in Leland and Denver, North Carolina—after collecting the mortgage payoffs.

Spirit/Mortgage Corp. and Citizens/Funding Corp.’s refusal to fund new FMC mortgages prompted McCord to seek out a new warehouse lender.  In early 2017, McCord began negotiating with CapLOC, LLC, a North Carolina-based mortgage lending business, and offered to sell FMC’s mortgage lending business in exchange for quick funding from CapLOC.  At yesterday’s plea hearing, McCord admitted that he made a materially false statement and representation to CapLOC in the course of those negotiations, in order to influence CapLOC’s actions.

Finally, in 2017, FMC serviced approximately 12,000 loans worth a total of approximately $1,800,000,000.00 for the Federal National Mortgage Association (“Fannie Mae”).  McCord admitted at the plea hearing that he defrauded Fannie Mae by diverting escrow monies intended to pay homeowners’ taxes and insurance premiums to cover FMC’s operating expenses.  McCord also admitted that he then laundered the proceeds by causing a wire transfer from FMC’s operating account to a custom home builder, as payment towards construction of McCord’s home in Colorado.

At sentencing, which is currently scheduled for August 9, 2021, McCord faces up to 30 years in prison and a fine of up to $1,000,000.00 on each count of bank fraud and false statement to a financial institution.  He also faces up to 10 years in prison and a $250,000.00 fine on the money laundering count.  Per the terms of his plea agreement, the government agreed not to advocate at sentencing for a sentence above 104 months.  Under the plea agreement, McCord will be ordered to pay restitution to the victims of his conduct in amounts to be determined by the court at the time of sentencing.  McCord must also forfeit proceeds of the fraudulent schemes and property involved in the offenses.  Further, as part of the plea agreement, the government will dismiss at sentencing the remaining counts of the Indictment.

On June 3, 2020, a grand jury returned a 24-count Indictment against McCord.  The charges included bank fraud, money laundering, and making a false statement to a financial institution.

The announcement was made by Acting U.S. Attorney Robert J. Troester.

This case is the result of investigations by the Federal Housing Finance Agency Office of the Inspector General, Federal Deposit Insurance Corporation Office of Inspector General, and the Federal Bureau of Investigation.  Assistant U.S. Attorney Julia E. Barry is prosecuting the case.

Reference is made to court filings for further information.

 

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Attorney Sentenced for Stealing Down Payments Held in Escrow

Stephanie Abbott —  May 10, 2021 — Leave a comment

Edmundo Roman-Perez, 71, Sunset Park, Brooklyn, an attorney has been sentenced today to 1 to 3 years in prison for stealing approximately $280,000 in down payments he received to hold in escrow from two clients he represented in the sale of their homes. The defendant pleaded guilty to second-degree grand larceny in December 2020.

According to the investigation, in late 2018, a couple hired the defendant to represent them in the sale of their two-family, Sunset Park, Brooklyn home. The home sold for $1,350,000 and the defendant received a $135,000 down payment from the buyers that he should have held in his attorney escrow account until the date of closing, when the funds should have been released to his clients. Instead, the defendant used the money for his own benefit. After closing in March 2019, the defendant issued checks to his clients purporting to cover the $135,000 owed, which bounced upon deposit. The defendant failed to disburse the funds he owed to his clients.

Similarly, between November 2018 and April 2019, the defendant represented three brothers in the sale of their two-family home in Dyker Heights, Brooklyn. The home sold for $1,500,000 and the defendant received a $150,000 down payment from the buyers that he should have held in his attorney escrow account until closing, when he should have released the money to his clients. Instead, the defendant again used the money for his own benefit, and issued the brothers checks purporting to cover the funds owed to each of them. The checks bounced and the defendant failed to distribute the funds he owed to the brothers.

Additionally, the defendant was under indictment in Richmond County related to allegations that he stole client funds. In November 2020, he pleaded guilty to one count of third-degree grand larceny and received a sentence of 1 to 3 years in prison. The Brooklyn and Staten Island sentences will run concurrently.

Brooklyn District Attorney Eric Gonzalez made the announcement.

District Attorney Gonzalez said, “Today’s sentence holds this defendant accountable for the serious breach of trust and financial hardship he caused his victims. Let this serve as a reminder that I am committed to protecting Brooklyn’s residents from attorneys and other unscrupulous fraudsters who abuse their positions of authority to take advantage of those they are entrusted to advise and represent.”

The case was investigated by Supervising Financial Investigator Deborah Wey of the District Attorney’s Investigations Division.

The case was prosecuted by Senior Assistant District Attorney Katherine Zdrojeski of the District Attorney’s Public Integrity Bureau, under the supervision of Assistant District Attorney Laura Neubauer, Chief of the Public Integrity Bureau, and Assistant District Attorney Michel Spanakos, Deputy Chief of the Investigations Division, and the overall supervision of Assistant District Attorney Patricia McNeill, Chief of the Investigations Division.

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