Frank Garcia, 51, Florida, pleaded guilty before U.S. District Court Judge Richard J. Arcara to fraud affecting a financial institution. The charge carries a maximum penalty of 30 years in prison, a fine of $1,000,000, or both.
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Kareem Serageldin, the former Managing Director/Global Head of Structured Credit in the Investment Banking Division of Credit Suisse Group, pled guilty to mortgage-related fraud.
Thomas Komasa, 48, and his wife Heidi Komasa, 40, former Vermont residents, who now live in Saugerties, New York, were sentenced in United States District Court in Burlington, Vermont, following their mortgage fraud convictions in the summer of 2012.
Francis Santore, a/k/a Frank Martin, 53, Northfield, New Jersey, a former employee in the New Jersey offices of the Vacation Ownership Group LLC admitted that he conspired to defraud owners of timeshare properties by offering phony consulting services and debt elimination while also illegally collecting unemployment benefits.
Brandon Barber, 37, New York, and his four co-defendants, appeared in United States District Court for arraignment on various charges of bank fraud, bankruptcy fraud, wire fraud, and money laundering stemming from schemes to defraud involving several Northwest Arkansas real estate transactions and Barber’s bankruptcy case.
Mitchell Cohen, the owner of the now defunct Buy-A-Home real estate brokerage business, was sentenced in Manhattan, New York, federal court to 70 months in prison for participating in a multi-million dollar mortgage fraud scheme and for committing perjury.
Quelyory A. Rigal, a/k/a Kelly, Homestead, Florida, was convicted after a jury trial before U.S. District Judge William J. Zloch in Fort Lauderdale, FL. Sentencing is scheduled for July 18, 2013 at 10:30 a.m.
Brian Corley, a/k/a John Corley, 28, Little River, South Carolina, formerly of Egg Harbor, New Jersey, a prior employee in the New Jersey offices of the Vacation Ownership Group LLC admitted to conspiring to defraud owners of timeshare properties by offering phony consulting services while also illegally collecting unemployment benefits.
Baljit Singh, 47, and Sharanjit Kaur, 36, both of Fresno, California, were sentenced by United States District Judge Lawrence J. O’Neill sentenced for conspiring to commit mail and wire fraud. Judge O’Neill sentenced Singh to 51 months in federal prison and Kaur to 41 months in federal prison. Judge O’Neill also ordered the forfeiture of a property in New York owned by Kaur with more than $100,000 in equity and $26,943.20 from two bank accounts held by Singh and Kaur.
As previously reported by Mortgage Fraud Blog, and according to the indictment, which both Singh and Kaur pleaded guilty, from approximately July 2010 to June 2011, Kaur and Singh owned and operated several companies based in Fresno for the sole purpose of defrauding at least 180 customers throughout the United States. Through their companies Consumer Financial Services, Consumer Credit Repair, and Client Financial Services, they touted to potential customers that these businesses could provide debt consolidation services. The defendants also falsely promised that they could obtain low-interest loans for customers, assist in avoiding lawsuits, lower car and mortgage payments, replace high-interest credit cards with low-interest ones and correct errors in credit reports. The defendants utilized a call center in India from which individuals would call customers under aliases such as “Neil McKenzie” or “Anthony Jones.”
After luring customers into using these purported services, they and their agents instructed customers to send in monthly payments of $500 or more. Even though they collected regular payments from customers, no creditors were contacted on behalf of customers as promised. To mislead customers, forged letters from creditors were sent, indicating that loan modifications had been approved. When customers would contact the debt repair companies about late-payment or default notices they had received from their creditors, the defendant and his agents would either hang up on customers or request that customers continue to make service payments. The funds received from customers were used for their own benefit or wired to an individual located in Kolkata, India.
Singh has been in custody pending sentencing. Kaur was taken into custody today following the sentencing.
United States Attorney Benjamin B. Wagner announced the sentences.
This case was the product of an investigation by the Federal Bureau of Investigation and the Fresno Police Department. Assistant United States Attorney Grant B. Rabenn prosecuted the case.
U.S. Attorney Wagner said: “The defendants in this case shamelessly ripped off scores of people who were already struggling financially. Few white-collar crimes are more deplorable. Prosecuting those who prey on distressed homeowners and other vulnerable consumers is an important part of our mission, and we will continue to seek prison terms for those who stoop to such conduct.”
“Financial crimes such as these are borne from greed and disregard for the victims the criminals claim to serve,” said Herbert M. Brown, Special Agent in Charge of the Sacramento Division of the FBI. “The FBI encourages victims of financial crime to contact law enforcement to ensure full investigation of the alleged fraud and to avoid victimization of others.”
Golden First Mortgage Corp., and its owner, operator, and president, David Movtady, are the subjects of a civil mortgage fraud lawsuit. The lawsuit seeks damages and civil penalties under the False Claims Act and the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) for years of misconduct in connection with Golden First‘s participation in the Federal Housing Administration’s (FHA”) Direct Endorsement Lender Program.
The Complaint alleges that Golden First and Movtady intentionally, knowingly, and recklessly approved loans since 2002 that should never have been federally insured.
The following allegations are based on the Complaint filed in Manhattan federal court:
Golden First was a participant in the Direct Endorsement Lender Program – a federal program administered by FHA – from 1989 until 2010. Movtady was the owner, president, and operator of Golden First from 1979 until 2010. As a Direct Endorsement Lender, Golden First had the authority to originate, underwrite, and certify mortgages for FHA insurance. If a Direct Endorsement Lender approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to HUD for the costs associated with the defaulted loan, which HUD must then pay.
Under the Direct Endorsement Lender program, HUD relies on lenders to properly review, underwrite, and certify loans before they are endorsed for FHA insurance. Direct Endorsement Lenders are required to follow HUD’s program rules, including certifying mortgages and maintaining a quality control program that can prevent and correct any deficiencies in their underwriting. The quality control program requirements include maintaining a program independent of the lender’s business units; disclosing to HUD, within 60 days of initial discovery, all loans containing evidence of fraud or other serious underwriting problems; and conducting a full review of all loans that go into default within the first six payments Golden First and Movtady failed to comply with all three of these basic requirements.
Since 2002, Golden First and MOVTADY failed to maintain a quality control program independent of the company’s business units even though HUD expressly warned the company in 2005 that its quality control plan failed to conform to HUD requirements. Closing and selling loans trumped quality control, as Golden First employees closed loans at rates inconsistent with any semblance of due diligence, paid employees to expedite loan approvals, and spent minimal time on underwriting. Golden First and Movtady also did not meet their obligation to disclose to HUD all loans containing evidence of fraud or other serious underwriting problems. The defendants failed to pass on to HUD any such reports even though the default rate on the company’s loans exceeded 75% in 2008 and the company’s contractor advised it of significant deviations from HUD guidelines.
In addition, Golden First and Movtady failed to conduct a full review of loans that defaulted within the first six payments, even though in 2008 nearly one of every three loans underwritten by Golden First defaulted shortly after closing. Notwithstanding these failures, Movtady fraudulently certified that Golden First “conforms to all HUD-FHA regulations necessary to maintain its HUD-FHA approval.”
Golden First and Movtady engaged in a regular practice of originating and underwriting FHA loans that Golden First and Movtady knew should have never been approved. Golden First certified that more than a thousand FHA loans met HUD’s requirements and were eligible for FHA insurance. In some instances, Movtady personally performed the underwriting and provided false certifications that the loans conformed to HUD’s requirements. Despite these certifications, Golden First and Movtady knew that the company’s underwriters routinely failed to perform basic due diligence, failed to verify information in the loan file that bore directly on the borrower’s ability to make payments on the mortgage, and repeatedly certified mortgage loans that contained serious defects and departures from HUD’s underwriting standards. The extremely poor quality of Golden First‘s loans stemmed from Golden First‘s and Movtady‘s determination to increase volume and profits irrespective of the quality of the loans being originated.
As a result of Golden First‘s and Movtady‘s refusal to truthfully advise HUD of its failures to comply with HUD requirements, their false certifications to HUD, and their approval of loans that should never have been approved, FHA has paid more than $12 million in insurance claims on loans underwritten by GOLDEN FIRST and Movtady since July 2007.
Claims for millions of additional dollars in defaulted loan obligations have not yet been, but likely will be submitted to HUD, and will likely result in additional Government expenditures stemming from defendants’ fraud.
The Complaint seeks treble damages and penalties under the False Claims Act, as well as FIRREA penalties for millions of dollars in insurance claims already paid by HUD for mortgages wrongfully certified by Golden First and Movtady. In addition, the United States seeks compensatory damages under the common law theories of gross negligence, negligence, and breach of fiduciary duty for the millions of dollars in insurance claims that HUD has paid, and expects to pay in the future, for mortgages wrongfully certified by Golden First and Movtady.
Preet Bharara, the United States Attorney for the Southern District of New York, Helen R. Kanovsky, General Counsel of the U.S. Department of Housing and Urban Development (“HUD”), and David A. Montoya, Inspector General of HUD, announced the civil lawsuit.
The case is being handled by the Office’s Civil Frauds Unit. Mr. Bharara established the Civil Frauds Unit in March 2010 to bring renewed focus and additional resources to combating financial fraud, including mortgage fraud.
Mr. Bharara thanked HUD and HUD-OIG for its assistance in this case. He also expressed his appreciation for the support of the Commercial Litigation Branch of the U.S. Department of Justice’s Civil Division in Washington, D.C.
Assistant U.S. Attorneys Lara K. Eshkenazi and Lawrence H. Fogelman are in charge of the case.
Manhattan U.S. Attorney Preet Bharara said: “As alleged, Golden First and David Movtady churned out bad loans and lied about their compliance with HUD requirements, leaving taxpayers on the hook for millions of dollars when the loans inevitably defaulted. This Office continues its work to hold the perpetrators of mortgage fraud accountable, as this latest complaint demonstrates.”
HUD General Counsel Helen R. Kanovsky said: “Our program depends on lenders properly originating FHA loans and certifying their compliance with our rules. Today’s complaint should send an unmistakable message that we will use the False Claims Act to protect working families and FHA’s insurance fund from allegedly unscrupulous lenders.”
HUD Inspector General David A. Montoya said: “The alleged utter disregard and willful failure to abide by the standards set by the FHA make this one of the worst examples of mortgage fraud that I have seen since becoming Inspector General. My office will continue its dedicated efforts to protect the integrity of FHA’s mortgage insurance program. Safeguarding HUD’s programs from exploitation and ensuring that they are managed with honesty, competency, and stewardship is our commitment to the public we serve.”