• /
    • Search / [ No search query. ]

Search Results For "new york"

Man Admits Participating in Mortgage Fraud Conspiracy

Allison Tussey —  April 25, 2011 — Leave a comment

Steven J. Kottage, 45, Weston, Connecticut, pleaded guilty before United States District Judge Mark R. Kravitz in New Haven, Connecticut, to two counts of conspiracy stemming from mortgage fraud schemes in which Kottage participated. As previously reported by Mortgage Fraud Blog, Kottage was indicted in July 2010.

According to court documents and statements made in court, Kottage conspired with others to commit wire fraud by making materially false statements to H&R Block Home Mortgage, Inc., including a false loan application, W-2, employment verification, and pay stub in connection with a mortgage on a home on Fire Island, New York. In addition, Kottage admitted that he conspired with others to commit bank fraud by submitting a materially false loan application to Washington Mutual to refinance a condominium in Hillsboro Beach, Florida. A co-defendant, Mary Ellen Durso, served as the straw owner for the condo in order to obtain the fraudulent loan proceeds for the benefit of Kottage and another co-conspirator. Through both schemes, Kottage and others defrauded Wells Fargo and Freddie Mac of more than $600,000.

Judge Kravitz has scheduled sentencing for July 11, 2011, at which time Kottage faces a maximum term of imprisonment of 30 years on each count. He also will be ordered to pay restitution in the amount of at least $616,547.93.

Kottage is currently detained.

On December 14, 2010, Durso pleaded guilty to one count of conspiracy and five counts of filing false tax returns. On March 9, 2011, she was sentenced to three years of probation, the first six months of which she must serve in home confinement.

This case is being investigated by the Federal Bureau of Investigation and the Internal Revenue Service – Criminal Investigation. The case is being prosecuted by Assistant United States Attorney David T. Huang and Senior Litigation Counsel Richard J. Schechter.

In July 2009, the U.S. Attorney’s Office and the Federal Bureau of Investigation announced the formation of the Connecticut Mortgage Fraud Task Force to investigate and prosecute mortgage fraud cases and related financial crimes occurring in Connecticut. Citizens are encouraged to report any suspected mortgage fraud activity by calling 203-333-3512 and requesting the Connecticut Mortgage Fraud Task Force, or by sending an email to ctmortgagefraud@ic.fbi.gov.

The Connecticut Mortgage Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service – Criminal Investigation; U.S. Postal Inspection Service; U.S. Department of Housing and Urban Development, Office of Inspector General; Federal Deposit Insurance Corporation, Office of Inspector General, and State of Connecticut Department of Banking.

To report financial fraud crimes, and to learn more about the President’s Financial Fraud Enforcement Task Force, please visit www.stopfraud.gov.

David B. Fein, United States Attorney for the District of Connecticut, announced the guilty plea.

In Mortgage Fraud
 permalink

FinCEN’s 2010 Mortgage Fraud Report

Allison Tussey —  March 29, 2011 — Leave a comment

The Financial Crimes Enforcement Network (FinCEN) in its new report, Mortgage Loan Fraud SAR Filings In Fourth Quarter and Calendar Year 2010, released full year data showing the number of suspicious activity reports involving mortgage loan fraud (MLF SARs) increased 4 percent in 2010 to 70,472 compared with 67,507 MLF SARs filed in 2009. The report also shows that the growth rate of MLF SARs began to slow over the last two to three years. Looking at just the 2010 fourth quarter, filers submitted 18,759 MLF SARs, a 1 percent decrease from the 18,884 filings over the same period in 2009.

The FinCEN report found that references to bankruptcy have steadily increased over time in MLF SAR filings. In 2010, 6 percent of all MLF SARs contained a key term related to bankruptcy in the SAR narrative, compared to 1 percent in 2006 and 2007. In 2010, mortgage loan fraud was cited in 54 percent of all SARs referencing bankruptcy fraud, up from 42 percent in 2009. Some MLF SARs specified the type of bankruptcy filing, most frequently Chapter 7, which was cited in 27 percent of 2010 reports citing both bankruptcy and MLF.

Filers in their SARs also called attention to debt elimination scams as one of the emerging practices. Debt elimination scams were cited in nearly 1,300 MLF SARs in 2010. In these SARs, filers noted subjects sending a variety of documents or bogus payment methods to financial institutions, in attempts to eliminate or satisfy mortgage obligations. SAR filers over the course of 2010 explicitly referenced “flopping” in 112 SARs last year. This compares with relatively stable occurrences of suspicious activity involving broker price opinions and short sales in 2010.

Flopping occurs when a foreclosed property is sold at an artificially low price to a straw buyer, who quickly sells the property at a higher price and pockets the difference. Anecdotal feedback on this practice from law enforcement and industry sources suggests that the volume of related MLF SARs is much lower than the actual number of suspected flopping incidents. The increasingly dated activities reported on SARs suggests a lack of emphasis on this type of current activity.

The FinCEN report also contains data of state, county, and metropolitan statistical area (MSA) by total number of and per capita filings of MLF SARs. For instance, the report shows that Nevada had the highest number of MLF SARs per capita in 2010, followed by Florida, California, Illinois, and Georgia. The five MSAs with the highest per capita filings of MLF SARs in 2010 were Miami; Las Vegas; San Jose, CA; Riverside, CA; and Los Angeles. The five counties with the highest number of MLF SARs per capita were Miami-Dade, Gwinnett in Georgia, Broward and Orange in Florida, and Nassau in New York.

FinCEN also reported that all types of SARs filed by depository institutions in 2010 fell 3 percent to 697,389 compared with 720,309 SARs filed by depository institutions in 2009. But, the total number of SARs filed in 2010 by all types of financial institutions covered by the Bank Secrecy Act grew nearly 4 percent to 1.3 million SARs up from 1.9 million filed in 2009.

Note to reporters: Beginning with this mortgage fraud report, FinCEN has added new features that provide additional data and explanation of MLF SARs. Among the new features include:

* More concise MLF SARs information on all 50 states and the District of Columbia provided by links to spreadsheets.
* An expanded metadata section containing reference information on the derivation and uses of this data.
* Historical quarterly data going back through 2006 for almost 600 metropolitan statistical areas and approximately 960 counties in addition to the states data.
* Trend analysis enabled by linking to electronic spread-sheets and to historical data.
* Ability to drill down to the county or city level revealing more concise information.
* Maps: Calendar year 2010 SAR data provides a new perspective on year-over-year changes enabling more illustrative comparisons with prior years’ data.

“FinCEN remains active with law enforcement and other partner agencies to provide lead information and to identify and combat potential abuses in the mortgage market,” said FinCEN Director James H. Freis, Jr. “As a member of the President’s Financial Fraud Enforcement Task Force, FinCEN is coordinating with the United States Trustee Program (USTP) and the Federal Bureau of Investigation (FBI) to identify potential mortgage loan fraud in a number of areas including identifying potential abuse of the bankruptcy system to facilitate mortgage fraud.”

In Mortgage Fraud
 permalink

Real Estate Unit Takes Down Large Mortgage Fraud & I.D. Theft Scheme

Allison Tussey —  March 22, 2011 — 6 Comments

After a two-year investigation, four indictments charging 17 people with more than 108 crimes were handed down for their roles in mortgage fraud and identity theft schemes that stole more than $20 million from homeowners, banks, and the County government. Among those arrested are lawyers, mortgage brokers, real estate brokers, bank employees, an appraiser, a financial consultant and one United States Postal worker. The investigation was dubbed “Operation Sweet Deal.”

James Robert Sweet, 43, Westbury, New York, is charged with OCCA, two counts of Grand Larceny in the First and Third Degrees, 32 counts of Grand Larceny in the Second Degree, Money Laundering in the First Degree, seven counts of Money Laundering in the Second Degree, eight counts of Money Laundering in the Third Degree, six counts of Money Laundering in the Fourth Degree, Scheme to Defraud in the First Degree, Conspiracy in the Fourth Degree, six counts of Identity Theft in the First Degree, and 30 counts of Falsifying Business Records in the First Degree. He faces up to 25 years in prison if convicted and is represented by Robert Del Grosso, Esq.

Dwayne Benjamin, 44, Westbury, is charged with OCCA, two counts of Grand Larceny in the First and Third Degrees, 32 counts of Grand Larceny in the Second Degree, Grand Larceny in the Fourth Degree, Money Laundering in the First Degree, seven counts of Money Laundering in the Second Degree, eight counts of Money Laundering in the Third Degree, six counts of Money Laundering in the Fourth Degree, Scheme to Defraud in the First Degree, Conspiracy in the Fourth Degree, six counts of Identity Theft in the First Degree, 30 counts of Falsifying Business Records in the First Degree, and three counts of Offering a False Instrument for Filing. He faces up to 25 years in prison if convicted.

Stephanie Watkins, 36, Amityville, New York, a real estate broker, is charged with OCCA, 12 counts of Grand Larceny in the Second Degree, Conspiracy in the Fourth Degree, Money Laundering in the First Degree, six counts of Money Laundering in the Second Degree, Scheme to Defraud in the First Degree, six counts of Falsifying Business Records in the First Degree, and six counts of Identity Theft in the First Degree. She faces up to 25 years in prison if convicted and is represented by Richard Langone, Esq.

Sophia Welsh, 43, West Babylon, New York, a mortgage originator, is charged with OCCA, 12 counts of Grand Larceny in the Second Degree, Conspiracy in the Fourth Degree, Money Laundering in the First Degree, six counts of Money Laundering in the Second Degree, Scheme to Defraud in the First Degree, six counts of Falsifying Business Records in the First Degree, and six counts of Identity Theft in the First Degree. She faces up to 25 years in prison if convicted and is represented by Michelle Armstrong, Esq.

Alfred Gary, 44, Englewood, N.J. a high-end car dealer and alleged launderer of funds, is charged with OCCA, Conspiracy in the Fourth Degree, Scheme to Defraud in the First Degree, Money Laundering in the First Degree, five counts of Money Laundering in the Second Degree, and Falsifying Business Records in the First Degree. He faces up to 25 years in prison if convicted and is represented by Michael Premliser, Esq.

Vertus Vielot, 35, Baldwin, New York, alleged impersonator of seller and other ID thefts, is charged with OCCA, 12 counts of Grand Larceny in the Second Degree, Scheme to Defraud in the First Degree, and Conspiracy in the Fourth Degree. He faces up to 25 years in prison if convicted and is represented by Meredith Bettenhauser, Esq.

Yves Mathieu, 45, Elmont, New York, alleged provider of fake docs for ID thefts, is charged with OCCA, four counts of Grand Larceny in the Second Degree, two counts of Falsifying Business Records in the First Degree, Scheme to Defraud in the First Degree, three counts of Offering a False Instrument for Filing, three counts of Grand Larceny in the Third Degree, and Conspiracy in the Fourth Degree. He faces up to 25 years in prison if convicted and is represented by David Epstein, Esq.

John DiCanio, 37, Islip Terrace, New York, a mortgage originator, is charged with OCCA, four counts each of Grand Larceny in the Second Degree and Falsifying Business Records in the First Degree, Scheme to Defraud in the First Degree, and Conspiracy in the Fourth Degree. He faces up to 25 years in prison if convicted and is represented by Michael Finkelstein, Esq.

Carlos Irizarry, 34, Long Beach, New York, a mortgage originator, is charged with OCCA, four counts each of Grand Larceny in the Second Degree and Falsifying Business Records in the First Degree, Scheme to Defraud in the First Degree, and Conspiracy in the Fourth Degree. He faces up to 25 years in prison if convicted and is represented by William Petrillo, Esq.

Larinzo Clayton, 45, Westbury, an attorney, is charged with OCCA, five counts of Grand Larceny in the Second Degree, four counts of Money Laundering in the Third Degree, Money Laundering in the Fourth Degree, Scheme to Defraud in the First Degree, and Conspiracy in the Fourth Degree. He faces up to 25 years in prison if convicted and is represented by David Smith, Esq.

Ethan Serlin, 40, Dix Hills, New York, an attorney, is charged with OCCA, two counts of Grand Larceny in the First Degree, 12 counts of Grand Larceny in the Second Degree, Money Laundering in the Second Degree, four counts of Money Laundering in the Third Degree, five counts of Money Laundering in the Fourth Degree, Identity Theft in the First Degree, five counts of Falsifying Business Records in the First Degree, Scheme to Defraud in the First Degree, and Conspiracy in the Fourth Degree. He faces up to 25 years in prison if convicted and is represented by Joey Jackson, Esq.

Radamex Velasquez, 34, Valley Stream, New York, an appraiser, is charged with OCCA, nine counts of Grand Larceny in the Second Degree, 10 counts of Falsifying Business Records, Scheme to Defraud in the First Degree, and Conspiracy in the Fourth Degree. He faces up to 25 years in prison if convicted and is represented by Robert Semensohn, Esq.

James Gant, 35, Brooklyn, New York, alleged straw buyer, is charged with OCCA, four counts of Grand Larceny in the Second Degree, Scheme to Defraud in the First Degree, and Conspiracy in the Fourth Degree. He faces up to 25 years in prison if convicted and is represented by Steven Barnwell, Esq.

Allen Woods, 35, Hempstead, New York, alleged straw buyer, is charged with OCCA, three counts of Grand Larceny in the Second Degree, two counts of Falsifying Business Records in the First Degree, Scheme to Defraud, and Conspiracy in the Fourth Degree. He faces up to 25 years in prison if convicted and is represented by Joshua Kahn, Esq.

Lyshaan Hall, 33, Brooklyn, a tax preparer who allegedly provided fake documents, is charged with two counts of Falsifying Business Records in the First Degree. He faces up to four years in prison if convicted and is represented by Steve Williams, Esq.

Sonia Panameno, 29, Mineola, New York, a bank employee who allegedly provided fake documents, is charged with Falsifying Business Records in the First Degree. She faces up to four years in prison if convicted and is represented by Marc Gann, Esq.

Roxanna Calero, 33, Brooklyn, a bank employee who allegedly provided fake documents, is charged with Falsifying Business Records in the First Degree. She faces up to four years in prison if convicted and is represented by Emrah Artukmac, Esq.

Initially, the scammers used straw buyers who were convinced by Sweet and his members to purchase properties in Nassau County, New York, using their own personal information. Sweet told some of the straw buyers that they would be assisting sellers who were trying to sell their homes from foreclosure and/or that the homes would be a good investment opportunity. But the straw buyers were actually assisting in helping the Sweet Deal members to successfully perform their mortgage fraud schemes. Sweet Deal would typically pay their straw buyers $10,000 for the use of their name and personal information.

Members of Sweet Deal identified homes which were either already for sale or in distress. The key to the scam was that, unlike in a normal home purchase, Sweet Deal negotiated with the sellers to purchase the properties at a higher price than the seller was asking. As part of the deal, Sweet Deal arranged to keep the difference between the total amount lent by the bank and what the seller wanted as profit.

The scam worked because Sweet Deal never intended to make any payments on the properties; they only intended to walk away with the profit. Most of the homes ended up in foreclosure.

In one case, Sweet Deal actually purchased the same house twice in a two-week period. On November 28, 2005, a Sweet Deal straw buyer took out a $390,000 mortgage to pay for a West Hempstead home. Sweet Deal members then took advantage of a delay in the filing of paperwork in the Nassau County Clerk’s Office, quickly “purchasing” the home again through a different straw buyer with a second $390,000 mortgage on December 16, 2005, while the official paperwork still listed the home’s original owner.

By doing this, Sweet Deal members were able to take out two $390,000 mortgages, using the cash from the first to pay off the original owners’ outstanding mortgage, and keeping the entirety of the second. After closing costs, Sweet Deal members walked away with more than $361,000. The house eventually went into foreclosure.

Soon, however, the group began to branch out into more lucrative thefts by recruiting friends, family members, and co-workers to steal the identities of home buyers and property owners and to impersonate them at the closings.

Using these stolen identities, Sweet Deal members could impersonate both the home buyer and seller, and keep all of the proceeds of the phony home sale. In other words, using a stolen identity, Sweet Deal imperators would secure a real mortgage. At the closing, another Sweet Deal member would act as the home owner, using a stolen identity of the real home owner.

Once Sweet Deal members had stolen the mortgage proceeds, they had no reason to keep making mortgage payments and they let the property fall into foreclosure.

Using this scheme, organization members were able to steal the entire proceeds of at least six home sales in the Westbury area.

In order to accomplish this, Sweet Deal recruited individuals to impersonate the seller and buyer, whose identities had been stolen. Sweet Deal also assigned a member of Sweet Deal to impersonate a paralegal and also stole an attorney’s identity to set up a bank account to launder money through.

Another scheme involved defrauding county government by renting some of the properties they had purchased through straw buyers before and during foreclosure proceedings. Some of the tenants qualified for low-income subsidies offered by Nassau County government programs. However, the programs would only issue the subsidy checks to the owners of record.

Since the properties were held in the straw buyers’ names, members of Sweet Deal would not be able to collect the rent. Therefore, in order to collect the subsidies, several members of Sweet Deal submitted fake deeds to the program, indicating that they owned the properties, and stole more than $80,000 in undeserved subsidies.

Nassau County District Attorney Kathleen Rice announced the charges.

The New York State Banking Department offered significant investigative assistance.

The scheme was uncovered by the office’s Crimes Against Real Estate Unit, which Rice formed during the national economic and housing crisis in 2009. The indictment represents the largest takedown of mortgage fraud in Nassau County history. Fourteen of the 17 defendants are charged with Enterprise Corruption under New York’s Organized Crime Control Act (OCCA)*, and related crimes, including grand larceny, scheme to defraud, and falsification of business records.

Rice said that her office’s investigation, dubbed “Operation: Sweet Deal,” uncovered more than 45 independent acts of fraud. The ringleaders, James Robert Sweet, 43, of Westbury, Dwayne Benjamin, 44, of Westbury, and their numerous co-conspirators, face charges ranging from enterprise corruption and first-degree grand larceny to money laundering, identity theft and conspiracy. (See attached documented for defendant names and formal charges.)

Rice said that Sweet Deal has operated in Nassau County for nearly six years under the leadership of Sweet and Benjamin.

“The criminal activity by these mortgage fraud schemers has now been brought to a screeching halt,” said Rice. “Thanks to the meticulous and thorough work by prosecutors and investigators in my office we were able to pull down this $20 million house of cards. Mortgage fraud hurts every honest, hard-working citizen by making it more difficult for them to get good mortgage rates and destroys communities when houses fall into foreclosure and end up boarded-up or sold for less than their original value.”

“Sweet and his co-conspirators used their knowledge of the mortgage industry for their own financial gain at the expense of innocent consumers, financial institutions and the Nassau county government,” said Richard H. Neiman, Superintendent of Banks for New York State. “Through our Criminal Investigations Bureau, the Banking Department will continue to work with our law enforcement partners to ferret out these fraudulent schemes and bring unscrupulous individuals to justice.”

“Mortgage fraud and white collar crimes strike at the economic heart of the American system,” said Acting Inspector General Michael P. Stephens of the Unites States Department of Housing and Urban Development Office of the Inspector General. “To the extent that we can uncover and prosecute these activities, it’s to everyone’s benefit.Accordingly, I am happy to lend the HUD Office of Inspector General’s nationwide expertise to this exceptional group of law enforcement agencies.”

Assistant District Attorney Abigail Margulies, Chief for the Crimes Against Real Estate Unit, and Assistant District Attorney Nasreen Syed, are handling the case for the District Attorney’s Office.

Rice also thanked the New York State Banking Department, the Westchester and Kings County District Attorney’s Offices, the U.S. Postal investigators and the New York State Department of Motor Vehicles for their involvement in the investigation.

The Organized Crime Control Act (OCCA), the New York State counterpart of the federal Racketeer-Influenced and Corrupt Organizations (RICO) statute, which permits prosecutors to deal with criminal groups on an enterprise-wide basis rather than pursue isolated instances of criminal conduct. Using this law also provides for potentially higher sentences to be imposed. This is the first time in Nassau County history that OCCA has been used to prosecute mortgage fraud.

The charges are merely accusations and the defendants are presumed innocent until and unless proven guilty

In Mortgage Fraud , , ,
 permalink

Man Accused of Stealing Home from Ex-Wife

Allison Tussey —  February 1, 2011 — Leave a comment

Egon Linzenberg, Hillburn, NY, was sentenced by County Court Judge Victor J. Alfieri, Jr. in the Rockland County Court to 1-3 years in state prison. The defendant was convicted of Grand Larceny in the 2nd Degree (1 count); Criminal Possession of a Forged Instrument in the 2nd degree (2 counts) and Forgery in the 2nd Degree (4 counts) after an eight-day jury trial last January.

The defendant had been charged with stealing the house he shared with his estranged and long time common law wife and one of their three sons. By forging multiple documents, the defendant illegally and secretly removed his wife’s name from the deed to the home, leaving title to the shared house in only his name. He then fraudulently refinanced the house, again using forged documents, and took and spent all of the proceeds from the refinance. The house, located at 82 Regina Road, Monsey, New York, is currently in foreclosure. The forged documents included a power of attorney and various real estate and mortgage documents.

In addition to being sentenced to 1-3 years on each of the seven counts, the defendant was ordered to pay $226,000 in restitution. At the time of sentencing the defendant paid a total of $200,000 of the total restitution, which will be turned over to the victim of this crime. The defendant, who has been in the Rockland County Correctional Facility since the jury verdict was returned on January 20, 2009, was again remanded to the custody of the Rockland County Sheriff.

The defendant had founded the Ramapo Valley Brewery in Hillburn which specialized in kosher for Passover beer.

Rockland County District Attorney Thomas P. Zugibe today announced that

The conviction was the result of an investigation by the Rockland County Special Investigations Unit. The case was tried by Executive Assistant District Attorney Gary

Lee Heavner and Assistant District Attorney Robert Trudell.

In Mortgage Fraud
 permalink

Redefault Rates on Loan Mods are Dropping

Allison Tussey —  August 25, 2010 — Leave a comment

Following concerted efforts to prevent unnecessary foreclosures, the Washington Attorney General’s Office and a group of other state attorneys general and banking regulators say they’ve seen improvements in programs designed to help homeowners. But they’re concerned that foreclosures continue to outpace loan modifications, and note that most modifications increase the loan balance.

According to a report issued by the State Foreclosure Prevention Working Group, a multi-state coalition, recent loan modifications are performing better. Modifications can include reduced interest rates and other changes to terms that result in smaller payments and, in some cases, lower outstanding balances.

The report tracks loan modifications made by nine mortgage companies who were servicing 4.6 million loans as of March 2010. Banks, which are regulated by federal agencies, are not included. Compared to loans modified in 2008, borrowers whose loans were modified in 2009 were 40-50 percent less likely to be seriously delinquent six months later.

The Office of Thrift Supervision and the Office of the Comptroller of Currency reported a similar reduction in redefault rates in their Mortgage Metrics Report for the first quarter of 2010. The agencies reported that of the 590,000 modifications made in 2009, nearly 52 percent were current at the end of the first quarter of 2010. Only 27 percent of the modifications implemented during 2008 were current.

“Some analysts have predicted redefault rates as high as 75 percent but today’s report paints a brighter picture of the future,” Washington Attorney General Rob McKenna said. “The newer modifications are holding up better, with fewer borrowers redefaulting.”

McKenna and his office have been leading efforts to help homeowners, including cracking down on unethical lenders and fraudsters, advocating for modifications of mortgages that have become unaffordable, urging changes to bankruptcy rules, and seeking state-federal collaboration on bank regulation. The Washington Attorney General’s Office granted $920,000 of its Countrywide/Bank of America settlement payment for local foreclosure prevention programs that provide counseling and pro bono legal services.

Despite the progress made on the sustainability of the loan modifications being made, McKenna said he’s concerned that 6 out of 10 seriously delinquent borrowers are not getting any help.

McKenna encouraged Washington residents facing foreclosure to call The Washington State Homeownership Information Hotline at 1-877-894-HOME (4663) or visit the Attorney General’s Web site at www.atg.wa.gov/foreclosure.aspx for additional resources. He cautioned that loan modifications aren’t miracle cures and not every homeowner will qualify.

The majority of loan modifications (89 percent) tracked by the working group for the first quarter of 2010 showed some reduction in payments, and nearly 78 percent lowered the monthly payment by more than 10 percent.

Redefault rates were lower for loan modifications that reduced the principal balance by more than 10 percent. However, only 1 in 5 modifications reduce the loan amount and, in fact, the vast majority increase the balance by adding servicing charges and late payments.

“When housing prices are low, the lender is going to take a loss if that home is foreclosed and surrounding home values will ultimately be impacted,” McKenna said. “The underlying theory of a loan modification is to enable the lender to get the same value out of the home as if it had been foreclosed. The lender still takes a loss through the reduction of interest or principle. But the net result is better for the community and the borrower because, of course, a house is more than just an asset. It’s a home.”

The State Foreclosure Prevention Working Group consists of 12 state attorneys general (Arizona, California, Colorado, Florida, Illinois, Iowa, Massachusetts, Nevada, North Carolina, Ohio, Texas and Washington), bank regulators for New York, North Carolina, and Maryland, and the Conference of State Bank Supervisors. The group was founded in 2007 and has issued four prior reports, available at www.csbs.org/regulatory/Pages/SFPWG.aspx.

In Mortgage Fraud
 permalink

FinCEN Analysis: Foreclosure Rescue Scam Reports Increase

Allison Tussey —  June 21, 2010 — Leave a comment

The Financial Crimes Enforcement Network (FinCEN) released its first analysis of suspicious activity reports (SARs) containing information about potential foreclosure rescue scams. The report, Loan Modification and Foreclosure Rescue Scams – Evolving Trends and Patterns in Bank Secrecy Act Reporting, involved an analysis of more than 3,500 SARs filed from 2004 through 2009, of which the great majority, 3,000, were filed last year. Additionally, FinCEN provided updated guidance to the financial industry concerning new scam techniques that financial professionals should watch for and report.

In addition to the increase in reported activity, the analysis shows that the nature of foreclosure rescue scams had shifted during the period examined in the study. Early SARs containing information about loan modification/foreclosure rescue scams identified subjects purporting to be loan modification or foreclosure rescue specialists. These subjects targeted financially troubled homeowners with promises of assistance. The scams involved the homeowners signing quit claim deeds, and resulted in loss of equity in or title to their property. The scammers used straw borrowers, who misrepresented income, employment, or occupancy, or provided other fraudulent information to deceive a new lender into making a new mortgage loan.The scams described in later SARs and analyzed in this report, reflect an evolution into advance fee schemes, in which purported loan modification or foreclosure rescue specialists promised to arrange modification of a homeowner’s mortgage for more favorable repayment terms. Following receipt of large advance fees, scammers rarely, if ever, provided any service. A variation of the advance fee scam involved phony debt elimination programs in which the homeowners paid advance fees and were given bogus documents, or were instructed to contact their lenders with specious assertions that the original mortgage debt was illegal.

The top ten metropolitan regions, ranked by the concentration of local subjects of all mortgage loan fraud SARs reported between January 1, 2009 and June 10, 2010, are as follows:

Miami-Fort Lauderdale-Pompano Beach, FL; SARS – 5,029; rank – 1;

Los Angeles-Long Beach-Santa Ana, CA; SARS – 4,839; rank – 2

New York-Northern New Jersey-Long Island, NY-NJ-PA; SARS – 3,447; rank – 3;

Chicago-Naperville-Joliet, IL-IN-WI; SARS – 2,973; rank – 4;

Washington-Arlington-Alexandria, DC-VA-MD-WV; SARS – 1,848; rank – 5;

Riverside-San Bernardino-Ontario, CA; SARS – 1,791; rank – 6;

Phoenix-Mesa-Scottsdale, AZ; SARS – 1,674; rank – 7;

Atlanta-Sandy Springs-Marietta, GA; SARS – 1,667; rank – 8;

San Francisco-Oakland-Fremont, CA; SARS – 1,364; rank – 9;

Orlando-Kissimmee, FL; SARS – 1,326; rank – 10.

Due to its national and international networking and coordination mission, FinCEN is actively involved with a number of initiatives that focus on combating mortgage fraud and ensure that financial institutions are not used as conduits for illicit activity. Among its initiatives is an April 2009 FinCEN advisory, updated today, to provide indicators, or red flags, of loan modification and foreclosure rescue fraud, and request that filers who become aware of this type of activity include the term “foreclosure rescue scam” in the SAR’s narrative section to assist law enforcement in identifying applicable reports.

The report supports the efforts of the Financial Fraud Enforcement Task Force (FFETF), established by President Obama in November 2009 to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. Additionally, FinCEN efforts are being further developed as part of the FFETF anti-mortgage fraud initiative to provide not only information sharing based on SAR data, but also to support law enforcement investigations and prosecutions. FFETF is composed of representatives from a broad range of Federal agencies, regulatory authorities, inspectors general, and State and local law enforcement, and is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. FinCEN has been actively involved in these efforts, as Suspicious Activity Reports are one of the best sources of lead information for law enforcement in fighting financial crime.

“The increase in reporting of suspected foreclosure rescue scam activity could mean that there is an increase in fraudulent activity but it also reflects an increase in awareness among financial institutions of the fraud perpetrated,” said FinCEN Director James H. Freis, Jr. “This report emphasizes the importance of including the specific term ‘foreclosure rescue scam’ in the SAR narrative to enable law enforcement to search for and identify fraudulent activity more easily when reviewing SAR information, which assists in focusing investigative resources and ultimately reducing these scams.”

In Mortgage Fraud
 permalink

13 Mortgage Fraud Defendants Indicted for $16.9M Scheme

Allison Tussey —  April 14, 2010 — Leave a comment

Thirteen defendants have been charged in a superseding indictment in connection with a mortgage fraud scheme that resulted in approximately $16.9 million in fraudulent mortgage loans, and losses of $9.7 million to the lender, Wells Fargo Bank:

Greta Medina, 26, Coral Gables, Florida

Ricardo Estrada, 39, Miami, Florida

Dania Arguelles, 44, Miami, Florida

Fernanda Abrea, 50, Miami, Florida

Obed Hernandez, 38, Miami, Florida

Martin Mere, 42, Port St. Lucie, Florida

Nestor Collantes, 59, Miami, Florida

Alfonso Velasco, 55, Miami, Florida

Adan Vasquez, 40, Houston, Texas

Yohamel Caballero, 26, Miami, Florida

Ana Aviles, 45, Miami, Florida

Leismy Barcia, 33, Miami, Florida

Christian Gomez, 37, West New York, New Jersey

The 18 count superseding indictment was unsealed on April 8, 2010.

The properties charged in the superseding indictment include multiple units at a luxury condominium building on Brickell Bay Drive in Miami, Florida and single family homes in Coral Gables, Florida.

According to the superseding indictment, defendant Greta Medina and other co-conspirators identified eleven properties to be used to defraud Wells Fargo Bank into issuing $16.9 million in mortgage loans. The real estate broker, Margaret Roberts, who previously pled guilty, negotiated the purchases with the sellers. Medina and others paid a Wells Fargo loan officer, defendant Ricardo Estrada, to facilitate the approval of the fraudulent loan applications at Wells Fargo. Medina also paid the title agent to create fraudulent closing documents and to release the lender’s proceeds early to allow the straw purchasers to use the lender’s money to make deposits on the properties and pay their closing costs.

The conspirators recruited straw buyers to purchase the properties. The recruiters, including defendants Dania Arguelles, Fernanda Abrea, Obed Hernandez, and Martin Mere, recruited straw buyers Nestor Collantes, Alfonso Velasco, Adan Vasquez, Yohamel Caballero, Ana Aviles, and Leismy Barcia to submit fraudulent loan applications to the lender. The loan applications included false information about the straw buyers’ salaries and deposits, to create the impression that the straw buyers could qualify for loans in excess of one million dollars for each property.

At closing, the defendants diverted millions in loan proceeds by skimming the difference between the inflated purchase price and the price actually paid to the seller for the property. Greta Medina, Dania Arguelles, Christian Gomez, Alfonso Velasco and Fernanda Abrea received loan proceeds from the title company and paid off their co-conspirators, including the title agent, the loan officer, the recruiters, and the straw buyers. In some instances, the defendants stripped more money out of the properties by taking out home equity lines of credit. Ultimately, the straw buyers defaulted on the loans, causing each of the properties to go into foreclosure and resulting in estimated losses to the lender of more than $9.7 million.

The superseding indictment includes charges of conspiracy to commit bank fraud, substantive bank fraud and receipt of commissions and gifts for procuring loans. The bank fraud and receipt offenses carry a statutory maximum sentence of 30 years’ imprisonment.

Jeffrey H. Sloman, United States Attorney for the Southern District of Florida, commended the investigative efforts of the Federal State Mortgage Fraud Strike Force with special commendation to the U.S. Secret Service, the U.S. Postal Inspection Service and the Miami-Dade Police Department. The case is being prosecuted by Assistant U.S. Attorney Peter A. Forand.  The superseding indictment was announced by Jeffrey H. Sloman, Michael K. Fithen, Special Agent in Charge, U.S. Secret Service, Henry Gutierrez, Postal Inspector in Charge, U.S. Postal Inspection Service, and James K. Loftus, Director, Miami-Dade Police Department.

In Mortgage Fraud
 permalink

Man Arrested for Buying Real Estate With Stolen Identity

admin —  March 4, 2010 — 1 Comment

John Melchionna, 42, a former Linden, New Jersey, resident was arrested and charged with 13 separate counts after an investigation revealed that he used another man’s identity to secure $270,000 in loans. Melchionna a faces charges of theft by deception, identity theft and forgery.

According to the complaints, Melchionna used the money, obtained by using a business associate’s name, to purchase real estate in Elizabeth, New Jersey. He then forged the associate’s name on mortgages to secure the loans.

In addition, Melchionna was charged with running up approximately $300,000 in credit card charges between 2006 and 2008 on credit cards he obtained in the victim’s name. The credit card statements and correspondence regarding the real estate transactions used the address of an investment property the victim owned in Linden, New Jersey where Melchionna collected the rents on his behalf while also intercepting the victim’s mail.

The victim went to the Linden Police in New Jersey in December 2008 when he ran a credit check on his name and discovered numerous mortgages and credit cards had been taken out by Melchionna in his name.

Melchionna is currently under indictment for using another friend’s identity in November 2007 to obtain a $40,000 loan from The Hamilton Group, a New York lender. In that case, authorities allege that Melchionna secured the loan by preparing fraudulent invoices for non-existent accounts receivable. The fraud was discovered when the owner of The Hamilton Group contacted the company listed on the fraudulent invoices and demanded payment.

The charges were filed following an investigation by the Prosecutor’s Office and Linden New Jersey Police Department Detective Mark Case.

These criminal charges are mere accusations. The defendants are presumed innocent until proven guilty in a court of law.

In Mortgage Fraud , , ,
 permalink

Ringleader of Real Estate Investment Scam Sentenced

admin —  January 18, 2010 — Leave a comment

Wayne Puff, 61, Old Bridge, New Jersey, the ringleader of a massive Ponzi scheme which defrauded hundreds of investors and mortgage lenders of more than $100 million through a purported real estate investment business, was sentenced to 216 months in federal prison and ordered to pay approximately $101.1 million in restitution and to serve 3 years of supervised release upon the completion of his prison term. Puff has remained in custody since his arrest on June 10, 2008, pursuant to a federal criminal Complaint.

As previously reported on Mortgage Fraud Blog, Puff, the founder and president of NJ Affordable Homes, Corp. (NJAH), pleaded guilty before U.S. District Judge Jose L. Linares on April 9, 2009, to a one-count Information that charged him with conspiracy to commit wire fraud. The criminal Information filed by the government described a broad fraud conspiracy spanning from 1998 to September 2005, during which Puff and his co-conspirators obtained more than $120 million from individual investors by falsely touting the profitability and security of their investment in NJAH, which were secured, in part, with fraudulent mortgage loans. Puff admitted that NJAH was a massive investment and mortgage fraud scheme, which defrauded hundreds of investors located across the United States and internationally, as well as multiple mortgage lenders, of more than $101 million.

Through print and radio advertisements, NJAH solicited individual investors and depicted itself as a private company which purchased and renovated residential properties for resale. Puff, through NJAH, promised investors that their investments were fully secure, and guaranteed them annual profit returns of between 15 and 22 percent.

Instead of investing the investors’ monies as promised, Puff diverted and misappropriated the money for a variety of illegal purposes, including utilizing the classic Ponzi modus operandi of paying existing investors with new investors’ money, as well as embezzling money for his personal use, and using investors’ money to settle other investors’ lawsuits and satisfy judgments brought by investors against NJAH and Puff. Puff also admitted using investors’ money to pay personal expenses, large and small, for trips to the Cayman Islands, meals at restaurants, purchases at cigar shops, and more.

Beginning in late 2003, in need of substantial cash to maintain and conceal the ongoing fraud, Puff and others created a second investment program referred to as “Our Money, Your Credit.” Under this program, Puff and others solicited investors who would serve as purported purchasers of NJAH properties, and would allow NJAH to use their names and credit histories for purposes of obtaining mortgage loans for multiple lenders, and NJAH would assume all fees and costs associated with the transactions. The buyers, however, did not pay money in connection with the purchases, although the closing documents which were submitted to the mortgage lenders and Department of Housing and Urban Development (HUD) falsely stated they did.

In order to obtain tens of millions of dollars in loans from mortgage lenders, Puff recruited so-called “independent” licensed real estate appraisers to create false and misleading appraisals that grossly inflated the true value of NJAH properties. Many of the mortgage liens were essentially worthless, as they were premised on inflated and fraudulent appraisals. The fraudulent appraisals often substantiated inflated values on dilapidated, uninhabitable properties, as well as nonexistent structures on vacant lots.

According to Assistant United States Attorneys Justin W. Arnold and Robert Kirsch, of the U.S. Attorney’s Office Criminal Division in Newark, Puff and others also submitted a variety of fraudulent documents to the lenders, such as false mortgage applications, false sales contracts, false employment verification data, false investor statements, and false HUD-1 Settlement Statements. The false HUD-1s were often ultimately submitted to HUD and the Federal Housing Administration (FHA), which, in turn, federally insured the loans.

The fraud was first exposed in September 2005, when the U.S. Securities and Exchange Commission (SEC) commenced a civil enforcement action against Puff and NJAH. At Puff’s plea hearing, he admitted that after the SEC began its inquiry into the business practices of NJAH, Puff and others shredded thousands of incriminating documents to conceal the fraud.  Puff also obstructed justice by submitting false information to the New Jersey Bureau of Securities, in violation of a Consent Judgment, entered by a New Jersey state court judge. The fraud required the participation of numerous individuals, both in and out of the company, including a high-level NJAH executive and outside licensed real estate appraisers and lawyers. In total, 10 of Puff’s co-conspirators have pleaded guilty and admitted their roles in the conspiracy.

Other co-conspirators who have been sentenced include:

John Kurzel, 58, New Brunswick, New Jersey, an NJAH mortgage loan processor who pleaded guilty to conspiracy for his role in preparing false and misleading loan applications in the names of straw buyers, was sentenced to 20 months in federal prison.

Michael Meehan, 49, Belmar, New Jersey, a former licensed real estate appraiser who pleaded guilty for creating and submitting materially false and misleading property appraisals in the names of straw buyers to various mortgage lenders, was sentenced to 30 months in federal prison.

Anthony Natale, 45, Neshanic Station, New Jersey, a lawyer who pleaded guilty to conspiracy for also creating and signing materially false and fraudulent HUD-1s relating to NJAH real estate transactions, was sentenced to 30 months in federal prison.

Sydney Raposo, 42, Rahway, New Jersey, a paralegal for Natale, who pleaded guilty to making false statements to HUD relating to a federally insured mortgage loan issued by a mortgage lender, was sentenced to three years probation with six months house arrest.

The remaining defendants, Kenneth Lagonia, 58, John Morris, 63, Katrina Arrington, 37, Mitchell Fishman, 57, William Page, 50, and Lucesita Santiago, 39, await sentencing.

First Assistant U.S. Attorney Ralph J. Marra, Jr., credited Special Agents of the FBI’s Franklin Township Resident Agency, under the direction of Acting Special Agent in Charge Kevin B. Cruise in Newark; the HUD Office of Inspector General, under the direction of Special Agent in Charge Joseph W. Clarke; and Postal Inspectors with the U.S. Postal Inspection Service, under the direction of Inspector in Charge David L. Collins, for investigation of the case. Marra also thanked the U.S. Securities and Exchange Commission, under the direction of George S. Canellos, the Regional Director in New York, for its assistance in the investigation.

Marra also acknowledged the assistance of Charles Forman, Esq., of the law firm Forman, Holt, Eliades, and Ravin, LLC, of Paramus, New Jersey, who serves as the bankruptcy trustee for NJAH in its Chapter 7 bankruptcy liquidation.

The case is being prosecuted by Assistant U.S. Attorneys Justin W. Arnold and Robert Kirsch of the U.S. Attorney’s Office Criminal Division in Newark.

In Mortgage Fraud , , , , ,
 permalink

Marc Dreier Co-Conspirator Pleads Guilty

Allison Tussey —  November 4, 2009 — Leave a comment

Kosta Kovachev, 58, formerly a registered broker with the National Association of Securities Dealers, pleaded guilty this morning to one count of conspiracy to commit securities and wire fraud and one count of wire fraud stemming from his participation with Marc Dreier in the sale of over $100 million dollars in fictitious promissory notes to various hedge funds, as part of a larger fraud perpetrated by Dreier. The plea was entered in Manhattan federal court before United States District Judge Naomi Reice Buchwald.

According to the criminal Information previously filed against Kovachev, other documents filed in this case, and statements made during Kovachev‘s plea proceeding:

During 2006 and 2007, Marc Dreier, the founder and managing partner of the law firm Dreier LLP, sold to a New York City hedge fund various promissory notes with a face value of approximately $115 million. The notes were purportedly issued by a New York City real estate development company (the “Developer”). In September 2008, after the notes were not repaid
on time, an employee of the hedge fund asked to meet with representatives of the Developer at the Developer’s offices.

Dreier agreed, and on October 15, 2008, when employees of the hedge fund went to the Developer’s offices, Dreier brought them into a conference room and introduced Kovachev, who pretended that he worked in the finance department of the Developer and falsely answered questions about the Developer’s finances.

That same month, Kovachev directly contacted the founder of another hedge fund to tell him about notes that Dreier had for sale. Kovachev thereafter introduced DREIER to employees
of that hedge fund, which ultimately purchased for $13.5 million fictitious promissory notes purportedly issued by the Developer.

Also in October 2008, Dreier informed a third hedge fund that it could buy the Developer’s notes at a discount. When employees of the fund asked to speak with someone at the Developer about financial statements Dreier had supplied, Dreier arranged a conference call among himself, the hedge fund employees, and Kovachev, who falsely pretended to be the Developer’s CEO. During the call, Kovachev discussed the financial statements, which were fictitious, and falsely answered questions about the Developer’s finances. That third hedge fund subsequently bought fictitious notes from Dreier for approximately $100 million.

During October and November 2008, Dreier paid Kovachev a total of approximately $215,000 for engaging in the impersonations and assisting in the sale of fictitious promissory notes.

Kovachev pleaded guilty to Count One of the Information, which charged him with conspiracy to commit securities fraud and wire fraud, and to Count Three of the Information, which charged him with wire fraud. He is scheduled to be sentenced by Judge Buchwald on March 5, 2010, at 2:30 p.m.

Following a guilty plea, DREIER was sentenced in July to 20 years in prison by Judge JED S. RAKOFF, and ordered to pay $387,675,303.32 in restitution and to forfeit $746,460,000 in
proceeds of his offenses.

Kovachev faces a maximum sentence of 5 years in prison on the conspiracy charge and a maximum sentence of 20 years in prison on the wire fraud charge. Each of those charges also carries a maximum fine of $250,000 or twice the gross gain or loss from the offense. Kovachev agreed as part of his plea to forfeit the funds he received from DREIER as payment for his
fraudulent activities.

Preet Bharara, the United States Attorney for the Southern District of New York, announced the guilty plea. 

United States Attorney Bharara stated: “Kosta Kovachev flagrantly disregarded the law when he impersonated others to induce purchases of fictitious notes. Unfortunately, Kovachev’s
play-acting caused millions of dollars of real losses to real victims.”

Mr. BHARARA praised the work of the Criminal Investigators of the United States Attorney’s Office and thanked the United States Securities and Exchange Commission for its assistance in the case.

In Mortgage Fraud
 permalink