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Ronald J. McCord, 69, Oklahoma City, Oklahoma, was charged yesterday with defrauding two locally-based banks, Fannie Mae, and others. The charges include bank fraud, money laundering, and making a false statement to a financial institution.

McCord was the former President of First Mortgage Company, LLC (“FMC”), an Oklahoma City, Oklahoma based mortgage lending and loan servicing company.  The Indictment alleges a broad range of fraudulent conduct spanning approximately three years.

McCord is charged in Counts 1 through 7 with 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.”).  According to the Indictment, in approximately June 2016, 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.

According to the Indictment, this discovery prompted further internal review.  An internal audit revealed that McCord had misappropriated additional Spirit/Mortgage Corp. and Citizens/Funding Corp. loans by: (1) using FMC’s warehouse line of credit with (i.e., obtaining mortgage loans from) Spirit/Mortgage Corp. or Citizens/Funding Corp., selling those Spirit/Mortgage Corp. or Citizens/Funding Corp. loans to Fannie Mae, then resubmitting the loan documents to Spirit/Mortgage Corp. or Citizens/Funding Corp. to receive additional money from the Spirit/Mortgage Corp. or Citizens/Funding Corp. line of credit; (2) using FMC’s warehouse line of credit with Spirit/Mortgage Corp. or Citizens/Funding Corp. to refinance the resulting loans without repaying Spirit/Mortgage Corp. or Citizens/Funding Corp. the originally loaned funds; (3) using FMC’s Spirit/Mortgage Corp. or Citizens/Funding Corp. line of credit to fund mortgages to borrowers, receiving payments from those borrowers, but never repaying Spirit/Mortgage Corp. or Citizens/Funding Corp.; (4) obtaining funds from Spirit/Mortgage Corp. or Citizens/Funding Corp. for loans that never closed, then failing to return the funds to Spirit/Mortgage Corp. or Citizens/Funding Corp.; and (5) using FMC’s warehouse lines of credit with Spirit/Mortgage Corp. and Citizens/Funding Corp. to “double fund” loans by obtaining funds from both financial institutions to fund the same loans.

The Indictment alleges that McCord’s actions involved Spirit/Mortgage Corp. and Citizens/Funding Corp. loans that totaled approximately $40,000,000.00, in addition to the more than $14,100,000.00 in Spirit/Mortgage and Citizens/Funding Corp. loans that McCord had sold out of trust.

The Indictment further alleges that, 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 that the title companies handling those mortgages sent payoffs directly to the banks.  Though McCord filed the assignments as required, his employees contacted the title companies handling the mortgages and directed payments to FMC, not Spirit/Mortgage Corp. and Citizens/Funding Corp.  McCord continued to collect loan payoffs without repaying Spirit/Mortgage Corp. and Citizens/Funding Corp.  He then signed releases on the assigned mortgages after receiving the payoffs, subjecting the properties to potential foreclosure should Spirit/Mortgage Corp. or Citizens/Funding Corp. try to collect payments on the mortgages, to which they held title.

According to Count 8 of the Indictment, 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.  In the course of those negotiations, McCord made false statements and representations to obtain CapLOC funds.  McCord then used the money to repay Spirit/Mortgage Corp. part of his outstanding $40,000,000.00 debt.

Finally, the Indictment alleges that, 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”).  Counts 9 through 24 of the Indictment allege that McCord defrauded Fannie Mae by diverting escrow monies intended to pay homeowners’ taxes, insurance, principal, and interest, to cover FMC’s operating expenses.  As a result, McCord bounced checks to more than sixty taxing authorities and borrowers throughout the Oklahoma City area and elsewhere missed making their tax payments.  The Indictment further alleges that McCord laundered the stolen escrow monies by using the funds to write himself checks, pay more than half the purchase price of his son’s $900,000.00 Oklahoma City home, and build a custom vacation home in Colorado.

With regard to the bank fraud and false statement to a financial institution charges in the Indictment, McCord faces up to 30 years in prison and a fine of up to $1,000,000.00 on each count.  He also faces up to 10 years in prison and a $250,000 .00 fine on to each of the money laundering counts. Furthermore, the Indictment seeks forfeiture from McCord in the amount of the proceeds of the fraudulent schemes and in the amount of the property involved in the offenses.

The announcement was made by Timothy J. Downing, United States Attorney for the Western District of Oklahoma.

This case is the result of an investigation 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 Oklahoma City Field Office.  It is being prosecuted by Assistant U.S. Attorney Julia E. Barry.

Reference is made to the Indictment and other public filings for further information.  An indictment is only a charge and is not evidence of guilt.  A defendant is presumed innocent and is entitled to a fair trial at which the government must prove guilt beyond a reasonable doubt.  To download a photo of U.S. Attorney Downing, click here.

Shenandoah Adams Sr., a/k/a “Shane Adams Sr.,” 54, New Providence, New Jersey, was charged today by indictment with six counts of wire fraud and two counts of making false statements in connection with a mortgage loan.

According to the indictment:

Adams was a principal of Adams Property Management and Investment Group Limited Liability Company (Adams Property Management), which purchased property on Hilton Street, East Orange, New Jersey, in 2014. The following year, Adams arranged for a close associate (Individual 1) to obtain a $153,562 loan from a mortgage lender to purchase the Hilton Street property from Adams Property Management. Adams knew that Individual 1 did not have the money to pay the balance of the purchase price of $225,000. At the closing on March 25, 2015, Adams directed Individual 1 to issue a fraudulent check in the amount of $90,280.47 (the balance of the purchase price) to give the false impression that Individual 1 had paid the closing balance. Adams reassured Individual 1 that Adams would not negotiate the check. Adams signed a settlement statement, falsely certifying that Individual 1 paid the closing balance and that the settlement statement was a true and accurate statement of all receipts and disbursements made in connection with the sale of the Hilton Street property, when Adams knew that Individual 1’s check was fraudulent. Adams used Individual 1’s loan proceeds to pay off Adams Property Management’s $100,000 mortgage loan to purchase the Hilton Street Property and to obtain a $26,335.30 check for Adams Property Management.

Although Adams reassured Individual 1 that Adams would fund Individual 1’s mortgage payments, by May 2016 Individual 1’s mortgage payments on the Hilton Street property were substantially in arrears. Adams arranged for Individual 1 to sell the property to another associate for a price of $255,000. The closing on that sale commenced on May 31, 2016; the total amount to pay off Individual 1’s mortgage was $210,565.34. On June 1, 2016, Adams and Individual 1 had a telephone conversation with an out-of-state representative of the mortgage servicer for Individual 1’s lender, during which Adams made false and fraudulent statements to induce the lender to reduce the payoff amount. The lender agreed to reduce Individual 1’s payoff amount to $190,000. At Adams’s direction, Individual 1 cashed the check for the amount of the reduction, $20,665.34, and delivered the cash proceeds to Adams.

Adams also was a principal of VH Electrical and Plumbing Limited Liability Company (VH). On March 11, 2015, Adams, on behalf of VH, entered into a contract with the Orange Public Library to replace the library’s HVAC/Chiller unit for a price of $49,000. The project was funded by a U.S. Department of Housing and Urban Development (HUD) Community Development Block Grant to the library and Orange.

Before getting the contract with the library, Adams sent the library’s executive director, Timur Davis, two fake quotes purportedly from two vendors to give the false impression that VH would replace the library’s chiller for less than those other vendors. After VH had been hired, Adams sent Davis records to give the false impression that Adams was taking steps to order a replacement chiller. Adams received $40,000 from the library, but did not replace the chiller. Davis pleaded guilty on Feb.13, 2020 to making false statements to HUD in connection with the project.

He is scheduled to appear this afternoon before U.S. Magistrate Judge Leda Dunn Wettre in Newark federal court.

The charges of wire fraud carry a maximum potential penalty of 20 years in prison and a maximum $250,000 fine. The charges of making false statements in connection with a mortgage application carries a maximum potential penalty of 30 years in prison and a maximum potential fine of $1 million.

U.S. Attorney Craig Carpenito made the announcement.

U.S. Attorney Carpenito credited special agents of the FBI, under the direction of Special Agent in Charge Gregory W. Ehrie in Newark; special agents of the U.S. Department of Housing and Urban Development, Office of Inspector General, under the direction of Special Agent in Charge Christina Scaringi; and special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge John R. Tafur, with the investigation leading to today’s arrest.

The government is represented by Assistant U.S. Attorneys J Imbert and Cari Fais of the U.S. Attorney’s Office’s Special Prosecutions Division.

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

Defense counsel: TBD

Paul Nicoletti, 60, Bloomfield Hills, Michigan, a former Oakland County lawyer was sentenced yesterday, January 30, 2020, to serve 70 months in federal custody on one count of conspiracy to commit bank fraud, and three counts of bank fraud.

According to the evidence introduced during the trial, Mr. Nicoletti, a lawyer and owner of a title company became involved in a scheme to obtain large mortgage loans from Fifth Third Mortgage, Michigan, a lending arm of Fifth Third Bank. Although somewhat complicated, the essence of the scheme involved real estate developers, a corrupt loan officer and Mr. Nicoletti working together to obtain large mortgage loans from Fifth Third Mortgage, Michigan, purportedly for the purchase and development of high-end properties in Bloomfield Hills and Birmingham, Michigan, based on numerous false statements both in the application and closing process of the loans, resulting in Fifth Third Mortgage, Michigan releasing over eight million dollars in loan proceeds.

More specifically, one or more of the conspirators would find and recruit “straw buyers” to serve as mortgage loan applicants for the purchase of real property which the conspirators wanted to purchase and develop. The straw buyers, who viewed themselves as “investors,” were paid a fee for the use of their names and credit histories in the loan applications and real estate transactions, and were promised a portion of the expected profit after the property was developed and resold. The straw buyers had no intention of living at or actually exercising ownership and control of the property, despite representations to the contrary in their applications, and in closing documents. Despite their good credit ratings, the straw buyers did not have the assets or income necessary to qualify for mortgages in the substantial amounts sought. Thus, false information pertaining to their income and assets was included in the mortgage loan applications to qualify them. Mr. Nicoletti’s role was to facilitate the fraudulent loans as the title agent by, among other things, falsely verifying that the borrowers made substantial down payments on the properties. To do so, Mr. Nicoletti obtained cashier’s checks, issued after the loan proceeds were released to his Continental Title account and which were funded by the loan proceeds themselves, bearing the names of the straw buyers as “remitters,” which he then re-deposited into his Continental Title account, making it appear as though the borrowers funded the substantial down payments. In fact, the borrowers brought no money to the closings. When the fraud was discovered by authorities, Mr. Nicoletti counseled the destruction of evidence of the fraud and also personally destroyed relevant electronic and paper records.

Mr. Nicoletti was the sixth person convicted as a result of this investigation. The loan officer, a mortgage broker, an appraiser and several of the real estate developers have previously been sentenced after entering guilty pleas relating to the scheme. The investigation was conducted by the Federal Bureau of Investigation and prosecuted by Assistant United States Attorneys Craig Weier and John Neal.

Nicoletti received the sentence from the Honorable Victoria A. Roberts, United States District Judge, in Detroit, Michigan. Judge Roberts also ordered that the defendant serve two years on supervised release after his release from federal custody and pay restitution totaling $5,299,751.58. A jury returned guilty verdicts against Mr. Nicoletti on May 5, 2019 after a seven-day trial.

United States Attorney Matthew Schneider made the announcement today.

George Gilmore, 70, Toms River, New Jersey, a partner at an Ocean County, New Jersey, law firm, was sentenced today to one year and one day in prison for his conviction on two counts of failing to pay over payroll taxes withheld from employees to the IRS and one count of making false statements on a bank loan application submitted to Ocean First Bank N.A.

According to documents filed in this case and the evidence at trial:

Gilmore worked as an equity partner and shareholder at Gilmore & Monahan P.A., a law firm in Toms River, New Jersey, where he exercised primary control over the firm’s financial affairs. Because he exercised significant control over the law firm’s financial affairs, Gilmore was responsible for withholding payroll taxes from the gross salary and wages of the law firm’s employees to cover individual income, Social Security and Medicare tax obligations. For the tax quarters ending March 31, 2016, and June 30, 2016, the law firm withheld tax payments from its employees’ checks, but Gilmore failed to pay over in full the payroll taxes due to the IRS.

Gilmore also submitted a loan application to Ocean First Bank containing false statements. On November 21, 2014, Gilmore reviewed, signed, and submitted to Ocean First Bank a Uniform Residential Loan Application (URLA) to obtain refinancing of a mortgage loan for $1.5 million with a “cash out” provision that provided Gilmore would obtain cash from the loan. On January 22, 2015, Gilmore submitted another URLA updating the initial application. Gilmore failed to disclose his outstanding 2013 tax liabilities and personal loans that he had obtained from others on the URLAs. Gilmore received $572,000 from the cash out portion of the loan.

On April 17, 2019, Gilmore was acquitted of two counts of filing false tax returns for calendar years 2013 and 2014; the jury could not reach a unanimous verdict on one count of income tax evasion for calendar years 2013, 2014, and 2015. The verdicts were returned following a trial that began April 1, 2019, before U.S. District Judge Anne E. Thompson, who imposed the sentence today in Trenton federal court.

In addition to the prison term, Judge Thompson sentenced Gilmore to three years of supervised release.

First Assistant U.S. Attorney Honig for the District of New Jersey and Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division credited special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge John R. Tafur, special agents with the U.S. Attorney’s Office under the direction of Supervisory Special Agent Thomas Mahoney, and special agents of the FBI Red Bank Resident Agency, under the direction of Special Agent in Charge Gregory W. Ehrie in Newark, with the investigation leading to today’s sentencing.

The government is represented by Deputy U.S. Attorney Matthew J. Skahill; Assistant U.S. Attorney Jihee G. Suh of the U.S. Attorney’s Office Special Prosecutions Division; and Trial Attorney Thomas F. Koelbl of the U.S. Department of Justice – Tax Division.

 

Latrice Calvin, 48, Collierville, Tennessee was sentenced in connection with a scheme to defraud mortgage lending institutions and individuals of more than $1.5 million dollars.

According to the information, between April 2016, and October 2018, Calvin, through her company, Trinity Home and Investments, made false statements and representations to mortgage lenders and individuals to induce them to fund mortgage loans and invest monies with Trinity.

Calvin entered a plea of guilty to a one-count information charging her with wire fraud in May 2019.

On October 18, 2019, United States District Judge John T. Fowlkes, Jr., sentenced Calvin to 75 months imprisonment followed by 4 years of supervised release. She was also ordered to pay restitution to the lenders and investors in the total amount of $1,524,564.28 and to pay a money judgment to the United States in the same amount.

U.S. Attorney D. Michael Dunavant announced the sentence today.

U.S. Attorney D. Michael Dunavant said, “Financial fraud can happen anywhere, and can be devastating to lending institutions and individual investors. The defendant used her position of trust and authority to steal proceeds for her personal benefit, and her dishonesty has been exposed. We are pleased that justice has been achieved on behalf of the victims, and we commend the FBI for their outstanding investigation in this disturbing case. Wherever fraud occurs in the Western District of Tennessee, this office will be prepared to hold offenders accountable.”

The Federal Bureau of Investigation investigated this case.

Assistant U.S. Attorney Carroll L. André III prosecuted this case on behalf of the government.

Patrick Healey, 34, New Orleans, Louisiana and a former employee of an undisclosed entity, ABC Homes, LLC, located in St. Bernard Parish, Louisiana was sentenced May 1, 2019 for his role in making false statements to a financial institution.

According to court documents, beginning in or around October 24, 2008 and continuing to on or about May 31, 2009, Healey, along with co-defendants Jared Castellaw and Valerie Schones made false statements to the Federal Housing Administration (“FHA”) in order to assist low-income borrowers in qualifying for FHA insured loans for which they would not otherwise have qualified. In total, due to the acts of the defendants, the FHA suffered a loss in excess of $852,415.

Healey was sentenced to time served, supervised release of 5 years, a special assessment of $100, and ordered to pay restitution in the amount of $852,415.

U.S. Attorney Peter G. Strasser made the announcement.

U.S. Attorney Strasser praised the work of the Department of Housing and Urban Development, Office of Inspector General and the Federal Bureau of Investigation. The case is being prosecuted by Assistant U.S. Attorneys Sharan E. Lieberman and Edward J. Rivera.

George Gilmore, 69, Toms River, New Jersey, was charged today in a six-count indictment with one count of income tax evasion for calendar years 2013, 2014, and 2015; two counts of filing false tax returns for calendar years 2013 and 2014; failing to collect, account for, and pay over payroll taxes for two quarters in 2016, and making false statements on a 2015 loan application submitted to Ocean First Bank N.A.

According to documents filed in this case:

Gilmore worked as an equity partner and shareholder at Gilmore & Monahan P.A., a law firm in Toms River, New Jersey where he exercised primary control over the firm’s financial affairs. Gilmore filed on behalf of himself and his spouse federal income tax returns declaring that he owed $493,526 for calendar year 2013, $321,470 for 2014, and $311,287 for 2015. Despite admitting that he owed taxes for each of these years, Gilmore made no estimated tax payments and failed to pay the federal individual income taxes that he owed. Rather, between January 2014 and December 2016, Gilmore spent more than $2.5 million on personal expenses, including substantial home remodeling costs, vacations, and the acquisition of antiques, artwork, and collectibles. By Dec. 31, 2016, based on the tax due and owing that Gilmore reported on the returns, he owed the IRS $1,520,329 in taxes, penalties, and interest.

Gilmore also submitted a loan application to Ocean First Bank containing false statements. On Nov. 21, 2014, Gilmore reviewed, signed, and submitted to Ocean First Bank a Uniform Residential Loan Application (URLA) to obtain refinancing of a mortgage loan for $1.5 million with a “cash out” provision that provided Gilmore would obtain cash from the loan. On Jan. 22, 2015, Gilmore submitted another URLA updating the initial application. Gilmore failed to disclose his outstanding 2013 tax liabilities and personal loans that he had obtained from others on the URLAs. Gilmore received $572,000 from the cash out portion of the loan, the proceeds of which he did not apply to his unpaid taxes.

To evade and defeat the payment of his taxes Gilmore concealed information from the IRS and falsely classified income, made false and misleading statements to IRS personnel, and filed false tax returns that materially understated the true amount of income that he received from the law firm:

  • From January 2014 to December 2016, Gilmore used the law firm’s bank accounts to pay more than $2 million worth of personal expenses, including obtaining checks to cash and cash advances on a corporate credit card. Gilmore falsely classified payments as “shareholder loans” instead of income to him.
  • On Oct. 16, 2014, Gilmore sent the IRS a $493,526 check as payment for his 2013 taxes despite having no more than $2,500 in his personal bank account at the time. Gilmore’s check bounced and he never resubmitted payment in lieu of the bounced check. From November 2014, when he was notified by the IRS concerning the bounced check, to the end of December 2014, Gilmore spent more than $80,000 toward the construction of his home and to purchase artwork, antiques, and collectibles and more than $25,000 in mortgages and related expenses for five real estate properties that he owed.
  • From November 2014 to October 2015, Gilmore falsely represented to the IRS collections officer that he would make partial payments to the IRS for his outstanding tax liability, but made none.
  • Gilmore filed false tax returns for 2013 and 2014, which under reported his actual income from the law firm.

Because he exercised significant control over the law firm’s financial affairs, Gilmore was a person responsible for withholding payroll taxes from the gross salary and wages of the law firm’s employees to cover individual income, Social Security and Medicare tax obligations.  For the tax quarters ending March 31, 2016, and June 30, 2016, the law firm withheld tax payments from its employees’ checks, but Gilmore failed to pay over in full the payroll taxes due to the IRS.

The tax evasion count and the two counts of failing to collect, account for, and pay over payroll taxes each carry a maximum penalty of five years in prison, and a $250,000 fine, or twice the gross gain or loss from the offense. The two counts of filing a false tax return each carry a maximum penalty of three years in prison, and a $250,000 fine, or twice the gross gain or loss from the offense. The count alleging loan application fraud carries a maximum penalty of 30 years in prison and a $1 million fine. Gilmore will be arraigned at a date to be determined.

First Assistant U.S. Attorney Rachael A. Honig made the announcement.

First Assistant U.S. Attorney Honig credited special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge John R. Tafur, special agents with U.S. Attorney’s Office under the direction of Supervisory Special Agent Thomas Mahoney, and special agents of the FBI Red Bank Resident Agency, under the direction of Special Agent in Charge Gregory W. Ehrie in Newark, for the investigation leading to today’s indictment.

The government is represented by Deputy U.S. Attorney Matthew J. Skahill; Assistant U.S. Attorney Jihee G. Suh of the U.S. Attorney’s Office Special Prosecutions Division; and Trial Attorney Thomas F. Koelbl of the U.S. Department of Justice – Tax Division.

The charges and allegations in the indictment are merely accusations, and Gilmore is considered innocent unless and until proven guilty.

Kevin Morgan, 42, Pittsford, New York, pleaded guilty today to conspiracy to commit bank fraud, which carries a maximum penalty of five years in prison and a fine of $250,000.

Between March 2011 and June 2017, the defendant, along with co-defendants Todd Morgan, Frank Giacobbe, Patrick Ogiony, and others, conspired to defraud financial institutions, including UBS Securities LLC, Arbor Commercial Mortgage LLC, and Berkadia Commercial Mortgage, LLC

Kevin Morgan was employed as a Vice President at Morgan Management, LLC, a real estate management company that managed more than 100 multi-family properties.  Todd Morgan also was employed by Morgan Management as a Project Manager. Kevin and Todd Morgan worked with Frank Giacobbe, who owned and operated Aurora Capital Advisors, LLC, a mortgage brokerage company, and Patrick Ogiony, an Aurora employee, to secure financing for properties managed by Morgan Management or certain principals of Morgan Management.

Kevin Morgan and his co-defendants provided false information to financial institutions and government sponsored enterprises that overstated incomes of properties managed by Morgan Management or certain principals of Morgan Management. This resulted in the financial institutions issuing loans for larger amounts than the financial institutions would have authorized had they been provided with truthful information.

The defendants misled the financial institutions regarding the occupancy of properties. For example, Kevin Morgan: conspired to provide false rent rolls to lenders and appraisers on a variety of dates, overstating either the number of renters in a property and/or the rent paid by occupants; conspired to provide false and inflated income statements for the properties; and worked with others to deceive inspectors into believing that unoccupied apartments were, in fact, occupied.

In one such instance, Kevin Morgan and his co-defendants provided false information to Berkadia Commercial Mortgage, LLC, in connection with Rochester Village Apartments at Park Place, a multi-family residential community owned by certain Morgan Management principals. The false information included inflated income derived from storage unit rentals, inflated reports of rental income, and reporting apartment units as occupied before certificates of occupancy were obtained for those units.

In addition, Kevin Morgan and his co-defendants made misrepresentations to conceal from the lending financial institutions that Morgan Management used a portion of the loan proceeds for purposes other than that disclosed in the loan application. Loan funding was used to maintain or improve other properties managed by Morgan Management, and to satisfy debts associated with other properties managed by Morgan Management. For example, the defendants included a fictitious $2.5 million debt in a loan application purportedly owed to a Morgan Management controlled entity and created a fabricated payoff letter for that debt to increase the amount of the loan in connection with a property known as Autumn Ridge.

U.S. Attorney James P. Kennedy, Jr. made the announcement.

History has shown us the havoc that can be wrought when fraud takes place in the mortgage industry,” noted U.S. Attorney Kennedy. “This investigation, and today’s plea, protect that industry from fraud and those who invest in securities which are backed by mortgages.

From day one, our investigation has focused on protecting the residential and commercial financing industry,” said Gary Loeffert, Special Agent-in-Charge of the FBI’s Buffalo Division. “With Kevin Morgan’s plea today, we have advanced our efforts to safeguard the tens of thousands of investors who own mortgage-backed securities.

Robert Manchak, Acting Special Agent in Charge for the Northeast Region of the Federal Housing Finance Agency, Office of Inspector General, said, “The financing of multifamily loans is a significant segment of Fannie Mae’s and Freddie Mac’s portfolio.  As our commitment to this case demonstrates, FHFA-OIG will work with our partners in law enforcement to investigate and hold accountable those who subject the entities regulated by FHFA to fraud, waste, or abuse.

Charges are pending against defendants Frank Giacobbe, Patrick Ogiony, and Todd Morgan. The fact that a defendant has been charged with a crime is merely an accusation and the defendant is presumed innocent until and unless proven guilty.

Today’s plea is the result of an investigation by the Federal Bureau of Investigation, under the direction of Special Agent-in-Charge Gary Loeffert, and the Federal Housing Finance Agency, Office of Inspector General, under the direction of Acting Special Agent-in-Charge Robert Manchak, Northeast Region.

Sentencing will be scheduled at a later date before Judge Wolford.

Victor Santos, a/k/a “Vitor Santos,” 58, Wachtung, New Jersey; Arsenio Santos, a/k/a “Gaspar Santos,” 51, Warren, New Jersey; and Fausto Simoes, 65, Millington, New Jersey were arraigned today on multiple charges in connection with their alleged roles in a mortgage fraud scheme.

The three were charged on Sept. 24, 2018, in a 19-count indictment. They were each charged with one count of conspiring to commit bank fraud. Victor Santos was charged with nine counts of bank fraud and nine counts of making false statements in an application for credit. Arsenio Santos was charged with four counts of bank fraud and four counts of making false statements in an application for credit. Simoes was charged with seven counts of bank fraud and seven counts of making false statements in an application for credit.

According to documents filed in this case:

From September 2007 through November 2008, Victor Santos, a real estate investor; Arsenio Santos, a builder; and Simoes, a real estate settlement attorney, and others allegedly conspired to fraudulently obtain mortgage loans with a total value of more than $4 million.

Victor Santos, Arsenio Santos, and their conspirators allegedly recruited “straw buyers”, individuals who purchase a property for another in order to conceal the identity of the actual purchaser, usually in exchange for a fee, to purchase properties in Newark, New Jersey.

In exchange for the use of the straw buyers’ identity and credit history, Victor Santos, Arsenio Santos, and others allegedly agreed to pay each of the straw buyers a fee of at least $5,000, provide the straw buyer’s down payment and cash required for closing, secure tenants to lease the purchased property, and make the mortgage payments on each of the fraudulently obtained mortgages. These secret agreements were not disclosed to the bank. Shortly after the properties were acquired the mortgages went into default.

For the three representative schemes highlighted in the indictment, Victor Santos, Arsenio Santos, and their conspirators prepared and submitted mortgage applications containing false information to the bank and obtained loans totaling more than $1.3 million. The conspirators allegedly arranged transactions for the Newark properties whereby the straw buyers would nominally purchase the properties for far more than the sellers had agreed to sell them, and the conspirators diverted excess loan proceeds for their own benefit and to further the conspiracy.

Simoes was the closing attorney on approximately 10 of the fraudulent transactions and signed and certified the final settlement statements. These statements falsely stated that the cash required for closing for each transaction came from the straw buyer. In fact, Victor Santos and his conspirators provided those funds to Simoes and the funds were deposited into Simoes’ attorney trust account. For certain transactions, a shell company – whose bank account was controlled by Victor Santos and a conspirator – and to which funds from fraudulently obtained mortgage loans were disbursed – was the source of the cashier’s checks given to Simoes to fund the straw buyer’s cash required at closing. For other transactions, down payments came from an account owned and controlled by Arsenio Santos or from the proceeds of a previously obtained fraudulent loan.

The conspiracy to commit bank fraud count, the bank fraud counts, and the false statement counts, each carry a maximum potential penalty of 30 years in prison, a fine of $1 million or twice the gross gain to the defendants or twice the gross loss to others whichever is greater.

The announcement was made by U.S. Attorney Craig Carpenito.

U.S. Attorney Carpenito credited special agents of the Federal Housing Finance Agency, Office of Inspector General, under the direction of Acting Special Agent in Charge Robert Manchak, and special agents of the FBI, under the direction of Special Agent in Charge Gregory W. Ehrie of the Newark office, with the investigation leading to the charges.

The government is represented by Special Assistant U.S. Attorneys Charlie Divine and Kevin DiGregory of the U.S. Attorney’s Office’s Economic Crimes Unit in Newark and the Federal Housing Finance Agency, Office of Inspector General.

Timothy Thomas Kes, a former Lonsdale realtor who pleaded guilty in April to mortgage fraud, was sentenced July 3, 2018 to 30 days in jail and five years probation.

Source: Jail, probation for ex-Realtor convicted of mortgage fraud | News | southernminn.com