Archives For Flipping

Duo Sentenced In HUD Fraud Scheme

Stephanie Abbott —  November 1, 2019 — Leave a comment

Sergio Garcia, Sr., 50, Chicago, Illinois and Sergio Garcia, Jr., 30, of Lowell, Indianapolis were sentenced on their guilty pleas to conspiracy to commit mail fraud.

According to documents in the case, between January 1, 2011 and May 31, 2014, the Garcias conspired with others to engage in a scheme to defraud HUD and to obtain money and property by means of false pretenses, representations and promises.  The scheme involved contracting with HUD to buy more than 87 homes in Indiana and Illinois and attempting to sell them for a profit the same day. The purchase contracts the conspirators provided to HUD stated that they or one of their businesses were purchasing the properties as investors and would pay with cash or use other financing not involving FHA. To support their claimed ability to pay for the homes, the conspirators mailed fraudulent letters purporting to show that they or their company had access to the funds needed to complete each purchase.  Many of the letters purported to be written by a private venture capital business and falsely stated that the Garcias or their business held a line of credit of up to $500,000.00, when in fact, as the conspirators well knew: the letters were forged and counterfeited; the lines of credit referenced therein did not exist; and the signatures thereon were forged and unauthorized.

Once under contract to purchase homes from HUD, the conspirators advertised the homes for subsequent resale and placed their own “for sale” signs at the homes. When the conspirators could not find a subsequent purchaser to buy the homes, they allowed their purchase contracts with HUD to expire and filed false liens on the homes for the full purchase price, impeding HUD’s ability to sell the homes to others. In some instances, the conspirators demanded money from would-be subsequent purchasers to release the false liens on the HUD-owned homes.

Garcia, Sr. was sentenced to serve 70 months in prison followed by 2 years of supervised release and was ordered to pay $471,571.06 in restitution to the Department of Housing and Urban Development (“HUD”) and $3,862 in restitution to other victims of his crime.

Garcia, Jr. was sentenced to serve 18 months in prison followed by 1 year of supervised release and was ordered to pay $24,819.53 in restitution to HUD and $202.25 to other victims of his crime

“This sentencing serves as an example that when housing professionals defraud the system of rules sponsored by  HUD, the HUD Office of Inspector General will continue to partner with both the U. S. Attorney’s Office and the FBI to pursue those individuals to ensure the integrity of its federal housing programs.”

“If you attempt to defraud the system and violate public trust, we will find you, we will investigate you, and we will ensure you are held accountable for your illegal actions,” said Special Agent in Charge Grant Mendenhall, FBI Indianapolis. “Today’s sentence should serve as a warning to others that the FBI and our partners will continue to pursue those who would seek to blatantly commit fraud.”

The case was investigated by the Federal Bureau of Investigation and the HUD Office of Inspector General.  The case was handled by Assistant United States Attorney Jill R. Koster.

 

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Man Charged In Mortgage Fraud Scheme

Stephanie Abbott —  June 26, 2019 — Leave a comment

Anthony Garvin, 49, Jersey City, New Jersey was charged in a superseding indictment returned June 25, 2019 for his role in running a large-scale mortgage fraud scheme that involved properties in Jersey City, Union, and elsewhere in New Jersey and caused losses of millions of dollars.

According to the documents filed in this case:

From January 2011 through November 2017, Garvin and others engineered fraudulent short sale “flips” of various New Jersey properties with mortgages that were in default, and also fraudulently obtained numerous home equity lines of credit, or “HELOC” loans, using fraudulent documents and information.

The conspirators allegedly arranged simultaneous fraudulent transactions on the same target property. In the first transaction, which involved the sale by the current owner, the conspirators convinced the financial institution holding the mortgage to accept the sale of the target property at a loss, usually to a buyer who was secretly a conspirator or an entity controlled by the conspiracy.

In the second transaction, the conspirators flipped the same target property from the first buyer to a second buyer, who typically obtained a mortgage from another financial institution using false loan applications, pay stubs, bank account statements and title reports provided by members of the conspiracy. The second transaction frequently closed for significantly more or even double the price of the first transaction.

Garvin and others allegedly rigged the short sale process at each step to maximize the difference in price between the two transactions and keep the victim financial institutions from detecting the fraud. The conspirators used various kinds of phony documents and misrepresentations, including generating false pre-approval letters from a New Jersey corporation controlled by a conspirator and generating phony deeds that backdated the closing date of the first transactions.

To obtain HELOC loans, the conspirators allegedly submitted loan applications in the name of straw borrowers, who did not in fact reside at the subject properties, and used false and fraudulent information – including false pay stubs and tax information – to make it appear as though the straw borrowers made more money than they actually did. The conspirators frequently applied for multiple HELOC loans on the same property nearly contemporaneously, withholding from each lender the existence of other applications.

The conspirators then disbursed the funds received from financial institutions – which totaled millions of dollars – into various accounts they controlled to conceal their illegal activities and split the profits.

The count of conspiracy to commit bank fraud and each substantive count of bank fraud are each punishable by a maximum potential penalty of 30 years in prison and a $1 million fine.

Garvin was charged with one count of bank fraud conspiracy and five counts of bank fraud. Garvin was originally indicted on one count of bank fraud conspiracy and one count of bank fraud on January 11, 2019.

U.S. Attorney Craig Carpenito made the announcement today.

U.S. Attorney Carpenito credited special agents of the FBI, under the direction of Special Agent in Charge Gregory W. Ehrie in Newark, postal inspectors of the U.S. Postal Inspection Service, under the direction of Inspector in Charge James Buthorn, and special agents of the Federal Housing Finance Agency (FHFA) – Office of Inspector General, under the direction of Special Agent in Charge Steven Perez in Newark, with the investigation leading to the superseding indictment.

The government is represented by Assistant U.S. Attorneys David Feder and Zach Intrater of the U.S. Attorney’s Office in Newark.

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

Defense counsel: Murdoch Walker II Esq., Atlanta, Georgia; Charles D. Dawkins Jr. Esq., Elizabeth, New Jersey.

 

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Man Sentenced for Defrauding Mortgage Lending Institutions

Stephanie Abbott —  October 26, 2018 — 1 Comment

James Bayfield, 46, Queens, New York was sentenced today to 21 months’ imprisonment, to be followed by three years of supervised release, for conspiracy to commit bank and wire fraud.

Bayfield, a self-described mortgage specialist, was convicted by a federal jury in January 2017 for his role in a multi-million dollar mortgage fraud scheme. http://www.mortgagefraudblog.com/?s=James+Bayfield

Between September 2008 and May 2011, Bayfield and his co-conspirators caused mortgage loan applications with false information to be submitted to lending institutions, including Amtrust, Bank of America and JPMorgan Chase, in connection with the purchase of residential properties located in Brooklyn and Queens, New York.  These applications contained fraudulently inflated purchase prices and false information about the assets and income of the purported purchasers, many of whom were paid to act as straw purchasers.  Bayfield and his co-conspirators also provided false down payment checks to make it appear as if the straw purchasers and other borrowers had made down payments on the properties.

To complete their scheme, Bayfield and his co-conspirators conducted simultaneous and secretive purchases and sales of the properties, sometimes called “flips,” at inflated prices.  Ultimately, the lending institutions issued millions of dollars of mortgage loans secured by properties with inflated appraisal values, and many of these loans were placed into default status.

Bayfield was also ordered to pay $184,651 in forfeiture.

Richard P. Donoghue, United States Attorney for the Eastern District of New York, announced the sentencing.

“Bayfield has portrayed himself as a mortgage specialist, but now stands exposed as a convicted thief who used his knowledge of real estate transactions to carry out his fraudulent schemes against lending institutions,” stated United States Attorney Donoghue.  “This Office will continue working with our law enforcement partners to vigorously prosecute those who commit mortgage fraud and enrich themselves at the expense of lenders left holding the loans.”  Mr. Donoghue thanked the Federal Bureau of Investigation; the Federal Housing Finance Agency, Office of Inspector General; the U.S. Department of Housing and Urban Development, Office of Inspector General; the Federal Deposit Insurance Corporation, Office of Inspector General; and the New York State Department of Financial Services for their hard work and dedication over the course of this multi-year investigation and prosecution.

The government’s case is being handled by the Office’s Business and Securities Fraud Section.  Assistant United States Attorneys David C. Pitluck, Mark E. Bini and Michael T. Keilty are in charge of the prosecution.

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Construction Company Owner Pleads Guilty to Defrauding Investors

Stephanie Abbott —  June 5, 2018 — Leave a comment

Jesse Wells Haug, 33, Rosemount, Minnesota, pled guilty yesterday to one count of wire fraud.

According to the defendant’s guilty plea and documents filed in court, Haug is the owner of a Twin Cities-based construction company called 7-10 Services, LLC. From 2015 through the end of 2016, Haug executed a scheme to defraud investors by falsely representing to them that he would use their money to purchase and renovate residential real estate, and, in exchange, he would share the profits when the properties were re-sold, or “flipped.”

According to the defendant’s guilty plea and documents filed in court, during the course of the scheme, Haug obtained $880,000 from two victim-investors to purchase and renovate residential properties located throughout the Twin Cities. During the course of Haug’s interactions with the victim-investors, Haug used false documentation showing how the investment money was being used, false information about upcoming real estate closings and re-sales of properties Haug claimed to have flipped, as well as fictional documents showing “returns” from the so-called investment properties. In reality, Haug spent the investment money on personal expenses and never purchased or sold any of the properties.

United States Attorney Gregory G. Brooker made the announcement.

This case is the result of an investigation conducted by the FBI and the Minnesota Commerce Fraud Bureau.

Assistant United States Attorneys Kimberly A. Svendsen and Charles J. Kovats are prosecuting this case.

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Man Sentenced for Defrauding Mortgage Lending Institutions

Stephanie Abbott —  January 26, 2018 — Leave a comment

Dirk Hall, 42, Queens, New York was sentenced today to 41 months’ imprisonment, to be followed by five years of supervised release, after having pleaded guilty to conspiracy to commit bank fraud and wire fraud in connection with a multi-million dollar mortgage fraud scheme.

According to court filings and facts presented at the sentencing hearing, between September 2008 and May 2011, Hall, together with others, caused mortgage loan applications with false information to be submitted to lending institutions in connection with the purchase of residential properties located within the Eastern District of New York. http://www.mortgagefraudblog.com/5-charged-with-defrauding-mortgage-lending-institutions/#more-20083  These applications contained fraudulently inflated purchase prices, as well as false information about the assets and income of the purchasers of the properties, many of whom were being compensated as part of the scheme to act as straw purchasers.  The defendant and his co-conspirators also provided false down payment checks to make it appear as if the straw purchasers and the other borrowers had made down payments in connection with the purchase of the properties, which was a condition of the lending institutions for issuing the mortgage loans.

To carry out their scheme, the defendant and his co-conspirators conducted simultaneous purchases and sales of the properties, sometimes called “flips,” in an effort to conceal their criminal involvement and to inflate the value of the properties.  To that end, the defendant and his co-conspirators, through the use of backdated and falsified documents, concealed from the lending institutions the fact that the purchase and sale had occurred on the same day and made it appear as if the transaction between the homeowner and the co-conspirator had occurred over 60 days prior to the sale from the co-conspirator to the straw purchaser.

As a result of the false applications and appraisals, the lending institutions were fraudulently induced to issue millions of dollars of mortgage loans secured by properties that had inflated appraisal values to individuals who had insufficient income and assets to qualify for the mortgage loans.  In many instances, the straw purchasers and the other borrowers failed to make required mortgage payments to the lending institutions, which caused the mortgage loans to be placed into default status.

The announcement was made by United States District Judge Eric N. Vitaliano.

Richard P. Donoghue, United States Attorney for the Eastern District of New York, announced the sentencing.  Mr. Donoghue thanked the Federal Bureau of Investigation (FBI); the Federal Housing Finance Agency, Office of Inspector General (FHFA-OIG); the U.S. Department of Housing and Urban Development, Office of Inspector General (HUD-OIG); the Federal Deposit Insurance Corporation, Office of Inspector General (FDIC-OIG); and the New York State Department of Financial Services (DFS) for their hard work and dedication over the course of this multi-year investigation and prosecution.

The government’s case is being handled by the Office’s Business and Securities Fraud Section.  Assistant United States Attorneys David C. Pitluck, Mark E. Bini and Michael T. Keilty are in charge of the prosecution.

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Two Arrested For Short Sale Fraud Scheme

Stephanie Abbott —  November 16, 2017 — Leave a comment

Christopher Goodson, 44, Newark, New Jersey, a New Jersey attorney and Anthony Garvin, 47, Jersey City, New Jersey, are charged by complaint with one count of conspiracy to commit bank fraud. They were charged with running a large-scale mortgage fraud scheme that involved dozens of properties in Jersey City, Clifton, Union, and elsewhere in New Jersey and caused losses of more than $30 million.

According to the Complaint:

From January 2011 through August 2017, Goodson, Garvin, and others engaged in a short sale mortgage fraud conspiracy targeting various New Jersey properties with mortgages that were in default.

As part of the scheme, the conspirators arranged simultaneous fraudulent transactions on the same target property. In the first transaction, which involved the sale by the current owner, the conspirators convinced the financial institution holding the mortgage to accept the sale of the target property at a loss, usually to a buyer who was secretly a conspirator or an entity controlled by the conspiracy.

In the second transaction, the conspirators flipped the same target property from the first buyer to a second buyer, who typically obtained a mortgage from another financial institution using false loan applications, pay stubs, bank account statements and title reports provided by members of the conspiracy. As a result, the second transaction frequently closed for significantly more or even double the price of the first transaction.

Goodson, Garvin, and others allegedly rigged the short sale process at each step in order to maximize the difference in price between the two transactions and keep the victim financial institutions from detecting the fraud.

For instance, Goodson, an attorney, concealed the fact that he played multiple-roles in the short sale transactions, including allegedly generating false preapproval letters from a New Jersey corporation he owned that purported to be a short-term lending company operating out of California. These letters were used to deceive banks into believing that the purchaser – typically a conspirator or entity controlled by Goodson – had the credit necessary for the transaction. Goodson also negotiated the fraudulent short sales with the banks, generated phony deeds that backdated the closing date of the first transactions, and even served as the closing attorney during some of the short sales.

Garvin was a real estate agent and investor who allegedly coordinated fraudulent transactions as part of the scheme.

The conspirators disbursed the funds into various accounts they controlled to conceal their illegal activities and split the profits. In total, the conspiracy defrauded financial institutions out of more than approximately $30 million.

The conspiracy to commit bank fraud count is punishable by a maximum potential penalty of 30 years in prison and a $1 million fine.

Both defendants were arrested this morning and are expected to appear this afternoon before U.S. Magistrate Judge Leda Dunn Wettre in Newark federal court.

Acting U.S. Attorney Fitzpatrick made the announcement and credited special agents of the FBI, under the direction of Special Agent in Charge Timothy Gallagher in Newark, postal inspectors of the U.S. Postal Inspection Service, under the direction of Acting Inspector in Charge Joseph W. Cronin, and special agents of the Federal Housing Finance Agency (FHFA) – Office of Inspector General, under the direction of Special Agent in Charge Steven Perez in Newark, with the investigation

The government is represented by Assistant U.S. Attorneys David Feder and Zach Intrater of the U.S. Attorney’s Office Economic Crimes Unit in Newark.

The charge and allegations contained in the complaint are merely accusations, and the defendants are considered innocent unless and until proven guilty.

 

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Final Defendant Sentenced in $5.8M Flipping Scheme

Rachel Dollar —  January 4, 2016 — 3 Comments

Chiedu “George” Chukwuka , 47, Stone Mountain, Georgia, was sentenced to serve nine years in prison to be followed by three years of supervised release, and ordered to pay restitution in the amount of $5,868,243.80 in connection with his lead role in a mortgage fraud ring that spanned five years and caused millions in losses.  Chukwuka, along with his co-defendants and other co-conspirators, engaged in a massive property-flipping scheme resulting in over $5.8 million in actual losses to financial institutions between 2006 and 2011. Chukwuka pled guilty to conspiracy to commit wire fraud on August 10, 2015.

“At the height of the recent mortgage-fraud crisis, this property-flipping scheme caused scores of homes to fall into foreclosure, costing financial institutions millions of dollars in losses,” said U. S. Attorney John Horn.  “Many communities in our district have been decimated by mortgage fraud during the last 15 years and even now struggle to recover from the effects of these schemes.”

According to U.S.A. Horn, the charges and other information presented in court:  Chukwuka, along with his co-defendants and co-conspirators, recruited straw buyers to purchase homes at a discounted price, typically a bank-owned or distressed property.  The group then recruited a second straw buyer to purchase the same home at a dramatically inflated price. In turn, Chukwuka, his co-defendants and co-conspirators applied for an acquisition loan for the second straw buyer, supporting the loan application with false income, fake employment, and fraudulent net worth data.

The group profited from their scheme by pocketing the acquisition loan proceeds paid by the victim bank to the straw seller (who was the straw purchaser in the first transaction). The amount of profit was the difference between the price paid by the straw purchaser in the first transaction and the price paid by the straw purchaser in the second transaction, less transaction costs.  Since none of the straw purchasers made any significant loan payments, the targeted properties usually went into foreclosure, resulting in over $5.8 million in actual losses to financial institutions between 2006 and 2011.

“The sentencing of Mr. Chukwuka brings to a close a lengthy investigation and prosecution of a criminal enterprise that targeted the banking industry through their prolific mortgage fraud schemes.  Mr. Chukwuka, considered by law enforcement and prosecution to be head of this enterprise, caused extensive damage with high loss amounts to those victim banks involved.  The FBI is pleased with the role it played in bringing about this sentencing to federal prison of Mr. Chukwuka as well as the previous sentencings of his co-defendants in this matter,” said J. Britt Johnson, Special Agent in Charge, FBI Atlanta Field Office.

The following five defendants also pleaded guilty for their roles in the scheme, and were previously sentenced as follows:

  • Shelly Gee, a/k/a Shelly Baker, 48, Atlanta, Georgia, was sentenced on November 10, 2015, to one year, six months in prison, to be followed by three years of supervised release, and ordered to pay restitution in the amount of $2,243,909.99. Gee pled guilty on June 17, 2015.
  • Sandra Petgrave, 43, Stone Mountain, Georgia, was sentenced on December 4, 2015, to one year, six months in prison, to be followed by three years of supervised release, and ordered to pay restitution in the amount of $1,051,970.77. Petgrave pled guilty on August 18, 2015.
  • Kennedy Simmonds, 54, Snellville, Georgia, was sentenced on December 17, 2015, to three years, ten months in prison, to be followed by three years of supervised release, and ordered to pay restitution in the amount of $5,868,243.80. Simmonds pled guilty on July 6, 2015.
  • Marcelle Welch, 37, Stone Mountain, Georgia, was sentenced on December 17, 2015, to two years, three months in prison, followed by three years of supervised release, and ordered to pay restitution in the amount of $2,554,189.25. Welch pled guilty on July 29, 2015.
  • Leah Freeman, 43, Atlanta, Georgia, was sentenced on December 17, 2015, to two years in prison, to be followed by three years of supervised release, and ordered to pay restitution in the amount of $1,828.532.94. Freeman pled guilty on June 19, 2015.

The defendants were sentenced by U.S. District Court Judge Timothy C. Batten, Sr.

In a related case, Chinedum Oli, 42, Snellville, Georgia, was sentenced on February 19, 2013, by Senior U.S. District Court Judge Marvin H. Shoob to five years in prison, followed by five years of supervised release, and ordered to pay restitution in the amount of $4,373,281.63. Oli pled guilty on October 9, 2012.

The cases were investigated by the Federal Bureau of Investigation.

Assistant United States Attorneys Jamie L. Mickelson and Steven D. Grimberg prosecuted the cases.

 

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Sentences in Georgia Real Estate Ponzi Scheme

Rachel Dollar —  September 30, 2015 — Leave a comment

Charles Wooden, 48, Stone Mountain, Georgia, was sentenced to seven years in prison to be followed by three years of supervised release, and to pay restitution of $2.4 million. Hendrickx H. Toussaint, 44, a now disbarred lawyer, Decatur, Georgia, was sentenced to three years, ten months in prison to be followed by three years of supervised release, and to pay restitution of $1.2 million.  The sentenced arise out of a real estate-based Ponzi scheme that took in almost $5 million dollars from out-of-state and foreign investors.

According to U.S. Attorney John Horn, the charges, and other information presented in court: In or about 2009, Charles Wooden, doing business as Aeon Capital Management, LLC, held himself out to the public as a real estate broker who could locate and oversee the purchase of residential properties and apartment buildings for or on behalf of real estate investors.  Wooden purported to find properties that could be flipped in a short period for a profit, and also properties that he would manage for the investors.  Continue Reading…

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Mastermind of Illegal Flipping and Equity Skimming Scam Sent to Prison

Allison Tussey —  May 12, 2015 — Leave a comment

Stephen Mayer, 51, Miami, Florida, was sentenced by U.S. District Judge Susan C. Bucklew to 11 years and 3 months in federal prison for his role in a real estate flipping and equity skimming conspiracy. The Court also ordered him to pay more than $3.1 million in restitution to the affected lenders, and more than $4 million in forfeiture, which were proceeds traceable to the scheme.

Continue Reading…

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Investor Receives 4 Year Sentence for Illegal Flipping Scheme

Allison Tussey —  April 29, 2015 — 1 Comment

Benny Chetcuti, Jr., 60, Walnut Creek. California, was sentenced to 51 months in prison, and ordered to pay $21,823,526.10 in restitution, as well as forfeit $3,968,995 in proceeds obtained from a multi-year real estate investment fraud scheme. Continue Reading…

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