Archives For Straw Buyer

Mary Beyer Halsey, age 59, Rising Sun, Maryland, the former President and Chief Executive Officer of Cecil Bank, pleaded guilty today to the federal charges of conspiracy to commit bank fraud, receipt of a bribe by a bank official, and false statement in bank records, in connection with the straw purchase of a home in Elkton, Maryland, upon which Cecil Bank had foreclosed.

Cecil Bank, located in Elkton, Maryland, had received $11,560,000 in federal taxpayer funds in 2008, under the Capital Purchase Program, as part of the Troubled Asset Relief Program. On April 20, 2011, Cecil Bank initiated the foreclosure of a single-family house located at 127 Ebenezer Church Road in Elkton.

According to her plea agreement, from 2012 to 2013, Halsey conspired with Daniel Whitehurst, an employee of a real estate development company that did business in Maryland, to defraud Cecil Bank and another bank to purchase a home through false pretenses, representations and promises. Specifically, on March 28, 2012, Halsey and Whitehurst met at a restaurant in Cecil County. Whitehurst asked Halsey if she could help him and a business partner get a $500,000 line of credit from Cecil Bank. Halsey agreed to help Whitehurst to obtain a line of credit from Cecil Bank, in exchange for Whitehurst agreeing to serve as the straw purchaser of 127 Ebenezer, Elkton, Maryland on behalf of Halsey. Halsey suggested that she increase the line of credit for Whitehurst to $650,000 to include the funds needed to buy the house. Whitehurst agreed to Halsey’s request to secretly buy 127 Ebenezer on Halsey’s behalf. On May 9, 2012, Halsey participated in a loan committee meeting at Cecil Bank that considered and approved a $650,000 line for credit for Whitehurst and a $500,000 line of credit for his business partner.

Halsey admitted that at her request, on May 14, 2012, Whitehurst visited 127 Ebenezer and provided Halsey with an estimate of the costs to update the house. Whitehurst determined that beyond replacing the kitchen subflooring at a cost of about $1,000, there were no significant repairs needed. Whitehurst provided a letter of intent to purchase the home from the bank for $150,000 for Halsey to review. Halsey suggested lowering the price to $145,000 to allow room to increase the offer later. Halsey knew that an exterior-only appraisal of the property ordered by Cecil Bank on November 9, 2011, showed a market value of $263,000. A full appraisal on September 10, 2012, reflected a market value of $295,000. To support the below-market price that Halsey wanted to pay, Whitehurst included in the letter of intent a list of lower-priced home sales in the same area that were not comparable to 127 Ebenezer and therefore was not reflective of the property’s actual market value.

As detailed in the plea agreement, on May 23, 2012, Whitehurst e-mailed Cecil Bank his offer to purchase 127 Ebenezer for $145,000. On the same day, during a meeting of the Cecil Bank Board of Directors, Halsey advised the Board that Whitehurst had made a purchase offer of $140,000 for 127 Ebenezer, $5,000 less the actual offer. To support the below-market price of $140,000, Halsey falsely characterized the property as having “structural deficiencies [that] will require significant repairs.” Halsey did not disclose her personal interest in the property, nor Whitehurst’s role as her nominee to acquire the property on her behalf. The Board authorized Halsey to “negotiate the best price.” Thereafter, Whitehurst submitted a contract for him to purchase 127 Ebenezer from Cecil Bank for $150,000, which Halsey signed on August 17, 2012 on behalf of Cecil Bank.

According to the plea agreement, subsequent to authorizing the sale of 127 Ebenezer, Halsey told Whitehurst that he should not use his line of credit from Cecil Bank to purchase the house, but should instead get the funds from a different source. Whitehurst applied for and obtained a $100,000 loan from another bank to purchase 127 Ebenezer, fraudulently claiming that he was purchasing the property for himself and that the down payment was from an investment account. On October 31, 2012, prior to 127 Ebenezer going to settlement, Halsey wired $75,000 to Whitehurst’s bank account to cover the cost of the down payment as well as closing costs and upgrades to the property that Halsey directed Whitehurst to arrange. To conceal the true purpose of the wired funds, Whitehurst sent Halsey a fictitious real estate contract purporting to show that the $75,000 was the down payment for a different property that Whitehurst owned in Havre de Grace, Maryland.

On November 21, 2012, the settlement of 127 Ebenezer was held with Halsey representing Cecil Bank as the seller, and Whitehurst as the purported purchaser, selling the property to Whitehurst for $150,000. Both signed the HUD-1 form which falsely represented that Whitehurst had paid approximately $52,566 at settlement, when in fact, the down payment and all related closing costs were paid from the $75,000 Halsey had wired to Whitehurst’s bank account beforehand. From October 31, 2012 through March 29, 2013, Halsey transferred an additional $60,000 to Whitehurst to cover the cost the upgrades to the house that they had previously discussed, as well as to reimburse Whitehurst for mortgage payments he made on the property. Halsey and Whitehurst also made plans to transfer title of the property to Halsey by selling the house to her at a price that would minimize the tax consequences of the sale for Whitehurst.

In December 2012, in response to a question from a bank examiner for the Federal Reserve Bank of Richmond inquiring about the sale of the property to Whitehurst, Halsey falsely stated that she was “not totally familiar with [that] property” and that the bank had difficulty marketing the property and had not listed it with a realtor because of “issues with the county over the bonds outstanding.”

In April 2013, federal agents began interviewing employees and other borrowers about banking irregularities at Cecil Bank. Title to 127 Ebenezer was never transferred to Halsey. Halsey never told the bank that she was the true purchaser of 127 Ebenezer, nor did the bank know that Halsey and Whitehurst had orchestrated the sale of the foreclosed property at the fraudulent price of $150,000, instead of the appraised pre-renovation price of $295,000.

As a result of Halsey’s misrepresentations and omissions, the bank lost approximately $145,000.

Halsey faces a maximum sentence of 30 years in federal prison for each offense: conspiracy to commit bank fraud; false statement in bank records; and receipt of a bribe by a bank official. Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors. U.S. District Judge Deborah K. Chasanow has scheduled sentencing for November 6, 2020 at 11:00 a.m.

The guilty plea was announced by United States Attorney for the District of Maryland Robert K. Hur; Special Agent in Charge Mark P. Higgins of Federal Housing Finance Agency, Office of Inspector General (FHFA-OIG), Mid-Atlantic Region; Special Agent in Charge Patricia Tarasca of Federal Deposit Insurance Corporation, Office of Inspector General (FDIC/OIG), New York Region; Special Inspector General Christy Goldsmith Romero for the Troubled Asset Relief Program (SIGTARP); and Inspector General Hannibal “Mike” Ware of the Small Business Administration, Office of Inspector General (SBA/OIG).

Mary Beyer Halsey used her position as President and CEO of Cecil Bank for her personal benefit, causing a loss to the bank, which had already received federal taxpayer funds as part of the Troubled Asset Relief Program,” said U.S. Attorney Robert K. Hur. “Corrupt bank officials undermine the public’s trust in our financial system.

The Federal Housing Finance Agency Office of Inspector General (FHFA-OIG) is committed to investigating allegations of fraud committed by officers of financial institutions which are members of the 11 Federal Home Loan Banks (FHLBanks) because their crimes strike at the heart of the FHLBank System,” said Mark Higgins, Special Agent in Charge of the FHFA-OIG’s Mid-Atlantic Region. “We are proud to have partnered with the U.S. Attorney’s Office for the District of Maryland on this case.”

This plea illustrates the tremendous harm bank insiders can cause when they use their positions for personal gain, breaking the trust placed in them by their employees, shareholders, and customers,” said Patricia Tarasca, Special Agent in Charge, New York Region, Office of Inspector General for the Federal Deposit Insurance Corporation. “We thank our law enforcement partners and appreciate the cooperation between investigating agencies.

Today, another bank CEO pleads guilty to committing fraud against the bank while the bank was in TARP,” said Special Inspector General Christy Goldsmith Romero. “Cecil Bank CEO Halsey pled guilty to conspiracy to commit bank fraud, making false statements in bank records, and receiving a bribe in a fraud that caused losses to Cecil Bank. Taxpayers lost nearly $11 million in TARP when Cecil Bank failed. SIGTARP commends U.S. Attorney Robert Hur and his team for fighting financial fraud related to TARP.”

OIG and its law enforcement partners are poised to root out fraud and bring wrongdoers to justice,” said SBA Inspector General Hannibal “Mike” Ware. “I want to thank the U.S. Attorney’s Office and our law enforcement partners for their dedication and pursuit of justice.”

Daniel Whitehurst, age 36, Bel Air, Maryland, pleaded guilty under seal to the federal charge of mail fraud on April 6, 2018. Whitehurst faces a maximum sentence of 30 years in federal prison for conspiracy to commit bank fraud. Judge Chasanow has not scheduled a date for Whitehurst’s sentencing.

United States Attorney Robert K. Hur commended the FHFA-OIG, Mid-Atlantic Region; FDIC/OIG; SIGTARP; and SBA/OIG for their work in the investigation. Mr. Hur thanked Assistant U.S. Attorneys Martin J. Clarke and Harry M. Gruber, who are prosecuting the case

Isaac DePaula, 40, Brazil, was arrested this morning for his role in a long-running mortgage fraud scheme based in New Jersey.

DePaula was charged by complaint in 2012, indicted in 2016, and has been a fugitive. He returned via Newark Liberty International Airport this morning to face a four-count indictment charging him with conspiracy to commit bank fraud and three counts of bank fraud.

According to documents filed in this and other cases and statements made in court:

From September 2006 to May 2008, DePaula and his conspirators engaged in a long-running, large-scale mortgage fraud conspiracy through a company called Premier Mortgage Services (PMS). The conspirators targeted properties in low-income areas of New Jersey. After recruiting straw buyers, the conspirators used a variety of fraudulent documents to make it appear as though the straw buyers possessed far more assets, and earned far more income, than they actually did. The conspirators then submitted these fraudulent documents as part of mortgage loan applications to financial institutions. Relying on these fraudulent documents, financial institutions provided mortgage loans for the targeted properties. The conspirators then split the proceeds from the mortgages among themselves and others by using fraudulent settlement statements (HUD-1), which hid the true sources and destinations of the mortgage funds provided by financial institutions. In reality, the straw buyers had no means of paying the mortgages on the properties, many of which entered into foreclosure proceedings.

DePaula was a loan officer at PMS and recruited straw buyers, provided false and fraudulent documents to the straw buyers, and incorporated false and fraudulent documents into loan applications to induce financial institutions to fund mortgage loans. The loan officers profited illegally by receiving a commission from PMS for each mortgage loan that they closed, and also profited illegally by diverting portions of the fraudulently obtained mortgage proceeds for themselves, often via shell corporations or nominee bank accounts.

DePaula faces a maximum potential penalty of 30 years in prison and a fine of $1 million per count. His co-defendant, Rodrigo Costa, remains at large. All of the remaining conspirators have previously pleaded guilty and been sentenced for their roles in the scheme.

DePaula made his initial appearance before U.S. Magistrate Judge James B. Clark III in Newark federal court and was released on his own recognizance.

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; special agents of the IRS, under the direction of Special Agent in Charge John R. Tafur; and special agents of the Federal Housing Finance Agency’s Office of the Inspector General, under the direction of Special Agent in Charge Robert Manchak, for the investigation leading to today’s arrest.

The government is represented by Assistant U.S. Attorneys Rahul Agarwal and Zach Intrater.

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

Defense counsel: Joshua Cohn Esq., Saddle Brook, New Jersey

 

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 Bussanich Sr., 60, of Park Ridge, New Jersey and George Bussanich Jr., 39, Upper Saddle River, New Jersey, a father and son, were sentenced today to 27 months in prison and eight months of home detention, respectively, for their roles in a scheme to use straw buyers and short sales on properties to defraud mortgage lenders out of hundreds of thousands of dollars and to avoid paying taxes on the proceeds of the scheme.

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

Between 2009 and 2012, Bussanich Sr. and Bussanich Jr. conspired to defraud mortgage lenders through the sham short sales of two properties, located on Jefferson Avenue, Emerson, New Jersey, and Lillian Street, Park Ridge, New Jersey.

Bussanich Sr. controlled various purported medical clinics and surgical centers in New Jersey. He recruited his business partner and an employee from a sleep clinic in Cliffside Park, New Jersey, to pose as legitimate, unrelated buyers of the properties. In order to conceal his involvement, Bussanich Sr. used a business entity he controlled to fund each short sale transaction and the subsequent repurchase of those properties. Bussanich Jr., the owner of record of both properties, negotiated the short sales with the lenders using materially false information that misrepresented the circumstances of the short sales, the relationships of the parties, and the source of funding for the transactions.

Approximately two years after the fraudulent short sales, Bussanich Sr. bought the properties back from the straw purchasers using money that he owed his business partner from an earlier venture.

Bussanich Sr. and Bussanich Jr. also failed to disclose on their tax returns income that they received from the purported medical clinics and surgical centers. Bussanich Sr. and Bussanich Jr. used those funds to purchase high-end luxury vehicles and to purchase official bank checks to fund the fraudulent short sales.

Bussanich Sr., was sentenced to 27 months in prison. He previously pleaded guilty before U.S. District Judge Claire C. Cecchi to a superseding information charging him with one count of bank fraud conspiracy and one count of tax evasion. Bussanich Jr., was sentenced to eight months of home detention. He previously pleaded guilty to tax evasion. Judge Cecchi imposed both sentences today in Newark federal court.

In addition to the prison terms, Judge Cecchi sentenced Bussanich Sr. to five years of supervised release and Bussanich Jr. to three years of supervised release.

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, 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 sentencings.

The government is represented by Assistant U.S. Attorney Ari B. Fontecchio of the Office’s Economic Crimes Unit, and Nicholas P. Grippo, Attorney in Charge of the Trenton Office.

Defense counsel: Stacy Biancamano Esq., Jersey City, New Jersey

 

Daniel Badu, 56, New City, New York, was convicted today of conspiring to commit mail and wire fraud affecting a financial institution.

Between 2008 and 2009, the defendant conspired with others to defraud The Funding Source (“TFS”), a mortgage bank, and other financial institutions by submitting fraudulent applications for home loans.  After being originated by TFS, the loans were sold to other financial institutions, including M&T Bank and JPMorgan Chase. http://www.mortgagefraudblog.com/?s=Daniel+Badu

The co-conspirators in this case submitted fraudulent applications for loans on eight properties in Bronx, New York. They fraudulently obtained mortgages that were insured by FHA on behalf of unqualified borrowers, such as the defendant. Badu was the purchaser on two of the properties and he aided in the submission of false documentation as part of the loan application, including documents purporting to show income from a fake job. The defendant also backstopped false employment for another loan, pretending that the borrower worked for his ophthalmology company, Eagle Eyes, which in reality was a shell company that performed no business.
The total loan amount for these eight transactions was $4,800,007.

In total, six defendants have pleaded guilty for their roles in this fraud. Attorney Laurence Savedoff, Esq. pleaded guilty to a misprision of a felony and was sentenced to four months in prison. Realtor and appraiser Julio Rodriguez pleaded guilty to mail and wire fraud affecting a financial institution, and a conspiracy to do the same, and was sentenced to six months in prison. Sentencing hearings are pending for mortgage broker Gregory Gibbons, and realtors Tina Brown and Alagi Samba.

Badu was sentenced to time served and 10 months home detention.

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

The sentencing is the culmination of an investigation by the United States Postal Inspection Service under the direction of Joseph W. Cronin, Inspector-in-Charge, Boston Division; the United States Department of Housing and Urban Development, Office of the Inspector General, under the direction of Special Agent-in-Charge Brad Geary; and the Federal Bureau of Investigation, under the direction of Special Agent-in-Charge Gary Loeffert.  Additionally, the New York State Department of Financial Services assisted with the investigation.

Jorge Flores, 48, Oakdale, New York; Joseph A. Gonzalez, 45, Henderson, Nevada; and Jose L. Piedrahita, 57, and Yorce Yotagri, 52, both of Freeport, New York, have been indicted for carrying out a scheme to use phony information and simultaneous loan applications at multiple banks to fraudulently obtain home equity lines of credit (HELOCs).

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

From 2010 through 2018, Flores and Simon Curanaj, a real estate broker in the Bronx, New Yourk who has previously pleaded guilty and is awaiting sentencing, ran a mortgage fraud scheme in which they applied for more than $9 million in HELOCs from banks on residential properties in New Jersey and New York.

For instance, Gonzalez and Flores used a property in Jersey City, New Jersey, as part of the scheme. Gonzalez had been allowed to live at the property by the owner in exchange for management services, but neither he nor Flores owned the property. Gonzalez also recruited an individual with good credit to act as a straw buyer (Individual 1). Later, unbeknownst to the owner of the property, a “quitclaim” deed – a deed which contains no warranties of title – was prepared transferring the property to Individual 1. The signatures on the deed were forged.

Gonzalez and Flores then applied for two HELOCs from multiple banks using the Jersey City property as collateral in Individual 1’s name. They concealed the fact that the property offered as collateral was either already subject to senior liens that had not yet been recorded, or that the same property was offered as collateral for a line of credit from another lender. The applications also contained false information concerning Individual1’s income, which was stated to be higher than his actual income. At the time the applications were made, the value of the property was less than the amount of the HELOC loans for which Gonzalez and Flores applied.

The victim banks eventually issued loans to Individual 1 in excess of $500,000. After the victim banks funded the HELOCs and deposited money into Individual 1’s bank account, Individual 1 disbursed almost all of it to Gonzalez, Flores, and others. Gonzalez used $43,000 of the illicit proceeds to buy a luxury car. Individual 1 eventually defaulted on both HELOC loans.

In another example, Flores, Piedrahita, and Yotagri used a property in Freeport, New York, to carry out a similar scheme.

Each defendant is charged by indictment with one count of conspiracy to commit bank fraud. Flores and Gonzalez are also charged with two substantive counts of bank fraud. Yotagri was arraigned July 8, 2019, before U.S. District Judge John Michael Vazquez in Newark federal court. Flores and Piedrahita remain at large. Gonzalez will be arraigned at a date to be determined.

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

U.S. Attorney Craig Carpenito made the announcement.

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

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

The charges and allegations contained in the indictment are merely accusations, and the defendants are presume innocent unless and until proven guilty.

 

Steve Young Kang, a/k/a “Steven Young Kang and “Young Tae Kang,” 64, Ridgefield, New Jersey, and Young Jin Son, a/k/a “Joshua Son,” 49, Norwood, New Jersey, pleaded guilty today for their respective roles in a scheme to defraud financial institutions and others.

According to documents filed in these cases and statements made in court:

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

Kang, a real estate broker and agent, admitted to a scheme in which, from June 2013 to January 2017, he sold his own properties and recruited others to sell properties in short sales to a co-schemer, Mehdi Kassai, who was able to obtain the properties for substantially less than the properties were actually worth through false documents, straw buyers, cosmetic damage to properties, and restricting the ability of others to bid on and buy those properties. Kassai then sold many of those properties to third-parties at a substantial profit. Kang defrauded financial institutions and others of $2.7 million in this manner.

Son, a real estate broker and agent, admitted recruiting others to sell properties in short sales to Kassai, who obtained the properties for substantially less than they were actually worth through false documents, straw buyers, cosmetic damage to properties, and restricting the ability of others to bid and buy those properties. Kassai sold many of those properties to third-parties at a substantial profit. Son defrauded financial institutions and others of $1.9 million in this manner.

The bank fraud and wire fraud charges each carry a maximum potential statutory penalties of 30 years in prison and a $1 million fine. Kang and Son have both agreed to forfeit the proceeds of the scheme. Sentencing for both defendants is scheduled for Oct. 1, 2019. Kassai previously pleaded guilty to his role in the scheme and is awaiting sentencing.

U.S. Attorney Craig Carpenito made the announcement.

U.S. Attorney Carpenito credited the Bergen County Prosecutor’s Office, under the direction of Prosecutor Mark Musella; special agents of the Federal Housing Finance Agency, Office of Inspector General, under the direction of Special Agent in Charge, Robert Manchak; and special agents of the U.S. Department of Homeland Security Investigations, under the direction of Special Agent in Charge Brian Michael, with the investigation leading to the guilty pleas.

The government is represented by Senior Trial Counsel Andrew Leven of the Healthcare & Government Fraud Unit of the U.S. Attorney’s Office, District of New Jersey, and Special Assistant U.S. Attorneys Charlie Divine and Kevin Di Gregory of the Federal Housing Finance Agency, Office of Inspector General.

 

Michael Todd Barrick, aka Kentuckyana Jones, 56, Smiths Grove, Kentucky, pleaded guilty to five counts of bank fraud on Monday.

According to Barrick’s plea agreement and other documents filed in the case, in 2007 Barrick and his co-defendant, Roger Hagan, agreed that Hagan would purchase property at 302 Laurel Street, Smiths Grove, Kentucky from Barrick for $575,000, but Barrick would make all loan payments and keep all rental income.  Hagan did not have sufficient assets and income to qualify for the loan, but at Barrick’s direction Hagan submitted a fraudulent financial statement to American Bank & Trust (AB&T) that substantially overstated Hagan’s assets and income.  Based on these fraudulent representations, AB&T approved Hagan for the loan.  Barrick paid Hagan’s $118,977.50 loan down payment, and gave Hagan $21,422.50 as payment for participating in the transaction.  The loan went into default in November 2010.

In 2008, Hagan entered a similar agreement with Barrick to purchase 708 Kelly Road, Bowling Green, Kentucky for $300,000.  At Barrick’s direction, Hagan again submitted a fraudulent financial statement to PBI Bank.  Based on these fraudulent representations, PBI approved Hagan for the loan.  After the loan closed Barrick paid Hagan $6,534 for participating in the transaction, and the loan went into default in March 2010.

In 2011, Barrick recruited co-defendant Lorri Hughes to purchase a Wholesale Mattress Warehouse (WMW) from Barrick for $179,000.  The WMW was purportedly located at 1700 N. Dixie Highway in Louisville, but in reality a McDonalds restaurant operated at that address, and had been there for many years.  At Barrick’s direction, Hughes submitted a fraudulent financial statement to Monticello Bank that substantially overstated her income and assets.  Based on these fraudulent representations, Monticello Bank approved the loan, and after the loan closed Barrick paid Hughes $20,000 for participating in the transaction.  The loan went into default in February 2012.

In 2010, Barrick recruited T.P. to purchase Som’ Beach Tanning (SBT), a business located at 140 River Place Avenue, Bowling Green, Kentucky from Barrick.  At Barrick’s direction, T.P. submitted a fraudulent financial statement to Monticello Bank that substantially overstated his assets.  The loan was supposed to be collateralized by SBT’s equipment, but Barrick had already used that equipment as collateral in a separate December 2009 loan from BB&T Bank, and that BB&T loan was not satisfied.  Based on these fraudulent representations, co-defendant Garry Hammer, a Monticello Bank loan officer, approved the loan, and after the loan closed Barrick paid T.P. $5,000 for participating in the transaction, but Barrick never surrendered control of the business.

In late 2010, Barrick recruited R.R. to purchase a Mattress City Wholesale (MCW) from Barrick for $179,880.  Under the terms of their agreement, R.R. would own the business on paper and would receive a small percentage of profits, but Barrick would pay the taxes, insurance, and all loan payments, and would receive the majority of profits.  The paperwork Barrick submitted reflected that the MCW was located at 2201 Gallatin Road, Madison, Tennessee.  In reality, a PetSmart was located at that address, and had been there for many years.  Based on these fraudulent representations, Monticello Bank, through co-defendant Garry Hammer, approved the loan.  After the loan closed, Barrick paid R.R. $30,000 for participating in the transaction, and used a significant portion of the remaining proceeds to pay off T.P.’s SBT loan.  The R.R. loan went into default in February 2012.

Barrick’s codefendants, Roger Hagan, Lorri Hughes, and Garry Hammer, all pleaded guilty in April.

Barrick is scheduled to be sentenced by United States District Court Judge Joseph McKinley in Bowling Green on August 15, 2019, at 9:30 a.m., and faces a statutory maximum penalty of 150 years in prison.  Barrick also stipulated to a loss of over $1.4 million. Roger Hagan, Lorri Hughes and Garry Hammer are all scheduled to be sentenced in Bowling Green on July 9, 2019.

The announcement was made by United States Attorney Russell M. Coleman.

This case is being prosecuted by Assistant United States Attorneys David Weiser and Josh Judd and was investigated by the Federal Deposit Insurance Corporation (FDIC) and the FBI.

Jaime Mayorga, 40, and Ruben Rodriguez, 42, both of Sacramento, California were found guilty, on Tuesday, after a six-day trial, on one count of conspiracy to commit wire fraud.

On July 14, 2011, Mayorga, Rodriguez, and five others were charged by indictment with conspiracy to commit wire fraud. The defendants, including Mayorga and Rodriguez, worked for Delta Homes & Lending, a Sacramento, California, based real estate and mortgage lending company that falsified home loan applications to obtain mortgage loans for borrowers, many of whom did not and could not qualify for a loan without the lies submitted by Delta employees. Mayorga and Rodriguez were real estate agents and loan officers. The now defunct Delta Homes was founded by co-defendant Moctezuma “Mo” Tovar, 49, Sacramento, California.

According to court documents, Delta opened one office in 2003 and eventually had multiple offices in Sacramento, with additional branch offices in Woodland, Yuba City, and Southern California. Rodriguez and Mayorga both started working at the original Delta office on Enterprise Drive in Sacramento. Later, they both moved to a branch on Franklin Boulevard, and Rodriguez went on to work at other Delta branches, including a large branch office located on Howe Avenue.

According to court documents and evidence presented at trial, Delta targeted the Latino community with advertisements in Spanish that heralded the company’s ability to obtain home loans for borrowers who otherwise would not qualify for a mortgage. In addition to advertisements in which Delta claimed to be “Hispanics Serving Hispanics,” Delta employees solicited clients at flea markets and by going door-to-door through the community.

In order to obtain mortgages, the defendants falsified information on loan applications regarding the clients’ income, occupation, and personal savings. Straw buyers were sometimes used when the true borrower did not have a sufficient credit score to qualify. The defendants also deposited money into borrowers’ bank accounts to meet the lenders’ requirement that the borrower have money on hand, taking the money back after acquiring the verification of deposited funds that the lenders also required.

The evidence at trial showed that the defendants’ fraud was also personally lucrative. During the investigation, Rodriguez estimated that in 2006 alone, he earned more than $400,000. Similarly, Mayorga told agents that although he earned a salary when he started at Delta, he shifted to commission-based compensation and then earned between 50 and 85 % of the brokerage fees. Mayorga stated that he earned more than $500,000 in 2005.

The aggregate sale price of the homes involved in the conspiracy was in excess of $10 million, and as a result of the conspiracy, mortgage lenders and others suffered losses of at least $4 million.

Co-defendants Tovar, Manuel Herrera, 39, Davis, California; Sandra Hermosillo, 57,  Woodland, California; and Jun Michael Dirain, 46, Antelope, California all pleaded guilty to one count of conspiracy to commit wire fraud. Christian Parada-Renteria, 43, Woodland, California pleaded guilty to two counts of concealing felonies related to the wire fraud conspiracy.

Rodriguez and Mayorga are scheduled to be sentenced on August 6, 2019 by U.S. District Judge John A. Mendez. The court has not yet set a sentencing date for Tovar, Herrera, Hermosillo, and Dirain. Parada-Renteria was sentenced to serve one year in prison.

Each of the defendants faces a maximum statutory penalty of 20 years in prison and a $250,000 fine. The actual sentences, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

U.S. Attorney McGregor W. Scott made the announcement.

U.S. Attorney Scott stated: “Mayorga and Rodriguez took advantage of members of the Latino community who hoped to become homeowners and manipulated the real estate process for personal gain. As so often occurs in these cases, the result was losses to the financial institutions and neighborhoods burdened with foreclosed properties. We are grateful for the diligence and professionalism of the FBI in investigating this case.”

This case is the product of an investigation by the Federal Bureau of Investigation. Assistant U.S. Attorneys Brian A. Fogerty and Justin L. Lee are prosecuting the case.

Kirk Lawrence Brannan, 65, Lake Jackson, Texas pleaded guilty today for his role in a mortgage fraud scheme, admitting he conspired with others from 2005 to 2009 to execute a scheme to defraud Wells Fargo Bank and other lenders.

At the hearing, the court held that, in committing the crime, Brannan had used sophisticated means and had employed his special skills as an attorney and real estate agent. The court noted that Brannan had created false HUD-1 settlement forms and title documents that purported to show the sale of three of his properties to his children at grossly inflated prices. These HUD-1 forms then became the three comparable sales that appraisers relied upon in over-valuing the rest of Brannan’s beach home properties which Brannan then sold through the fraud scheme at inflated prices.

Brannan sold 10 beach homes in the Freeport/Surfside, Texas area to “straw buyers” at exorbitant prices. Other co-conspirators recruited straw buyers who created loan applications with misrepresentations that lenders relied upon in deciding to make the mortgage loans. The applications contained misrepresentations of the buyer’s address, employer, income and expenses. The applications also suggested the buyers were much better credit risks than they actually were. Brannan admitted he paid kickbacks to co-conspirators each time one of the beach homes was sold to a straw buyer.

The beach properties were sold at two to three times the appraised values. The mortgage lenders, including Wells Fargo Bank, were induced to lend the inflated amounts for the purchases through flawed or fraudulent appraisals which were based on comparisons Brannan manufactured to further the scheme.

Brannan created settlement statements that suggested he sold three of his properties to his children at exorbitant prices. Appraisers relied upon these “sales” as comparable sales in appraising Brannan’s remaining properties sold to straw buyers. As a result of the fraudulent appraisals, he and his co-conspirators were able to inflate the values for his properties and deceive the lenders into approving home loans at those exorbitant amounts.

All of the straw buyers defaulted on the mortgages, and all 10 of the beach properties ended up in foreclosure.

The fraudulent mortgage loan scheme resulted in a loss of $5,317,350 to Wells Fargo Bank and the other lenders. Brannan paid $2,401,368 to his co-conspirators as part of the scheme.

Previously released on bond, Brannan was permitted to remain on bond and voluntarily surrender to a U.S. Bureau of Prisons facility to be determined in the near future.

Co-conspirators Chucoboie Lanier, 42, David Lee Morris, 56, and Derwin Jerome Blackshear, 52, all of Houston, Texas previously pleaded guilty for their roles in the scheme. Lanier received a sentenced of 36 months while Morris was ordered to serve a 42-month prison term. Blackshear is set for sentencing April 9, 2019.

Chief U.S. District Judge Lee Rosenthal handed Brannan a 36-month sentence to be immediately followed by three years of supervised release.

In imposing the sentence, Judge Rosenthal balanced Brannan’s honorable military service and other aspects of what, up to the time of the fraud, had been an exemplary life, with the tremendous damage mortgage fraud had done to the U.S. financial system and economy and the fact that Brannan had been a knowing and willing participant in such a scheme. She also pointed out that some individuals much less sophisticated than Brannan had suffered severe economic harm as a result of Brannan’s scheme.

Brannan was further ordered to pay $5,317,350 in restitution. A money judgement was previously entered in the amount of $2,401,368.

The announcement was made by U.S. Attorney Ryan K. Patrick.

The Texas Department of Public Safety and the FBI conducted the investigation. Assistant U.S. Attorneys Robert Johnson and Michael Day are prosecuting the case.