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May 11, 2012

Mortgage Brokers Sentenced For Federal Offenses

HONOLULU Three former Honolulu mortgage brokers have been sentenced to federal prison terms as a result of their participation in a mortgage fraud and money laundering scheme. The individuals and the sentences imposed were as follows:
  • Welton Kalani, 49, was sentenced today to a term of imprisonment of 70 months, and ordered to pay total restitution of approximately $714,216, less any amounts recovered by a lender in pending foreclosure proceedings.
  • Stephen Balino, 51, was sentenced on April 30, 2012 to a term of imprisonment of 27 months.
  • Bobby Wood, 51, was sentenced on February 2, 2012 to time served, which amounted to 32 months in jail, and ordered to pay restitution of approximately $740,000.
The sentencings followed a December 2011 trial in United States District Court, at which Kalani was found guilty of 12 counts of conspiracy, mail and wire fraud, obstruction of justice and money laundering, and Balino was found guilty of seven counts of conspiracy, mail and wire fraud, making false statements on loan applications, and money laundering. Wood pled guilty to conspiracy, money laundering and identity theft charges prior to trial. All three individuals were ordered to serve terms of supervised release following their release from prison.

United States Attorney Florence T. Nakakuni said that, according to information produced in court, Kalani and Balino owned mortgage brokerage companies offering loans to the public. Kalani was co-owner of Accel Mortgage, LLC, and Balino was owner of New Horizons Financial, both of whom maintained offices in downtown Honolulu. According to evidence produced at trial, both individuals conspired with others to engage in fraudulent real estate transactions designed to pull equity out of properties about to go into foreclosure. Kalani, Balino and others identified homeowners facing financial difficulties, and offered them the chance to stay in their homes, rent free, by transferring title to others temporarily. Kalani and Balino promised the homeowners that a "buyer" would purchase the property, and make mortgage payments until the homeowners were able to buy the property back. Kalani and Balino then recruited persons to serve as "straw buyers" by promising them money to induce them to make false loan applications to fund the sham purchases.

According to United States Attorney Nakakuni, the trial evidence focused on three transactions involving the sale of two properties in Aiea and Mililani. In each case, Kalani, Balino or others working with them found an individual who served as a "straw buyer," or one who obtained loans by falsely claiming that he would live in the property, and by inflating his income. The loans were "stated income loans" where the sub-prime lenders did not verify income, but instead relied on the figures stated by the borrowers. The false loan applications were supported by other false documents produced by others working in concert with Kalani and Balino, including several employees at Accel Mortgage, Kalani's company. The false documents included false verifications of rent, employment and deposits, false letters, and documents that were not properly notarized.

Following each sale, the brokers were paid fees and commissions for procuring the loans. The equity in the property was also diverted away from the seller, and channeled through third parties to Kalani, Balino or others working with them. In the sale of one property, Balino directed the deposit of $98,000 into the account of a third party, and then instructed the individual to divert $92,000 to Kalani. In a second sale, $78,000 was diverted to a company co-owned by Wood. In the third sale, $51,000 was diverted into an Accel account.

After learning of the criminal investigation, Kalani contacted two witnesses, telling them to destroy documents and to lie to investigators. These acts formed the basis of two obstruction of justice convictions.

According to United States Attorney Nakakuni, eight other individuals pled guilty to charges arising out of the same transactions, and testified for the government during the trial. Five of those individuals worked with Kalani at Accel Mortgage, which is no longer in business.

The case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service - Criminal Investigation, and was prosecuted by Assistant U.S. Attorney Larry Tong.

Source: United States Attorney's Office for the District of Hawaii

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