Bank executives have recently been busted for an array of alleged crimes including mortgage fraud, embezzlement and bribery. At non-bank organizations, it’s investors who are getting the shaft. Other recent mortgage-related crimes to land defendants in prison involve short-sale fraud by a mortgage servicing employee and a scam that tricked borrowers into believing that their mortgages had been transferred.
On Jan. 19, Scott D. Farah was sentenced in U.S. District Court for the District of New Hampshire to 15 years in prison because he allegedly deceived investors in his company, Financial Resources Mortgage Inc. The New Hampshire resident pled guilty to one count of mail fraud and one count of wire fraud on Oct. 4, 2010.
The Securities and Exchange Commission said that it issued an Order Instituting Administrative Proceedings Pursuant on Feb. 9 against Farah barring him the securities industry.
Another player in the $33 million Financial Resources saga, Donald E Dodge, received a six-year sentence. Dodge operated an unlicensed loan servicing company, C L and M Inc., which serviced all loans brokered through Financial Resources.
The SEC said it entered a final consent judgment against Farah and Dodge on Feb. 2.
Robert R. Jones pleaded guilty on Jan. 20 to defrauding his employer, Community Bank & Trust, on several loans and collecting $640,000 in kickbacks, according to a news release from the U.S. Attorneys Office of the Northern District of Georgia. Jones was an executive vice president and chief credit officer at the bank. From 2005 until 2009, he allegedly conspired with Joseph C. Penick Jr., Douglas C. Emig and Berrong Moulton to obtain $8.0 million in fraudulent loans from Community Bank. Penick and Emig pled guilty in August.
Former Webster Bank employee Susan A. Curtis pled guilty on Jan. 20 to collecting $5.0 million by setting up vendor companies that were fraudulently paid for services. She escaped scrutiny by classifying the vendors as brokers — a category that was exempted for due diligence and annual review.
Curtis also collected $0.7 million in fraudulent tenant improvements and reimbursements. In addition, Curtis admitted to lying on a loan application to obtain a $649,000 mortgage from Bank of America.
Among 15 people indicted by in U.S. District Court for the Southern District of Florida was mortgage broker Frank Santa, a Department of Justice news release last month said. Santa owned Palm Beach Business Consultants, “a loan brokerage business specializing in obtaining fraudulent business loans for clients with poor credit histories.” He collected fees ranging from $12,500 to $25,000 up front.
The charges followed a two-year FBIÂ undercover investigation.
Also charged in the $10 million scheme were seven bank officers who took bribes ranging from $1,000 to $10,000 from either Santa or an undercover agent. Among the executives were Fifth Third Bank small business bankers Daniel Agudelo and Alexander Reyes; Bank of America executive Christopher Brooks; Macario Deguzman, a vice president at Regions Bank and Am Trust Bank; HSBCÂ Bank VPÂ William Hebert; Wachovia Bank regional private banker David Mcguire; and Floridian Community Bank officer David Ramoy.
Two other Palm Beach Business Consultants employees, Rodney Kahane and Daniel Paine, have already been sentenced to around six years each for their roles creating fraudulent files.
In Orlando, Fla., Victor Cedeno was sentenced on Jan. 5 in U.S. District Court for the Middle District of Florida to five years in prison, the Justice Department announced. The former loss mitigation negotiator for defunct Taylor, Bean and Whitaker Mortgage Corp. was assisted in a short-sale scheme by fellow employee Richard Nanan.
According to the government, Cedeno would approve a 90 percent short sale, only report an 80 percent transaction to the company and pocket the difference. But in August 2009, Cedeno’s work space was sealed at Taylor Bean, so he rushed to consolidate his bank accounts and obtained a cashier’s check for $320,000. His plan was to move the money offshore. His plan, however, fell through and he eventually pled guilty. Cedeno was sentenced last month to five years in prison and ordered to forfeit $1.3 million.
Sheila Kilborn-Jones was a former mortgage broker associated with Vitruvian Investments and a fund manager with the Vitruvian Investment Group. In August 2005, she acquired Home Mortgage Financial in Idaho and changed the name of the business to Vitruvian Investment Group LLC. Through the company and another business she formed, she underwrote real estate loans and managed an investment pool involving funds from short-term real estate transactions.
But Kilborn-Jones disregarded many of promises she made to investors about their investments, the Idaho Attorney General said in a recent news release. She also borrowed $300,000 from the funds to remodel her home — masking the expenditure as a loan in an unfamiliar name and giving investors a worthless third lien on her property. Another $220,000 was allegedly misappropriated.
Vitruvian filed bankruptcy in 2008. Jones, who pled guilty in October, was sentenced to four years in prison.
Great Western Business Services was a sham set up to trick borrowers into mailing their mortgage payments to what they thought were their new servicers, according to the Nevada Attorney General’s office. The operators of the business, Joseph Yorkus and James Bartczak, were arrested on Feb. 3.
The state claims that the pair mailed letters to borrowers indicating that their loans had been transferred from Bank of America to Great Western. Borrowers who thought they were making their payments as required were instead defaulting on their mortgages.
Customers of Linda Sadr were promised that through her mortgage elimination program, she could make their loans disappear. Borrowers were told that the securitization process was illegal and that she would challenge the lenders and thereby eliminate the mortgages.
Sadr had the borrowers refinance for the maximum cashout transaction and give 10 to 15 percent of the proceeds to her. She would also collect 12 to 18 months in advance mortgage payments from the borrowers which was supposed to be held in escrow to pay the loans until they were eliminated. She offered another program that promised returns of between 12 and 18 percent after an investment period, helping her reputation to spread and increasing her pool of clients to more than 150.
But, according to the Department of Justice, Sadr was operating a Ponzi scheme, costing her clients more than $10 million. Sadr pled guilty last month.
Crystal Spreng was sentenced to six months of house arrest after being convicted of mortgage fraud against her employer, Citizens Bank, the Justice Department said. Spreng, who managed several branches, allegedly provided fraudulent verifications of deposit as part of her role in a scheme.
In 2009, Michael Lee Wilson, owner of Pacific Coast Mortgage, claimed he nearly died after being thrown from his boat near the Channel Islands Harbor in California. Later that year, Wilson was arrested over accusations that he deceived elderly investors and committed mortgage fraud. Millions of dollars were allegedly lost in the apparent Ponzi scheme.
Last month, the Lompoc Record reported that Wilson, who is accused of stealing as much as $14 million, is scheduled for sentencing this Wednesday. He has been in jail since his 2009 arrest.
In 2003, HomeGold Financial Inc. and subsidiary HomeGold Inc. announced Chapter 11 bankruptcy filings. An inability to pay a loan to subsidiary Carolina Investors Inc. was blamed for the insolvency. But by July 2005, former Carolina Investors vice president Anne Owen pleaded guilty to lying to investors, while husband Larry Owen was sentenced to eight years in prison.
Losses to investors were estimated at $278 million.
This month, the Associated Press reported that the South Carolina Supreme Court denied former HomeGold chief executive officer Ronnie Sheppard’s appeal to reduce his 20-year prison sentence. Shepard was reportedly found guilty of securities fraud in 2007.
Thuan Nhan Du and Cindi Gayle Kelly pleaded guilty to, and were given probation for, their roles in a massive Riverside, Calif., mortgage investment and mortgage fraud scheme, The Press-Enterprise reported. James Duncan, the mastermind of the $142 million scheme, agreed to a nearly 20-year prison sentence a day earlier.
California mortgage broker Louisa K. Dubinsky avoided hard time in prison after pleading guilty to knowingly writing more than $1 million in bad checks, stealing $500,000 from clients and taking property valued at more than $200,000, McClatchy-Tribune News Service reported. She turned herself in on Feb. 1 at a Santa Cruz County Jail becoming infamous for her “Most Wanted” status and a $500,000 warrant for her arrest.
Robert Santiago is scheduled to go to trial on April 25 to defend himself against six counts of mortgage fraud, KRQE reported. The former loan officer is also accused of murdering John and Bernadette Ohlemacher.
Paramount Mortgage employee Cheretica Mitchell was sentenced to five months in prison over allegedly steeling appraisal fees and committing identity theft using information from one of the Memphis, Tenn.-based mortgage company’s customers, the Memphis Commercial Appeal reported.
A 41-month sentence was handed down on Feb. 11 to Lynda S. Steel, the Department of Justice announced. The 37-year-old was also ordered to pay $1 million in restitution. Steele pled guilty in September to allegations that she portrayed herself as a licensed certified public account, was a military widow and previously worked for the Internal Revenue Service — though none of that was true. Her deceit helped lure investors to finance properties that were never purchased.
U.S. v. Scott Farah.
Crim. Indictment No. 1:10-CR-44-01 (U.S. District Court for the District of New Hampshire).
U.S. v. Scott Farah and Donald Dodge.
Crim. Indictment No. 1:10-CR-44-PD-01/02, LR-21837 (U.S. District Court for the District of New Hampshire).
United States of America, Plaintiff, vs. Christopher Brooks, Defendant.
Case No. 0:11-cr-60005-JIC-COHN/SELTZER (U.S. District Court for the Southern District of Florida).
United States of America, Plaintiff, vs. Macario A. Deguzman, Defendant.
Case No. 9:11-cr-80009-KLR (U.S. District Court for the Southern District of Florida).
United States of America, Plaintiff, vs. Rodney J. Kahane and Daniel C. Paine, Defendants.
Case No. 9:10-cr-80101-WJZ (U.S. District Court for the Southern District of Florida).
United States of America, Plaintiff, vs. Francis Santa, David L. McGuire, William J. Hebert, David J. Ramoy, Alexander R. Reyes, Daniel Agudelo, Antonio Mannarino, Anthony Depierro, Terrance T. Ward, Jeane Ward, and Derek L. Nadler, Defendants.
Case No. 9:10-cr-80101-WJZ (U.S. District Court for the Southern District of Florida).
