Several defendants in different cases have been accused of using their positions inside banks and mortgage companies to line their pockets with illicit profits -- and some are headed to prison. Victims include investors, employers and borrowers.
A 25-year sentence was handed down this month by U.S. District Judge Otis D. Wright III to Jeff McGrue -- who was found guilty in January by a jury of four counts of mail fraud and four counts of passing $55 million in fictitious notes purportedly backed by a Treasury Department account to lenders and loan servicers. The scam was allegedly operated in 2007 and 2008.
In its press release, the Department of Justice claims that McGrue targeted distressed borrowers in California with a scheme where they paid enrollment fees and monthly rental payments, and transferred the title to their homes, to his company, Gateway International. In return, 250 borrowers who collectively paid $1 million thought they would avoid foreclosure -- though no foreclosures were prevented through the scheme.
Three other defendants in the Gateway case -- Gerald Guidry, owner of My Debt Solutions; Ronald Morgan, owner of Omnipoint; and John-Pierre Rivera -- previously pleaded guilty and face sentencing in October and November.
Investor clients of Valley Mortgage Inc. were promised returns of between 10 percent and 18 percent if they financed lot and development loans, according to U.S. Attorney John Walsh. The properties involved were located in affordable housing markets, and the structures were mobile homes or manufactured houses. In all, 400 investor contracts generated $30 million in proceeds.
But, after owner Philip Lochmiller Sr. and his son Philip Lochmiller Jr. began spending investor funds on non-business expenditures and personal expenses, there wasn't enough left to make a profit -- though investors were told that the business was thriving. The duo allegedly presented un-filed trust deeds and overvalued assets, and the business devolved into a classic Ponzi scheme where incoming investor funds were used to make interest and principal payments to existing investors.
On Thursday, following a 10-day trial, a jury found the senior Lochmiller guilty of conspiracy, money laundering conspiracy, money laundering, and mail fraud. The son, as well as co-defendant Shawnee Carver, have both pled guilty and await sentencing.
Former Citigroup Inc. vice president Gary Foster is suspected of swindling $19 million from his employer, according to a complaint and affidavit by FBI Special Agent Thomas J. D'Amico in support of application for arrest warrant filed last month in U.S. District Court for the Eastern District of New York. While working in the New York-based company's treasury finance department, Foster allegedly diverted $19,209,955 in wire transfers from Citi to an account he held at JPMorgan Chase, N.A.
A criminal information filed last month charges Douglas E. Brandewie with making a false statement to the Federal Deposit Insurance Corp., the Department of Justice announced. The defendant was the president of mortgage banking at Citizens First Savings Bank.
The government claims that Brandewie had unfavorable real estate appraisals removed from mortgage files that the FDIC was reviewing during a routine audit of the bank. The scheme enabled him to hide around $10 million in potential loan losses and impairments from FDIC auditors and make the bank appear more sound.
Beginning in May 2007 and continuing until the end of last year, David Rubin, who owned two St. Louis offices of Coral Mortgage Bankers Corp., and former stockbroker Joshua Gould took in $5 million in investments, according to the Department of Justice. Clients were told that the funds would be used as collateral for the mortgage business' operations and promised they would receive regular interest payments.
But Rubin wound up using some of $1.2 million in one couple's life savings for his personal salary and an out-of-court sex-discrimination settlement, the statement said. He gave Gould the rest to pay for personal expenses, adult entertainment and start-up costs for personally owned businesses. Bogus client statements were provided to cover up the alleged embezzlement. Gould is also accused of embezzling $3.5 million from other clients by providing them with worthless share of a shell company he secretly owned.
This month, Gould -- who plead guilty along with Rubin in April -- was sentenced to eight years in prison, the Associated Press reported. Rubin is scheduled for sentencing on Sept. 23.
Mortgage broker John Robert Miller pleaded guilty in August 2008 to paying former Coast Bank of Florida executive Phil Coon $1.1 million in a scheme where the pair illegally skimmed fees from loans closed through the bank. Miller has now been sentenced to three months' home detention, the Bradenton Herald reported. Coon was sentenced earlier this month to 18 months.
Former Northland National Bank vice president William M. Vaughan and mortgage broker and former police officer Craig Chambers were indicted along with Patrick Friedl, Tom K. Crowley and Jon Nevins in a superseding indictment announced on June 23 by U.S. Attorney for the Western District of Missouri Beth Phillips. The defendants allegedly participated in a $485,000 mortgage fraud scheme, while Chambers and Nevins were additionally accused in a $657,768 mortgage fraud scheme.
Mortgage loan processor Helen Hinojos, along with Ruth Farias and Esmeralda Garcia, are being tried for taking out fraudulent cashout second mortgages and stealing refinance proceeds from five elderly homeowners, the Whittier Daily News reported. The money is suspected of having been used to pay gambling debts.
Former Taylor Bean and Whitaker Mortgage chairman Lee Bentley Farkas filed a pro se notice of appeal to the U.S. Court of Appeals for the Fourth Circuit this month, Ocala.com reported. In addition, a judge denied Farkas' request to force National Union Fire Insurance Company of Pittsburgh to continue footing the bill for his defense.
San Diego City Attorney Jan I. Goldsmith announced that the owner of Nations Mortgage Solutions, Christopher Dixon, pleaded guilty on June 17 in San Diego Superior Court to acting as a real estate agent without a license in connection with loan modifications. Dixon paid $6,500 in restitution and was fined $1,000.
United States of America - against - Gary Foster, Defendant.
Case No. M-11-645, June 23, 2011 (U.S. District Court for the Eastern District of New York).
United States v. Douglas Brandewie.
Case No. 11-20367.
United States of America v. John Robert Miller.
Case No. 8:08-cr-0030-T30 TBM (U.S. District Court, Middle District of Florida, Tampa Division).