Defendants in a range of mortgage-related criminal cases are being indicted, tried and sentenced at a breakneck pace. Alleged crimes include embezzlement, secondary fraud and mortgage fraud. In addition to borrowers, those being deceived include auditors, regulators and investors. Several cases involve failed banks.
The California Department of Financial Institutions seized United Commercial Bank in November 2009. The failure of the $11 billion bank cost the Federal Deposit Insurance Corp. was an estimated $2.5 billion.
Earlier this month, a federal grand jury indicted former United Commercial executive vice president Ebrahim Shabudin and former senior vice president Thomas Yu in connection with the bank’s failure, the U.S. Attorney for the Northern District of California announced. The pair was charged with conspiracy to commit securities fraud, securities fraud, falsifying corporate books and records, and lying to auditors. The San Francisco-based bank was a recipient of funds from the Troubled Asset Recovery Program.
Shabudin and Yu, along with other unnamed conspirators, began in September 2008 to hide the bank’s true financial condition from the Department of Treasury, investors, depositors, regulators and the bank’s independent auditor, the statement said. The defendants allegedly hid declining asset quality and values, falsified bank accounting records to hide the bad loans and lied to the bank’s outside auditors.
In September, Monroe L. Beachy was indicted by a federal grand jury over allegations he defrauded nearly 2,700 investors through his company, A&M Investments, according to the U.S. Attorney’s Office for the Northern District of Ohio. Beachy allegedly told investors he would invest the funds in Ginnie Mae mortgage-backed securities — though he actually invested in junk bonds. More than $16.8 million was lost by the investors, many who were members of the Amish community.
The Securities and Exchange Commission obtained a consent judgment against Beachy on March 18. The 77-year-old Beachy, who the SEC said raised at least $33 million from investors since 1986, filed for Chapter 7 bankruptcy in June 2010 and closed down his company.
On Thursday, U.S. District Judge Benita Pearson entered a “not guilty” plea on behalf of Beachy, who balked when asked to enter a plea himself, according to a story by the Times Reporter. Beachy was reportedly advised by his attorney not to follow through on his planned “no contest” plea, a move that reflected the Amish community’s avoidance of the court system.
Joshua Brown led Boston Equity Investments, a company that solicited multifamily property owners for an option to sell their properties at below the asking prices, according to an announcement Friday from Massachusetts Attorney General Martha Coakley. The company also found buyers for the properties at above the sellers’ asking prices based on promises to renovate and rent the properties for them.
But the company instead obtained inflated appraisals, convinced real estate agents to raise the listing prices and lied about recent renovations, Coakley said. Fraudulent purchase contacts were allegedly created, and the loans were submitted through mortgage brokers Linda Defeo and Brian Arrington — who then submitted the packages with fake supporting documents. In all, fraudulent financing was obtained on 26 properties for $12.5 million, and Brown share of the take was $1.5 million.
Brown, of New Hampshire, was convicted by a Suffolk Superior Court jury and is scheduled to be sentenced on Nov. 10. Co-defendant John Sweetland pleaded guilty in March, while guilty pleas were extracted last year from co-defendants Brian Arrington, Brian Frank, Linda Defeo and Bruce Namenson.
David Findel, the former CEO of Worldwide Financial Resources, pleaded guilty in October 2010 to preparing $11 million fake loan packages on mortgages for sale that had already been sold to secondary investors. When Worldwide ended operations in August 2009, published reports indicated that $20 million in repurchase requests from CitiMortgage Inc. were responsible for the collapse.
On Sept. 27, Findel was sentenced in federal court to 63 months in prison, according to an announcement from the U.S. Attorneys Office for the District of New Jersey. He was also ordered to pay $11,994,000 in restitution.
In addition, Findel pleaded guilty to bankruptcy fraud the prior week. He allegedly tried to conceal assets from the bankruptcy trustee. Sentencing in that case is scheduled for Nov. 14.
Hard-money mortgage broker Mark Alan Helsing plead guilty this month to defrauding 12 investors — mostly long-time friends — out of $6.9 million in a Ponzi scheme, according to the Orange County District Attorney. He allegedly kept money that was supposed to be used to fund the loans but made interest payments to investors. But checks began bouncing in 2008, prompting an investigation by the Tustin Police Department.
Helsing — who ran the scheme through his companies Sea View Investments, HLHS Financial Services Inc., Foothill Realty and Sea View Mortgage — faces up to 15 years in prison at his Dec. 2 sentencing.
In Birmingham, Ala., Gregory T. Smith was sentenced to 30 months in prison by U.S. District Judge R. David Proctor on Sept. 22, the Justice Department announced. Smith, who pleaded guilty in March, was a branch manager of First South. He allegedly created fraudulent loan documents, forged signatures of First South customers and falsified title insurance policies on $2,165,043 in loans. He also created fake notes and used the names of existing Farm Credit borrowers.
Co-defendant Roger Saunders admitted that he conspired with Smith on $271,000 of the loans.
Charges were filed in U.S. District Court for the Northern District of California Thursday against Gary Anderson, Patrick Campion, James Doherty, Keith Goodman, Troy Kent, Craig Lipton, Henry Pessah and Laith Salma, according to the U.S. Department of Justice. All eight of the defendants agreed to plead guilty to bid-rigging at foreclosure auctions.
“The eight real estate investors conspired with others not to bid against one another at public real estate foreclosure auctions in Northern California, participating in a conspiracy for various lengths of time between November 2008 and January 2011,” the Justice Department said. “The real estate investors were also charged with conspiracies to use the mail to carry out a fraudulent scheme to make payoffs to obtain title to selected real estate at fraudulently suppressed prices, to receive payoffs and to divert money to co-conspirators and away from mortgage holders and others with a legal interest in these properties.”
In all, 18 plea agreements have been reached in the case.
Real estate investor Robert Rose pled guilty on Sept. 23 to bid rigging in 2009, a statement from the U.S. Attorney for the Eastern District of California said. Rose was the seventh defendant to plead guilty in that case so far.
Torlando Ramont Childress, 40, was the chief financial officer of South Carolina Community Bank. But it turns out that Childress was also embezzling from his employer, according to the U.S. Attorney’s Office for the District of South Carolina. In all, Childress allegedly stole $377,112.
Childress, of Hopkins, S.C., was sentenced on Oct. 18 to a year and a half in prison.
A no contest plea was entered by Ashik Ahmed Azeez, an announcement last month from the Sacramento, Calif., district attorney said. He collected illegal up-front fees through his businesses, Turbo Mortgage Modification and Turbo Solutions, in 2010. The plea agreement calls for him to spend 90 days in jail and return $8,250 to the borrowers.
A 61-month sentence was handed down on Oct. 21 to Khristian Munizaga by U.S. District Judge Janet Bond Arteton, the Justice Department reported. Munizaga, who operated Global Mortgage Investments, allegedly racked up $200,000 in purchases using counterfeit credit cards.
Mortgage brokerage AFG Financial was established by Aaron Hand in 2004. Hand was among 13 people indicted in July 2009 over allegations that they originated $100 million in fraudulent loans. By the time he was indicted, another 12 defendants had already pleaded guilty in the alleged scheme.
The Wall Street Journal reported earlier this month that Hand, who was convicted in July 2010 and subsequently incarcerated, has now been charged with trying to pay a hit man $2,000 to kill one of the witnesses in his mortgage fraud trial. Turns out that the hit man was an undercover agent who recorded the conversations in a visiting room at the Coxsackie Correctional Facility in New York.
Jerry J. Williams was indicted in March over allegations of mortgage fraud and accounting fraud. Williams was the president and chief executive officer of Orion Bank, which failed in November 2009.
On Wednesday, three of Williams co-defendants — Thomas B. Hebble and Angel P. Guerzon and Francesco “Frank” Mileto — were sentenced to hard time, the Herald-Tribune reported. Hebble and Guerzon were Orion executives, while Mileto was a borrower.
In 2007, Metropolitan Grapevine LLC and its CEO Andrew H. Williams were among those named in a cease-and-desist order issued by Maryland Attorney General Douglas Gansler. At issue was an alleged Ponzi scheme involving investments of at least $55,000 in return for the full payoff of their mortgages within five years. Funds were supposed to be derived from income from financial services equipment.
The Free Lance-Star reported that Williams is scheduled to go on trial on Tuesday in U.S. District Court for the District of Maryland.
After pleading guilty two years ago to stealing from Roger and Lourdes Vales $350,000 that was supposed to fund a loan, mortgage broker Alma Preciado fled to Mexico, a story in The Washington Times said. But in September, the former mortgage broker and radio show host was located and flown back to the country and is now in jail.
Former RBC Bank employee Matthew Skinner pled guilty on Oct. 27 in U.S. District Court for the District of South Carolina to personally accepting payments on mortgage loans, CarolinaLive reported. The alleged crime occurred in June 2008.
John Andrew Portik, who was negotiating on behalf of a friend, was arrested in January after he allegedly made a bomb threat to American Home Mortgage Servicing Inc. employee Samara Maloney, TCPalm reported. So Portik, who pleaded no contest to the charges, filed a civil suit on Sept. 15 in Florida’s St. Lucie County Circuit Court against American Home over allegations of defamation, abuse of process and intentional infliction of emotional distress.
A 30-month sentence was handed down in September by U.S. District Judge Rudolph Randa to Milwaukee mortgage broker Christopher Johns over an alleged foreclosure rescue scheme operated since 2005 through Prosperity Mortgage, the Journal Sentinel reported. Co-defendant Allen Banks was previously sentenced to two years.
Colorado’s 10th Judicial District Attorney’s Office filed a charge in November 2010 against Anthony Pagilone alleging that the mortgage broker obtained a $200,000 mortgage on David Roscover’s residence in May 2005 without Roscover’s knowledge, the Pueblo Chieftain reported. But Pueblo District Judge David Crockenberg ruled last month that the charge was filed after the five-year statute of limitations had expired for the alleged offense.
More than $17 million in mortgages were impacted by an alleged scam operated by Stephen Andrew Easterly and Emanuel Percival, the San Bernardino County Sun reported in August. The two men were arraigned for collecting between $3,500 and $7,000 from borrowers seeking to avoid foreclosures or modify their loans.
