A Los Angeles-area mortgage brokerage is accused of defrauding lenders out of more than $9 million and trying to launder the money through offshore accounts, according to a 14-count indictment returned by a federal grand jury.
Kenneth Christopher Ketner, 57, the owner and CEO of Mortgage Capital Resources in Newport Beach, Calif., faces up to 105 years in prison if convicted on all counts, the U.S. Attorney’s office for the Central District of California said in a written statement.
Also indicted on six counts of wire fraud and one count of conspiracy to launder money was Allen Johnson, 59, also of Newport Beach and a lawyer who allegedly acted as Ketner’s accomplice, the U.S. Attorney’s office said.
Johnson faces up to 40 years in prison if convicted on all of the charges.
The indictments are the latest in a federal investigation that has lasted more than a year, spanned three states and went back to loans made in the late 1990s.
Federal prosecutors said the scam worked like this.
Ketner cut deals with various lenders that allowed him to make loans to mortgage borrowers on their behalf.
“After the loans were approved, the lenders would wire the money to a closing agent who was supposed to complete the transaction by disbursing the funds directly to the borrowers,” prosecutors said.
But Ketner allegedly defrauded the lenders by having them send the loan proceeds to Johnson, who prosecutors describe as a “longtime friend of Ketner.”
Johnson would then wire the money to Ketner, who “would direct the money into uses other than to fund loans,” prosecutors allege.
For instance, Ketner is accused of using “misdirected lenders’ funds” to help pay for a new $244,000 Ferrari luxury sports car, prosecutors say.
Assistant U.S. Attorney Andrew Stolper reportedly told the Los Angeles Times the scam involved hundreds of loans and it was exposed by borrowers who did not receive any money.
“Borrowers were the first to see what was wrong when they didn’t get a check or received a check that bounced,” Stolper said.
Neither Ketner nor Johnson could be reached for comment.
The indictment also alleges that Ketner and Johnson tried to launder some of the money through offshore accounts at foreign banks in Nevis and Luxembourg.
“Ketner and Johnson set up bank accounts using a fake identification in Nevada and had their money wired to these accounts from which they would withdraw the money,” the U.S. Attorney’s office said.
The FBI and Internal Revenue Service-Criminal Investigation Division assisted in the investigation.
Last year, five former Mortgage Capital loan officers were sentenced in Nevada and Alabama for their roles in the scheme, according to prosecutors.
Beth Lanza, 49, of Huntsville, Ala., a former regional manager and loan officer with Mortgage Capital Resources and National City Mortgage in Las Vegas, was sentenced to 27 months in prison and ordered to pay $333,375 in restitution for her guilty plea to one count of Wire Fraud.
Another loan officer, Gary Stephens, 55, also of Huntsville, was sentenced to 10 months in prison and ordered to pay $148,249 in restitution for his guilty pleas to making a false statement to HUD.
And Zina Sagona, 42, of Las Vegas, also a former loan officer, was sentenced to two years probation and ordered to pay $197,594 in restitution for her guilty pleas to conspiracy and making a false statement to HUD.
Two other codefendants — Michael Cartron and Horace Smith — who were former loan officers with Mortgage Capital Resources and National City Mortgage, have also pleaded guilty. Cartron sentenced last year to 21 months in prison; Smith is serving 37 months.
Federal prosecutors in Nevada said in a statement that while working at Mortgage Capital Resources, the defendants falsified loan applications and other supporting documentation for borrowers who would not have otherwise qualified for FHA loans.
“Subsequently, most applicants defaulted on their mortgage loans causing losses of approximately $148,249 to HUD,” prosecutors said.
“At both mortgage companies, the fraudulent applications and documents were material to the decisions to fund the mortgage loans and included documents such as, bank statements, pay stubs, tax forms, gift letters, etc.” prosecutors said. “The defendants used the false statements and documents to obtain the mortgage loans in order to receive commissions.”