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Investment Scams Halted

Investment Scams Halted

Recent regulatory and license actions against mortgage companies

August 27, 2007

By PATRICK CROWLEY

photo of Patrick Crowley
Two mortgage investment scams have been uncovered in Maryland and California.

Maryland Attorney General Douglas Gansler has issued a cease and desist order alleging a company was operating an unregistered investment company that promised to pay off investors’ mortgages in five years.

The Maryland Securities Division brought the action to halt the registration violations, but to also because of the “material misrepresentations and omissions” made in connection with the claims of the investment program, Gansler said in a statement.

“There is great risk of the loss of investors’ money where there is no demonstrated source of income except other investors,” Gansler said. “In a climate of rapid change in home values, a program like this can increase risks to lenders and home owners.”

Named in the order are POS Dream Home, LLC; Metropolitan Grapevine, LLC; CEO Andrew H. Williams; agent Laveda Whitfield; and their officers and directors. All were operating out of Laurel, Maryland.

This action orders POS Dream Home, Williams, and their agents and officers to cease any operations in Maryland “until a hearing can be held in this matter,” said Gansler. “In the meantime, this company will no longer be able to unlawfully solicit investors and risk the potential loss of their money.”

According to Gansler, the company used personal contact and public meetings to solicit investors with an offer to live “mortgage free.” In exchange for $5,000, a lump sum payment of $50,000 or more and 50 percent of the homes value the “company promised to pay off the home buyer’s or owner’s mortgage in full in five years or less.”

The money for the mortgage payments was supposedly generated from POS’s investment in “POS cafes,” which included ATMs, credit card readers, and other revenue-generating devices.

But Gansler said the order alleges that POS and its agents failed to disclose to investors material information such as the cafes’ locations, past financial results, operating expenses, the lack of any registration of the investments, and the history of management personnel.

Neither of the companies, their notes or promoters is registered with the Securities Division as required by Maryland law, Gansler said.

Gansler said investors with questions should contact their state’s securities regulators.

“Potential investors should thoroughly check out any investment opportunity by contacting (regulators) regarding securities broker-dealers, agents, investment advisors, investment advisor representatives, financial planners, the registration status of securities, or to report suspected fraud,” he said.

Investors in California should have also done their home work, according to documents filed by the FBI in Sacramento.

A search warrant filed in U.S. District Court shows that several mortgage brokers and their officers are being investigated by federal authorities.

Named in the warrant are VFM Investment Group and officers Mario Fellini III, James R. Martin and Gabriela R. Viramontes; Esnian Mortgage Realty Network and officers Fellini, Martin and Viramontes; and Freedom Capital Mortgage Inc. and officer Joseph Gallo.

Investors were told by Martin that he placed borrowers with bad credit into homes by using the investors’ credit. The investor would purchase the home, then one of the 50 to 70 people Martin “pre-qualified” would enter into a contract to purchase the home from the investor.

The pre-qualified borrower would pay the investor $5,000 as well as the monthly mortgage payment and other expenses, including taxes and insurance. The homes would be sold after two years to the pre-qualified buyers.

But in the search warrant the FBI says the pre-qualified buyers never existed. The group of alleged scammers convinced 21 investors to pay more than $9 million from houses, earning commissions and other income for the Martin, Fellini and the others.

Phony documents were also used to secure the loans, according to investigators.

The FBI seized thousands of pages of documents from brokerage and real estate offices. The investigation is continuing, so the FBI office in Sacramento refused to comment.

Records filed with the state of California indicate that Fellini has surrendered his license to broker loans in the state.

Regulators in Georgia have ordered three brokers out of the business.

The state pulled the license of Raymond L. Moatz III of Fort Lauderdale, Fla., after he agree to a cease and desist order with the Georgia Department of Banking and Finance.

Neither Moatz nor his 1st Continental Mortgage Inc. can do business in Georgia for three years.

Moatz was operating unapproved branches with unapproved managers, failing to maintain proper records, improperly engaging in net branching and conducting its “mortgage operations” not in conformity with state laws, according to the cease and desist settlement.

Moatz was also fined $7,000.

Georgia also slapped cease and desist orders on The Debt Elimination Group of Duluth, Ga.; Preferred Mortgage of Peachtree City; Progressive Mortgages of North Miami Beach, Fla; Curt D. Francis, also of North Miami Beach; Tenesha Davis of Atlanta; and Vicki Jones of Sharpsburg, Ga.; and Genese Nicole Richardson.

All are accused of brokering loans without a license or other authority from the state, regulators said. The companies have and brokers have 30 days to respond.


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