ANATOMY OF MORTGAGE FRAUD/HO– USE STEALING

 

MORTGAGE FRAUD:

Department of Justice Press Release
sacramento.fbi.gov
For Immediate Release March 24, 2008
McGregor W. Scott
United States
Attorney Eastern District of California
Contact: Lauren Horwood (916) 554-2706

Indictments Announced in Major Mortgage Fraud Scheme
Federal law enforcement officials discuss ongoing efforts to combat mortgage fraud in region

SACRAMENTO—U.S. Attorney McGregor W. Scott; FBI Special Agent in Charge Drew Parenti; and Internal Revenue Service Criminal Investigation Special Agent in Charge Scott O’Briant announced today the indictment of 19 individuals for mortgage fraud-related offenses under Operation Homewrecker. The leader of this nationwide scam is Charles Head, 33, of Los Angeles, California, who targeted homeowners in dire financial straits, fraudulently obtaining title to over 100 homes and stole millions of dollars through fraudulently obtained loans and mortgages.

Operation Homewrecker is the product of an extensive investigation by the FBI and IRS Criminal Investigation.
According to Assistant U.S. Attorneys Laura Ferris, Rob Tice-Raskin, and Ellen Endrizzi, who are prosecuting the case, the charges are broken out into two separate indictments, “Head One” and “Head Two.” On February 28, 2008, a federal grand jury returned the first set of charges in a 13-count indictment against 16 defendants with violations of mail fraud, conspiracy to commit mail fraud, conspiracy to commit money laundering and other related offenses. “Head One” involved a “foreclosure rescue” scam, netting approximately $6.7 million in fraudulently obtained funds taken from 47 homeowners, nearly all of whom were located in California.
From approximately January 1, 2004 to March 14, 2006, the defendants contacted desperate homeowners, offering two “options” allowing them to avoid foreclosure and obtain thousands of dollars up-front to help pay mounting bills. If the homeowner could not qualify for the “first option,” which virtually none could, they would be offered the “second option.” Under the latter option, an “investor” would be added to the title of the home, to whom the homeowner would make a “rental” payment of an amount allegedly less than their mortgage payment, thereby allowing the homeowner to repair their credit by having the mortgage payments made in a timely fashion. Unfortunately all of this was a scam. The defendants would recruit straw buyers as the “investors” and oftentimes these individuals would in fact replace the homeowners on the titles of the properties without the homeowners’ knowledge. These straw buyers were often friends and family members of the defendants. Once the straw buyer had title to the home, the defendants immediately applied for a mortgage to extract the maximum available equity from the home. The defendants would then share the proceeds of the ill-gotten equity and “rent” being paid by the victim homeowner. When the defendants ultimately would sell the home, stop making the mortgage payment, and/or pursue an eviction proceeding, the victim homeowner was left without their home, equity, or repaired credit.
The following defendants were charged in the February 28, 2008 “Head One” indictment: Charles Head, 33, of La Habra, California; Jeremy Michael Head, 30, of Huntington Beach, California; Elham Assadi, aka Elham Assadi Jouzani, aka Ely Assadi, 30, of Irvine, California; Leonard Bernot, 51, of Laguna Hills, California; Akemi Bottari, 28, of Los Angeles; Joshua Coffman, 29, of North Hollywood; John Corcoran, aka Jack Corcoran, 52, of Anaheim; Sarah Mattson, 27, of Phoenix, Arizona; Domonic McCarns, 33, of Brea, California; Anh Nguyen, 36, of Los Angeles; Omar Sandoval, 32, of Rancho Cucamonga, California; Xochitl Sandoval, 29, of Rancho Cucamonga; Eduardo Vanegas, 28, of Phoenix; Andrwe Vu, 39, of Santa Ana; Justin Wiley, 28, of Irvine; and Kou Yang, 32, of Corona, California.

On March 13, 2008, the federal grand jury returned a five-count indictment in “Head Two” against seven defendants, including Charles Head, John Corcoran, Kou Yang, each also charged in “Head One,” as well as Keith Brotemarkle, 42, of Johnstown, Pennsylvania; Benjamin Budoff, 41, of Colorado Springs, Colorado; Domonic McCarns, 33, of Brea; and Lisa Vang, 24, of Westminster. “Head Two” involved an “equity stripping” scheme, netting approximately $5.9 million in stolen equity from 68 homeowners in states across the nation. While still targeting distressed homeowners and defrauding mortgage lenders through the use of straw buyers, this time Charles Head altered the scheme so that he would receive approximately 97 percent of the stolen equity, while his “sales agents” and employees, and the other defendants, would receive either the remaining 3 percent of equity or a salary from the fraudulently-obtained funding.

Instead of recruiting friends and family members as straw buyers, as in “Head One,” in “Head Two” the defendants recruited strangers via the Internet. They also used referrals from mortgage brokers to identify and solicit new victim homeowners. Beyond advertising on the Internet, the defendants also would send “blast faxes” to mortgage brokers throughout the country and generate mass emails to potential victims. Through material misrepresentations and omissions, victim homeowners would be offered what appeared to be their last best chance to save their homes. Unfortunately, as in “Head One,” these victims also were left without their homes, equity, or repaired credit.

The maximum statutory penalty for conspiracy to commit mail fraud is five years incarceration and a fine. The maximum statutory penalty for conspiracy to commit money laundering is 10 years incarceration and a fine. The maximum statutory violation for mail fraud is 20 years incarceration and a fine. The maximum statutory penalty for bank fraud is 30 years incarceration and a fine. The maximum statutory penalty for identity theft is 15 years incarceration and a fine. The actual sentence, however, will be determined at the discretion of the court after consideration of the Federal Sentencing Guidelines, which take into account a number of variables and any applicable statutory sentencing factors. The charges are only allegations and the defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.

Mortgage Fraud Task Force
In recent months, an Eastern District of California Mortgage Fraud Task Force has been established. This action was taken as a result of the significant increase in reported mortgage fraud as economic conditions and the housing market have worsened. Members of the task force include representatives from the U.S. Attorney’s Office, FBI, IRS-CI, the Department of Housing and Urban Development, the United States Bankruptcy Trustee’s Office, and the California Department of Real Estate.

“Mortgage fraud is a very real problem, both legally and economically. Federal law enforcement here in the Eastern District is fully committed to holding responsible those who in their greed have stolen from their fellow citizens. It is our duty to do all we can to restore faith and confidence in the marketplace by placing these thieves where they belong: in prison.” stated U.S. Attorney Scott.

Drew Parenti, Special Agent in Charge of the Sacramento FBI, said, “Mortgage Fraud has recently been elevated to the FBI’s highest financial crime priority, and we are attempting to address the numerous reports of fraud within the real estate industry that have occurred across the country. We are focusing on the industry professionals, the “insiders” who have manipulated the mortgage loan process for their own financial gain. These investigations are lengthy and complicated but we will work with our law enforcement partners and utilize every resource available to us to ensure these cases are investigated and prosecuted to the extent the law allows.”

Scott O’Briant, Special Agent in Charge of IRS Criminal Investigation said, “Mortgage fraud adds secret dollars to the underground economy that erodes the integrity of our tax system and threatens the financial health of our communities. IRS-CI will continue to utilize its financial investigative expertise to aggressively investigate criminal activities that adversely affect our financial system.”

“These types of crimes create a significant loss of tax revenue, drive buyers into foreclosure, leave lenders burdened with bad loans and neighborhoods with abandoned and deteriorating properties. IRS-CI is committed to pursuing individuals who commit these types of crimes.”

The task force allows for a more targeted, coordinated approach in prioritizing the massive volume of referrals being made to federal and state agencies.
sacramento.fbi.gov


MORTGAGE INVESTMENT FRAUD:

Felony charges filed in massive Utah real estate investment fraud case
By Tom Harvey
The Salt Lake Tribune
Article Last Updated: 02/06/2008 01:42:06 PM MST
Posted: 12:49 PM

Ogden businessman Val E. Southwick was charged in state court today with nine felony charges for allegedly bilking 817 investors out of $140 million in what is described as a massive Ponzi scheme involving a web of real estate development and financing companies.

In a joint action, the federal Securities and Exchange Commission filed a civil complaint today in federal court alleging Southwick engaged in fraud through the creation or use of 150 companies. He allegedly received $180 million from investors, according the SEC, assuring them their money was secured and that the projects were profitable.

“Instead, Southwick operated a massive Ponzi scheme, paying existing note holders with funds from new investors,” the SEC complaint says.

In more than 17 years in business, Southwick raised more than $445 million from banks and professional and unsophisticated investors.

Money from investors often was used to repay other investors and pay Southwick and his family’s living expenses, the SEC said.

Southwick, 62, has been under investigation by state and federal regulators, the IRS and Securities and Exchange Commission since at least 2006. He faces up to 15 years in prison on each felony count. Southwick filed for bankruptcy in federal court through one of his companies, VesCor Capital Inc., in May 2007, about a year after he stopped paying investors promised interest.

According to court testimony, the interlocking companies were used as vehicles through which Southwick or company officers moved funds around to pay investors or bills, depending on which entity had money at the time. Money from investors went into various companies and was used to pay obligations not necessarily related to the manner in which investors were told their funds were to be used.

Among creditors are several hundred Utahans and investors from 29 other states and three foreign countries.
Sltrib.com


HO– USE STEALING:

HO– USE STEALING: The Latest Scam on the Block
03/25/08

What do you get when you combine two popular rackets these days—identity theft and mortgage fraud? A totally new kind of crime: house stealing.

Here’s how it generally works:

… The con artists start by picking out a house to steal—say, YOURS.
… Next, they assume your identity—getting a hold of your name and personal information (easy enough to do off the Internet) and using that to create fake IDs, social security cards, etc.
… Then, they go to an office supply store and purchase forms that transfer property.
… After forging your signature and using the fake IDs, they file these deeds with the proper authorities, and lo and behold, your house is now THEIRS.

There are some variations on this theme…

… Con artists look for a vacant house—say, a vacation home or rental property—and do a little research to find out who owns it. Then, they steal the owner’s identity, go through the same process of transferring the deed, put the empty house on the market, and pocket the profits.
… Or, the fraudsters steal a house a family is still living in…find a buyer (someone, say, who is satisfied with a few online photos)…and sell the house without the family even knowing. In fact, the rightful owners continue right on paying the mortgage for a house they no longer own.

It can get even more complicated than this, as we learned in a recent case out of Los Angeles that we investigated with the IRS. Last year, a real estate business owner in southeast Los Angeles pled guilty to leading a scam that defrauded more than 100 homeowners and lenders out of some $12 million. She promised to help struggling homeowners pay their mortgages by refinancing their loans. Instead, she and her partners in crime used stolen identities or “straw buyers” (people who are paid for the illegal use of their personal information) to purchase these homes. They then pocketed the money they borrowed but never made any mortgage payments. In the process, the true owners lost the title to their homes and the banks were out the money they had loaned to fake buyers.

So how can you  prevent your house from getting stolen? Not easily, we’re sorry to say. The best you can do at this point is to stay vigilant. A few suggestions:

If you receive a payment book or information from a mortgage company that’s not yours, whether your name is on the envelope or not, don’t just throw it away. Open it, figure out what it says, and follow up with the company that sent it.

From time to time, it’s also a good idea to check all information pertaining to your house through your county’s deeds office. If you see any paperwork you don’t recognize or any signature that is not yours, look into it.

House-stealing is not too common at this point, but we’re keeping an eye out for any major cases or developing trends. Please contact us or your local police if you think you’ve been victimized.

Resources:
– Los Angeles investigation press release
– Mortgage Fraud: General overview and statistics
– Related story

Fbi.gov/news/stories/2008/march/housestealing