Mortgage Loan Officers Plead Guilty in $1.8 Million Mortgage Fraud

MINNEAPOLIS—Yesterday in federal court, two mortgage loan officers pleaded guilty to recruiting straw buyers to purchase properties at inflated prices and then distributing the excess loan funds among themselves, the straw buyers, and others involved in the scheme. Chad Arthur Anderson, age 38, and Troy Allen Huston, age 42, both of Chisago City, pleaded guilty to one count of conspiracy to commit mortgage fraud through the use of interstate wires. The two were indicted on April 3, 2012, and entered their pleas before United States District Court Judge Joan N. Ericksen.

In their plea agreements, the defendants admitted that from 2006 through 2007, they recruited others, mainly relatives and friends, to act as straw buyers for the purchase of homes in the Twin Cities. At the time, the men worked as loan officers at Prestige Mortgage, a mortgage brokerage company in White Bear Lake, where they brokered numerous fraudulent mortgage loans by submitting false loan applications to prospective lenders. Anderson admitted to recruiting five straw buyers to purchase 17 homes during the course of the scheme, while Huston admitted to recruiting an unspecified number of buyers to purchase additional homes. The scheme involved a total of 32 homes in Minnesota. The properties involved are located in Otsego, Oak Grove, Elk River, St. Francis, Brooklyn Park, Isanti, St. Paul, Chisago City, Becker, Cambridge, Buffalo, Minneapolis, Zimmerman, and Albertville. All of the mortgage loans involved have gone into default, causing losses to the mortgage lenders that exceed $2.5 million.

At all times relevant to this case, Anderson and Huston were also involved in Lofton Property Management, a property management company in Chisago City. They used Lofton’s name on construction invoices and other statements to obtain loan proceeds for property management services never provided. In addition, they used Lofton’s name on property settlement statements, thereby receiving fraudulent mortgage loan proceeds, which they disbursed among themselves, the straw buyers, and others involved in the scam.

At the same time, Huston was involved in YES Financial, a property finance company in Chisago City. Through that company, he received additional, illicitly acquired loan proceeds. Moreover, he arranged for a colluding appraiser, who offered appraisals to support the inflated prices of the properties. He also prepared false loan applications on behalf of the straw buyers, often overstating their income, misrepresenting their employment, and failing to disclose their other mortgage obligations or the true source of their down payments.

For their crimes, the defendants face a potential maximum penalty of five years in prison. Judge Ericksen will determine their sentences at a future hearing, yet to be scheduled.

This case is the result of an investigation by the Federal Bureau of Investigation. It is being prosecuted by Assistant U.S. Attorney David J. MacLaughlin.

Final Two Defendants in Mortgage Fraud Scheme Sentenced

Former East Grand Rapids Businessman Kevin Grady, Sr. Sentenced to 14 Years’ Imprisonment

GRAND RAPIDS, MI—The last two participants in a multi-million-dollar mortgage loan fraud scheme were sentenced in U.S. District Court today, announced U.S. Attorney Donald A. Davis. Kevin Grady, Sr., 48, of Grand Rapids, Michigan, was sentenced by the Hon. Robert J. Jonker to serve 14 years in prison for his convictions for wire fraud, bank fraud, and making false statements to the FBI. Edward Hessie Sumrell, 55, of Grand Rapids, Michigan, was sentenced to serve three years’ probation for making a false statement to the FBI. Seven other individuals, including a convicted licensed appraiser and a convicted closing agent, testified for the government at the trial of Grady and Sumrell in February of this year. Both were previously sentenced for their roles in conjunction with the same mortgage fraud scheme.

During 2005 and 2006, Grady managed the Grand Rapids office of Sure Financial, a mortgage brokerage business owned and licensed by another individual. The government proved at trial that Grady, and loan officers working at his direction, obtained inflated appraisals and fixed prices with sellers. Grady enticed financially unqualified buyers to purchase the homes by promising them kickbacks of $5,000 to $10,000 per property after the closings. Grady defrauded the mortgage lenders by submitting loan applications that misrepresented the buyers’ places of employment, employment income, assets, and other pertinent information. Grady and his loan officers created or obtained false paystubs, residential leases, tax documents, verifications of employment, and other documentation that was submitted to the lenders to make it appear that the information on the loan applications was truthful. Some of these counterfeit documents were prepared and provided by Sumrell, who was convicted by the jury of lying to the Federal Bureau of Investigation regarding his association with Grady’s office. Judge Jonker stated that Grady’s significant sentence was attributable not only to his blatant and pervasive pattern of fraud, but also to his abusive behavior directed at individuals that he needed to carry out the fraud and who were vulnerable to his intimidation.

Evidence submitted at trial proved that, in less than one year, Grady defrauded mortgage lenders in excess of two million dollars and personally pocketed over $500,000 of the fraudulently obtained loan proceeds, some of which was then used to pay kickbacks to the buyers. Grady also defrauded Key Bank in conjunction with a million-dollar loan that he used to pay off the building on East Paris Avenue where he operated the fraudulent mortgage loan business and Grady Group Properties. Judge Jonker ordered Grady to pay $3,000,000 in restitution to the lending institutions, and he agreed to forfeiture in the amount of $1,181,332. “Mortgage fraud will continue to be vigorously investigated and prosecuted by this office. Pervasive mortgage fraud schemes do not just victimize the mortgage lenders, they victimize our entire community by manipulating the true value of real estate through falsely inflated appraisals, followed by inevitable foreclosure sales at below-market values,” said U.S. Attorney Davis.

The Grand Rapids Resident Agency of the FBI investigated the case.

President of Broward Title and Escrow Company Sentenced in Two Separate Multi-Million-Dollar Mortgage Fraud Schemes

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida; John V. Gillies, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office; Paula Reid, Special Agent in Charge, United States Secret Service, Miami Field Office; and Linda Charity, Interim Commissioner, State of Florida’s Office of Financial Regulation, announced the sentencing of defendant Michelle Austin-Wilks, 38, of Parkland, Florida, for her participation in two separate mortgage fraud schemes in Broward and Palm Beach Counties.

At this morning’s hearing, U.S. District Judge James I. Cohn sentenced Austin-Wilks to 63 months in prison, to be followed by five years of supervised release. Austin-Wilks was also ordered to pay $6,269,547 in restitution to the victims of her fraud. Austin-Wilks previously pled guilty to conspiracy to commit wire fraud, in violation of Title 18, United States Code, Section 1349, and four counts of wire fraud, in violation of Title 18, United States Code, Section 1343, for her participation in the mortgage fraud schemes.

Austin-Wilks participated in two schemes. The first scheme was charged in U.S. v. Gaith Al Nahar et. al, Case No 11-60183-CR-COHN. In that case, from February to November 2007, Ghaith Al Nahar, 40, a mortgage broker, formerly of Boynton Beach, identified residential properties and paid individuals to act as straw buyers for the properties. These straw buyers submitted false loan applications and supporting documents containing false information to various mortgage lenders across the United States. After the lenders approved the loans based on the false information provided, defendant Austin-Wilks, then president and director of Direct Title & Escrow Services Inc., prepared false HUD-1 Settlement Statements that contained false information. For example, the forms falsely represented to the lenders that the straw buyers were bringing their own money to closing. Austin-Wilks also falsely represented to the lenders that she had disbursed the loan proceeds in accordance with the lenders’ instructions. Instead, Austin-Wilks made unauthorized disbursements from the loan proceeds to one of her companies as “processing fees.” Based on these false statements and documents, the mortgage lenders issued more than $9 million in loans.

Ghaith Al Nahar pled guilty and was sentenced on January 27, 2012 to 63 months in prison and was ordered to pay $1,863,109.30 in restitution. An employee at Al Nahar’s office, Romy Defay, 28 of West Palm Beach, also pled guilty and was sentenced on January 27, 2012 to 33 months in prison and was ordered to pay $441,747 in restitution. The straw buyers, Jeffery Gilbert and Philip Jay Newman, pled guilty. Gilbert was sentenced to three years of probation and was ordered to pay $441,747 in restitution. Newman was sentenced to 21 months in prison and was ordered to pay $662,051.42 in restitution.

In the second case, U.S. v. Michelle Austin Wilks, Case No. 12-60054-CR-COHN, defendant Austin-Wilks and others, through Direct Title & Escrow Services Inc., engaged in a scheme to enrich themselves from June to October 2007 by fraudulently buying and selling residential real estate property in Broward County through straw buyers. These straw buyers obtained high value mortgages based on fraudulent mortgage loan applications and closing statements that contained false information. After the lenders approved the loans based on the loan applications, Austin-Wilks prepared HUD-1 Settlement Statements that, among other things, falsely represented to the lenders that the straw buyers were bringing their own money to closing. Austin-Wilks also created and submitted duplicate HUD-1 Settlement Statements for the same real estate transaction to the mortgage lenders, reflecting different sales prices to the seller and to the lender. The lender’s version reflected a significantly higher purchase price than the seller’s version of the HUD-1 Settlement Statement. After closing, the lenders wired a total of approximately $3 million in mortgage loan proceeds into a bank account controlled by Austin-Wilks.

Thereafter, Austin-Wilks made numerous wire transfers, including transfers of $68,562 and $382,000, respectively, to a mortgage broker and a straw buyer for their assistance in the mortgage fraud scheme. The mortgage broker, Jinnie Mathurin, pled guilty to one count of wire fraud and was sentenced on March 7, 2012 to one year and one day in prison, and was ordered to pay $1,170,443.71 in restitution. The straw buyer, Guhier Florvilus, also pled guilty to one count of wire fraud and was sentenced on May 17, 2012, to 14 months in prison and was ordered to pay $1,421,233 in restitution. In addition to these wire transactions, Austin-Wilks was also convicted of two additional wire fraud transactions for two wires sent by national mortgage lenders.

Mr. Ferrer commended the investigative efforts of the FBI, the U.S. Secret Service, and Florida’s Office of Financial Regulation. Mr. Ferrer noted the assistance of the U.S. Marshals Service for their substantial efforts in locating defendant Austin-Wilks in Jamaica and returning her to United States. These cases were prosecuted by Assistant U.S. Attorneys Randy Katz and Armando Rosquete.

Statement on Search Warrants Executed in Midvale, West Valley City

SALT LAKE CITY—Federal law enforcement agencies executed search warrants Tuesday at three locations associated with a business formerly operating under the name “CC Brown Law Office” in Midvale and West Valley City. The business has also operated under other names, including “Sentry Legal,” “WT Lee,” and “JL Martin.” The search warrant is sealed. No criminal charges have been filed in connection with the investigation.

Individuals who have been working with the business on a mortgage modification and who would like information can contact a toll-free number established by the FBI at 1-877-236-8947 (press option 2). The toll-free number will be activated this evening. A recorded message will advise individuals that they can submit contact information and copies of any documents to the FBI by mailing them to the FBI Salt Lake City Division, attention CC Brown Investigation. The FBI’s address is 257 East 200 South, Suite 1200, Salt Lake City, UT 84111.

Individuals can also submit information about the company’s business practices to the FBI by e-mail at saltlakecity@ic.fbi.gov.

The FBI, IRS-Criminal Investigation, and Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) are working together to create a web page to provide an online resource for CC Brown customers. The web page is currently under construction. Anyone interested in the web page can call 1-877-236-8947 (press option 2) for updates on when it will be available.

Several agencies, including the FBI, the Federal Trade Commission, SIGTARP, and the Departments of Treasury and Housing and Urban Development’s Making Home Affordable program, have online resources available to provide information and tips for those looking for consumer advice on mortgage modifications.

Three People to be Arraigned on Time Share Mortgage Fraud Charges in 29-Count Indictment

CAMDEN—Three people from southern New Jersey are being arraigned today on charges of conspiracy to commit mail and wire fraud, mail and wire fraud, and conspiracy to commit money laundering in a $2.6 million time share mortgage fraud, U.S. Attorney Paul J. Fishman announced.

Ashley Lacerda, 32, of Egg Harbor Township, New Jersey; Francis Santore, 52, of Northfield, New Jersey; and Brian Corley, 27, of Egg Harbor, New Jersey, are scheduled to appear before U.S. District Judge Noel L. Hillman in Camden federal court to be arraigned. Four more defendants also charged in the indictment: Adam Lacerda, 28, of Egg Harbor Township, New Jersey; Steven Cox, 48, of Ventnor City, New Jersey; Alfred Giordano, of Hurry County, South Carolina; and Joseph Diventi, 32, of Somers Point, New Jersey, and they are scheduled to be arraigned before Judge Hillman on May 21 at 12:15 p.m.

The seven people listed above and nine others were arrested on April 17, 2012 on a complaint that charged them with conspiracy to commit mail and wire fraud. Additional substantive counts of mail fraud and wire fraud and conspiracy to commit money laundering were added when they were charged by an indictment returned by a federal grand jury May 3, 2012.

The nine other defendants—Ian Resnick, 37, of Absecon, New Jeresy; Ryan E. Bird, 34, of Clementon, New Jersey; Catherine Bannigan, 57, of Egg Harbor Township; Vincent Giordano, 27, of Margate, New Jersey; Joseph Saxon, 38, of St. Thomas, Virgin Islands; Aimee Allen, of Little River, South Carolina; Genevieve Manzoni, 46, of Lake Worth, Florida; Eric Reilly, 33, of Galloway, New Jersey; and Eric K. Reiff, 40, of Williamsburg, Virginia—remain under the charge in the complaint.

According to documents filed in this case and statements made in court:

In July 2010, law enforcement officers began investigating The Vacation Ownership Group, (a/k/a VO Group LLC). The investigation revealed that from at least March 2009 and to September 1, 2011, the defendants, through the VO Group, participated in a fraudulent scheme in which representatives of the VO Group, often using false identities, telephoned owners of timeshare vacation properties purchased from Flagship Resort Development, Wyndham Vacation Resorts Inc., and other timeshare developers. They convinced the owners in some cases to submit money to the VO Group, purportedly to pay off the owners’ “mortgages” on their timeshares. The VO Group claimed that the timeshare owner could pay off the mortgage balance at a substantially reduced amount—often by as much as 50 percent the amount of the owner’s original mortgage—by mailing payment to the VO Group at a post office box in Pleasantville, New Jersey. The VO Group representatives also got timeshare owners to send the VO Group money, purportedly to have timeshares cancelled or sold. After receipt of payments for the VO Group’s “service,” the conspirators caused those payments to be deposited into a bank account in the name of the VO Group. Rather than paying off the timeshare owner’s mortgage, cancelling the owner’s timeshare, or selling the timeshare, the conspirators used the timeshare owner’s money for their personal use.

The investigation also revealed that in an attempt to cover up the scheme, the conspirators in most cases engaged in a “bait and switch” tactic by purchasing an additional timeshare in the victim’s name without the victim’s knowledge. The victim purportedly had assented to the purchase based on documents the VO Group previously emailed to the victim for signature even though the victim had been led to believe he or she was simply paying off the original timeshare mortgage.

During the course of the investigation, law enforcement officers interviewed approximately 225 victims of the conspirators’ scheme identified to date. Many of the victims are elderly. Law enforcement has determined that the conspirators defrauded the victims of more than $2.6 million.

Since the arrests, the VO Group changed its name to VO Financial Corp.

The investigation also revealed that Adam Lacerda, Ashley Lacerda, and Brian Corley sought and received unemployment compensation during the time they were working at the VO Group. The indictment charges them with mail fraud in connection with this related scheme.

The mail and wire fraud conspiracy charge, and mail and wire fraud charges each carry a maximum potential penalty of 20 years in prison and a $250,000 fine. The conspiracy to commit money laundering charge carries a maximum potential penalty of 10 years in prison and a $250,000 fine.

U.S. Attorney Fishman credited special agents from the FBI’s Atlantic City Resident Agency, under the direction of Special Agent in Charge Michael B. Ward in Newark; and special agents from the Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations, under the direction of Special Agent in Charge Robert Panella, New York Region, for their roles in the ongoing investigation. He also thanked the New Jersey Department of Labor, Benefit Payment Control Unit for their assistance.

The government is represented by Assistant U.S. Attorneys R. Stephen Stigall and Alyson M. Oswald of the U.S. Attorney’s Office Criminal Division in Camden.

Anyone who believes they are a victim of the fraud should contact the FBI’s Atlantic City Resident Agency at 609-677-6400.

Former State Trooper Pleads Guilty to Fraud, Witness Tampering

COLUMBUS—Former Ohio State Highway Patrol Trooper Benjamin W. Richardson, 46, of Powell, pleaded guilty in U.S. District Court to an eight-count indictment charging him with mortgage fraud, bankruptcy fraud, and witness tampering.

Carter M. Stewart, United States Attorney for the Southern District of Ohio; Edward J. Hanko, Special Agent in Charge, Federal Bureau of Investigation (FBI), and Anthony Marotta, Assistant Special Agent in Charge, Drug Enforcement Administration (DEA), announced the pleas entered today before U.S. District Judge Gregory L. Frost.

FBI agents arrested Richardson on September 6, 2011 based on similar charges in a criminal complaint. He has been in custody since his arrest. The indictment was returned on September 8, 2011 under seal and has since been unsealed. Richardson was a trooper with the Ohio State Highway Patrol when he was charged and resigned when the charges were returned.

“A federal investigation revealed that Richardson engaged in a scheme to enrich himself and avoid personal liabilities,” an FBI agent testified during the hearing.

Richardson admitted that, in 2005, he engaged in a conspiracy to defraud mortgage lending institutions out of $678,275 in loans by means of false and fraudulent pretenses involving three properties he was buying and the refinancing of his own home. Richardson also admitted to falsely under-reporting his income when he filed for bankruptcy in 2007 by not disclosing income he received from a nightclub he owned at the time.

Richardson pleaded guilty to one count of conspiracy to commit wire fraud and four counts of wire fraud. Each crime is punishable by up to 30 years in prison. He also pleaded guilty to two counts of making false statements and false oaths in bankruptcy. Each count is punishable by up to five years in prison. Richardson also pleaded guilty to one count of witness tampering for attempting to prevent a witness from talking with law enforcement during the investigation. Witness tampering is punishable by up to 20 years in prison.

Stewart commended the cooperative investigation of this case by FBI and DEA agents, and Assistant U.S. Attorneys Doug Squires and Laura Denton, who are prosecuting the case.

Judge Frost will schedule a date for sentencing.