WHITE CITY — Police are asking the public to be aware of a man involved in a mortgage scam that has cost at least one White City resident $300 and opened her up to identity theft.
A White City woman was approached recently by a man claiming to work for a mortgage "watchdog" group. The suspect said he could look over mortgage paperwork to spot potential errors that could save the buyer thousands of dollars, Jackson County Detective Sgt. Colin Fagan said.
"He charges a $300 fee for this bogus service," Fagan said. "Also, he takes the paperwork with him and does not return."
The suspect said he was affiliated with a local mortgage lender. Detectives believe he may have visited the company and made away with several business cards, which he displayed to the victim, Fagan said.
Mortgage paperwork gives a criminal a wealth of financial information that could be used to drain a bank account or open credit cards in the victim's name, Fagan said.
"Mortgage papers contain your social security number, full name and date of birth," Fagan said. "That's all an identity thief needs to get started. People under foreclosure are vulnerable to begin with and this is the last thing they need."
Police believe the suspect is Bart Arthur Blahosky, 50, who has a long history of fraud spread over Utah, Nevada and Idaho.
"Our victim said he was dressed very nicely and sounded like a lawyer," Fagan said.
Blahosky is described as a white male, standing 5 feet 11 inches tall and weighing 170 pounds. The picture is from his a recent Oregon drivers license, Fagan said.
"We know of only one victim in our area so far, but there could me more," Fagan said.
By Chris Conrad
Showing posts with label Mortgage Fraud. Show all posts
Showing posts with label Mortgage Fraud. Show all posts
Saturday, July 12, 2008
Wednesday, July 9, 2008
Foreclosures bringing cases of fraud to light - signonsandiego.com – 8 Jul 2008
Last year, an Orange County man was rejected for a personal loan at his credit union. To his surprise, his credit report had been red-flagged because he was six months behind on mortgage payments on a $660,000 home in Oceanside.
That was news to him. He had never bought a house in Oceanside.
So he contacted police, who uncovered that his identity had been stolen to make the purchase in October 2006.
Now the home on Overlook Drive is in foreclosure. The real estate agent involved in the deal, Robert Hugh Decker, is in custody in San Diego. Prosecutors allege that Decker's company was paid nearly $37,000 in commissions and that he was collecting $1,800 per month in rent from tenants.
The charges against Decker highlight the seamy side to the mortgage meltdown. Industry experts say the same lax lending standards that lured home buyers to stretch beyond their means created a fertile petri dish for real estate fraud.
Law enforcement officials say a host of real estate shenanigans sprouted during the housing boom. The most prevalent – and least likely to be prosecuted – involved fudging income on loan applications. Other buyers fibbed about whether they would occupy the home or rent it.
Some schemes were more complicated and nefarious. They often involved inflated appraisals, zero-down financing and grossly false information on loan documents. In these scams, the idea was not to own the property long-term but instead to siphon off as much money as possible from commissions, rental income or undisclosed cash kickbacks before letting the home fall into foreclosure.
“Many people just assume these foreclosures are part of the subprime meltdown,” said Todd Lackner, a real estate appraiser in San Diego. “This is not true. These properties were purchased with the intention of being foreclosed on.”
More of these cases are coming to light as the foreclosure crisis deepens. Last month, federal prosecutors charged six people from a downtown San Diego mortgage and real estate firm with wire fraud as part of a nationwide crackdown on bogus real estate transactions.
The probe, called Operation Malicious Mortgage, resulted in more than 400 indictments nationwide. The Justice Department and FBI estimate losses from the schemes at more than $1billion.
In Oceanside, Decker is one of a handful of people charged by state prosecutors in connection with the Overlook Drive property and two additional home purchases. The four other people, all of whom have pleaded guilty, include notaries, a mortgage broker and an Orange County chiropractor who provided the personal information of two patients whose identities were stolen, said San Diego Deputy District Attorney Stephen Robinson, who is prosecuting the case.
The investigation is continuing, and at least two additional foreclosure homes may be involved, authorities said.
Decker's attorney, Charles Guthrie, said that his client is innocent and that those who pleaded guilty are pointing fingers to escape tougher treatment.
“Mr. Decker is an honest man,” Guthrie said. “He wants to go to trial . . . We're looking for specifics. We want to see what they say Mr. Decker did.”
Who gets hurt by mortgage fraud? Lenders, of course, often lose money when they foreclose on a house. Identity-theft victims can spend months or years trying to repair their credit scores.
But there's also a wider impact. Real estate experts say that suspicious deals helped inflate property values during the boom and that the foreclosures are fueling a faster fall in values in today's market.
One example occurred in Mission Hills. In October 2005, a roughly 1,400-square-foot home was listed for $1 million. It didn't sell. In early April 2006, it was relisted for $989,000. A month later, the price was raised to $1.3 million.
It went into escrow for $1.25 million two days after the price increase. The buyer purchased it with zero-down financing, according to deed records.
The lender foreclosed on the home in October. The bank resold it in April. The price: $640,000.
Lackner, the real estate appraiser, has unearthed about 1,500 such unusual sales in San Diego County. He began researching questionable real estate deals about a year ago after stumbling across some suspect, high-priced purchases.
“As an appraiser, I'm asked if properties in Mission Hills have decreased 50 percent in value like this one,” Lackner said. “My answer is no. This property was never worth $1.25 million.”
In San Diego County, home prices have tumbled 26.5 percent since their peak in November 2005, according to La Jolla-based DataQuick, a real estate research firm.
Buyers who lied about income or occupancy on loan applications also are contributing to the price plunge, said lawyer Ann Fulmer, a vice president with Atlanta-based Interthinx, which provides fraud-detection services to lenders. Today's tougher lending standards make it harder to fudge information when trying to refinance these loans, so the buyers are walking away in many cases, she said.
During the end of the housing boom – from 2006 to early 2007 – the climate was particularly sunny for these questionable transactions. No-documentation loans and stated-income “liar” loans were plentiful.
One scheme used during the boom years was cash back in which the buyer gets a kickback from the seller after the loan closes. Cash back is not illegal if everyone, including lenders, knows it's happening.
Cash-back schemes sometimes involve “straw buyers” – witting or unwitting accomplices whose names are used to purchase a home. If straw buyers know what's going on, they often get a fee.
In March 2006, Shamika Copenhagen purchased a $1.5 million home in Eastlake using zero-down financing, federal prosecutors said. Creative Financial Services of San Diego arranged the loan. The application claimed Copenhagen made $337,000 a year working for U.S. Mergers, a company prosecutors say “does not exist as a functioning entity.”
When the sale was completed, the lender paid Creative Financial $38,000 in commissions for arranging the loan.
The seller, however, also wrote a $200,000 check to Said Betech of Creative Financial, prosecutors said. The purpose of the $200,000 was not disclosed on any documents associated with the transaction, said Assistant U.S. Attorney Christopher Alexander, who is prosecuting Betech and several others in the case.
A couple of weeks later, one of Betech's colleagues at Creative Financial wrote a $15,000 check to Copenhagen, prosecutors say.
The lender foreclosed on the 3,800-square-foot house in March 2007. It sold a year later for $700,000.
Betech's lawyer could not be reached for comment; Copenhagen is not among those charged.
Federal prosecutors examined 21 suspicious home sales linked to Creative Financial. So far, 18 have been taken back by lenders or are in the process of foreclosure.
More arrests could be coming, police said. One case under investigation involves five condos in San Diego – three downtown, one in La Jolla and another in Rancho Santa Fe – that were purchased between May and October 2006 in the name of a Pennsylvania man for more than $3 million combined.
The unwitting buyer is a mechanic who lives in a manufactured home, police said. All of the condos have been foreclosed, and San Diego police have a suspect. The San Diego Union-Tribune is not using names because the investigation is continuing.
This sordid side of the housing meltdown is increasingly getting the attention of policymakers and law enforcement. A recent report by the Mortgage Bankers Association ranked California fourth nationally for incidents of mortgage fraud – behind Florida, Nevada and Michigan.
In part because the loans are big, losses related to real estate fraud amount to $6 billion a year, according to a study by BasePoint Analytics, a Carlsbad company that makes mortgage-fraud-detection software for lenders and investors in mortgage-backed securities.
“Looking back to 2004 when we got into it, it was seen as a pretty small problem” by the mortgage industry, said Frank McKenna, chief fraud strategist with BasePoint. “But at $6 billion a year, you're looking at something that's three times the size of credit card fraud.”
That was news to him. He had never bought a house in Oceanside.
So he contacted police, who uncovered that his identity had been stolen to make the purchase in October 2006.
Now the home on Overlook Drive is in foreclosure. The real estate agent involved in the deal, Robert Hugh Decker, is in custody in San Diego. Prosecutors allege that Decker's company was paid nearly $37,000 in commissions and that he was collecting $1,800 per month in rent from tenants.
The charges against Decker highlight the seamy side to the mortgage meltdown. Industry experts say the same lax lending standards that lured home buyers to stretch beyond their means created a fertile petri dish for real estate fraud.
Law enforcement officials say a host of real estate shenanigans sprouted during the housing boom. The most prevalent – and least likely to be prosecuted – involved fudging income on loan applications. Other buyers fibbed about whether they would occupy the home or rent it.
Some schemes were more complicated and nefarious. They often involved inflated appraisals, zero-down financing and grossly false information on loan documents. In these scams, the idea was not to own the property long-term but instead to siphon off as much money as possible from commissions, rental income or undisclosed cash kickbacks before letting the home fall into foreclosure.
“Many people just assume these foreclosures are part of the subprime meltdown,” said Todd Lackner, a real estate appraiser in San Diego. “This is not true. These properties were purchased with the intention of being foreclosed on.”
More of these cases are coming to light as the foreclosure crisis deepens. Last month, federal prosecutors charged six people from a downtown San Diego mortgage and real estate firm with wire fraud as part of a nationwide crackdown on bogus real estate transactions.
The probe, called Operation Malicious Mortgage, resulted in more than 400 indictments nationwide. The Justice Department and FBI estimate losses from the schemes at more than $1billion.
In Oceanside, Decker is one of a handful of people charged by state prosecutors in connection with the Overlook Drive property and two additional home purchases. The four other people, all of whom have pleaded guilty, include notaries, a mortgage broker and an Orange County chiropractor who provided the personal information of two patients whose identities were stolen, said San Diego Deputy District Attorney Stephen Robinson, who is prosecuting the case.
The investigation is continuing, and at least two additional foreclosure homes may be involved, authorities said.
Decker's attorney, Charles Guthrie, said that his client is innocent and that those who pleaded guilty are pointing fingers to escape tougher treatment.
“Mr. Decker is an honest man,” Guthrie said. “He wants to go to trial . . . We're looking for specifics. We want to see what they say Mr. Decker did.”
Who gets hurt by mortgage fraud? Lenders, of course, often lose money when they foreclose on a house. Identity-theft victims can spend months or years trying to repair their credit scores.
But there's also a wider impact. Real estate experts say that suspicious deals helped inflate property values during the boom and that the foreclosures are fueling a faster fall in values in today's market.
One example occurred in Mission Hills. In October 2005, a roughly 1,400-square-foot home was listed for $1 million. It didn't sell. In early April 2006, it was relisted for $989,000. A month later, the price was raised to $1.3 million.
It went into escrow for $1.25 million two days after the price increase. The buyer purchased it with zero-down financing, according to deed records.
The lender foreclosed on the home in October. The bank resold it in April. The price: $640,000.
Lackner, the real estate appraiser, has unearthed about 1,500 such unusual sales in San Diego County. He began researching questionable real estate deals about a year ago after stumbling across some suspect, high-priced purchases.
“As an appraiser, I'm asked if properties in Mission Hills have decreased 50 percent in value like this one,” Lackner said. “My answer is no. This property was never worth $1.25 million.”
In San Diego County, home prices have tumbled 26.5 percent since their peak in November 2005, according to La Jolla-based DataQuick, a real estate research firm.
Buyers who lied about income or occupancy on loan applications also are contributing to the price plunge, said lawyer Ann Fulmer, a vice president with Atlanta-based Interthinx, which provides fraud-detection services to lenders. Today's tougher lending standards make it harder to fudge information when trying to refinance these loans, so the buyers are walking away in many cases, she said.
During the end of the housing boom – from 2006 to early 2007 – the climate was particularly sunny for these questionable transactions. No-documentation loans and stated-income “liar” loans were plentiful.
One scheme used during the boom years was cash back in which the buyer gets a kickback from the seller after the loan closes. Cash back is not illegal if everyone, including lenders, knows it's happening.
Cash-back schemes sometimes involve “straw buyers” – witting or unwitting accomplices whose names are used to purchase a home. If straw buyers know what's going on, they often get a fee.
In March 2006, Shamika Copenhagen purchased a $1.5 million home in Eastlake using zero-down financing, federal prosecutors said. Creative Financial Services of San Diego arranged the loan. The application claimed Copenhagen made $337,000 a year working for U.S. Mergers, a company prosecutors say “does not exist as a functioning entity.”
When the sale was completed, the lender paid Creative Financial $38,000 in commissions for arranging the loan.
The seller, however, also wrote a $200,000 check to Said Betech of Creative Financial, prosecutors said. The purpose of the $200,000 was not disclosed on any documents associated with the transaction, said Assistant U.S. Attorney Christopher Alexander, who is prosecuting Betech and several others in the case.
A couple of weeks later, one of Betech's colleagues at Creative Financial wrote a $15,000 check to Copenhagen, prosecutors say.
The lender foreclosed on the 3,800-square-foot house in March 2007. It sold a year later for $700,000.
Betech's lawyer could not be reached for comment; Copenhagen is not among those charged.
Federal prosecutors examined 21 suspicious home sales linked to Creative Financial. So far, 18 have been taken back by lenders or are in the process of foreclosure.
More arrests could be coming, police said. One case under investigation involves five condos in San Diego – three downtown, one in La Jolla and another in Rancho Santa Fe – that were purchased between May and October 2006 in the name of a Pennsylvania man for more than $3 million combined.
The unwitting buyer is a mechanic who lives in a manufactured home, police said. All of the condos have been foreclosed, and San Diego police have a suspect. The San Diego Union-Tribune is not using names because the investigation is continuing.
This sordid side of the housing meltdown is increasingly getting the attention of policymakers and law enforcement. A recent report by the Mortgage Bankers Association ranked California fourth nationally for incidents of mortgage fraud – behind Florida, Nevada and Michigan.
In part because the loans are big, losses related to real estate fraud amount to $6 billion a year, according to a study by BasePoint Analytics, a Carlsbad company that makes mortgage-fraud-detection software for lenders and investors in mortgage-backed securities.
“Looking back to 2004 when we got into it, it was seen as a pretty small problem” by the mortgage industry, said Frank McKenna, chief fraud strategist with BasePoint. “But at $6 billion a year, you're looking at something that's three times the size of credit card fraud.”
Sunday, June 22, 2008
400 charged as U.S. cracks down on mortgage fraud
WASHINGTON -- With Wall Street executives handcuffed and paraded in front of TV cameras and dozens of alleged mortgage scam artists arrested in cities nationwide, the penalty phase of the mortgage meltdown has begun in earnest.
The Justice Department said Thursday that more than 400 real estate industry players, including dozens in recent days, had been charged since March in a federal crackdown on incidents of mortgage fraud that have contributed to the housing crisis. Those arrested included brokers, appraisers, bankers and lenders.
The announcement came on the same day that two former hedge fund managers at Bear Stearns Cos. were arrested on suspicion of misleading investors about a fund that invested in sub-prime loans and collapsed at a cost to investors of $1.4 billion.
The executives became the first Wall Street figures to be charged criminally in the wake of the sub-prime debacle. The charges against them could be a road map for authorities to hold other Wall Street executives to account.
The FBI estimated the losses to homeowners and other borrowers who were victims of mortgage fraud at more than $1 billion. That is a small fraction of the near $1 trillion in losses worldwide that have been chalked up to the U.S. mortgage fiasco, and federal officials said the number of cases under investigation continues to grow rapidly.
California has been a center of mortgage fraud. On Thursday, Justice Department officials in Los Angeles announced the formation of a nine-agency task force to target those crimes.
"Whether committed by unscrupulous lenders, real estate professionals or desperate homeowners, mortgage fraud affects all of us," said Thomas P. O'Brien, the U.S. attorney in Los Angeles. "Defaults on inflated loans and resulting foreclosures impose huge monetary and social costs, as well as making it more expensive for everyone to obtain credit."
In Washington, FBI Director Robert S. Mueller III said the number of cases of possible mortgage fraud the bureau was investigating had doubled in the last three years to more than 1,400 as of May 31.
"To persons who . . . are involved in such schemes, we will find you. You will be investigated and you will be prosecuted," he said. "To those who would contemplate . . . engaging in such schemes, you will spend time in jail. That is the message we're sending out."
Kevin Stein, associate director of the San Francisco-based California Reinvestment Coalition, said he welcomed the federal crackdown but that it may have come too late "for the thousands upon thousands of borrowers who have been victimized by mortgage fraud."
Robert Gnaizda, policy director for the Greenlining Institute in Berkeley, said he feared the government would seek to make examples of mortgage brokers when the true culprits were the lenders and Wall Street firms he said had provided loans they knew were unaffordable in the long run.
"Mortgage brokers only did what financial institutions allowed them to do," Gnaizda said.
FBI officials said their "Operation Malicious Mortgage" focused on individual cases and smaller crime rings. The agency said it was also probing 19 companies, including investment banks and hedge funds, that may have engaged in accounting fraud or other crimes related to mortgage securities.
FBI officials also said they were investigating cases in which gangs and organized crime are suspected of mortgage fraud. "It is a means by which individuals could launder their money," said Sharon Ormsby, chief of the FBI's financial crimes section.
Prosecutors said their crackdown resulted in 60 arrests on Wednesday alone, including in Chicago, Miami and Houston. Mueller said the FBI had seized more than $60 million in assets as part of the sweep, including luxury cars, speedboats and a helicopter.
The 400 cases cover a range of mortgage scams, the officials said. The defendants include a suburban Washington couple charged with running a $35-million fraudulent foreclosure rescue operation called the Metropolitan Money Store.
The firm allegedly used fake buyers to take control of homes while promising the homeowners they could continue living there and buy back their property after a year, when they were back on their feet. But Metropolitan allegedly took out loans against the value of the homes, burying them further in debt and making it impossible for the former owners to reclaim them.
Joy Jackson, president of the Metropolitan Money Store of Lanham, Md., and her husband, Kurt Fordham, were arrested last week in North Carolina. Prosecutors allege that Jackson, Fordham and six other defendants used money from the elaborate scheme to pay for a lavish lifestyle that included luxury cars, houses, jewelry, fur coats and travel.
Investigators' suspicions grew after Jackson and Fordham threw a wedding reception at the Mayflower Hotel in Washington for 360 guests. Jackson reportedly told friends that the event, with lobster and Cristal champagne on the menu and singer Patti LaBelle entertaining, cost nearly $800,000.
In Los Angeles, federal authorities said their new SCAM task force (which stands for Southern California Mortgage) would include the U.S. attorney's office, the IRS, the U.S. Postal Inspection Service and the Small Business Administration, among other agencies.
It will focus on two types of cases, "fraud for profit" and "fraud for housing," the FBI said.
The first category accounts for about 80% of all mortgage fraud and involves such schemes as skimming equity or borrowing against falsely inflated property values -- scams often carried out by several players working in concert. Fraud-for-housing schemes are perpetrated solely by borrowers who acquire and maintain real estate under false pretenses.
In what prosecutors believe to be the largest fraud-for-profit case in California history, two well-known Beverly Hills real estate agents are accused of conspiring with others to secure $142 million in loans by falsely inflating the values of homes in exclusive enclaves of Northern and Southern California.
Prosecutors say the losses to two lenders, including Lehman Bros. Bank, exceeded $40 million.
Former star agents Joseph Babajian and Kyle Grasso have pleaded not guilty to a raft of charges, including conspiracy, loan fraud and money laundering. They are scheduled for trial in October.
Seven other people have pleaded guilty and await sentencing, including developers Charles Elliott Fitzgerald and Mark Alan Abrams.
Fitzgerald, who fled the country in 2003 and was later arrested in Samoa, has admitted to reaping at least $5 million from the fraud. He faces a mandatory 10-year sentence on one of the charges, conducting a continuing criminal enterprise, said Assistant U.S. Atty. Jeremy D. Matz, one of the prosecutors.
"The fraud in this case lasted from 1999 to 2003," Matz said. "Those were some really, obviously plum years for real estate, especially in California, where the market was taking off."
Lenders, meanwhile, have been accused repeatedly of cheating borrowers. Ameriquest Mortgage Co. of Orange settled with 49 states in 2006 by agreeing to pay $325 million and clean up its lending practices.
New Century Financial Corp. of Irvine, which had been the largest independent sub-prime lender until it collapsed into bankruptcy, has told shareholders it is under federal criminal investigation. The probe centers on allegations that its top executives made millions of dollars exercising stock options while failing to warn how quickly the loans they had sold to Wall Street were going sour. Through attorneys, the executives have denied wrongdoing.
Investigators also have focused on Countrywide Financial Corp., the No. 1 home lender. The Securities and Exchange Commission, the U.S. attorney in Los Angeles and the state attorney general's office have told The Times they were conducting separate probes of the Calabasas company. Countrywide was near collapse in January, when it agreed to be sold to Bank of America Corp.
Denying that it acted improperly, the company has said it was cooperating with investigators.
By Richard B. Schmitt, Kim Christensen and E. Scott Reckard, Los Angeles Times Staff Writers
The Justice Department said Thursday that more than 400 real estate industry players, including dozens in recent days, had been charged since March in a federal crackdown on incidents of mortgage fraud that have contributed to the housing crisis. Those arrested included brokers, appraisers, bankers and lenders.
The announcement came on the same day that two former hedge fund managers at Bear Stearns Cos. were arrested on suspicion of misleading investors about a fund that invested in sub-prime loans and collapsed at a cost to investors of $1.4 billion.
The executives became the first Wall Street figures to be charged criminally in the wake of the sub-prime debacle. The charges against them could be a road map for authorities to hold other Wall Street executives to account.
The FBI estimated the losses to homeowners and other borrowers who were victims of mortgage fraud at more than $1 billion. That is a small fraction of the near $1 trillion in losses worldwide that have been chalked up to the U.S. mortgage fiasco, and federal officials said the number of cases under investigation continues to grow rapidly.
California has been a center of mortgage fraud. On Thursday, Justice Department officials in Los Angeles announced the formation of a nine-agency task force to target those crimes.
"Whether committed by unscrupulous lenders, real estate professionals or desperate homeowners, mortgage fraud affects all of us," said Thomas P. O'Brien, the U.S. attorney in Los Angeles. "Defaults on inflated loans and resulting foreclosures impose huge monetary and social costs, as well as making it more expensive for everyone to obtain credit."
In Washington, FBI Director Robert S. Mueller III said the number of cases of possible mortgage fraud the bureau was investigating had doubled in the last three years to more than 1,400 as of May 31.
"To persons who . . . are involved in such schemes, we will find you. You will be investigated and you will be prosecuted," he said. "To those who would contemplate . . . engaging in such schemes, you will spend time in jail. That is the message we're sending out."
Kevin Stein, associate director of the San Francisco-based California Reinvestment Coalition, said he welcomed the federal crackdown but that it may have come too late "for the thousands upon thousands of borrowers who have been victimized by mortgage fraud."
Robert Gnaizda, policy director for the Greenlining Institute in Berkeley, said he feared the government would seek to make examples of mortgage brokers when the true culprits were the lenders and Wall Street firms he said had provided loans they knew were unaffordable in the long run.
"Mortgage brokers only did what financial institutions allowed them to do," Gnaizda said.
FBI officials said their "Operation Malicious Mortgage" focused on individual cases and smaller crime rings. The agency said it was also probing 19 companies, including investment banks and hedge funds, that may have engaged in accounting fraud or other crimes related to mortgage securities.
FBI officials also said they were investigating cases in which gangs and organized crime are suspected of mortgage fraud. "It is a means by which individuals could launder their money," said Sharon Ormsby, chief of the FBI's financial crimes section.
Prosecutors said their crackdown resulted in 60 arrests on Wednesday alone, including in Chicago, Miami and Houston. Mueller said the FBI had seized more than $60 million in assets as part of the sweep, including luxury cars, speedboats and a helicopter.
The 400 cases cover a range of mortgage scams, the officials said. The defendants include a suburban Washington couple charged with running a $35-million fraudulent foreclosure rescue operation called the Metropolitan Money Store.
The firm allegedly used fake buyers to take control of homes while promising the homeowners they could continue living there and buy back their property after a year, when they were back on their feet. But Metropolitan allegedly took out loans against the value of the homes, burying them further in debt and making it impossible for the former owners to reclaim them.
Joy Jackson, president of the Metropolitan Money Store of Lanham, Md., and her husband, Kurt Fordham, were arrested last week in North Carolina. Prosecutors allege that Jackson, Fordham and six other defendants used money from the elaborate scheme to pay for a lavish lifestyle that included luxury cars, houses, jewelry, fur coats and travel.
Investigators' suspicions grew after Jackson and Fordham threw a wedding reception at the Mayflower Hotel in Washington for 360 guests. Jackson reportedly told friends that the event, with lobster and Cristal champagne on the menu and singer Patti LaBelle entertaining, cost nearly $800,000.
In Los Angeles, federal authorities said their new SCAM task force (which stands for Southern California Mortgage) would include the U.S. attorney's office, the IRS, the U.S. Postal Inspection Service and the Small Business Administration, among other agencies.
It will focus on two types of cases, "fraud for profit" and "fraud for housing," the FBI said.
The first category accounts for about 80% of all mortgage fraud and involves such schemes as skimming equity or borrowing against falsely inflated property values -- scams often carried out by several players working in concert. Fraud-for-housing schemes are perpetrated solely by borrowers who acquire and maintain real estate under false pretenses.
In what prosecutors believe to be the largest fraud-for-profit case in California history, two well-known Beverly Hills real estate agents are accused of conspiring with others to secure $142 million in loans by falsely inflating the values of homes in exclusive enclaves of Northern and Southern California.
Prosecutors say the losses to two lenders, including Lehman Bros. Bank, exceeded $40 million.
Former star agents Joseph Babajian and Kyle Grasso have pleaded not guilty to a raft of charges, including conspiracy, loan fraud and money laundering. They are scheduled for trial in October.
Seven other people have pleaded guilty and await sentencing, including developers Charles Elliott Fitzgerald and Mark Alan Abrams.
Fitzgerald, who fled the country in 2003 and was later arrested in Samoa, has admitted to reaping at least $5 million from the fraud. He faces a mandatory 10-year sentence on one of the charges, conducting a continuing criminal enterprise, said Assistant U.S. Atty. Jeremy D. Matz, one of the prosecutors.
"The fraud in this case lasted from 1999 to 2003," Matz said. "Those were some really, obviously plum years for real estate, especially in California, where the market was taking off."
Lenders, meanwhile, have been accused repeatedly of cheating borrowers. Ameriquest Mortgage Co. of Orange settled with 49 states in 2006 by agreeing to pay $325 million and clean up its lending practices.
New Century Financial Corp. of Irvine, which had been the largest independent sub-prime lender until it collapsed into bankruptcy, has told shareholders it is under federal criminal investigation. The probe centers on allegations that its top executives made millions of dollars exercising stock options while failing to warn how quickly the loans they had sold to Wall Street were going sour. Through attorneys, the executives have denied wrongdoing.
Investigators also have focused on Countrywide Financial Corp., the No. 1 home lender. The Securities and Exchange Commission, the U.S. attorney in Los Angeles and the state attorney general's office have told The Times they were conducting separate probes of the Calabasas company. Countrywide was near collapse in January, when it agreed to be sold to Bank of America Corp.
Denying that it acted improperly, the company has said it was cooperating with investigators.
By Richard B. Schmitt, Kim Christensen and E. Scott Reckard, Los Angeles Times Staff Writers
Monday, June 9, 2008
Mortgage fraud burgeoning with new twists - sfgate.com - 08 Jun 2008
Good news. There are no new mortgage frauds. But the bad news is that the old schemes are becoming more intricate, and the criminals who work them are more active then ever.
"Mortgage fraud is so easy, even a caveman can do it," says Scott Broshears, the FBI's mortgage fraud coordinator.
No wonder fraud has become the F-word in the home loan business.
The Financial Crimes Enforcement Network fielded nearly 15,000 mortgage-related suspicious activity reports in the first quarter of fiscal 2008, which ended Dec. 31. And Special Agent Broshears expects the pace to quicken.
"We'll get over 60,000" suspicious activity reports this year, he said at a recent conference in Chicago. By comparison, the agency received a record 46,700 reports in fiscal year '07, up from 35,600 in '06.
The FBI's estimate jibes with a letter the Mortgage Bankers Association sent to members warning that mortgage fraud is "a burgeoning crime." But the number of reports is probably only the tip of the fraud iceberg because only federally regulated institutions must file them, whereas the bulk of all home loans are made by lenders not required to comply with the government dictum.
Swindles more complex
Still, the basic scams haven't changed, said Ann Fulmer, industry relations manager at Interthinx, an Agoura Hills (Los Angeles County) firm that helps lenders flag fraudulent loans. "The same old (stuff) has been going on forever."
But the swindles are growing more complex, according to MBA Chairman-elect David Kittle, president of Principle Wholesale Lending. "The deviousness of the schemes continues to evolve," he said.
Like builder bailouts to move remaining inventory. Under the old scam, builders, using inflated appraisals, would sell a $100,000 house for $120,000 and use the extra money to fund the buyers' down payments and closing costs. Now they are offering all kinds of "lavish (buyer) incentives" they hide from lenders.
Builders used to give away microwaves. Now, says Jenny Brawley, fraud investigations manager at Freddie Mac, they give away cars, swimming pools, two years' worth of homeowner association dues, four years of mortgage payments, even five years of guaranteed rental income.
Gifts inflate prices
These incentives not only are built into the inflated purchase price, they are not disclosed to the loan officer or the appraiser. "In fact," says Brawley, "there is an organized effort to conceal them" from lenders, who end up providing loans for more than the property is worth.
The fraud specialist also is seeing a lot more involvement in these types of schemes from real estate agents. "They're the ones shopping these loans to lenders," she said.
Rescue scams aimed at owners facing foreclosure also have a new twist. Under the old ruse, troubled owners are tricked into signing their homes over to the perpetrator with the promise that they will be able to get their homes back when they get back on track.
Owners are told to make their payments to the con man, who will forward them to the lender. But the con man never makes any payments. Instead, he collects money from the hapless owner and the house eventually goes into foreclosure.
Now the scam artists are going a step further. Rather than simply let the house go back to the lender, they are selling it to an unsuspecting buyer who uses another lender. Now, they are collecting "rent" from the original owner and a payoff from the sale of a house they took under false pretenses.
Now comes 'puffing'
Then there's "puffing," a new wrinkle on the flipping scam. Instead of buying a house on the cheap from a seller who wants out desperately and selling it an inflated price the next day, the drifter offers to buy the place at an inflated price with the buyer agreeing to kick back the difference at closing. Now the con collects on both ends, says John Gray, a fraud prevention specialist at Bear Stearns, the Wall Street investment banking company: Once when he buys and again when he sells.
Phony investment clubs also are growing in popularity. Gray says, "I can't tell you the number of deals we see" in which investors are lured into joining with others to put their money into buying houses at distress-sale prices with the promise of big rewards when the houses are sold.
Of course, the houses are never purchased. But if they are, they are sold at inflated values to fictitious buyers. So now, the thief not only has money from the unsuspecting investors, he pockets the proceeds from the sale as well. "It's amazing," said Gray. "Guys are coming in through the front door and again through the back door."
Another disturbing trend: Organized crime is using mortgage fraud to pad its bank accounts and launder gains from other illegal enterprises.
Traditionally, fraud has been used to obtain houses, says Merle Sharick, vice president of the Mortgage Asset Research Institute, which provides information services and helps prevent fraud.
Sharick is still seeing a lot of that, perhaps more so than anyone ever believed.
Housing fraud - fibbing on loan applications, overstating incomes, faking employment histories and making other false statements in order to qualify for the would-be borrower's dream house - "is a much bigger deal than we thought it was," Sharick said.
But John Arterberry, executive deputy chief in the Justice Department's fraud section, says now, even street gangs have discovered the mortgage sector and are manipulating it to the tune of billions of dollars.
"Organized crime is always looking for an opportunity," Arterberry says. "It's incredible how good their radar is. If they find a chance, they are going to exploit it."
Gray of Bear Stearns says mortgage fraud was always pretty much a white collar crime. But now he, too, is seeing more perpetrators with violent criminal histories like assault or even attempted murder.
"We never used to see this," he says. "But now this is the best place to make money."
No one knows for sure how much all this is costing lenders and investors. But the tab is probably far higher than the authorities believe. Broshears, the FBI's point man on mortgage fraud, estimated that the feds' investigation is likely to uncover some $3 billion in mortgage losses. Previous government estimates have put losses somewhere from $1 billion to $2 billion.
But analysts at Interthinx, the California fraud detection company, recently called into question some $11 billion in loan applications - just from its own clients. The analysts found more than 42,000 applications in the second half of last year that contained significant misrepresentations of the borrowers' incomes. The questionable applications were from borrowers who submitted applications to more than one lender and said their incomes had jumped more than 15 percent over a prescribed period.
Lew Sichelman is a Washington, D.C., freelance writer
Wednesday, May 21, 2008
Businessman charged with $4.1m fraud - ABC News - 21 May 2008
A Sydney businessman accused of fraudulently obtaining loans and investments worth more than $4.1 million has been charged
About two years ago, fraud squad detectives started investigating complaints from several people who claimed their Certificates of Title for Land had been used without permission to obtain loans.
The 46-year-old, who works in the finance sector, turned himself in at Parramatta Police Station about 12:30pm (AEST) yesterday.
He was charged with 26 offences and refused bail to face Parramatta Local Court this afternoon.
Police say their investigation is continuing.
About two years ago, fraud squad detectives started investigating complaints from several people who claimed their Certificates of Title for Land had been used without permission to obtain loans.
The 46-year-old, who works in the finance sector, turned himself in at Parramatta Police Station about 12:30pm (AEST) yesterday.
He was charged with 26 offences and refused bail to face Parramatta Local Court this afternoon.
Police say their investigation is continuing.
Tuesday, May 13, 2008
Film producer faces arrest for fraud - TOI Kolcutta 13 May 08
Film producer faces arrest for fraud
TIMES NEWS NETWORK
Kolkata: A Bengali film producer, who promoted Geraftar, may be arrested for the alleged embezzlement of funds to the tune of Rs 1.25 crore. Calcutta High Court heard Rasika Chatterjee’s anticipatory bail prayer on Monday and rejected it after government lawyers accused her of producing forged property deeds and obtaining a huge bank overdraft. According to a complaint lodged at Tollygunge police station on December 18, 2007, by the C R Avenue branch of Karnataka Bank, Rasika and her husband Indrajit Chatterjee — claiming to be proprietors of one M/s Amtek Universal — had mortgaged five flats on Syed Amir Ali Avenue. Investigation revealed that these properties had been mortgaged to other banks and the documents were forged. A part of the sum obtained in this manner was used to produce a film — Geraftar — said the lawyers appearing for the state. Police initiated a case against Jamir Lane resident Rasika under Sections 420, 120B and 407 of the IPC. The proprietor of M/s Karunamoyee Films moved the anticipatory bail plea before Justice D P Sengupta and Justice Kalidas Mukherjee. State counsels Pradip Roy and Pinaki Bhattacharjee opposed the move. They claimed that Rasika had used similar documents to procure loans from Canara Bank, UCO Bank, Bank of Baroda and Allahabad Bank
TIMES NEWS NETWORK
Kolkata: A Bengali film producer, who promoted Geraftar, may be arrested for the alleged embezzlement of funds to the tune of Rs 1.25 crore. Calcutta High Court heard Rasika Chatterjee’s anticipatory bail prayer on Monday and rejected it after government lawyers accused her of producing forged property deeds and obtaining a huge bank overdraft. According to a complaint lodged at Tollygunge police station on December 18, 2007, by the C R Avenue branch of Karnataka Bank, Rasika and her husband Indrajit Chatterjee — claiming to be proprietors of one M/s Amtek Universal — had mortgaged five flats on Syed Amir Ali Avenue. Investigation revealed that these properties had been mortgaged to other banks and the documents were forged. A part of the sum obtained in this manner was used to produce a film — Geraftar — said the lawyers appearing for the state. Police initiated a case against Jamir Lane resident Rasika under Sections 420, 120B and 407 of the IPC. The proprietor of M/s Karunamoyee Films moved the anticipatory bail plea before Justice D P Sengupta and Justice Kalidas Mukherjee. State counsels Pradip Roy and Pinaki Bhattacharjee opposed the move. They claimed that Rasika had used similar documents to procure loans from Canara Bank, UCO Bank, Bank of Baroda and Allahabad Bank
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