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Mortgage Industry Fraud Insights from Patrick Crowley




May 8, 2005

The mortgage company owner behind the biggest securities fraud in Michigan history is trying to stay out of prison.

Patrick Quinlan Sr., who ran the now defunct MCA Financial Corp. in Southfield, Mich., is trying to withdraw the guilty plea he made last year, according to the Detroit Free Press.

A federal court hearing has been set for late June. Quinlan faces 10 years in prison and could be forced to pay a whopping $256 million in restitution.

Quinlan was CEO of the company. He and other officers were charged with securities fraud for running what prosecutors say was a Ponzi scheme. Nearly 1,000 people lost their jobs when MCA went under six years ago.

Other officers have gone to jail, but Quinlan's attorneys have waged a long court battle to keep him out of the pen. In one petition he claims no responsibility for MCA's woes and said he was pressured to cop a plea.

"Regardless of what I said under oath on Feb. 24, 2004, the government, the court and my own attorneys knew very well that I had been mistreated, pressured and under the direct threat of a long incarceration if I did not capitulate and agree to a ... plea," Quinlan wrote in a 65 page motion.

I'll follow this one and let readers know what happens at the June 28 hearing.

read story at Detroit Free Press

May 6, 2005

After you cover mortgage fraud for awhile you come across some cases where you just have to ask yourself -- did they really think they were going to get away with it.

That comes to mind in the case of Jimmie Ray Lawson II, a Collinsville, Va., real estate lawyer facing charges of embezzlement.

According to the Roanoke Times and the Martinsville Daily court-appointed investigators believe Lawson may have stolen from as many as 30 people he was representing. Among them is former heavyweight boxing champion Riddick Bowe, who won a $1 million judgment against Lawson after a federal judge ruled that Lawson bilked the champ out of $500,000.

Lawson is also facing embezzlement charges for not turning over $28,800 from a real estate sale in which he was acting as the closing agent.

A report turned into Patrick County Circuit Court claimed Lawson is guilty of "forgery, fraud, embezzlement, theft and identity theft."

The report also said that two mortgage insurance companies have about $3 million in claims against Lawson and that he forged a document by -- get this -- cutting a client's signature from document and then using tape to attach it to another document that gave Lawson power of attorney over the client's affairs.

The client, of course, had no idea what Lawson had done.

Lawson is also accused of using fake names and phony documents to take out multiple mortgages on one property.

Court testimony shows that Lawson, who has lost his law license, has been called a con man, a liar and a scam artist.

No beating around the bush there.

read story at The Roanoke Times

read article at Martinsville Daily

Talk about your low lifes, how about the Miami crew that's been charged with ripping off the elderly and disabled in a mortgage scam busted by Florida state regulators.

Four people are facing a slew of charges, including unlicensed mortgage brokering, for allegedly convincing at least seven elderly and disabled homeowners to sign away their homes.

The charges were announced by the Florida Department of Financial Services and the state's top chief financial officer, Tom Gallagher. Charged were Jorge C. Rodriguez, 46; his wife, Rachel Rodriguez, 46; their business partner Cesar Durand, 30; and Norka Sole, 71.

According to regulators the four would use public records to find homes in foreclosures. They then allegedly convinced the homeowners that their company, PFSI, would help them get out of trouble. All the homeowners had to do was sign some loan applications.

But it turns out the documents were actually Quit Claim deeds and Rights of Surplus. By signing the homeowners turned transferred the titles to their homes to PFSI, which told the victims either to repurchase the homes, pay rent or face eviction.

The scam totaled about $1.5 million. The Miami-Dade State Attorney's Office is prosecuting. Other charges include first-degree grand theft, exploitation of the elderly or disabled and fraudulent acknowledgements by a notary public.

"Individuals who specifically target the most vulnerable members of our society to bilk them out of their life savings, their property and their homes are the lowest of the low," Gallagher said in a statement.

read announcement from Florida Dept. of Financial Services

May 4, 2005

Lawmakers in two states are responding to the growing rash of mortgage fraud crimes.

The Georgia General Assembly has passed a bill that would make it a felony to illegally flip properties. Flipping is when someone buys a piece of property, inflates its value -- often through phony documents and appraisals -- and then quickly sells it at a profit.

A first time offender would face up to 10 years in prison and a fine of up to $5,000; repeat offenders could do 20 years and have to pay $100,000.

"Fraud involving residential mortgages is at an all-time high in the United States and in Georgia," according to a copy of the bill. "Mortgage lending institutions and borrowers have suffered hundreds of millions of dollars in losses due to residential mortgage fraud."

Meanwhile in California state Assemblyman Dave Cogdill, a Modesto Republican, has filed bills aimed at providing more oversight of the lending industry, including companies that make mortgage loans.

One bill would require that anyone applying for a license to loan money must be fingerprinted and go through a criminal background check. The other bill would increase the state’s ability to regulate the mortgage industry by merging certain departments of state government.

Cogdill told The Modesto Bee that the bills were inspired by the case of Tony Daniloo, the CEO of DreamLife Financial. Daniloo is in jail awaiting trial on charges that he diverted up to $4 million from clients' escrow accounts for his own use.

read story at The Business Report & Journal

read story about Georgia law at MortgageDaily.com

read about California at The Modesto Bee

Three defendants have gone down in a mortgage flipping scheme out of Baltimore than involved more than 200 inner city properties.

They are following the ringleader of the scheme, Walter Hammond, to prison. He pleaded guilty to mail and wire fraud charges in November and is serving four years in prison.

Frederic Leffler, 50, a lawyer, will do 37 months behind bars. Title company owner Kelly Johnston Chase, 38, will serve 27 months and must pay nearly $82,000 in restitution. David Allen Uhrich, 33, who helped lure investors into the scheme, was sentenced to 33 months in prison and ordered to pay restitution of $81,951.

Prosecutors say that between 1997 and 2000 Hammond persuaded people to buy homes in inner city Baltimore neighborhoods by applying for mortgage loans. Of the 200 homes purchased 150 of the closings were handled by Chase's title companies.

The purchases were a scam for Hammond and his crew to bilk about $4 million from lenders.

Leffler was involved as the lawyer on the closings, prosecutors say.

Everybody involved was allegedly getting kickbacks from Hammond: Chase for closing properties without the borrowers having the necessary funds to buy a house; Leffler for conducting the closings where Hammond was putting up the money for the closings; and Uhrich for bringing in phony buyers who, for money, allowed their name and credit to be used.

read story from WBAL-TV 11

read another story from WBAL-TV 11

read story at The Baltimore Sun

read Department of Justice announcement

May 3, 2005

Don't think I've ever seen a restitution figure like this -- $241 million!

But that's what a federal judge in San Diego has ordered John D. Garitta, the former chief financial officer of PinnFund USA to pay back the investors he has admitted ripping off.

Garitta has pleaded guilty to federal charges of wire fraud, conspiracy to commit money laundering, tax evasion and filing false statements with the Department of Housing and Urban Development, or HUD, according to the U.S. Attorney's office in San Diego.

In addition to his whopper of a restitution payment Garitta must also serve four years in prison.

Garitta, 45, was an executive with PinnFund USA, which prosecutors say appeared to be a successful subprime mortgage lender. It had a cafeteria, a chef on staff and expensive art work in the executives' offices, according to media reports.

But prosecutors say PinnFund was actually a Ponzi scheme that convinced investors to put up $330 million on promises of 17 percent returns.

Only about $106 million was paid back to investors. The rest of the cash covered losses at PinnFund and paid for the expensive lifestyles of the company's executives.

PinnFund's CEO Michael Fanghella and President Keith Grubba have already pleaded guilty and are serving prison terms, respectively, of 120 months and 63 months.

Garitta cooped a plea and received less prison time than those two because he is providing information on James Hillman, who has been identified as the ringleader of the crew. Hillman has denied the charges but is scheduled to go on trial in October.

read story from The Union-Tribune

read about PinnFund scandal at The San Diego Union Tribune

read Department of Justice Announcement

The founder of a Milwaukee festival that celebrated Arab culture has pleaded guilty to federal mortgage fraud charges and will spend eight months in prison.

Mhammad Abu-Shawish, 41, was guilty of bank fraud and making false statements to a banking institution, according to information from the U.S. Attorney's office in Milwaukee and the Milwaukee Journal Sentinel.

Also convicted in the same scheme was Josephine Dvorak, 51. She will spend 30 days behind bars.

Dvorak tried to get a $153,000 mortgage on a home the pair was buying in Milwaukee. She had credit but didn't make enough money to qualify.

Dvorak then put Abu-Shawish, a former restaurant operator, on the mortgage application. Her situation was reversed -- she had the income but not an adequate credit history.

The two then allegedly falsified documents, including phony letters from a furniture store and car dealer, to convince lenders that Abu-Shawish's credit was good. She also was not forthcoming about a high-interest loan she was using for the down payment, failing to tell the lender the source of the $5,000 down payment.

Abu-Shawish, who is from Jordan, apparently no longer affiliated with Arabian Fest, the festival she helped start. But she is facing more charges of visa fraud and misusing $90,000 federal grants she received in connection to her work on the festival.

Abu-Shawish has been charged by the federal government for allegedly helping more than 20 illegal immigrants enter the country ostensibly to work on Arabian Fest.

read story from Milwaukee Journal Sentinel

Patrick Crowley is fraud journalist for MortgageDaily.com and a reporter and columnist for The Cincinnati Enquirer.

Email Patrick at: PatCrowley@FraudBlogger.com
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