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Mortgage Industry Fraud Insights from Patrick Crowley

Archives May 15, 2005



May 15, 2005

It's thoroughbred horse racing's Triple Crown season, and a pair of former bank employees who used millions of stolen dollars to buy race horses and other luxury goods are galloping off to prison.

As supervisors at Loomis, Fargo and Company, an armored car firm, Bryan Douglas Rosenquist, 43, and Michele Serrao, 42, were in charge of the vault.

But instead of watching over the money federal prosecutors say they helped themselves to nearly $12 million between 1998 and August of 2001. Both have been convicted in a federal court.

Rosenquist has been sentenced to nine years in prison; Serrao is facing seven years. Appeals are pending.

Prosecutors said the pairs used the pilfered money to buy expensive vehicles, jewelry, gambling at casinos and horses for their "Bella Thoroughbreds" racing business.

The pair hid their thefts by creating fake balance sheets that were sent to Bank of America, the victim of the thefts.

According to InsideBayArea.com, they only made about $40,000 a year. Eventually they had to draw attention to themselves by living a lavish lifestyle that included buying thoroughbred race horses.

The court also ruled that they must pay back the $11.8 million they stole.

read story at Inside Bay Area

read announcement from Department of Justice

May 13, 2005

The Missouri Attorney General's office has gone to court to stop a mortgage company from selling what authorities have called "bogus securities."

Attorney General Jay Nixon obtained the temporary restraining order in Boone County Circuit Court. It states that Vertical Group LLC, which also does business as Cerberus Inc., "must immediately cease the advertising, soliciting or sale of an investment opportunity," Nixon said in a statement.

Nixon accuses the company of promising investors returns of up to 1,000 percent on investments but then not paying anything.

"Not only did investors fail to receive those returns," he said, "they lost their principal as well.

"We wanted to move quickly to shut this operation down, then go to work to recover the funds that investors tendered in good faith."

An FBI search warrant of the company's offices turned up standby letters of credit, which is what was being sold to investors. But those letters are not "legitimate financial instruments," according to the Securities and Exchange Commission (SEC).

Nixon said he knows of at least four people who invested $575,000 with Vertical Group. One couple put up $50,000 and was promised $10 million.

They ended up with nothing.

read story at Columbia Daily Tribune

read story at Columbia Daily Tribune

read Missouri Attorney General's announcement

May 11, 2005

All five members of what prosecutors described as a predatory lending ring have pleaded guilty to federal charges in Pennsylvania.

The crew was accused of defrauding about a 100 first time home buyers. Most were low income and had bad credit.

The scam totaled $9.2 million.

The ringleader was Philip Garland, a builder from Lancaster, Penn. Four of his employees also went down with him.

They knew the buyers could not qualify for mortgage loans on their own. So, prosecutors say, they set up phony companies and used fake documents to help the borrowers get their loans.

But as often happens in scams like this, where illicit means are used to get mortgages for people who can't afford them, the buyers couldn't keep up on the payments. Most ended up in foreclosure and some were forced into bankruptcy.

"It was a sophisticated scheme targeting unsophisticated borrowers to enable them to qualify on paper for the American dream of home ownership," U.S. Attorney Patrick Meehan reportedly told the Lancaster New Era. "The American dream turned into a nightmare."

read story from Intelligencer Journal

read news release from U.S. Attorney's Office

read indictment from Department of Justice

When it comes to fraud the United States has Enron; Canada has Eron.

Eron Mortgage Corp. was a company that operated out of Vancouver. But it is now out of business and thousands of investors lost more than $200 million when Canadian securities regulators shut the company down in 1997.

One of the company's top executives pleaded guilty last month to fraud and theft and is now awaiting sentencing. Frank Biller went to work for Eron in 1993. Before that he had built houses, sold time-shares and declared bankruptcy.

Along with former president Brian Slobigan Biller was promising returns of up to 24 percent on real estate investments. But CBC News is reporting that most of the money raised from investors went to pay off earlier investors.

Slobigan is already serving six years in prison. Biller is headed there as well.

During Biller's sentencing hearing prosecutors played a video tape of an investment seminar Eron put on for potential investors. In the tape Biller is quoted as saying that he often heard about Eron that "if it sounds too good to be true, it probably is."

If only those investors had listened to Biller's warning instead of his pitch.

read announcement from British Columbia's Criminal Justice Ministry

read story at Yahoo.com

read story from CBS News

The feds have ordered alleged mortgage scammer Phil Ranney to pay $128,000 to the victims of his fraud.

But instead of paying the Colorado man has apparently hit the road.

KOAA television is reporting that Ranney, who is barred from the mortgage business in Illinois and faces consumer complaints in other states, has fled from Massachusetts. It was there he was reportedly holding down a construction job.

Last year the Federal Trade Commission charged Ranney for breaking federal mortgage loans for a scam that worked like this.

Ranney would promise to refinance homes at low interest rates and with no closing costs. But it turns out, the FTC charged, that Ranney was just taking people's money and not coming up with the loans he promised.

"The FTC alleges that, instead of receiving a low-rate mortgage, many consumers have been stuck with high-interest loans, had liens placed on their property, incurred damage to their credit ratings, and, in some cases, faced the beginning of foreclosure proceedings," the agency said in a statement.

Ranney is likely looking at additional charges and fines once he is eventually caught. And these guys always get caught.

read story at MortgageDaily.com

read Patrick's coverage at MortgageDaily.com

read story at KOAA TV

read announcement from Federal Trade Commission

The numbers is this Florida mortgage fraud case are hard to imagine.

Bankrupt lender Brasota Mortgage owes creditors nearly $140 million and The Bradenton Herald is reporting that new documents just filed in court show that almost $40 million is still missing from the failed company.

Originally, it was thought only about $20 million was unaccounted for. But that figure has doubled.

A bankruptcy receiver has described Brasota as a Ponzi scheme. About 1,700 retirement accounts, family trusts and individuals invested in the company, which promised high returns on the high risk investments.

Well, this should really anger those jilted investors.

The company still has about $100 million in assets. But the paper is reporting that one of the first payments approved by the bankruptcy receiver was for $205,000 -- to pay for criminal defense attorneys for Brasota's top executives.

"That seems so unfair," said a lawyer representing one of the creditors in the case.

At one time Brasota was paying investors 11% returns on the money. But eventually it was discovered that the money wasn't really growing through investments in mortgages. Instead, money from new investors was used to pay off earlier investors -- the classic description of a Ponzi scheme.

read Pat's story at MortgageDaily.com

read Bradenton Herald story

read Herald Tribune story

May 10, 2005

Remember the woman accused of planting a fingertip in a bowl of chili at a California Wendy's restaurant? Well, now Anna Ayala's husband has been arrested on a warrant that includes charges of mortgage fraud, several newspapers are reporting.

James Plascencia was arrested on a $450,000 warrant that is unrelated to the charges against his wife. But the two are serving in the same Las Vegas jail, according to the San Jose Mercury News.

Plascencia, 43, is facing four felony charges in San Jose of failure to pay child support and child abandonment, one count of identity theft and one count of fraudulent use of official documents. The last charge stems from using his kids' identification and Social Security numbers to first get a mortgage and then hide from the lender when the payments fell behind, authorities said.

"He was using his children's Social Security numbers and names in order to gain financially," a police spokesman reportedly told the paper. "That will have future financial consequences for the kids."

Police say he lives in Nevada now but authorities want to send him back to San Jose to face charges.

read article at Mercury News

read story from San Francisco Chronicle

read article at SiliconValley.com

The 11th defendant in a big $20 million mortgage fraud ring operating in and around Atlanta has pleaded guilty to federal charges of fraud, obtaining fake Social Security numbers and conspiracy.

Judith H. "Judy" Hooper, 55, was indicted in May of 2004. But when federal investigators first began to sniff her trail in mid-2000, she fled the country and stayed on the lame in Belize, Canada and elsewhere for nearly five years, according to the U.S. District's Attorney office in Georgia.

Hooper and the others were accused of using stolen identities, fake IDs, straw buyers and phony documents to obtain mortgage loans. Once they had the money they began flipping properties all through the Atlanta area.

Hooper was a former mortgage broker who allegedly changed her name to Jerry Dale Hunter, and then arranged for the fraudulently loans to be made through American Mortgage Exchange.

Hooper is also accused of using the Social Security number of a two-year-old boy to open a bank account where the illegally obtained money was deposited, the Atlanta Business Chronicle reported.

Sentencing is set for July 27. Also involved in the case was Chalana McFarland, a Fort Lauderdale closing attorney. She was convicted after a four week trial in January.

read story at Atlanta Business Chronicle

read announcement from Department of Justice

This one sounds like a movie.

A so-called college "whiz kid" claims he's Turkish royalty, convinces investors in Connecticut that he is worth $800 million, has a $100 million line of credit and is starting a hedge fund.

It turns out Hakan Yalincak isn't a member of the Turkish royal family, isn't worth $800 million, doesn't have a $100 million line of credit and isn't running a hedge fund.

But he has been indicted and charged by federal prosecutors in Connecticut with a $43 million bank fraud that included depositing counterfeit checks of $25 million and $17 million at banks in Switzerland and New York.

When Yalincak tried to withdraw $1.7 million the Bank of New York caught on to the alleged scam and the feds moved in. He faces up to 30 years in prison and a fine of $1 million.

According to an Associated Press story carried on Boston.com, the Web site of the Boston Globe, Yalincak may have learned grifting from his mother, Ayferafet. She is not charged but has been named in seven lawsuits for breach of contract.

Before he was busted Yalincak did convince investors to put up almost $3 million. Some of the money was donated to New York University, but he also bought a Porsche and jewelry at Tiffany's.

"They're just a bunch of huxters," Andris Kurins, a retired FBI agent, told the AP.

read Associated Press story

read story at Boston.com

read announcement from U.S. Attorney's office

May 9, 2005

Here's another public corruption case involving officials allegedly on the take and using connections to muscle to get a good but illegal deal on a mortgage.

And get this -- one of the defendants is a minister!

Federal prosecutors in North Carolina have arrested Kenneth Fox, the former mayor of East Spencer, N.C., and Alderman William Ronald Hash on charges that include extortion, mail fraud and conspiracy, the Charlotte Observer is reporting.

Prosecutors say the pair was throwing city business to a businessman, who in return was paying kickbacks to the officials.

Hash, a minister who runs a center for homeless veterans, denied the charges. Fox was not reached for comment by the paper.

The businessmen accused of paying the kickbacks, Rick G. Slade and former alderman Chris Sharpe, have already pleaded guilty and are cooperating with prosecutors.

Slade allegedly used one of his companies to help Fox and his wife fraudulently obtain an $116,800 loan.

It appears Hash is in trouble for a $5,300 payment he took form Slade and didn't report the payment. At the time Hash oversaw the city's finances.

Fox faces 350 years in prison; Hash is looking at 60 years behind bars.

East Spencer is outside of Charlotte, N.C.

read story from The Charlotte Observer

Verdicts in a Philadelphia city hall influence peddling trial could result in prison time for two bankers who allegedly cut a sweat heart mortgage deal to a city official who was the focus of the corruption probe.

Corey Kemp, the city's former treasurer, was found guilty Monday on 27 charges, including taking money and gifts from people in exchange for steering city business their way. The federal court trial lasted 19 days.

Also convicted were Commerce Bank executives Glenn Holck and Stephen Umbrell. They face prison time for giving Kemp a mortgage equal to 100 percent of the value of his new home even though he had a bad credit history, according to the Associated Press.

In return Commerce Bank allegedly received up to $30 million in city business.

The bust came after the FBI revealed it had bugged the office of Mayor John Street. Street was not accused of any wrong doing.

The bankers have indicated they will appeal their convictions.

read story from the Associated Press

read MortgageDaily.com story

read Department of Justice announcement

read Bloomberg story

The Massachusetts Attorney General's office is going after the operators of a real estate company accused of bilking two women -- one elderly, one mentally impaired -- out of their homes.

Attorney General Tom Reilly said in a statement he has gotten an injunction against Blackstone Valley Investment LLC owner Michael Pare and employee Diane Iudiciani that prevents them from selling the property they are accused of illegally obtaining.

The defendants tell the Worcester Telegram & Gazette that they did nothing wrong and that the two women knew what they were getting into.

In one instance Blackstone allegedly bought the home of a mentally impaired woman for $100 in exchange for giving her a car, paying for the car's insurance for a year and paying her rent in an apartment for a year.

Blackstone then put the home up for sale for $264,000. But Pare and Iudiciani reportedly told the paper that the woman was going to lose her home in a foreclosure and would have had no where to live had they not stepped in.

The other deals involves the purchase of six acres of land that Blackstone once again paid $100 to acquire. The owner is an elderly woman in here 80s who had a stroke and was confined to a wheelchair.

Reilly's office said the woman did not understand what she is signing.

Authorities are after restitution for the victims.

read story from the Associated Press

read announcement from Massachusetts Attorney General

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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