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Mortgage Industry Fraud Insights from Patrick Crowley

Archives May 22, 2005

 


 

May 22, 2005


In 2000 the U.S. Attorney's office in Baltimore started a crackdown on illegal mortgage flipping. Well, the 99th person has just been convicted as part of the effort.

Closing agent Kim M. Blackwell, 46, pleaded guilty to federal charges of conspiring to defraud mortgage lenders and the U.S. Department of Housing and Urban Development, or HUD.

Prosecutors allege that between November 1996 and April of 2000 Blackwell, while working for various title companies, was not collecting the funds she was supposed to during real estate transactions. She was working with the co-defendant in the case, a real estate investor and speculator named Mazie Jennings, who was allegedly selling newly purchased houses at inflated prices -- the illegal process known as flipping.

Most of the government guaranteed loans went into default, costing taxpayers nearly $250,000. Blackwell was accused of pushing 20 phony real estate settlements through the system.

She could serve up to five years in prison and have to pay a $250,000 fine.

read announcement from Department of Justice
(pdf viewer required)


Two more women have been convicted in what federal prosecutors in Arkansas have called a "multimillion-dollar real estate and mortgage scheme".

Tina Leigh Brown, 33, of Sheridan, Ark., and Shanna Moore Allen, 33, of Maumelle, Ark., face up to 35 years in prison and $1.25 million in fines, according to a report on Arkansas Business.com.

The women worked under the business name Guaranty Lending in Bryant, Ark. Each were convicted of conspiracy and wire fraud charges for what prosecutors described as a scheme to sell low-cost housing at inflated prices.

U.S. Attorney Bud Cummins reportedly told the paper that the conspiracy "involved submitting false documentation to mortgage lenders and banks to induce over financing of questionable mortgages."

The scheme involved more than 30 properties in central Arkansas. Previously convicted were Kenneth Dwayne Kelly, Paul Robertson and Kesha Miller McIntosh. Robertson has already been sentenced to 57 months in prison. The others are awaiting sentencing.

read story at Arkansas Business Publishing Group


May 20, 2005


The owner of a failed St. Louis area title company is looking at the possibility of jail time for allegedly running a nearly $4 million mortgage scam.

James A. Thurman, who owned Phoenix Title Inc. in St. Charles, MO., has been indicted by a federal grand jury in St. Louis on nine counts of wire fraud and one count of bank fraud.

The feds say Thurman cleaned out $3.84 million in escrow funds he was supposed to be holding for customers. He is also accused of defrauding First Bank out of about $100,000. He faces 75 years in prison and nearly $3 million in fines on top of paying nearly $4 million in restitution.

Phoenix went out of business in April after Fidelity National Title learned that Thurman was delaying the disbursement of escrow funds in an effort to cover his alleged thefts. About 60 people lost their jobs.

Fidelity scheduled an audit, so Thurman borrowed nearly $2 million from his parents and deposited in this company's accounts in another move to cover his tracks.

The plan didn't work and the feds eventually caught up with him.

read announcement from Department of Justice

read story from St. Louis Business Journal


A Michigan grocery store owner who may be linked to a terrorist group has been indicted for mortgage and credit cared fraud.

Federal prosecutors say Nemr Al, 41, and his wife, Rania Fawaz, 23, tried to obtain a $200,000 mortgage by making false mortgage applications and defrauded credit card companies out of $300,000. They pulled off the credit card scheme by allegedly writing cold checks to inflate limits on their credit cards, according to an indictment filed in a federal court in Detroit.

Fawaz has also been indicted.

The Detroit Free Press is reporting that federal agents are investigating Rahal's possible links to Hezbollah, which the U.S. government believes is a terrorist organization based in Lebanon.

The residue from military-type explosives were found on the passports of Rahal and his son, the paper reported. Agents raided their home and found a poster and tape featuring Hassan Nasrallah, the leader of the terrorist group.


read copy of indictment faxed to FraudBlogger.com
(free efax viewer required)

read story from the Detroit Free Press


Joseph Georges was buying the house of his dreams, a $4.9 million mansion that included a guest house in Bergen County, N.J.

Only Joseph Georges didn't exist. He was made up by Paul LoPapa, 58, who has pleaded guilty to numerous state charges of insurance and mortgage fraud, according to information from the New Jersey Attorney General's office.

LoPapa created Georges, along with fake promissory notes and financial statements, to entice a mortgage lender to make a loan on the property. The money, of course, went to LoPapa, prosecutors charged.

A mortgage broker in Arkansas got stuck with the phony promissory note after buying it from the original mortgage lender.

LoPapa has also admitted to posing as a mortgage broker and real estate agent in order to steal nearly $30,000 in bogus loan applications. And he confessed to collecting $33,400 from a bogus homeowner's insurance claim.

LoPapa faces 33 years in prison and a fine of $110,000.

read announcement from New Jersey attorney general's office


I don't think many mortgage brokers follow Jennifer Riley's example of customer service.

Riley, who worked as a broker in Longmont, Colo., is accused of stealing a client's identity and then using the bogus persona to take an $8,000 Caribbean cruise and run up $40,000 in credit card debt.

She was arrested last week and charted with using a client's Social Security number to open at least two bank accounts.

Riley was an escrow manager for LandAmerica Commonwealth, a title company, when she was arrested. But police believe her alleged thefts were orchestrated while working at Inspired Lending, which is apparently out of business.

Police reportedly told the Longmont Daily Times-Call that they fear more victims are out there. Former clients should check their credit reports for any suspicious activity, police reportedly told the paper.

Riley was busted for writing a bad check in 1991, the paper reported.

read story at the Longmont Daily Times-Call

read story at the Longmont Daily Times-Call


May 19, 2005


A married couple and a mortgage broker have been convicted in federal court for operating a property flipping scheme in Georgia. And the couple is facing a whopping restitution payment of nearly $1 million.

Federal prosecutors say Ofer Barlev will do two years and 9 months and must pay nearly $600,000 in restitution. His wife, Karen Barlev, was sentenced to six months of home incarceration and must back almost $400,000.

The hubby and wife were convicted on wire fraud and money laundering charges.

Mortgage broker David Demetz was popped on charges of conspiracy, wire fraud and money laundering. He will do nine years in prison and must pay pack $523,182 in restitution.

The Barlevs were used car dealers -- we'll leave the jokes out for now -- who were indicted not just on mortgage fraud. They were also charged with defrauding insurance companies by falsely reporting vehicles stolen and ripping off a lender by inflating car prices.

The mortgage charge involved a flipping scheme in concert with Demetz.

read Department of Justice announcement


May 18, 2005


What kind of low-life rips off a preacher?

The kind like Reginald Sims, a one-time East Memphis, Tenn., mortgage broker who is headed off to prison after pleading guilty to federal mortgage fraud charges.

Sims, 32, ran a scam where he would promise to fix customers' credit and find them mortgage loans. But he has admitted to stealing nearly $100,000 and is facing up to five years in prison.

WREG TV reported that Memphis pastor Tony Wright thought he had a good deal when Sims offered him a refinancing deal that included a $3,000 down payment and then $4,000 to close.

But the mortgage loan documents turned out to be phony.

"God promises that it would have been better for you if someone tied a millstone around your neck and case you into the sea than for you to offend the least of one of his children," Smith reportedly told Wright during a 2001 court appearance.

Sims has been on the run. But the FBI caught up with him in Georgia in December and a federal grand jury indicted him earlier this year.

read copy of indictment faxed to FraudBlogger.com
(free efax viewer required)

read story from WREG News 3 Channel


Nevada mortgage broker Kyle H. Pulsipher won't be making any loans, at least for awhile.

Pulsipher has been slapped with a cease-and-desist order and an $110,000 fine by state mortgage regulators, who claim he used "false and misleading" information to get loans for himself and members of his family.

Pulsipher's lawyer, Richard Schonfeld, reportedly told the Las Vegas Sun that his client will appeal the order.

Pulsipher worked for USA Home Loans and then Soma Financial. The state said both companies fired him and that his broker's license is inactive.

A routine audit by state examiners revealed that Pulsipher used phony employment and income information on 11 mortgage loan applications over a six-month period, Nevada Mortgage Lending Division Commissioner Scott Bice alleges.

Signatures of mortgage agents were also forged, the state said.

"I think that people don't understand how big fraud in the mortgage business is, especially in Nevada," Bice told the paper. "It's still the wild West out here."

Bice said in a statement that more oversight of the lending industry is needed.

"Not only are there no set standards for those agents that do not have to license, there is not state run background checks, finger print cards, credit checks or continuing education required," he said. "Talk about flying under the radar screen."

read State of Nevada's announcement
(free efax viewer required)

read story at Las Vegas Review-Journal

read story at Las Vegas Sun


May 16, 2005


When police in Cleveland, Tenn., pulled over a car on Interstate 75 last week they thought they had nabbed some small time drug dealers and would be counterfeiters.

Instead police bagged a couple of New York fugitives who have been linked to a $2 million mortgage fraud case in Buffalo and who have been on the run since 2002.

Venere Hutchinson and his girlfriend, Dana Upcher, are wanted on charges they were involved in a scheme to defraud lenders out of loans. They bought about 40 dilapidated properties for a total cost of about $120,000, but then used fraud to get second mortgages that totaled about $2 million.

Police officer Andy Ratcliff told The Buffalo News that he pulled the couple over for having an improper license tag. They had IDs identifying themselves as Michael Smith and Dequlan Jones.

Think they could have come up with better aliases than "Smith" and "Jones"? Well, that's not the only blunder made by the fugitives.

Ratcliff didn't believe Smith was the man's real name, and told the paper that Jones' ID was an obvious fake.

So he searched the car and found $14,000 cash, a digital scale with marijuana residue and a laptop and computer disk used for making counterfeit money. He arrested the couple, took them into custody and even after running a fingerprint check, nothing came back identifying the two as on the lam from New York.

"At this point we had no idea who we were dealing with," Ratcliff reportedly said.

But then Ratcliff read the newspaper he confiscated. There is was -- a story about the mortgage fraud and a picture of Hutchinson.

"He had a trophy," the cop said. "That was really stupid of him to keep."

The couple is still in jail but now back in New York.

read story from The Buffalo News

read announcement from New York Attorney General


Gerald Sherman is a big man who talked big, especially when it came to shopping potential investments.

The 6-foot-5 Seattle area man reportedly told investors who could produce 10-fold returns on investments in gold bullion, foreign current and "medium term notes" -- whatever those are.

Investors put up more than $1 million, but instead of investing the money federal prosecutors in Washington state say he spent the money on a traveling youth hockey team that over the last five years played in Florida, Toronto, Montreal, Vancouver and other cities.

The Seattle Times and other media are reporting that Sherman has been indicted by a federal grand jury.

Sherman paid for the players' travel and other expenses. At one time he used allegedly used a phony $600 million letter of credit, telling players' parents that he would eventually draw on the money but first needed to put up cash.

One parent paid as much as $15,000 in one year on uniforms, travel and more. Most paid dues of up to $1,750 to play on Sherman's Washington Evergreens team.

The paper also reported that Sherman and the team have been sued 11 times over the past five years, with the judgments totaling $1.5 million.

"I got sucked in, I'll admit it," an investor reportedly said. "He's hurt a lot of families."

Sherman faces 15 years in prison and more than $1 million in fines if convicted.


read Seattle Post-Intelligencer story

read story at Seattle Times

 
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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