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Mortgage Industry Fraud
Insights from Patrick Crowley

Archives July 31, 2005



July 28, 2005

Well, this explains a lot about the Brasota Mortgage debacle.

Papers in Florida are reporting that the accountant who said everything was fine at the bankrupt mortgage company had once lost his license because of bad audits.

Brasota investors lost nearly $40 million when the company, which authorities have described as a Ponzi scheme, failed.

"The audits were deficient," bankruptcy trustee Gerard McHale told reporters. "Any regular audit would have found the problems here."

Here's the amazing part -- the accountant, Morris Berch, is still doing audit work in the mortgage industry. Berch is not commenting.

Meanwhile, McHale has filed a federal lawsuit in Tampa against a vice president of the company that allegedly made $400,000 while the company was running the scam, the paper is reporting.

The suit alleges five counts of preferential and fraudulent transfers against Robert Coey, who according to the paper could not be reached to comment.

read story from the Bradenton Herald

read story from the Herald Tribune

I'm really starting to see a lot more of scams related to people who are facing foreclosure.

This one is out of Baltimore, where according to a statement from HUD Gary T. Coley has been charged in federal court for using counterfeit Treasury notes in his scam.

HUD alleges that Coley would contact homeowners facing foreclosure and tell them he was an investor who could stop foreclosure proceedings.

Coley would allegedly collect money from the homeowners. But he wouldn't use that cash to pay off their mortgages. Instead, he made $1.8 million in phony Treasury notes, which he tried to use to pay off the mortgages.

Not only are the homeowners out the money they gave Coley, but many are also losing their homes. And HUD is estimating that claims of an estimated $1 million will be made on the homes insured by FHA.

read announcement from HUD

Funny what the prospect of spending 24 years in prison does to some people.

Hoping to stay out jail and continuing making $20,000 a year in the mortgage business, a convicted stockbroker has agreed to repay his victims $2.3 million, according to the Denver Post.

Cade Emerson Lee, 30, was charged last year with bilking 24 people in a stock day-trading scam. But he has since started a mortgage brokerage he reportedly claims is making $20,000 a month.

So in a plea agreement Lee is promising to pay an initial restitution payment of $100,000 and then $30,000 every three months until his debt is repaid.

The Colorado attorney general's office has reportedly already dropped all but two of the original counts against Lee.

News of the plea brought a harsh response from the prosecutor who got the securities fraud conviction against Lee.

"For crying out loud," prosecutor Vic Reichman reportedly told the paper, "is the government also apologizing for prosecuting him?"

read announcement from Colorado Attorney General

read story from Rocky Mountain News

July 27, 2005

If you think mortgage fraud doesn't impact typical homebuyers, then take a look at went on in Utah.

The FBI tapped Utah as the worst spot for mortgage fraud in the nation during 2001, according to a report in the Salt Lake City Deseret News. That unwelcome distinction led to higher interest rates for all buyers, state Rep. Paul Ray, a Republican, reportedly told the paper.

Since Utah is now considered the 7th worst state for mortgage fraud interest rates have actually dropped a quarter of a percentage point, Ray said.

"We're paying more because we are a higher risk for loans from investors," Ray told the paper.

Even though suspicious activity reports regarding mortgage fraud filed with the FBI are increasing -- the reports filed this year are already double the 153 reports filed in Utah for all of last year -- the state has dropped in the rankings. Georgia and Florida are now the worst states for mortgage fraud, according to previous FBI reports.

read story from the Salt Lake City Deseret News

July 26, 2005

The more I follow mortgage fraud and identity theft stories from across the country the more I become concerned about Social Security numbers falling into the wrong hands.

Take this case out of Miami. Angela Blount, 34, has been pleaded guilty to using the identities of two people to go on a $341,000 spending spree that federal prosecutors say included a 2004 Audi A6.

Blount was also convicted for obtaining mortgage loans, personal loans and, according to a story in the Miami Herald, charge cards from Nordstrom, Visa, MasterCard, Bank One, Citibank, American Express, Burdines-Macy's and Home Depot.

She used the identities, including Social Security numbers, of two "unsuspecting victims", federal prosecutors said in a statement.

Blunt faces up to 25 years in prison. At least the penalties are harsh.

read story from the Miami Herald

read story from the Sun-Sentinel

read U.S. Department of Justice announcement

July 25, 2005

Colorado Attorney General is John Suthers is getting serious about cracking down on mortgage fraud.

Last week Suthers convened the first meeting of the Mortgage and Foreclosure Fraud Task Force, which he said in a statement is designed to "prevent Colorado consumers from falling victim to...a growing wave on consumer fraud."

"This Task Force will help those on the front lines deter these scams and assist the public with complaints," Suthers said.

The Task Force is comprised of prosecutors, law enforcement, mortgage industry professionals, county clerks and others.

Suthers has set three major goals for the panel: a public outreach effort to educate susceptible victims; recommendations to encourage multi-jurisdictional cooperation among law enforcement and other organizations and individuals who confront foreclosure and mortgage scams; and legislative proposals to be submitted by the group's next meeting in October 2005.

Colorado has seen an increase in mortgage fraud scams with the elderly and Spanish-speaking homeowners frequent targets.

read story from the Associated Press

read announcement from the Colorado Attorney General

At least the victims of disbarred New Jersey lawyer Dennis O'Brien are getting some of their dough back.

O'Brien, 63, is awaiting sentencing after pleading guilty to stealing more than $2.7 million from 33 victims, The Camden Courier-Post is reporting. O'Brien was reportedly convicted of embezzling money from clients, including some victims who invested with him in mortgage loans.

Prosecutors are now saying that people who lost money will get about 40 cents back on the dollar. Money is coming from New Jersey's Lawyers' Fund for Client Protection and through the sale of properties O'Brien owned.

O'Brien was "notorious", the paper reported, for embezzling $1.2 million from an estate that was set up to care for a disabled man. He allegedly used some of the money to pay personal and family expenses and for a "paramour" with whom he raised two kids.

In August of last year O'Brien was sentenced to 18 years in prison. But in March the New Jersey Court of Appeals told the lower court to take a second look at O'Brien's sentence and consider his help in liquidating assets to repay victims.

read story from the Courier Post

Nothing like ripping off mom to get a mortgage.

That's what a Pennsylvania couple is accused of doing, the Pittsburgh Tribune-Review is reporting.

Ernest E. Fulton, 63, and his wife, Myrna, 65, have been charged with forging his mother's signature to get a $121,500 mortgage loan. Fern O. Fulton, 84, is Ernest's mother.

The paper is reporting that Myna Fulton told police that the couple needed the loan because their home was in foreclosure.

The couple is facing charges of forgery, identity theft and two counts of criminal conspiracy.

The couple is free on bond, the paper reported.

read story from the Tribune-Review

Authorities in Denver are using crime fighting techniques usually reserved for the mob to go after two guys accused of mortgage fraud.

Luis Vagle, who ran First Financial Corp. in Denver, and Lawrence Rosenberg have been indicted under the Colorado Organized Crime Control act, according to the Rocky Mountain News.

Joe Morales, who runs the Denver district attorney's economic crime unit, reportedly told the paper that a "fair estimate" is that Vagle took home sellers and lenders for $1 million.

Vagle allegedly told buyers he would help them qualify for mortgage loans and that he would make the payments for them.

"Vagle did not disclose to those buyers that he, or others at his direction, would provide false information and documents to banks and mortgage companies to qualify those buyers for mortgages," according to the indictment.

Vagle and Rosenberg submitted phony applications to get the loans, and he did not make the mortgage payments, causing properties to fall into foreclosure. Vagle allegedly kept the money for himself.

So far neither man has been arrested, but authorities are looking for both.

read article from the Rocky Mountain News

An upstate New York television station is reporting that federal prosecutors have launched a mortgage fraud investigation in the Rochester area.

Station 10NBC is reporting that after "banks lost millions and homes were left abandoned" the feds began their probe. At least two arrests have been made.

Joseph Maggio pleaded guilty to conspiracy to commit bank fraud, the station reported.

Maggio allegedly used falsified documents in a property flipping scheme.

"The documents that were false included false tax returns, false W-2's, and other false information that make it more likely that he would qualify for the loan," Assistant U.S. Attorney Richard Resnick reportedly told the station.

Also arrested was William O'Keefe, who is likewise facing mortgage fraud charges. He allegedly used a phony mortgage application to get a federally insured bank loan to buy a house.

"After purchasing the property from the same seller, he applied for a mortgage loan using basically the same types of false documents," Resnick reportedly said.

read story from News 10

At one time Patrick Quinlan Sr. headed up a Michigan company that included a mortgage lending unit and employed more than 1,000 people.

Now, he's going to prison for 10 years after costing investors a quarter of a billion dollars, according to the Detroit Free Press.

Quinlan, 58, was also ordered by a federal judge to pay $256.6 million to investors and institutional lenders who lost money in the failed MCA Financial Corp., which had subsidiaries that included a mortgage company and a bank.

In putting on their case prosecutors reportedly said that MCA's Mortgage Corporation of American fraudulently sold securities representing interests in mortgages and land contracts it owned and pooled into securities.

The paper reported that the company misrepresented the performance of the pools, inflated the values of the land contracts and used money for its own means.

At his sentencing Quinlan apologized but also criticized prosecutors for "overkill."

Prosecutors told the paper they hoped Quinlan's case "sends a message" to corporate executives considering committing fraud.

read story from the Detroit Free Press

Here's another guy allegedly ripping people off with a scam that promised to wipe out victims' debts.

Kenneth G. Titus Sr., 60, a former plumber and self-professed preacher, faces federal charges on mail and wire fraud along with money laundering. Federal prosecutors in Albany, N.Y., say Titus collected a whopping $4.2 million in fees from almost 1,000 people with the promise he would make them debt free through his Redwood Trust company.

Titus, according to the Albany Times Union, claimed to operate a charitable organization that would pay off mortgages and erase credit card debt and child support payments.

But he has only paid off one mortgage -- and that was his son's.

Regulators in Oregon have warned consumers there to stay away from Titus and ordered him to stop conducting business there.

"Titus...is misrepresenting both his financial status and his ability to provide funds," Oregon securities regulators said in a statement.

Redwood has also reportedly solicited customers in Maine, Ohio, North Carolina and Michigan.

read story from the Times Union

read announcement from the Department of Justice

read announcement from Oregon Division of Finance

It's bad enough when people are losing their homes through a foreclosure; its worse when they are targeted by an alleged fraud scheme.

An Illinois man arrested in Atlanta has been charged by the feds with running a "foreclosure avoidance" scam and is awaiting extradition back to Chicago, newspapers in and around Chicago are reporting.

John D. Cash (how's that for a name), 45, told homebuyers he ran Lake Shore Group Fund Inc. with an office on Chicago's famed Magnificent Mile, which runs along the Lake Michigan shoreline.

With advertisements reportedly claiming he could "Stop ANY Foreclosure Dead in its Tracks" Cash collected a $3,500 retainer along with a homeowner's monthly mortgage payment. He also allegedly used seminars to entice victims.

He told customers he was filing bankruptcies to halt foreclosures. But he continued to collect monthly payments while doing little to actually help the homeowners keep their houses.

Authorities say Cash collected about $200,000 from 30 victims before he was arrested.

Cash is also known as "Baba Ankh" and "Dr. Typhon.Ra" according to published reports.

read story from the Daily Southtown

read article at the Chicago Tribune

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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