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Mortgage Industry Fraud
Insights from Patrick Crowley

Archives September 11, 2005

 


 
September 22, 2005


Billy Ray Johnson used fraud to scam mortgage lenders out of $1.2 million, according to federal prosecutors.

Now, he's looking at going to jail for as long as 46 months, the Salisbury Post in North Carolina is reporting.

Johnson, a real estate broker, will plead guilty to the charges of using fake documents, phony appraisals and other fraudulent methods to run his alleged scam.

The fraud involved 35 loans totaling more than $3.5 million, with lenders losing $1.2 million of that money. Buyers recruited to purchase the properties homes weren't aware they were caught up in a fraud scheme and many lost their homes, the paper is reporting.

Johnson was recruiting buyers of property with the idea of generating rental income. But what the buyers didn't know is that Johnson and his co-conspirators owned the properties and were just using the buyers to run the scam.

Johnson will be sentenced Oct. 19 in federal court in Charlotte.

read story from the Salisbury Post


A man indicted last year for his role in a massive mortgage fraud scheme has been arrested in Las Vegas. But, after posting bail, authorities are concerned he may go back on the run.

Luis Vagle was indicted by a Denver grand jury last summer for, according to The Rocky Mountain News, "masterminding mortgage scams in the Denver area involving millions of dollars in real estate."

Daniel Chun, a criminal investigator for the Denver district attorney's office, told the paper Vagle was involved in "one of the biggest mortgage fraud cases" ever prosecuted by the DA's office.

Vagle reportedly used phony documents to secure millions of dollars in fraudulent mortgage loans. He was busted while trying to buy a $1.19 million home in Vegas. The seller turned him in after Vagle proposed buying the house in an "illegal manner", according to the paper.

Chun considers Vagle a flight risk. He has been known to travel to Spain.

Vagle was arrested after authorities set up a sting at a title office. After leaving the office authorities followed him to an elevator and then pounced.

"It was like something out of a movie," Chun told the paper.

read story from the Rocky Mountain News


Imagine, a lawyer convicted of mortgage fraud and theft asking a judge to go easy because he's a lawyer.

Fat chance -- at least that's what Chester County, PA., Judge Howard F. Riley Jr. reportedly told lawyer Glenn Grogan when he suggested that the judge not hand out a tough sentence because of his profession.

"I beg to disagree," Riley said during Grogan's sentencing, according to The Philadelphia Inquirer. Riley slapped Grogan with 8 to 23 months behind bars, ordered him to pay $103,950 in restitution to the clients he allegedly ripped off and put him on seven years probation.

Grogan, 40, was convicted on not making a $37,000 mortgage payment for one of his clients, who because of Grogan's misdeed reportedly lost his home to foreclosure. The man had originally given Grogan $100,000 of his retirement money that the lawyer was supposed to invest.

Instead, Grogan kept the money for himself, prosecutors said.x

read story from The Philadelphia Inquirer


September 21, 2005


Four years ago, Barry Fauntleroy fled the country on his yacht after his company collapsed in an alleged mortgage fraud scheme.

This week, standing before a federal judge in New Jersey, Fauntleroy admitted to bilking the federal government out of more than $2 million by using fraud to secure mortgage for unqualified buyers.

Fauntleroy, 40, the former president of EON Institute, pleaded guilty to the federal charges and faces up to nearly four years in prison when he is sentenced in January, NJ.com is reporting.

Fauntleroy admitted to using phony loan documents, bank statements, pay stubs, employment verifications and other bogus information to convince the FHA to approve loans to buyers who should not have qualified. He has since sold his yacht and returned to the United States to face charges.

Fauntleroy's EON Institute reportedly bought run down houses, usually through tax sales or foreclosures, and then quickly flipped them at double or triple the price he paid. He promised buyers and investors the houses would be rehabbed, but little work was ever performed.

Devon Bowie, an alleged accomplice who reportedly sold the phony mortgages to banks, still faces charges in the scheme.

read story from The Star-Ledger

read Patrick's previous story at MortgageDaily.com
(subscription required)


A high-flying New York investor already under investigation for mortgage and investment fraud is now in trouble for allegedly ripping off his rich neighbors.

The New York Times is reporting that Andrew M. Kissel stole millions of dollars while treasurer of an apartment co-op on New York's opulent Upper East Side. The paper reported that Kissel repaid the co-op nearly $5 million in restitution after he was slapped with a civil suit in 2003.

But last week he was reportedly indicted in the alleged theft.

Kissel's lawyer told the paper that his client has cooperated with the investigation and paid back all the funds that were allegedly "misappropriated."

But Manhattan District Attorney Robert M. Morgenthau reportedly said "nobody is above the law" in a recent speech in which he pledged to crack down on white collar crime.

Kissel once controlled millions of dollars of east coast real estate, drove luxury cars and had a $3 million yacht. But federal authorities said he used forged mortgage releases and phony appraisals in an alleged fraud scheme uncovered earlier this year. He was charged in July after banks, insurance companies and investors reportedly lost millions in the scheme.x

read story from The New York Times


A jailed Pennsylvania man under suspicion for mortgage fraud has gone on trial after being accused of threatening to "whack" an FBI agent.

Regonaldo Demelio, who was being held on assault charges, is accused of making the threats against FBI agent Robert Zalno in January. Calls to his wife were taped and are being used again him in his federal trial, according to the Pittsburgh Post-Gazette.

"If you're listening...come at me head on," Demelio reportedly says on the one of the tapes. In other calls he is accused of wanting to murder, "get" and "whack" the agent.

Demelio does not deny making the calls, but says he did not mean his comments to be taken as threats.

Zalno was investigating Demelio, the owner of an auto parts store, on suspicion of mortgage and bank Draud. Zalno had asked Delemio's wife to examine checks and documents that were part of the investigation. After Zalno interviewed the wife Demelio allegedly made the threatening calls.

"You have no idea the power I have," he reportedly said on one of the tapes.

Also on the tapes, Demelio denies any involvement in the alleged fraud.

read story from the Pittsburgh Post-Gazette


September 19, 2005


Authorities in North Carolina have received guilty pleas from two alleged mortgage scammers in separate cases.

Mortgage broker Gordon George of Charlotte pleaded guilty to charges he was involved in a scheme that involved recruiting buyers for homes, promising to find renters for the homes and pay the mortgage and then selling the homes at a profit, according to the Charlotte Observer.

George and his accomplices allegedly overstated the value of the homes and did not find renters or pay off mortgages. About $34 million in fraudulent loans were involved, prosecutors told the paper.

A builder, a lawyer and two investors have previously also pleaded guilty.

In the other case real estate agent Billy Ray Johnson was convicted for being involved in a similar scam. Johnson and his co-conspirators were allegedly filling out false loan documents and inflating buyers' incomes. About $1.2 million in bad loans were made.

Both George and Johnson face prison time, the paper reported.x

read story from The Charlotte Observer


Gotta watch those fees some loan offices charge.

Terry W. Globe, identified by the News Tribune as a loan officer in Lakewood, Wash., has been charged with stealing $900 in clients' fees. The charges were levied by The Financial Crimes Unit of the Colorado Attorney General's office.

Goble, 52, is reportedly accused of charging customers $150 to $250 for a nonrefundable loan processing fee while worker as a loan officer for Premium Mortgage Corp. Allegedly, he told clients to leave blank the "pay to the order of" portion of the check and then inserted in own name in the space.

Globe faces three counts of theft. Investigators reportedly found canceled checks payable to Globe. He also endorsed the back of the checks, the paper is reporting. Police began investigating after a complaint.

read story from The News Tribune


A mortgage loan broker and the buyers of an historic mansion near Seattle that was nearly destroyed through arson have been charged with mortgage fraud.

The case surrounds the historic Pasco building, which over the years had served as a home, a Prohibition-era nightclub, a nursing home, a hangout for hippies and a boarding house for migrant workers, according to the Tri-City Herald.

Corey Britton bought the 1908 building in 1999 and used it for a restaurant and catering business. He paid $405,000. But just three years later he sold it to John and Susan Collins for nearly $1.3 million.

Hal Ireland reportedly acted as the loan broker on the deal.

Federal prosecutors have now indicted Ireland and the Collins' for fraud; the Collins are accused of overstating their income to qualify for the loan; Ireland is charged with preparing and submitted bogus loan papers.

Britton was indicted earlier on charges of tax fraud related to his restaurant and catering business. He has pleaded innocent. Britton has also been charged in the loan fraud.

The house was reportedly torched in 2001. Arson was ruled as the cause but no arrests have been made.

read story from the Tri City Herald


Ohio regulators are warning consumers about an alleged mortgage fraud scheme that is using newspapers ands and toll free numbers to fleece potential borrowers.

The ads, one of which appeared in the Lorain Morning Herald, provide a toll-free number but not the name of a mortgage company. The ads promise "no upfront fees and fast results" for people with "bad credit and bankruptcy", according to an alert from the Ohio Department of Commerce.

Ohio regulators have traced the number to Canada, but when the number was called it was answered under the name of Peach State Financial Services. There is a licensed broker under that name in Georgia but it is not licenses to solicit or conduct business in Ohio, the department said.

Consumers are told that the company can find them a loan after they pay a fee of $400 to $1,200. One Ohio resident reportedly paid $1,242 to purchase an insurance policy to secure a mortgage loan.

"When mortgage broker demands money, except for small amounts for credit or appraisal reports, before providing services, this should raise an immediate red flag for every broker," F. Scott O'Donnell, Ohio's superintendent of Financial Institutions, said in a statement. "Legitimate brokers get paid at the time of the loan closing."

read announcement from state of Ohio


When a mortgage broker has not one but two a.k.a. aliases, there might be trouble ahead.

Marion R. Wilson, a.k.a. Mary Smith and a.k.a. Marian Schamberg, of Alamogordo, New Mexico, has been has been arrested and is reportedly accused of defrauding clients and submitting bogus loan applications.

The Alamogordo Daily News is reporting that Wilson -- or Smith, or Schamberg or whatever her name is -- faces charges that include issuing worthless checks, improper sale of encumbered property and three counts of fraud over $2,500.

Her mortgage business is Frontier Mortgage. Investigators say she submitted loan applications that included phony information. She also allegedly had people turn over money to her after they received their loan on a promise she would invest the money.

But authorities say she kept the cash instead.

Some borrowers were also allegedly promised that for a $750 refundable fee Frontier could help repair their credit and find them a loan. But borrowers who did not qualify were also stiffed and didn't get their money back, according to the local district attorney's office.

read story from the Alamogordo Daily News


September 16, 2005


Two real agents were arrested in an alleged mortgage fraud scheme in Colorado, which seems to be a growing hot bed of mortgage fraud.

William E. Mendez, 40 and Claudia Mendez, 33, of suburban Denver have been indicted by a federal grand jury for using false documents to quality people for mortgage loans who couldn't qualify on their own.

The pair is the latest indicted in a scheme that has already included 11 other indictments and charges against 82 other people in the mortgage brokerage and real estate businesses.

"For the last two and a half years our office has quietly worked its way from buyers who lied on their mortgage applications all the way up to the real estate agents and mortgage bankers who participate in the fraud," U.S. Attorney Bill Leone said in the statement.

Prosecutors said William Mendez pulled employees from his real estate business in the scheme, paying them approximately half the commissions from the bogus transactions; he allegedly kept the rest.

William Mendez faces 32 counts and is looking at dozens of years in prison. Claudia Mendez was indicted on 12 charges.

read announcement from U.S. Attorney

read article from Rocky Mountain News

 
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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