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LAWFUEL
-- (Dec. 12, 2006) -- A former Los Angeles-based real estate
developer charged with running a $50 million mortgage fraud
scheme arrived in the United States this afternoon to face
federal criminal charges. Charles Elliott Fitzgerald was
arrested and deported by authorities in the Independent
State of Samoa, a Pacific island nation where he fled to
in June 2003 after he was sued by a mortgage lender he allegedly
defrauded.
Samoan law enforcement officials, responding to a request
from the United States, arrested the 46-year-old Fitzgerald
in the Samoan capital of Apia on December 11. Fitzgerald
was deported by Samoa because his United States passport
had been revoked after the criminal charges were filed,
which in turn subjected him to immediate deportation under
Samoan law. Federal authorities in the United States expressed
great appreciation for the cooperation of the Government
of Samoa and its law enforcement authorities.
Fitzgerald arrived at Los Angeles International Airport
at approximately noon today. He is being transported to
the Metropolitan Detention Center in downtown Los Angeles,
and he is expected to make his initial court appearance
in United States District Court tomorrow afternoon.
Fitzgerald is charged with one count of conspiracy to commit
bank fraud and loan fraud, four counts of bank fraud, one
count of loan fraud, five counts of money laundering and
one count of obstruction of justice.
The arrest warrant for Fitzgerald was unsealed today, as
well as criminal informations against four co-conspirators.
The other four defendants previously charged are:
Mark Alan Abrams, 45, of Long Beach;
Nicole LaViolette, 37, of Palm Springs;
Jamieson Matykowski, 33, of Laguna Niguel; and
Timothy Holland, 35, of Santa Ana.
Abrams previously pleaded guilty to charges of conspiracy
to commit bank fraud and loan fraud, bank fraud, making
a false statement on a tax return and obstruction of justice.
LaViolette, Matykowski and Holland previously pleaded guilty
to charges of conspiracy to commit bank fraud and loan fraud,
as well as wire fraud. All four are scheduled to be sentenced
next year by United States District Judge Dean D. Pregerson.
Fitzgerald and the others were allegedly involved in a wide-ranging
and sophisticated conspiracy to defraud federally insured
mortgage lenders out of tens of millions of dollars. As
part of the scam, the co-conspirators obtained inflated
mortgage loans on expensive homes in some of California's
most exclusive neighborhoods, including Beverly Hills, Bel
Air, Holmby Hills, Malibu, Carmel, Mill Valley, Pebble Beach
and La Jolla. According to the recently unsealed charges,
the conspiracy was spearheaded by Fitzgerald and Abrams.
In the charges filed against the others, Fitzgerald is identified
as the "DPF/BHEF Conspirator." According to these documents,
in late 1999 or early 2000, Fitzgerald went into business
with Abrams in a mortgage brokering company called Desert
Pacific Financial, Inc. (DPF). The company sent mortgage
loan applications to lenders for review and funding, and
received commissions from those lenders when the loans closed.
In late 2001, Fitzgerald and Abrams renamed the company
Beverly Hills Estates Funding, Inc. (BHEF).
LaViolette was a loan processor at DPF/BHEF, and Matykowski
was a property scout who helped locate homes for potential
purchase. Fitzgerald and Abrams also had several in-house
escrow companies, in which Holland was the escrow officer.
Fitzgerald and Abrams, working with Matykowski and real
estate agents, located homes for sale. According to court
documents, they primarily looked for homes with purchase
prices they could inflate, which generally meant they used
homes with good views in expensive neighborhoods throughout
California.
As part of the scheme, Fitzgerald and Abrams purchased homes
at their real market values. For example, the case against
Abrams details the purchase of a home on Roscomare Road
in Bel Air, which Fitzgerald and Abrams bought for $735,000
in the name of “Matykowski or his assignee,” even though
they were at all times in actual control of the home.
Fitzgerald, Abrams and associates then recruited “straw
borrowers” to obtain inflated loans on the properties. The
straw borrowers, some of whom received payments, allowed
Fitzgerald and Abrams to use their names and credit to obtain
mortgages as part of a “property-flipping” process. After
obtaining inflated appraisals and other false documentation
that were submitted with loan applications, Fitzgerald and
Abrams obtained mortgages in the names of the straw borrowers
for double or triple the actual values of the homes. For
example, when they flipped the Roscomare Road property,
they “sold” the residence to the straw borrower for $2,370,000.
The Abrams charges allege that a bogus loan application
package went to Lehman Brothers Bank seeking a loan of $1,422,000,
nearly double the true $735,000 purchase price, and that
Lehman Brothers Bank unwittingly funded a loan of more than
$1.4 million on the property, almost all of which ended
up in one of the in-house escrow companies controlled by
Fitzgerald and Abrams.
The victim lenders, having been deceived by the false documentation
supplied by Fitzgerald, Abrams, and others, unwittingly
funded the inflated loans. According to the Abrams charges,
Lehman Brothers Bank alone was deceived into funding about
80 such inflated loans from March 2000 through March 2003.
These 80 loans were more than $50 million over the true
prices of the homes. Fitzgerald and Abrams allegedly received
millions of dollars of these excess loan proceeds, and their
associates received kickbacks, inflated appraisal fees,
and large commissions.
Lehman Brothers Bank sued Fitzgerald, Abrams and others
in federal court in Los Angeles in 2003 and obtained a receivership,
temporary restraining orders, and preliminary injunctions
against them. Judge Pregerson appointed David J. Pasternak
as receiver to recover assets acquired with proceeds of
the fraud. The receiver, as well as attorneys and forensic
accountants employed by him, have cooperated extensively
with the government's ongoing criminal investigation.
If he is convicted of the 12 counts in the criminal complaint,
Fitzgerald faces a maximum possible sentence of 265 years
in federal prison.
A criminal complaint contains allegations that a defendant
has committed a crime. Every defendant is presumed innocent
until and unless proven guilty beyond a reasonable doubt.
The charges against Fitzgerald and the others are part of
an ongoing investigation being conducted by the Federal
Bureau of Investigation and IRS-Criminal Investigation Division.
Fitzgerald was returned to Los Angeles under escort by a
Special Agent assigned to the FBI's Legal Attache in Canberra,
Australia, which provided substantial assistance in facilitating
Fitzgerald's to the United States.
SOURCE: U.S. Department of Justice, U.S. Attorney's Office
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