On Monday June 30th, Judge Robert J. Nightingale found a mother and her two sons guilty on charges stemming from a “complex” mortgage fraud scheme that caused over $1.2 million in losses to four banks. Shan Lal was found guilty on two counts of fraud over $5,000 and one count of money laundering. Her son, Allan Mohammed, was found guilty of seven counts of fraud over $5,000 and one count of money laundering. His brother, Andrew Mohammed, was found guilty of uttering forged documents and two counts of fraud over $5,000. Andrew was acquitted on one count of fraud over $5,000
The investigation of this case started in 2008 when detectives responded to a single mortgage fraud complaint. Police officers eventually uncovered a scheme that involved five victims of identity theft (three from Kitchener and two from Hamilton), six residential properties (one in Hamilton, one in Simcoe), seven mortgages, and one line of credit. Three other co-conspirators involved in the scheme were charged and pleaded guilty in 2010 and 2011.
This scheme saw homes purchased cheaply and then sold at an inflated price to “straw buyers,” who obtained mortgages using stolen identification. The mortgages would immediately go into default, leaving the lending institution with significant losses.
“This was very sophisticated and one of the largest cases we’ve ever dealt with,” said major fraud unit Detective Duncan McCulloch.
Shan Lal, Allan Mohammed, Andrew Mohammed have been released from custody and are expected back in court on August 29th for sentencing submissions.
A federal grand jury has indicted two men for their roles in a large-scale mortgage fraud scheme arising from the fraudulent purchases of more than 40 properties in New Haven. Andrew Constantinou, 57, and Jacques Kelly, 48, were convicted on all counts charged in the indictment following a three week trial before Chief United States District Judge Janet C. Hall. They jury found both men guilty of conspiracy to commit mail fraud, wire fraud, and bank fraud. Kelly was also found guilty of one count of wire fraud and one count of making a false statement to a financial institution.
According to court documents, Constantine, Kelly, and others conspired to defraud mortgage lenders out of millions of dollars by inflating the contract price that property sellers had agreed to accept. The conspirators obtained mortgages from the inflated sale prices and then received thousands of dollars in cash back after closing. These payments were not disclosed to the lenders.
The scheme, which ran from 2006 to 2008, involved multi-family homes in the New Haven area. The majority of the properties purchased have gone into default and since been foreclosed upon. As a result, lenders have lost an estimated $7 million.
Andrew Constantinou, of Farmington, faces a maximum prison sentence of 30 years while Jacques Kelly, of Poughkeepsie, faces up to 80 years in prison. A sentencing hearing has been scheduled for July 14th. Both men are currently out on bail.
This case was investigated by the Federal Bureau of Investigation, the United States Postal Inspection Service, the United States Department of Housing and Urban Development-Office of Inspector General, and the Federal Housing Finance Agency-Office of Inspector General.
Klary Arcentales, 45, pleaded guilty on Tuesday to one count of conspiracy to commit bank fraud and four counts of bank fraud. She will now face a maximum penalty of 30 years in prison for her role in a large-scale mortgage fraud scheme that bilked lenders out of more than $2 million.
While working as a loan officer at Premier Mortgage services, Arcentales provided fraudulent documents to financial institutions that convinced the lenders to fund mortgage loans to bogus buyers. She was then able to profit illegally by receiving commission from Premier for each mortgage loan that she closed, and by diverting portions of the fraudulently obtained mortgage proceeds to herself.
Two other conspirators, Lester Soto, 57, and Linda Cohen, 56, have already pleaded guilty in connection to this mortgage fraud scheme. Soto hired “document makers” to work up the fraudulent papers and put loan officers in contact with these document makers to create other fraudulent documents. Cohen was a paralegal who acted as the settlement agent on loans Arcentales brokered.
Sentencing hearings for the conspirators have been scheduled as follows:
- Klary Arcentales on May 29, 2014.
- Lester Soto on February 10, 2014
- Linda Cohen on February 18, 2014
Assistant United States Attorneys Rahul Agarwal and Zach Intrater, of the Criminal Division in Newark, prosecuted this case. The investigation was led by the Federal Bureau of Investigation, the IRS-Criminal Investigation, and the Social Security Administration-Office of Inspector General.
Irving Fryar, a former Philadelphia Eagles wide receiver and Robbinsville High School varsity football coach, has been indicted by a state grand jury on charges of conspiracy in theft for a mortgage fraud scam. Fryar, and his 72 year old mother Allene McGhee, allegedly conspired to steal more than $690,000 after McGhee obtained five home equity loans on her Willingboro residence in a six day period during 2009. Both made only a few payments on four of the loans before those banks eventually wrote the loans off as losses.
Fryar and McGhee deceived banks by applying for and closing the loans within a short period of time and purposefully failing to disclose the existence of any prior loans. As a result,” each bank funded its loan in the belief that it held the first lien on the property and the loan would be secured by adequate equity.”
The indictment also says that Fryar and his mother provided false wage information on the loan applications submitted by McGhee, claiming that she earned thousands of dollars a month as an event coordinator for Fryar’s church.
Fryar allegedly received or spent over $200,000 of the fraudulently obtained loan proceeds according to Attorney General John H. Hoffman.
Irving Fryar and Allene McGhee will not be arrested, but will receive a summons to appear before a superior court judge in Burling County for an arraignment. The date for the hearing has not been set at this time.
Federal prosecutors have announced that former Charlotte attorney, Michelle V. Mallard, pleaded guilty to mortgage fraud conspiracy, money laundering conspiracy, and embezzlement in the middle of her trial this week. Mallard’s guilty plea is the latest conviction in a mortgage fraud investigation known by the name of Operation Wax House. Of the 91 defendants that are part of the ongoing investigation, 72 have already pleaded guilty.
According to evidence, Mallard agreed to use her law license to further mortgage fraud primarily in South Carolina and Waxhaw, NC. Testimony alleges that co-conspirators purchased houses at inflated prices in exchange for kickbacks representing the difference between the true price and the inflated price. Mallard agreed to pay these kickbacks to other members of the conspiracy and accepted counterfeit checks to make it appear that the buyers provided the money. Prosecutors alleged that Mallard participated in the mortgage fraud scheme after having stolen over $30,000 from clients by embezzling from her trust account.
After evidence was presented earlier in the week, Mallard told Chief United States District Judge Frank Whitney on Wednesday that she wanted to change her plea to guilty on all counts. She was released on bond and a sentencing date has not been set at this time.
Michelle Mallard, 46, faces a maximum sentence of 70 years in prison if she is found guilty.
Alexander Romaniolis, 48, has been arrested in Huntington Beach for his involvement in a mortgage fraud scheme that involves properties in Rocklin and Roseville. A Sacramento federal grand jury returned a three count indictment on March 21, 2013 charging the Irvine man with mail fraud. The indictment was unsealed after his arrest.
According to Lauren Horwood of the United States Attorney’s Office in Sacramento, Romaniolis recruited five straw buyers to purchase eight residential properties in Rockville, Roseville, and San Clemente. He allegedly assisted the buyers in providing false information to lenders about their job status, income, assets, and intent to occupy properties as primary residencies. According to authorities the straw buyers claimed to be executives of companies controlled and created by Romaniolis.
Romaniolis is reportedly responsible for the origination of more than $5 million in residential mortgage loans in this scheme. All of the properties were foreclosed on, resulting in a total loss of more than $2 million.
The indictment sprang from an investigation by the Federal Bureau of Investigation and the California Attorney General’s mortgage fraud task force. The Huntington Beach Police Department assisted in the arrest. Assistant United States Attorney Jean M. Hobler and Special Assistant United States Attorney Jeffrey A. Spivak are prosecuting the case.
If convicted of mortgage fraud, Romaniolis faces up to 30 years in prison and a $1 million fine. Any sentence will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines.
The former owner of Buy-A-Home real estate brokerage, was convicted over the holiday of conspiracy to commit criminal bank fraud, criminal mail fraud and criminal wire fraud. Mitchell Cohen pled guilty to this mortgage fraud scheme on December 27, 2012 and is scheduled to be sentenced April 26, 2013 in United States Federal Court in New York. Cohen’s crimes carry a maximum penalty of 30 years in prison, although the Federal Sentencing Guidelines will be utilized in determining his ultimate sentence.
Cohen criminal mortgage fraud scheme involved pushing purchasers to buy houses they could not afford, causing them to default, and leaving the banks to deal with the bad loans. As part of his conspiracy, Cohen was accused of paying off debt of borrowers who otherwise would be ineligible for a home loan to make them appear more credit worthy, and then sell them a home for tens of thousands of dollars more than what his company paid. He encouraged purchasers to include false financial information on loan applications in an effort to get the loans approved. He was also accused of providing cash to purchasers who had no money in the bank, which allowed them to obtain certified checks in an effort to defraud the bank into believing they had seasoned funds to close. As further part of his conspiracy, he was accused of having friends and family of the purchasers sign affidavits saying they had paid off some of the purchaser’s debt, when in fact that was untrue.
Cohen’s scheme caused HUD to issue and banks to purchase, millions of dollars in bad loans based on fraudulent information. As a result, many of the houses went into foreclosure. This is the unusual case where a loan originator is successfully prosecuted for pushing bad loans on unsuspecting consumers. It is unclear whether any of the borrower’s involved in Cohen’s conspiracy were charged with any crime. It is typical for authorities to charge the borrower’s with mortgage fraud based on the fact that they participated in the fraud by providing false financial information.
Cohen was charged with a Co-Defendant, believed to be a business associate, whose charges remain pending. It has not been reported whether a part of Cohen’s agreement to plead guilty included a promise to testify against his Co-Defendant who is expected to go on trial in 2013.
35-year-old Scott Eric Perry was sentenced to 18 months in prison on false statement charges connected to an almost $750,000 mortgage fraud scheme.
Beginning Around the end of February 2006 through December , 21 2006, he sold several properties to a variety of buyers throughout the Birmingham area. He allegedly signed and submitted required Housing and Urban Development statements that should have disclosed the payments of all money associated with a transaction and which parties made each payments.
Perry, doing business as Master Industries, bought houses in Jefferson County for the purpose of reselling them.In each of the transactions a HUD-1 settlement statement is required. The form is used to disclose who is to pay and who is to receive money as a part of the real state transaction. Perry failed to disclose that he made the down payments and paid the purchasers at least $3,000 as an incentive to buy the properties. Lenders would have never authorized or approved these loans if they had known the settlement statement was not true and accurate as Perry stated.
U.S. District Judge Karon O. Bowdre ordered Perry to serve 18 months in prison and to pay $746,865 in restitution to Wells Fargo, J.P. Morgan-Chase and Bank of America. Perry is scheduled to report to prison September 12, 2012.
U.S. Attorney Joyce Vance said that, Mortgage Fraud harms banks and lending institutions. It also damages neighborhoods and communities.
Perry agreed to plead guilty so the government would drop 30 charges against him. The charges included, 17 charges of wire fraud and 13 charges of making false statements to a lending institution. The charges were all dropped except for four counts of making false statements.
Lawyers who profited from the housing industry bubble may be finding themselves under increasing scrutiny for the mortgage fraud crisis of the past few years.
Although the case against the lawyers of the big banks responsible for the crisis have long been untold, it was inevitable that the lawyers would get targeted because every bank relies on large teams of high priced lawyers to give approval to every major decision the bank makes.
Two large firms are now feeling this pressure. Greenberg Taurig and Quarles & Brady, are looking at $88 million and $26 million dollars lawsuits due to charges of aiding and abetting a multi-million dollar Ponzi scheme involving mortgage loans. The lawsuits allege that the firms helped in forging documents or turning a blind eye to documents. Both firms deny any wrongdoing.
Normally only a client can sue a lawyer for bad advice or wrongdoing, however some securities laws allow lawyers and law firms to be sued to collect from their assistance in fraudulent schemes.
These lawsuits may mark a change in the tide of third party lawsuits to collect from disreputable lawyers who act unethically. This may signal that a lawyer’s duty will begin to extend out past their client.
The lawyers at Greenberg and Quarles are accused of covering up their clients wrongdoing or turning a at least blind eye to it. Attorneys take an oath to support the U.S. Constitution and the laws of the state in which they practice. Engaging in fraudulent conduct is enough to get attorneys disbarred.
Three former attorneys and a disbarred lawyer plead guilty for participating a mortgage fraud scheme which involved more than 100 homes and over $66 Million.
U.S. Attorney Preet Bharara announced on June 8 that Jacquelyn Todaro, Neal Sultzer, Kevin Hymes, and Michael Schlussel pled guilty to conspiring to commit wire and bank fraud.
The scheme was operated by First Class Equities (FCE), which operated under several alias business names in Oceanside and Old Westbury, New York.
In August last year 14 people, including the above four as well as loan officers and other individuals, were charged in connection to a massive mortgage fraud scheme. FCE arranged home sales between home owners and straw buyers. The straw buyers had no intention of ever living in or paying for the mortgaged properties.
The home owners were often in financial distress and willing to sell their homes. The Loan officers paid and recruited straw buyers to obtain mortage loans by submitting fraudulent applications to banks and lenders that falsified information about the straw buyers’ intentions with the properties, and financial assets.
After approving the loans the banks sent the proceeds to attorneys Todaro, Sultzer, and Hymes to finalize the mortgage transaction. The attorneys and Schlussel would then appear at real estate closings to distribute the loan proceeds to themselves and other consiprators. The attorneys submitted false statement to lenders about how the loan proceeds were distributed. Schlussel falsely represented himself as an attorney even though he had been disbarred.
Charges are still pending against remaining defendants in the scheme Ian Katz, Omar Guzman, Robert Thornton, Michael Raphan, and Ralph Delgiorno. Trial for these defendants is scheduled to begin July 2, 2012.
This case was coordinated with the Financial Fraud Enforcement Task Force. The task force was established by President Barack Obama to investigate and prosecute financial crimes.