Archive for the ‘Mortgage Fraud’ Category
Mary J. Fox Ianniello, 46, now of Los Angeles, California, pled guilty to her role in the bank fraud scheme involving Michael Cassadei and others where they used fraudulent loan applications, appraisals, settlement statements, and other false statements and documents to induce the former First Union National Bank of Delaware to finance the sale of Capital Region, New York residential properties to third parties in amounts well in excess of their actual value, with the participants in the scheme using the proceeds from the loans to purchase the properties in much lower amounts and retaining the bulk of the funds for themselves. Ianniello admitted in Court hat she engaged in various acts in furtherance of the scheme, including submitting false loan applications, executing false settlement statements and other documents, and assisting in the distribution of the loan proceeds.
As previously reported on Mortgage Fraud Blog, on February 17, 2010, Cassadei and appraiser Elmer J. “Joe” McIndoo pled guilty to involvement in the same scheme. All three defendants face sentences of up to thirty (30) years imprisonment, a fine of up to $1 million, or both, a period of up to five years supervised release to follow any term of imprisonment, and mandatory restitution and forfeiture of assets totaling approximately $135,148.45, subject to any apportionment by the Court. Based upon the estimates presented by the government in Court, Cassadei’s advisory sentencing guidelines range was approximately 41 to 51 months imprisonment, and the range for both Ianniello and McIndoo is up to approximately 27 to 33 months. Ianniello’ssentencing was set for July 13, 2010, at 1:00 p.m., before United States District Judge Thomas J. McAvoy in Albany, New York.
The announcement was made by Richard S. Hartunian, United States Attorney for the Northern District of New York, Rene Febles, Special Agent in Charge of the Office of Inspector General, U.S. Department of Housing and Urban Development in New York, John F. Pikus, Special Agent in Charge of the Albany Division of the Federal Bureau of Investigation, and Lt. John D. Durling of the New York State Police Special Investigations Unit.
The ongoing investigation in this matter is being conducted by the Office of the Inspector General of the United States Department of Housing and Urban Development, the Albany Division of the Federal Bureau of Investigation and the New York State Police Special Investigations Unit, with the assistance of the Internal Revenue Service, Criminal Investigation Division, the United States Postal Inspection Service, and the New York State Banking Commission. It is being prosecuted by the United States Attorney’s Office for the Northern District of New York.
Michael Hicks, 41, Quincy, Massachusetts, was sentenced in federal court for a mortgage fraud scheme in which he recruited straw buyers to purchase two properties in Dorchester, Massachusetts which ultimately went into foreclosure, causing a loss to the lenders of more than $1 million.
Hicks was sentenced to 42 months’ imprisonment to be followed by 3 years of supervised release. An order of restitution was deferred for up to 90 days because one unit of the foreclosed properties is scheduled to be sold at auction in March. Hicks pled guilty to one count of wire fraud and one count of money laundering on November 24, 2009.
At the earlier change of plea hearing and according to court documents, the prosecutor told the Court that had the case proceeded to trial, the evidence would have established that in August 2007, Michael Lee purchased a three-family dwelling at 162 Quincy Street, Dorchester, Massachusetts, for $400,000. He immediately converted the dwelling to three condominiums, which allowed Lee to sell the units individually. At Lee’s request, Hicks, through a Pennsylvania associate, recruited a “straw buyer” to purchase all three units. The straw buyer provided his identifying information to the Pennsylvania associate who forwarded it to Hicks. Hicks used this information, such as his name, address, date of birth and Social Security number, to apply for mortgages for the purchase of the three units at 162 Quincy Street. In the loan applications, Hicks falsely represented that the straw buyer intended to make each unit his primary residence, that he was self-employed as a contractor, and that he had an annual income ranging, in the various applications, from $156,241 to more than $379,152, all in an effort to secure mortgages for $370,000 for each of the three units. Hicks also created a fictitious business for the straw buyer, falsely verified the straw buyer’s employment status for the mortgage applications and arranged for false income tax returns to be submitted with the applications.
Hicks also arranged for a straw buyer for another multi-family dwelling at 3-5 Sexton Court in Dorchester, Massachusetts which was owned by Lee’s in-laws. For recruiting both buyers, Lee paid Hicks a total of $180,500 a sum which Hicks turned over to the United States prior to sentencing and which the Court ordered Hicks to forfeit.
Michael Lee also is under Indictment, charged with five counts of wire fraud, in connection with the scheme. His case is pending.
United States Attorney Carmen M. Ortiz, Steven Ricciardi, Special Agent in Charge of the U.S. Secret Service and Susan Dukes, Special Agent in Charge of the Internal Revenue Service – Criminal Investigations, Boston Field Office made the announcement.
The case was investigated by the United States Secret Service and the Internal Revenue Service. It was prosecuted by Assistant U.S. Attorney Sandra S. Bower of Ortiz’s Economic Crimes Unit.
Kevin Lafavers, 46, formerly of Indianapolis, Indiana, was sentenced to 33 months in federal prison, and Donald T. Brown, 67, Lebanon, Indiana, was sentenced to 27 months in prison. Both were sentenced following Lafavers’ guilty pleas to conspiracy to commit wire fraud and wire fraud and Brown’s guilty pleas to conspiracy to commit wire fraud and money laundering. These proceedings concerned the defendants’ participation in a multi-million dollar mortgage fraud scheme operated by Robert Penn in the Indianapolis, Indiana area.
As previously reported on Mortgage Fraud Blog, between November 2003 and August 2005, at least 136 fraudulent loans, totaling $16,613,850.00, were obtained by Robert Penn and his numerous business entities, assisted by Lafavers and Brown and others. The loans were obtained from Argent Mortgage Company, The MoneyStation, and People’s Choice Mortgage/Countrywide Home Loans.
The mortgage fraud schemes carried out by the defendants were accomplished as follows. Participants in the schemes, including Lafavers, located properties and arranged to purchase them at a fair market value generally by means of an option agreement or unrecorded land contract. Other participants in the scheme located straw purchasers who invested their good credit, but no money, to be the purchasers of these properties at a much higher price than that negotiated with the seller. Co-conspirators, including Brown, funded the down payments.
Lafavers was employed by Penn to locate properties for sale, negotiate the purchases of those properties, and enter into option agreements and land contracts with the sellers on behalf of Penn and his businesses. Lafavers generally received $1,000.00 per property located. Lafavers also attended some property closings on behalf of Penn’s companies and received checks that represented illegal proceeds. Lafavers’ sentence reflected his involvement in approximately 19 fraudulent loans. The total amount of those loans was $3,771,000.00.
Brown was primarily involved in funding down payments for investors on the fraudulent real estate transactions. Brown used a bank account, which was maintained by him and his son in the name of Brown Funding Inc. to fund the down payments. Brown obtained down payment checks and provided those checks to the title company, or to another co-conspirator, to be used for the closing. After the property closing, Brown received repayment of the checks from the fraudulent loan proceeds. In addition, Brown Funding Inc. received a fee of $1,000.00 – $3,000.00 for each down payment provided. The sole purpose of Brown Funding Inc. was to fund down payments for investors.
Brown borrowed some of the money for these down payments from individuals who he knew, but did not tell these people that they were in fact funding a fraudulent real estate scheme. Brown also added investors’ names to the Brown Funding Inc. bank account in order to convince the lenders that the investors had access to money which they did not have. Brown’s sentence reflected his involvement in approximately 113 fraudulent loans, including 86 Windsor Village loans. The total amount of those loans was $12,541,000.00.
According to Assistant U. S. Attorney Susan Heckard Dowd, who prosecuted the cases for the government, Circuit Judge David F. Hamilton also ordered Lafavers to serve three years on supervised release, and Brown to serve two years on supervised release following their incarceration. Judge Hamilton also ordered the defendants to pay restitution as follows: Lafavers – $ 1,475,851.63, Brown – $ 9,985,004.15.
The sentencing follows a lengthy investigation conducted by Special Agents of the Internal Revenue Service – Criminal Investigation Division, with the assistance of the Federal Bureau of Investigation. Judge Hamilton previously imposed sentence on six other individuals charged in the scheme as follows: Robert Penn, 84 months’ imprisonment; Mark Roth, 43 months’ imprisonment; Timothy Brown, 37 months’ imprisonment; Stephen Scott Brown, 37 months’ imprisonment; Jerry Jaquess, 30 months’ imprisonment; Tamara Scott, 24 months’ imprisonment.
Jeffrey L. Levine, 68, Atlanta, Georgia, pleaded guilty in federal district court to causing materially false entries that overvalued bank assets to be made in the books, reports and statements of Omni National Bank. Such practices contributed to the over 500 foreclosures and an additional 500 non-performing loans, which resulted in at least $7 million in losses to the FDIC.
Levine was Executive Vice President, the second largest bank shareholder, and head of the Community Redevelopment Lending Department at Omni National Bank from 2000 through October 12, 2007. To keep non-performing loans current on paper, Levine and others at Omni failed to disclose many exceptions to their policies and procedures which resulted in Omni being exposed to a greater risk of loss. Practices that went unreported included: diversion of loan proceeds escrowed for rehab; excessive credit concentrations to a single borrower; funding additional loans for Omni foreclosures at ever-increasing amounts; and failing to create sufficient reserves for those questionable loans or to properly record them on Omni’s books and records.
Before takeover by the FDIC on March 27, 2009, Omni was headquartered in Atlanta, Georgia with branch offices in Birmingham, Alabama; Tampa, Florida; Chicago, Illinois; Fayetteville, North Carolina; Houston,Texas; Dallas,Texas and Philadelphia, Pennsylvania. Omni borrowed Fed Funds at low rates to make high-interest, short-term loans through Levine’s Community Redevelopment Department to borrowers with less than stellar credit and often no steady employment or formal education. Such Omni borrowers were supposed to purchase and rehab distressed properties for prompt resale or Section 8 rental in run-down, inner-city neighborhoods. Borrowers were expected to do most of the rehab themselves within a few months of the loan, and qualify for a loan to purchase a second property only when the first property was sold, or ready for sale. Omni, its regulators and investors relied on the expected increased value of the property after rehab to be we! ll in excess of the loan amount. The Redevelopment Department generated a significant portion of the Omni profits reported on its books and reports, although the facts now show that those profits were materially overstated.
Levine and others were well aware that none of the foreclosed properties could be sold on the open market for the amount of the outstanding Omni loans. A number of foreclosures were never disclosed on the Omni books as required, and some properties were resold up to five times at ever-increasing amounts. The actions of Levine and others at Omni resulted in an overvaluation of bank assets, which in turn misled Omni’s outside auditors, its Office of the Comptroller of the Currency regulator, its FDIC insurer, the Securities and Exchange Commission, and Omni shareholders. Such practices contributed to the over 500 foreclosures and an additional 500 non-performing loans, which resulted in at least $7 million in losses to the FDIC.
The evidence showed that the HUD Section 8 Program and its tenants also suffered, because many of the Omni funded distressed properties were not rehabbed, but rather, stood vacant or were inhabited by squatters for years, corrupting other Section 8 properties and the community. Even if rented, the frequent Omni foreclosures resulted in unstable housing for Section 8 tenants, as well as increased crimes resulting from the vacant properties and transient tenants.
Levine was charged in a Criminal Information on December 22, 2009, with making, and causing others to make, materially false entries that overvalued bank assets, in the books, reports and statements of Omni National Bank, and pleaded guilty to this charge. He could receive a maximum sentence of 30 years in prison and a fine of up to $1,000,000. In determining the actual sentence, the Court will consider the United States Sentencing Guidelines, which are not binding but provide appropriate sentencing ranges for most offenders. Sentencing is scheduled for March 23, 2010, at 2 p.m., before United States District Judge Jack T. Camp.
Additional Omni-related prosecutions to date include:
●Mark Anthony McBride, 43, East Point, Georgia, as previously reported in Mortgage Fraud Blog, pleaded guilty on April 4, 2009, to fraudulently obtaining millions of dollars in mortgage loans from Omni and other lenders. McBride is scheduled to be sentenced on March 2, 2010 at 2 p.m., before United States District Judge Jack T. Camp. McBride remains in jail while awaiting sentencing.
●Brent Merriell, 37, Atlanta, Georgia, as previously reported on Mortgage Fraud Blog, was indicted on December 15, 2009, with six counts of aggravated identity theft and false statements in connection with his request to the FDIC for permission to “short sale” 14 properties for $2.2 million less than the Omni funded outstanding loans. Merriell was facing foreclosure on each of the properties when the charges allege that he submitted “short sale” requests supported by forged and counterfeited sales contracts and loan commitments in the names of four people whose identities had been stolen. Merriell has pleaded not guilty to the charges and remains in jail awaiting trial. No trial date has been set.
●Delroy Oliver Davy, 37, Lithonia, Georgia, as previously reported on Mortgage Fraud Blog, was charged in a Criminal Information on December 18, 2009, with bank fraud and conspiracy to commit bank, mail, and wire fraud in connection with a scheme to fraudulently obtain millions of dollars of mortgage loans from Omni and other lenders. At his initial appearance Davy waived indictment and announced his intention to plead guilty to those charges in January 2010. The plea hearing will be before United States District Judge Jack T. Camp. The hearing date has not yet been set.
These cases are being investigated by Special Agents of a Mortgage Fraud Task Force for Omni-related cases, which includes FDIC-OIG, HUD-OIG, the Postal Inspection Service, the SIGTARP, and the FBI. The Task Force is continuing a number of Omni-related investigations, including inquiries related to Omni’s application for Troubled Asset Relief Program (TARP) funds.
Acting United States Attorney Sally Quillian Yates said, “This case demonstrates the damage that can result when senior bank officials ignore rules and regulations designed to protect a bank by identifying problem loans. Bank executives and those in critical and knowledgeable positions will be held accountable when they deliberately circumvent the systems designed to reveal the true condition of their bank to its regulators, insurers and investors.”
Federal Deposit Insurance Corporation (FDIC) Inspector General Jon T. Rymer said, “The FDIC is tasked with liquidating the assets of failed banks such as Omni. Therefore, the FDIC OIG aggressively investigates and prosecutes fraudulent activities that undermine the integrity of the financial services system and impede the FDIC’s efforts to maximize recoveries. We are pleased to have partnered with our law enforcement colleagues in bringing about this successful action.”
Martin D. Phanco, Postal Inspector in Charge of the Atlanta Division said, “This investigation uncovered a fraudulent scheme which benefited the defendant and other individuals. The U.S. Postal Inspection Service mission is to protect the U.S. mail system from criminal misuse like that demonstrated in this case.”
Special Inspector General for the Troubled Asset Relief Program (SIGTARP) Neil Barofsky said, “There were many reasons for our financial crisis, including fraudulent schemes like the egregious conduct admitted today. SIGTARP is committed to working with its law enforcement partners to root out these crimes whenever they can be discovered.“
Department of Housing and Urban Development (HUD) Inspector General Kenneth M. Donohue said, “Families receiving Section 8 rental subsidies should expect safe, decent and sanitary housing. In this case, poor stewardship and management of the properties has negatively affected the neighborhoods and the entire community.”
Assistant United States Attorneys Gale McKenzie and Christopher Bly are prosecuting the case.
Three separate Superior Court lawsuits have been filed in Kennebec County, Maine, against out-of-state businesses and their principals: Elect Group, LLC, Anthony Ferlanti and Emmanuele Zuccarelli (Florida); Help Modify Now Debt Solutions, Inc., Help Modify Now, Inc. and Chas Bain (California and Nevada); US Advocate Law Group, P.C. and Jeff Nemerofsky (California).
These lawsuits allege that the defendants used deceptive and unfair practices in marketing so-called “debt settlement” services, in the form of foreclosure rescues and mortgage modifications, and that they failed to register as debt management services under Maine law. The suits seek the recovery of fees paid by Maine consumers to these defendants, as well as civil penalties and costs.
The defendants allegedly charged Maine consumers more for their debt settlement services than allowed for by Maine law. The State alleges that the defendants’ illegally high upfront charges ranged from $1,000.00 to $4,300.00. Maine law prohibits debt management service providers from charging more than a $75 set-up fee and for charging more than 15% of the amount by which the consumer’s debt is reduced as part of each settlement. The State also alleges that the defendants misrepresented the benefits of their programs to consumers and refused to provide refunds when consumers asked for them after the defendants failed to prevent foreclosure. As a result, many Maine consumers found themselves in more dire financial straits than they were before they engaged the defendants.
Maine’s Debt Management Services Act requires that providers of debt management services register with the Superintendent of the Bureau of Consumer Credit Protection and obtain a $50,000 surety bond for the protection of consumers. The defendants named in the recent lawsuits have never registered nor have they procured the required surety bond.
The three lawsuits follow investigations conducted by staff in the Attorney General’s Office and at the Bureau of Consumer Credit Protection within Maine’s Department of Professional and Financial Regulation, which licenses debt management service providers.
Superintendent Will Lund of the Bureau of Consumer Credit Protection stated that his agency has filed Cease & Desist Orders against 19 separate unlicensed debt management providers in the past 6 months, and that his staff has recovered more than $25,000 in restitution for Maine consumers during that time.
Attorney General Janet Mills and Superintendent Lund advise homeowners facing foreclosure that they now have a right to mediate with their lenders during the court proceedings. Homeowners should not hesitate to ask for mediation; this is an informal opportunity to resolve a foreclosure problem under the guidance of a court-approved mediator.
“A person’s home is not just their largest financial asset; it is the bedrock of their family, their anchor in the community, their children’s future and their legacy. These foreclosure rescue schemes take advantage of people threatened with foreclosure by demanding large upfront fees and doing little or nothing in return,” said Attorney General Mills.
“I am pleased to join a national effort to protect homeowners from unfair and deceptive practices. Maine homeowners need to know that there is legitimate help for those concerned about foreclosure. I encourage Maine consumers to talk to Maine registered non-profit counselors and to avoid paying fees to any entity without checking the state’s registry. Many times a homeowner can negotiate on their own without paying any fees to a debt management company. The money spent on these ‘debt solution’ services is better spent on paying down debt and negotiating with banks and other creditors,” Mills stated.
“We hear every week from consumers who have found unlicensed companies on the Internet and who have sent funds to those companies without receiving any benefit,” Superintendent Lund commented. “We will continue to work with the Attorney General and other partners to stop violations of laws and to protect the public,” he said.
Susan Feaman, Ellis Grove, Illinois, formerly of Perryville, Missouri, has pleaded guilty to charges of interstate transportation of stolen property and identity theft.
On March 6, 2006, a detective from the Perryville, Missouri, Police Department obtained a search warrant for the residence of Susan Feaman in Perryville. The warrant was based upon Feaman’s criminal conduct in using forged prescriptions to obtain controlled substance prescription drugs. In executing the search warrant, officers seized materials relating to the forged prescription conduct, as well as materials reflecting Feaman’s use of her mother’s name and social security number. Her mother has lived in another state for many years. In the time frame from October 1, 2005, to December 31, 2005, Feaman used the the name, social security number and credit worthiness of her mother to obtain a loan in the amount of $145,000, to purchase the residence in Perryville, Missouri. In addition to the residential loan, Feaman used her mother’s identification information to obtain credit cards and to make credit transactions with approximately twenty-five companies. She made $271,000 in fraudulent credit purchases and other transactions in 2005 and 2006.
As part of the investigation in this case, Feaman was prosecuted in Perry County on felony charges relating to the forged prescriptions. She plead guilty and was sentenced to four years in the Missouri Department of Corrections. She served that sentence and was paroled.
From April 1, 2009, through April 12, 2009, Feaman stole a series of Steuben Crystal glass figurines from the Sallie Home store in Ladue, Missouri, which she took to her home in Ellis Grove IL. She sold some of the items on E-Bay and kept some others. The figurines had a value of $15,120.
Feaman now faces a maximum penalty of ten years in prison and/or fines up to $250,000 for interstate transportation of stolen property and 15 years in prison and/or fines up to $250,000 for identity theft. Sentencing has been set for February 5, 2010.
Acting United States Attorney Michael W. Reap commended the work performed on the case by the United States Secret Service, United States Postal Inspection Service, the Perryville and Ladue Police Departments and Assistant United States Attorney James E. Crowe, Jr., who is handling the case for the U.S. Attorney’s Office.
Charges were announced in two separate mortgage fraud cases involving almost $10 million in fraudulent loans.
1- United States v. Greta Medina, et al. These defendants are charged in a mortgage fraud scheme, which resulted in the approval and disbursement of approximately $7.9 million in mortgage loans. According to the Indictment, to effectuate the scheme, Greta Medina, the alleged organizer of the scheme, identified five properties to be used to defraud a mortgage lender, Wells Fargo Bank. Margaret Roberts, a real estate broker, negotiated the purchase transactions with the sellers of the properties on behalf of Medina. Medina and other recruiters, including Dania Arguelles and Martin Mere, recruited straw buyers Melissa Ann Scher, Alfonso Velasco, Adan Vasquez, Yohamel Caballero, and Alberto Lopera to submit fraudulent loan applications to the lender, and paid off title agents to facilitate the closing of the transactions. Medina and the title agent, Karim Goding, caused the lender to loan more money than it otherwise would have loaned by preparing and submitting to the lender a false HUD-1 Settlement Statement with an inflated purchase price. The defendants then concealed the fraudulent scheme by creating a second version of the HUD-1 Settlement Statement to be provided to the seller reflecting the actual purchase price of the property. At closing, the defendants diverted millions in loan proceeds by skimming the difference between the inflated purchase price and the price actually paid to the seller for the property.
After closing, the defendants used those loan proceeds to pay off their co-conspirators, including the title company agents, the recruiters, and the straw buyers, and to fund their lavish life styles. In some instances, the defendants stripped more money out of the properties by taking out home equity lines of credit, which they used to conceal the fraud by making mortgage payments, and to further enrich themselves. Ultimately, the straw buyers defaulted on the loans, causing each of the properties to go into foreclosure and resulting in probable losses to the lender in excess of $4.5 million.
The Indictment includes charges of conspiracy to commit bank fraud and substantive bank fraud. The wire fraud offenses carry a statutory maximum sentence of 30 years’ imprisonment.
2- United States v. Julio Llanessa, et al. According to the Indictment, Julio Llanessa and Laura Fernandez a/k/a “Laura Llanessa,” recruited the straw buyer Fausto Guzman to use his identity and credit to buy a property in Miami-Dade County. Guzman received $30,000 for acting as a straw purchaser. Guzman and his co-conspirators sent two mortgage applications, which contained materially false statements as to his income and employment to Countrywide Home Loans, Inc for two loans – one in the amount of $1.5 million and the other in the amount of $100,000. Ryan T. Dosen, the title agent, and his employee, Emma Betancourt, prepared the necessary paperwork to close the loan. Unbeknownst to Countrywide, Dosen and Betancourt participated in the preparation of a false HUD-1 Settlement Statement for the property, which reflected a fraudulently inflated sale price of $2 million. A second HUD-1 Settlement Statement, which the defendants did not disclose to Countrywide, revealed a sales price of $1.68 million. It was based on the represented $2 million sale price that Countrywide approved the $1.6 million in loans.
About ten days later, Guzman was recruited to apply for a $400,000 Home Equity Line of Credit on the same property from Sun Trust Bank, a federally insured financial institution. A fraudulent application was submitted to SunTrust that contained material misrepresentations. The closing for the HELOC was conducted by Dosen and Betancourt, who again sent the false HUD-1 Settlement Statement reflecting the $2 million sale price to the lender. The day after the HELOC closed, Dosen’s title company wired $339,750 to Julio and Laura Llanessa’s personal account.
Defendants Llanessa and Fernandez were charged by complaint and arrested on December 3, 2009. When defendant Fernandez was arrested, she was carrying more than $200,000 in currency, which she failed to declare upon her entry into the U.S. at Miami International Airport.
The defendants were charged with conspiracy to commit wire and bank fraud, two counts of substantive wire fraud, one count of bank fraud and one count of bulk cash smuggling. These charges carry a maximum penalty of thirty (30) years’ imprisonment for the bank fraud and twenty (20) years for the wire fraud.
An Indictment is only an accusation, and the defendants are presumed innocent until and unless proven guilty.
On September 27, 2007, Acting U.S. Attorney Sloman announced a joint Federal-State Mortgage Fraud Initiative, designed to combat the growing mortgage fraud epidemic in South Florida. Since its inception, the Mortgage Fraud Initiative has yielded substantial results. Including the cases announced today, approximately 264 individuals have been charged since Sept. 2007 for their involvement in mortgage fraud schemes that have resulted or were intended to result in the approval and issuance of more than $305 million in mortgage loans.
Acting United States Attorney Jeffrey H. Slomancommended the investigative efforts of the FederalState Mortgage Fraud Strike Force with specialcommendation to the U.S. Secret Service, the United States Postal Service, and the Miami DadePolice Department. These case iarebeing prosecuted by Assistant U.S. Attorney Peter A. Forand and Assistant U.S. Attorney Cristina Pérez Soto.
Pasquale Scavitti, III, 46, Cranston, Rhode Island, a former attorney, has been sentenced to 42 months in prison and ordered to pay a total of $2,496,812 in restitution to various individuals and financial institutions for diverting more than $2.5 million in mortgage funds from his firm’s client account for personal use.
As previously reported on Mortgage Fraud Blog, in June, Scavitti pleaded guilty to wire fraud. At the plea hearing, Assistant U.S. Attorney Andrew J. Reich said the government could prove that Scavitti maintained a law practice in Cranston and shared his office space with other attorneys. As part of his practice, he maintained a client escrow bank account.
Mortgage Guarantee and Title Company, a real estate title and closing company, utilized the services of Scavitti’s law office to facilitate mortgage lending. As part of those services, mortgage and refinancing proceeds were wired into the client escrow account at Scavitti’s firm. The firm’s obligations were to pay off existing liabilities from those loan proceeds.
Between 2003 and August 2008, Scavitti directed that client escrow account funds not be used to pay off the corresponding existing mortgages but rather to pay for various personal and business expenses. Escrow funds were also used to pay off previously negotiated mortgages that were already delinquent, since they had not been paid off in a timely fashion.
Some of the proceeds that Scavitti caused to be diverted were used to pay off personal mortgage expenses. Other diverted funds were used to pay gambling expenses. In a four-day period in 2004, Scavitti bought $23,000 worth of casino chips at Foxwoods Casino.
In September 2007, Mortgage Guarantee terminated the authority of Scavitti’s law office and its attorneys from acting as approved attorneys for Mortgage Guarantee. However, for subsequent mortgages, Scavitti contacted other attorneys to act as title attorneys on real estate transactions and closings. For these transactions, Scavitti falsified letters purporting to authorize his firm to act as the approved attorney for Mortgage Guarantee. As before, loan proceeds were deposited into the escrow account at Scavitti’s firm, and Scavitti directed that they not be used to pay off the corresponding existing mortgages but instead be used for various personal and office expenses.
As a result of Scavitti’s fraudulent scheme, he failed to pay off 13 mortgage loans and refinancing transactions, resulting in total losses of approximately $2.5 million to borrowers and financial institutions.
The Federal Bureau of Investigation conducted the investigation.
William Arthur Sassman II, 41, Sacramento, California, who “looted” the life savings of dozens of investors to bankroll his lavish lifestyle and prop up a multi-million dollar real estate and business Ponzi scheme, has been arrested.
Sassman was arrested at his residence on a total of 100 counts: 43 counts of grand theft, 40 counts of misrepresentation or omission in the sale of a security, 16 counts of first-degree burglary and 1 count of use of a device, scheme, or artifice to defraud in the sale of a security. If convicted, Sassman faces up to 52 years in prison. Sassman is being held in the Sacramento County Jail and bail has been set at $3.2 million.
Over the past decade, Sassman used four companies – InTex, LLC; Formulating Insurance Agency (FIA); Formulating Investments (FI); and Systematic Management Services (SMS)-to solicit investments ranging from approximately $10,000 to $500,000 from more than 50 individuals across Northern California and beyond.
Sassman, a licensed insurance agent, convinced investors, many of whom were senior citizens, to shift their savings from IRAs, annuities, life insurance accounts, 401(k)s and certificates of deposit to “high return” investments with his companies. These investments included foreclosed properties and real estate in Georgia, Mare Island and Vallejo, California; a strip mall in Folsom, California; commercial property in El Dorado Hills, California; the production of a laptop computer stand called the “Notefloat” and annuity, stock and foreign currency investments.
However, Sassman made few, if any, of these investments and rarely paid the double to triple digit returns he promised. Instead, Sassman spent investors’ millions financing his lavish lifestyle, including $1.1 million on his American Express card, $300,000 on automobiles, $75,000 at Polo Ralph Lauren and three homes.
The limited funds Sassman invested were channeled into other illegal operations including a “stock trading program” run by a group indicted in federal court earlier this year for running a Ponzi scheme and a European investment scam that promised a 200 percent profit in 45 days or 800 percent annually.
As Sassman burned through investor funds, he paid returns to early investors by using funds from new ones. Investors are still owed close to $4.4 million, and additional losses could reach $3 million.
In September 2009, Sassman and his companies filed for bankruptcy.
Some of Sassman’s Victims
In January 2007, a Sacramento couple invested more than $80,000 with Sassman’s company SMS to be invested into real estate and to earn interest. Sassman informed the couple that their money had been used to purchase property, which was undergoing renovation. The couple was unaware that their entire investment had been used to pay other investors.
In October 2004, a Sacramento resident invested more than $250,000 in FIA. Sassman promised her a seven percent annual return. Her money was combined with money from other investors for a total of more than $700,000. Of that money, approximately $400,000 was spent on Sassman’s personal expenses, more than $50,000 went to Sassman’s wife, and more than $34,000 was paid in returns to other investors. The victim lost $170,000 of her investment.
In late 2005, Sassman promised a Rancho Cordova woman that if she closed her $78,000 life insurance policy and invested the funds with him, she would receive an 8 percent return on her investment. In early 2009, the victim was diagnosed with cancer and her son took over her finances. Her son contacted Sassman and requested $7,000 from his mother’s investment to help pay for her medical expenses. Sassman promised to send a check, which never arrived. Soon after, the victim’s son contacted Sassman and asked him to return the entire balance of the $78,000 investment. Sassman sent a check for $14,000 that bounced. The victim’s investment was never returned.
Sacramento-Attorney General Edmund G. Brown Jr. announced the arrest.
“William Arthur Sassman solicited millions of dollars from California investors with promises of high returns on business and real estate investments,” Brown said. “In reality, Sassman looted their savings to prop up a Ponzi scheme, so he could buy homes and Ferraris.”
