Posts Tagged ‘Mortgage Fraud’

John Stewart Morrison IV, 55, Columbia, Maryland has been indicted on two counts of mail fraud as well as Clifford Michael Seibert, 57, Berlin, Maryland; and Seibert‘s company, Modular Homes Wholesaler, Inc. was indicted on two counts of wire fraud in connection with a mortgage fraud scheme. Each indictment also seeks the forfeiture of the proceeds of the scheme, alleged to be $431,317 for Morrison and $363,808 for Seibert. The indictments were returned on August 19, 2010 and recently unsealed.

According to their indictments, Morrison was a mortgage originator and Seibert owned and operated Modular Homes Wholesaler, Inc., Berlin, Maryland. Modular Homes arranged the construction and delivery of pre-fabricated modular homes.

According to Morrison‘s indictment, on November 17, 2005 Morrison contracted to buy Lot #1, Rexwood Dr., Glen Rock Borough, Pennsylvania from the original owner which disclosed to Morrison at least two documents detailing significant problems with the steeply graded parcel of land. In order for a home to be built on Lot #1, extensive soil and engineering work had to be done. The indictment alleges that Morrison failed to follow through on his purchase of Lot #1 and instead recruited P.H., who wanted to have a modular home installed on the site, to purchase the lot. Morrison allegedly failed to disclose the problems with the lot to P.H.

The indictment alleges that Morrison and another individual prepared a loan package in P.H.’s name to apply for a loan from a mortgage lender in the amount of $431,377, to finance the purchase of Lot #1 and construction of a home on the land. The package falsely represented P.H.’s monthly income. Morrison allegedly failed to disclose the problems with Lot #1 to the appraiser, thereby causing the lender to rely on a materially deficient appraisal. Still believing that the land could be built-upon without additional preparatory work, P.H. paid $115,500 for the purchase of the lot at the closing held on June 14, 2006. Morrison allegedly received $36,800 as a result of P.H.’s purchase, which amount was actually paid to the “Atlantic Group,” an entity that Morrison created and used to ensure that his name did not appear on the closing documents.

According to Seibert‘s indictment, he arranged for the construction and delivery of a modular home to Lot #1 on P.H.’s behalf. Seibert prepared a draw schedule in which the lender was to pay Modular Homes a percentage of the loan funds as various stages of completion were reached in the construction and delivery of P.H.’s home. Seibert listed the total price of all services related to the modular home as $363,808. After the closing, the title company mailed a check to Seibert for $35,380 payable to Modular Homes, in accordance with the draw schedule, to begin work on P.H.’s project, including preparing the lot for construction and delivery of the home. The indictment alleges that Seibert did little work, if any, on P.H.’s behalf during this time.

The indictment alleges that on or about August 7, 2006, Seibert requested that funds from the construction escrow account be wired directly to Modular Homes, rather than to P.H. Shortly thereafter, in order to persuade the lender to exempt him from the company’s general policy of paying for construction work only after receiving proof of an approved building permit, Seibert is alleged to have falsely advised the lender that Glen Rock Borough would not issue a building permit until after the foundation for the home was poured. Soon thereafter, in early August 2006, Seibert allegedly submitted his first draw request which falsely represented that the clearing and filling of the lot was complete, when in fact, no work had been done. Seibert then falsely advised the lender that the construction project had overrun in costs because the lot’s community development association was demanding that substantial engineering work be done. The indictment alleges that on August 30,2006, Seibert requested an advance payment of $18,575 for additional costs that would be incurred to meet the demands of the lot’s community development association, when in fact, the development association had made no such demands. Seibert‘s request resulted in the lender agreeing in late October 2006 to fund $16,675 of this request.

Morrison and Seibert each face a maximum sentence of 20 years in prison on each of two counts of mail fraud and wire fraud, respectively. Morrison was arrested today and had an initial appearance in U.S. District Court in Baltimore. Seibert is expected to have an initial appearance on Monday, August 23, 2010.

An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.

The indictments were announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation; and Special Agent in Charge Ken Taylor of the Housing and Urban Development Office of Inspector General – Office of Investigations.

The Maryland Mortgage Fraud Task Force was established to unify the agencies that regulate and investigate mortgage fraud and promote the early detection, identification, prevention and prosecution of mortgage fraud schemes. This case, as well as other cases brought by members of the Task Force, demonstrates the commitment of law enforcement agencies to protect consumers from fraud and promote the integrity of the credit markets. Information about mortgage fraud prosecutions is available http://www.justice.gov/usao/md/Mortgage-Fraud/index.html.

United States Attorney Rod J. Rosenstein thanked the Maryland Department of Labor, Licensing and Regulation’s Division of Financial Regulation for its assistance in the investigation and commended Assistant U.S. Attorney Sujit Raman, who is prosecuting the case.

Veronica Frazier, 42, Pearland, Texas, Robert Veazie, 35, Houston, Texas, and Felton Greer, 41, Houston, Texas, have been charged with fraudulently obtaining home purchase loans. The indictments were returned under seal on May 5, 2010, and were unsealed once the three defendants were in custody.

Frazier was charged in a five-count indictment with conspiracy and wire fraud arising from a scheme to defraud residential lenders in connection with individual condominium purchases in a building located at 917 Main Street, Houston, Texas, also known as “The Kirby Lofts.”

Veazie and Greer were each charged in a separate but related four-count indictment with conspiracy and wire fraud relating to the Kirby Lofts scheme, as well as in connection with other single-family home purchases in the Houston, Texas area.

Greer surrendered to FBI agents, while Veazie surrendered to the United States Marshals Service. Both appeared before U.S. Magistrate Judge Mary Milloy who allowed them to be released upon posting $50,000 bond. Frazier was arrested by FBI agents and is expected to appear before U.S. Magistrate Judge Nancy K. Johnson.

According to the allegations in the indictment returned last week, the Kirby Lofts transactions were sham sales. From about January 2006 to October 2006, Frazier recruited individuals with good credit to act as borrowers in applications for mortgage loans to purchase units in The Kirby Lofts and, with the assistance of co-conspirators, assisted these “straw borrowers” with providing false information and documents to induce lenders to fund purchases of units in The Kirby Lofts. The indictment also alleges Frazier and other co-conspirators submitted invoices for payment from loan proceeds and used the money to pay themselves and straw borrowers from loan proceeds.

The indictment against Veazie and Greer alleges they acted as “straw borrowers” in the Kirby Lofts scheme and also for other residential loans involving single-family residential properties in the Houston, Texas area. According to the indictment, Veazie and Greer received kickbacks from loan proceeds and provided false statements and documents to induce lenders to fund the purchase loans.

The maximum penalty, upon conviction, for conspiracy and wire fraud is 20 years in prison and a fine up to $250,000.

The investigation leading to the charges was conducted by the FBI. Assistant United States Attorneys Belinda Beek and Vernon Lewis are prosecuting the case.

United States Attorney A. Brian Albritton has announced that U.S. District Judge Henry Lee Adams Jr. has sentenced Barry C. Westergom of Jacksonville, Fla. to four years in federal prison for conspiracy to commit wire and bank fraud. The court also ordered restitution in the amount of $866,141.62 and entered a money judgment for $100,000, the amount that Westergom had obtained from the fraud. Westergom had pleaded guilty on Oct. 8, 2009.Read more

Interthinx has launched the Interthinx Conditioned Valuation Model (CVM), a unique, cost-effective integration of robust automated valuation technology and analytics tempered by a professional property inspection. This new approach to property valuation will provide lenders and servicers with a powerful choice that is more accurate than an AVM (Automated Valuation Model) and less expensive than a BPO (Broker Price Opinion). Interthinx is a leading provider of proven risk mitigation, fraud detection, and regulatory compliance tools for the residential mortgage industry.Read more

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.

Owners of Real Estate Investment Company Indicted for Conspiracy

Acting United States Attorney Robert S. Cessar has announced that Robert Danenberg, a resident of Pittsburgh has plead guilty in federal court to a charge of wire fraud conspiracy in connection with a mortgage fraud scheme. Danenberg pleaded guilty to one count before United States District Judge Donetta Ambrose.Read more

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.

Edward William Farley of Hoschton, Ga., has pleaded guilty in federal district court to committing a mortgage fraud, a real estate investment “Ponzi” scam involving over 150 victims, a check-kiting scheme and a bankruptcy fraud. According to Acting United States Attorney Sally Quillian Yates and the information presented in court: Farley, a former mortgage broker, operated through “Creative Home Search,” “Southern Land Partners,” “Georgia Land Group,” and “Global Mortgage” in Dunwoody and Norcross, Ga., to defraud mortgage lenRead more

Cheryl Brooke, 52, Upper Marlboro, Maryland, was sentenced by U.S. District Judge Deborah K. Chasanow to 46 months in prison, followed by three years of supervised release, for conspiracy to commit wire fraud in connection with a scheme in which she and her conspirators offered to help financially vulnerable individuals save their homes from foreclosure, and instead defrauded homeowners and mortgage lenders. Judge Chasanow also entered a preliminary forfeiture judgement against Brooke of $2,228,878, generated as proceeds of the criminal activity in the mortgage fraud scheme.

According to Brooke‘s plea agreement, from at least 2004 until May 2008, Michael K. Lewis aired television advertisements that targeted financially-vulnerable individuals, representing that he could improve their credit, save their homes from foreclosure and assist them with bankruptcy. Viewers who called the toll-free number were scheduled to meet with Lewis. At the meetings, they were solicited to purchase a variety of for-fee services for reducing debt, as well as a pre-paid legal plan, income tax return preparation services and bankruptcy petition preparation.

Lewis, Brooke, and co-conspirator Winston Thomas specifically targeted individuals who owned and had equity in their homes, but were facing foreclosure on their homes because of their inability to make monthly mortgage payments. The goal of the conspirators was to steal the homeowners’ equity out of their property by inducing the homeowners to sell their property to co-conspirator Earnest Lewis and converting sale proceeds to the use of the conspirators. Lewis and his co-conspirators did this by fraudulently representing to the homeowners that their “lease/buy-back program” would help the homeowners to keep their homes. Lewis and Thomas, a senior loan officer with a mortgage lender, told the homeowners that the “good credit” of Earnest Lewis would be used to temporarily refinance their homes, that they had to sign their homes over to Earnest Lewis and that they could repurchase the homes in roughly one year, or once they regained their financial footing. During the interim, they could remain in their homes only by paying inflated “rent” and fees, which payments were directly debited from their bank accounts to an account belonging to Cheryl Brooke‘s company “In the House Technologies.” Brooke then made payments to Earnest Lewis and Thomas, with the remaining funds being used by Michael K. Lewis and Brooke for their personal benefit.

Lewis, Earnest Lewis and Thomas lied to the homeowners or omitted details as to the amount of money that the homeowners would receive at settlement, what would be done with any equity in the homes and the need to file for bankruptcy protection and failed to inform the homeowners of the particulars of how the lease/buy-back program worked.

In addition, in order to induce mortgage lenders to provide mortgage loans to purchase the homes, Thomas submitted false financial and employment information to mortgage lenders. After financing was obtained to purchase the properties, Brooke would file motions to dismiss the homeowners’ bankruptcy cases so that the settlements could take place.

Michael K. Lewis, 57 and his brother Earnest Lewis, 52, both of Takoma Park, Maryland, were sentenced to 78 months in prison and 54 months in prison, respectively. Winston Thomas, 43, New Carrollton, Maryland was sentenced to 37 months in prison. Judge Chasanow also entered a preliminary forfeiture judgement against all three men of $2,228,878.

United States Attorney for the District of Maryland Rod J. Rosenstein announced the sentencing.

United States Attorney Rod J. Rosenstein thanked the U.S. Postal Inspection Service, the Federal Bureau of Investigation, the Internal Revenue Service- Criminal Investigation and the United States Trustee’s Office (the Department of Justice agency that supervises bankruptcy cases and trustees) for their investigative work. Mr. Rosenstein commended Assistant United States Attorneys Gina L. Simms, Stacy Dawson Belf and Jonathan Su, who prosecuted the case.