Aryeh Schottenstein and Shawn A. Griffin Plead Guilty! And the Ohio Mortgage Fraud Guilty Pleas Keep on Coming…

As a mortgage fraud speaker, I observe what’s taking place in the mortgage fraud arena, but I have to say, the legal eagles in Ohio are working the mortgage fraud angles hard…

Two more Columbus-area people indicted as part of a mortgage fraud scheme that secured more than $7 million in mortgage loans pleaded guilty in United States District Court. Aryeh Schottenstein, age 34, of Columbus, pleaded guilty to one count of conspiracy to commit wire fraud and one count of money laundering, and Shawn A. Griffin, age 38, also of Columbus, pleaded guilty to two counts of conspiracy to commit wire fraud and one count of money laundering.

Schottenstein and Griffin were indicted along with Donald F. Green, Jeffrey Lieberman and George “Terry” Jordan for a mortgage fraud scheme in central Ohio in 2003 and 2004. COMMENT: It seems that at the height of easy money for mortgages - mortgage fraud was rising as well. See what these folks did below as their crime is becoming a common pattern.

According to statements of facts filed with Schottenstein’s and Griffin’s pleas, Schottenstein and Lieberman owned a company called Parkview Bank. One of Parkview’s business purposes was to locate financing for real estate investors seeking to buy and renovate houses in Columbus. Parkview needed a source for the financing for this venture. In 2003, Schottenstein and Lieberman met with the managing partners for Stillwater Asset Backed Fund to convince them to provide the funding. They were successful.

Parkview and Stillwater entered into an agreement whereby Stillwater would provide the funding for Parkview’s deals. Rather than abide by the agreement and locate legitimate investors, Schottenstein used Griffin to recruit straw-buyers to pose as real estate investors. Using straw-buyers was quicker and easier than locating legitimate real estate investors thereby making it easier to generate more loan origination fees. The straw-buyers were told by Griffin they did not need to renovate the houses or make monthly interest payments. Griffin assured them he would take care of all the details.

COMMENT: Two things stand out - (1) impatience with legitimate business became the foundation of the fraud; and (2) the “straw buyers” were motivated by quick money in order to participate in the scam.

Griffin also recruited straw buyers in 2002 and 2003 for Jeff Pearson, now deceased. Pearson bought dozens of low-income distressed houses in Columbus for amounts at or near their fair market value. The houses were in need of renovation. Very little if any renovation was done to the houses. The houses were sold to Griffin’s straw-buyers for two to three times the amounts Pearson had paid only a few weeks or months earlier. Despite having good credit, the straw-buyers usually had little income. At the closing on the straw-buyers’ purchases of the houses, the title companies issued large checks payable to Pearson as proceeds from the sales.

Green pleaded guilty on April 11. Lieberman and Jordan pleaded guilty on April 24. All are free pending sentencing. Judge Marbley will set a date for sentencing. Conspiracy to commit wire fraud is punishable by up to five years in prison and the money laundering charges carry a maximum sentence of ten years in prison.

According to the Columbus Dispatch a scheme that investigators say bilked millions from banks, lenders and investors was so involved that there were too many fraudulent home purchases to list in the 36-page federal indictment.

Those indicted originally were:

Donald F. Green, 48, of Columbus, real-estate investor

Shawn A. Griffin, 37, of Cleveland, real-estate investor

Aryeh M. Schottenstein, 33, of Oak Park, Mich., real-estate investor

Jeffrey M. Lieberman, 56, of Bexley, real-estate investor

George T. “Terry” Jordan, 50, of Canal Winchester, real-estate agent

Dwayne L. Carter, 37, of Columbus, loan officer

Jonathan L. Boyd, 38, of Columbus, loan officer

Kenyatta Johnson, 37, of Michigan, loan officer

James Darneil Gaither, 37, appraiser

Every choice has a consequence. As a white collar crime and mortgage fraud speaker, I speak from first hand experience about the truth about consequences. Reality is - no one escapes the consequences of their choices. While Schottenstein and Griffin may have enjoyed the money for a time and avoided the consequences - they did not avoid the consequences all together. Prison is no fun and both are facing several years plus substantial restitution for this conviction. Likely they will serve time and that will prove to be a dramatic change from their prior activities. You do reap what you sow.

If you were a victim…please share your experience so other may benefit.

Mortgage Fraud Speaker - Chuck Gallagher - signing off…

Mortgage Fraud Speaker Chuck Gallagher comments: Darrius C. Alati Charged with Bank Fraud!

As time passes it has become clear that many people have come to the wrong conclusion that creativity in financing is somehow legal. It is not! Just today I heard a radio show where they still talked about creative financing through means that others have found themselves on the back end of a conviction. And in this entry we have another Ohio indictment for bank or mortgage fraud.

Darrius C. Alati, age 38, who resides in Akron, Ohio was indicted. The information alleges that Darrius C. Alati committed three counts of bank fraud.

According to the indictment, Alati was a property broker who fabricated a false corporate resolution which was presented to the subject title company to obtain checks drawn on Fifth Third Bank’s escrow account related to monies flowing from the sale of homes in Akron, Ohio. Alati had the title company divide the monies in to a few checks and Alati forwarded only one of the checks to the seller, James Carter. Carter was unaware that Alati withheld these checks arising from the transactions. In the last instance of the scheme, Alati advised representatives of the title company that he would deliver a $70,000 check drawn on the Fifth Third escrow account to Carter. However, Alati deposited said check into own business account for his personal use.

COMMENTS: From time to time I have been approached at presentations I make on mortgage fraud issues by people who got caught up in a scheme unaware. Those situations are unfortunate. However, in this case, it seems clear that the actions of Alati were thought out and not the result of a simple mistake. Frankly, rarely have I found that mortgage fraud was occurred as the result of a misunderstanding.

Alati, if convicted, will likely spend time in federal prison. More and more the courts are losing patience with the proliferation of mortgage fraud. As the banking system writes off record losses due to the weakness in the subprime market, the punishment for mortgage fraud crimes will likely become more severe (within the federal sentencing guidelines).

Every choice has a consequence. As a mortgage fraud speaker, I believe that we are just at the beginning of a wave of prosecutions for mortgage fraud.

Mortgage Fraud Speaker Chuck Gallagher Comments: Mortgage Fraud in California - Iftikhar Ahmad Pleads Guilty!

Like many of my readers, I lived through the Savings and Loan crisis several decades ago and it wasn’t pretty. My fear - with the magnitude of potential mortgage fraud rising to the surface, what we might see in the future could dwarf the problems that were created by the S&L crisis.

And another man pleads guilty! IFTIKHAR AHMAD, 36, of Stockton, Calif., pleaded guilty to two counts of mail fraud and one count of engaging in monetary transactions involving criminally derived property. The charges relate to a widespread mortgage fraud scheme centered in the Stockton, California area.

After an extensive investigation conducted by the Federal Bureau of Investigation and the Internal Revenue Service–Criminal Investigation (IRS-CI), Ahmad saw the light and knew that a guilty plea would be best for him considering the circumstances. investigation remains ongoing.

But how did this massive fraud get uncovered?

Rebecca Wood knew something was wrong when she got a call from Washington Mutual about a late house payment. Her response helped the FBI uncover millions of dollars in mortgage fraud.

According to property records, someone using Wood’s identity bought two houses in Stockton in 2003. When the loan for one of the homes went bad, Washington Mutual called Wood.

According to the US Attorney’s office, AHMAD admitted that from July 2003 through October 2005, he participated in a scheme to defraud Long Beach Mortgage, a wholesale lender, in connection with the sale (and in one instance resale) of 10 residential real properties primarily located in the Stockton, area. Between July 2003 and January 2005, AHMAD, through a company called I & R Investment Properties, LLC, fraudulently sold (and in one instance resold) 10 residential real properties, obtaining in excess of $1.5 million in loan proceeds. In each of the transactions, the purchaser financed the property with money borrowed from Long Beach Mortgage.

The scheme involved the use of some straw purchasers— purchasers who lent the name and credit to real estate transactions in which they in fact had no interest. The scheme also involved false statements on loan documents, including those that related to income and occupation, and undisclosed payments by AHMAD of the down payment on behalf of the purchasers.

The use of false documents is common among mortgage fraud convictions. However, based on my experience speaking about mortgage fraud to realty associations and mortgage groups, it is clear that many people somehow feel that simple “financial positioning” is acceptable. More times than not, on close examination - “financial positioning” can be construed as fraud.

In this case, AHMAD is the fourth defendant to plead guilty as a result of the investigation in the case. On December 17, 2007, JOHN NGO, 27, of San Ramon, California, a former Senior Loan Coordinator for Long Beach Mortgage, pleaded guilty to perjury for falsely stating in testimony before the grand jury that he had not received money from a mortgage broker who referred borrowers to Long Beach Mortgage, including borrowers involved in transactions with AHMAD, when in fact he had received more than $100,000 from the mortgage broker.

On March 31, 2008, MANPREET SINGH, 24, of Stockton, entered a guilty plea to a single count of mail fraud. She admitted as part of her plea that she had participated as a straw purchaser and borrower in connection with two properties that she purchased from I & R Investments in late 2004 and early 2005. She further admitted that AHMAD paid her in excess of $22,300 for her participation in the scheme. Clearly here a case of fraud for money!

On April 17, 2008, JOSE SERRANO, 44, of Stockton pleaded guilty to a single count of mail fraud. As part of his plea, SERRANO admitted that AHMAD had paid SERRANO to recruit straw purchasers, and that AHMAD and SERRANO caused several purchasers to be paid for participating in the scheme.

“This prosecution begins to bring into focus the ways that fraud occurred in the subprime lending market in the Stockton area in the 2003 to 2005 time frame,” said United States Attorney Scott. “False representations were made in loan documents; down payments were secretly made “This prosecution begins to bring into focus the ways that fraud occurred in the subprime lending market in the Stockton area in the 2003 to 2005 time frame,” said United States Attorney Scott.

“False representations were made in loan documents; down payments were secretly made by the seller on behalf of borrowers; buyers and recruiters were paid to participate in the scheme; and a loan coordinator working for a wholesale subprime lender was paid by a mortgage broker handling the transactions. The investigation continues.”

Every choice has a consequence! Considering the wide spread incidences of mortgage fraud, I suspect that this case is just the tip of the iceberg when it comes to what has been done and how many are yet to be discovered. As a mortgage fraud speaker, I am finding more and more that people are just now beginning to understand how wide spread mortgage fraud is and how easy it can be to be caught up in a mortgage fraud investigation.

Mortgage Fraud Alive and Well in Ohio! Steven C. Gittinger Pleads Guilty to Mortgage Fraud Scheme Role

Either there is something in the water in Ohio when it comes to Mortgage Fraud - or - the US Attorney and others involved in law enforcement are serious about this wave of white collar crime. Either way, it seems that Ohio is talking a leading role in rooting out those involved in Mortgage Fraud.

Another Mortgage Fraud casualty is Steven C. Gittinger, who at age 50, pleaded guilty in United States District Court to one count of conspiracy to commit bank fraud and one count of money laundering for his participation in a mortgage fraud scheme.

According to a statement of facts filed with his guilty plea, Gittinger was a principal of Classic Title Agency, Inc. and helped close real estate sales. Between June 2003 and 2005, Gittinger received business and made money for performing closings of real estate sales. In 2003, Gittinger made various fraudulent representations on closing documents in which misrepresentations were made, then forwarded to financial institutions which funded loans for the property.

Gittinger agrees that for the purpose of the Sentencing Guidelines the amount of loss attributable to him is more than $400,000.00 but less than $1,000,000.00. Conspiracy to Commit Bank Fraud carries a maximum penalty of not more than thirty years imprisonment, a fine of up to $1,000,000 (or twice the gross gain to the defendant or loss of the victim. Money Laundering carries a maximum penalty of not more than ten years imprisonment, a fine of up to $250,000 (or twice the gross gain to the defendant or loss of the victim.

Since I jokingly mentioned Ohio as a hot spot…I decided as this was being written to verify if I was dreaming or has Ohio become a mortgage fraud “hot spot?” Interestingly enough with little effort the following was found on the FBI’s web site under mortgage fraud.

• Analysis of available law enforcement and industry resources indicates that the top ten mortgage fraud areas are California, Florida, Georgia, Illinois, Indiana, Michigan, New York, Ohio, Texas, and Utah. Other areas significantly affected by mortgage fraud include Arizona, Colorado, Maryland, Minnesota, Missouri, Nevada, North Carolina, Tennessee, and Virginia. There is a strong correlation between mortgage fraud and loans which result in default and foreclosure.
• Recent statistics suggest that escalating foreclosures provide criminals with the opportunity to exploit and defraud vulnerable homeowners seeking financial guidance. Perpetrators are exploiting the home equity line of credit (HELOC) application process to conduct mortgage fraud, check fraud, and potentially money laundering-related activity.
• The FBI is proactively working with the mortgage industry in an effort to curb mortgage fraud crimes. The FBI signed a memorandum of agreement with the MBA to promote the FBI’s Mortgage Fraud Warning Notice.

Mortgage Fraud is defined as the intentional misstatement, misrepresentation, or omission by an applicant or other interested parties, relied on by a lender or underwriter to provide funding for, to purchase, or to insure a mortgage loan.

As a mortgage fraud and white collar crime speaker, I receive many calls from people who either think they may have become involved in committing some form of mortgage fraud or who have been convicted and wonder what is next. There is a clear pattern that seems to emerge. Either, the people involved are clearly doing what they know is wrong for immediate and personal (ill gotten) gain, or they are pushing the system for the purchase of property and doing so with the help of professionals who know where the gray areas are and just how far to push it.

Remember, if you do anything that is inaccurate and do so for the express purpose of having a financial institution to make a loan based on your representations - you may be guilty of mortgage fraud.

If you think you’ve been a victim feel free to comment!

White Collar Crime Speaker - Chuck Gallagher - signing off…

White Collar Crime’s Surge - Mortgage Fraud - FBI Director’s Comments

As a white collar crime speaker, most of my presentations on the subject centered around corporate fraud and how to prevent it. Lately, however, more and more organizations from real estate firms, to associations, to mortgage companies are interested in the new hot topic - MORTGAGE FRAUD. They want to know how it happens, what to look for and how to prevent it.

Below are comments reprinted from the FBI web-site. The entire document can be found here.

A day after warning the Senate about a “tremendous surge” in the FBI’s mortgage fraud investigations, Director Robert Mueller talked in more detailed terms about the growth in both corporate fraud and public corruption cases at the annual conference of the American Bar Association’s Section of Litigation in Washington, D.C.

Despite limited resources, Mueller said that the FBI’s corporate fraud cases have grown more than 80 percent since 2003. Last year, we had more than 490 corporate and securities fraud convictions.

He predicted that the problem will only worsen because of the “ripple effect of the sub-prime crisis and its impact on the credit market.” The FBI, he said, has already “identified 19 corporate fraud matters related to the sub-prime lending crisis … targeting accounting fraud, insider trading, and deceptive sales practices.” And, we’re currently investigating more than 1,300 mortgage fraud matters.

Years past, the FBI was involved in other forms of white collar crime. Today, that is shifting. That is not to say that corporate and public corruption do not exist - they do, but this new wave of crime seems to have caught on right under the public’s nose as mortgage money came easy.

Mueller goes on to say, In my days as defense counsel with a firm representing corporate targets, I met a number of executives who could rationalize every bad decision. They would say it was “business as usual”—that they were acting in the best interests of the company, given financial constraints and the pressures of running a business.

And I would think to myself, “You broke about 14 laws before breakfast. How could you fail to see you were doing anything wrong?”

I saw executives who did not start out intending to break the law. They would argue they were playing by the same rules as everyone else. They began to believe their own explanations. But it is a slippery slope from behavior that skirts ethical or legal boundaries to behavior that crosses the line completely.

It calls to mind the saying: If you jump out of a window on the 100th floor, and you seem to be doing fine as you pass the 40th floor, that doesn’t mean you don’t have a big problem. Rationalization will not provide much padding when you hit the pavement.

Mueller points out a valuable truth that often comes out in my business ethics presentations, just because some one else does some thing does not mean that it is ethical, right or that you should make the same choice. Every choice has a consequence.

If your organization deals with the sale of real estate it is worthwhile to explore MORTGAGE FRAUD - how it happens, what to look for and how to avoid the outcome - PRISON. For more information contact me through my web site: www.chuckgallagher.com

Mortgage Fraud Speak - Chuck Gallagher - signing off…

Mortgage Fraud - Loan Kickback Scheme Earns Renato Gonzalez Quiazon 3 Years in Prison!

It might have been mortgage fraud that started the crime, but in the end it was the IRS that nailed Renato Gonzales Quiazon, who was sentenced to three years in prison, followed by three years of supervised release for wire fraud and filing false tax returns. This sentence is the result of an investigation by the Internal Revenue Service - Criminal Investigation.

As evidenced by the recent prison sentence for Wesley Snipes for failure to file a tax return - the message is clear. Pay your taxes and don’t mess with the IRS!

Quiazon, age 54, of Hayward, California, acknowledged that he knowingly devised a scheme to fraudulently obtain payments of loan kickbacks, commissions and cash outs/extraneous line items from borrowers’ escrow accounts from which he received more than $500,000. Beginning about January 2000 through October 2004, the defendant was employed as a loan officer with New Century Mortgage, located in Emeryville, CA. During this time, Mr. Quiazon entered into an agreement with an independent mortgage broker to use his name and broker’s license on loans that Mr. Quiazon processed as the loan officer. By using the mortgage broker’s identity on these particular loans, Mr. Quiazon defrauded New Century Mortgage by causing it to issue a 1% commission (1% of the total loan amount) to the mortgage broker who had not earned that commission. As part of the agreement with the mortgage broker, the mortgage broker was to retain 20% of the fraudulent commissions and pay Mr. Quiazon a kickback of 80% of the commissions.

Mr. Quiazon further admitted that from about 2002 through October 2004, he violated his agreement with the mortgage broker by retrieving some of the commission checks directly from title companies, forging the mortgage broker’s signature on the back of these checks, and depositing them into his bank account. He conducted these financial transactions without the mortgage broker’s knowledge or consent.

Not only did he conduct a crime against New Century Mortgage, but he expanded the crime by conducting a crime against his co-conspirator. Note: if someone suggests participation in a crime - run like a scalded dog. If they are willing to deceive others they will deceive you. In fact, more times than not, the reason a crime is uncovered is that a co-conspirator exposes the crime. But back to Quaizon…

During this same time period, Mr. Quiazon added cash outs, ranging from approximately $1,500 to $12,300, and extraneous line items on borrowers’ escrow accounts that were shown as payments to creditors or other third parties on behalf of the borrowers in amounts ranging from approximately $200 to $14,000. Title company checks were disbursed for these amounts from borrowers’ escrow accounts without the borrowers’ knowledge or consent. The defendant forged the borrowers’ signatures and deposited these checks into his bank account.

Mr Quiazon also filed false individual income tax returns for the tax years 2001, 2002, 2003 and 2004. He did not report income relating to the aforementioned scheme to the IRS. The total amount of unreported income was approximately $430,661 for the period under investigation.

STOP: I am not proud of my past, but what gives me license to discuss these crimes in detail is that I have been convicted of them myself. I, too, went to prison for failure to pay taxes on stolen money. As a former CPA and tax partner for a CPA firm, it never occurred to me to pay taxes on stolen money. The thought never crossed my mind. Well, obviously it didn’t cross Quiazon’s either…and that’s what got him in the end. Me too!  However, I have learned that every choice has a consequence and you do reap what you sow…

Your comments are welcome…

For now, white collar crime speaker, Chuck Gallagher, signing off…

Mortgage Fraud - A Week in Review April 17- April 24: Comments by Chuck Gallagher

As each week passes the number of indictments and sentencing hearings seem to increase as the mortgage financial system seems to unravel. Some have claimed that the mess today will become larger and more costly than the Savings and Loan crisis of the ’80’s. Here’s a snapshot of the week.

San Franscisco: Mortgage Ponzi Scheme - Cheryl Hernandez Camus of Concord, California is alleged to have made a number of misrepresentations about a money lending investment, where she promised fixed returns and the return of the principle investment within a fixed period of time. The indictment alleges that Ms. Camus made one or more of the following material false representations and promises in order to induce the investor to give her money:

• The investor’s money would be used to help finance real estate transactions, such as payment of closing costs or down payment;
• The investor’s money would be used to pay medical costs;
• The investor would receive a fixed monthly interest payment on the investment;
• The investor would receive the return of the principle investment amount within a fixed period of time;
• The loans would involve “really no risk.”
• Ms. Camus screened the borrowers to ensure that money was only lent to borrowers who had the ability to repay;
• Ms. Camus had been conducting similar transactions for three years and the returns had been “awesome.”
• Ms. Camus would personally guarantee the investment;
• The investment would be secured by a legitimate deed of trust.

Instead, according to the indictment, Ms. Camus used the money she obtained from investors for personal expenses and to pay back prior investors. Camus, if convicted, faces 20+ years in prison.

South Florida: Sentencing for Mortgage Fraud: Richard Weldon Crowder, II and Gary Mark Mills were sentenced to 108 months and 46 months imprisonment respectively for their roles in a multi-million dollar mortgage scheme. Co-defendant Karen Lynn Sullivan was sentenced yesterday to 50 months’ imprisonment.

Crowder is a former licensed mortgage broker and the former owner of America’s Best Mortgage Services, Inc., located in Coconut Creek, Florida. Mills is a former title attorney and the owner of Four Star Title Inc., located in Deerfield Beach, Florida. Sullivan is a former loan officer for Wachovia Bank.

To effectuate the mortgage scheme, Crowder identified residential properties, including luxury condominiums on South Beach, that were available for purchase. He then recruited buyers for the properties, representing that he could obtain 100% financing for their purchase. After finding a purchaser, Crowder would apply for equity lines of credit on their behalf with Wachovia. To induce Wachovia to issue the equity lines of credit, Crowder and Mills prepared fraudulent HUD-1 settlement forms. The forms falsely stated the buyers already owned the properties and also significantly understated the amount of the first mortgages on the properties. The fraudulent HUD-1 settlement forms were then given to Sullivan, who used the forms to facilitate the issuance of equity lines of credit from Wachovia.

Simultaneously, or shortly after obtaining the equity lines of credit from Wachovia, Crowder applied for the first mortgages on the properties. These applications overstated the buyers’ assets and income, and also included false verification of deposit forms prepared by Sullivan. To further induce the lenders to issue the loans, Mills prepared documents falsely representing that the buyers were using their own money for the down payments and closing costs. In fact, the buyers were using funds from the fraudulently obtained Wachovia equity lines credit or funds provided by Crowder. In total, the defendants caused the fraudulent purchase of seventeen (17) different luxury condominiums at The Continuum on South Beach and at The Point in Adventura using more than $37,000,000 in fraudulently obtained mortgage loans.

Palm Beach Co, Florida: Indictments in Sophisticated Mortgage Fraud Scheme: Berry Louidort, Lauren Jasky, and Ralph Michel, Palm Beach County, Florida were charged in a Criminal Complaint filed in federal court on April 22, 2008. The defendants are charged with bank fraud.

According to the Complaint, defendants Louidort, Michel and Jasky were involved in a sophisticated sub-prime mortgage fraud scheme in South Florida through which they submitted false qualifying information regarding potential borrowers to mortgage lenders. Among the false information the defendants submitted were false verification of earnings and false verification of deposits. As a result of these false submissions, defendants Louidort and Michel received approximately $6 million in loan proceeds.

This investigation began with an audit conducted by the Florida Office of Financial Regulation into 24 sub-prime mortgage loans in the period November 2006 to June 2007. The initial audit showed that the loans included what appeared to be excessively large fees paid to defendants Berry Louidort and Ralph Michel. The fees, ranging from $29,000 to $650,000, were described as marketing and/or assignment fees. In reality, the fees were kickbacks to defendants Louidort and Michel based on inflated sales prices. The audit also revealed that the majority of the suspect loans were originated by defendant Lauren Jasky, Senior Vice President of Compass Mortgage Services, located in Boca Raton, Florida.

Atlanta, GA: 5 Sentenced to Prison for Mortgage Fraud: Virginia Rose Novrit, Hilton Head, SC; Clarence Lorenzo Davis, Hilton Head, SC; Olympia D. Ammons, St. Louis, MO; Jerome Wings, Jr., Atlanta, GA; and Ronald Denzil Martin, Lithonia, GA were sentenced to prison for conspiracy, bank fraud, wire fraud, and money laundering in a multi-million dollar mortgage fraud scheme.

NOVRIT was sentenced to 3 years, 5 months in prison and ordered to pay $839,585 in restitution.

DAVIS was sentenced to 4 years, 3 months in prison and ordered to pay $839,585 in restitution.

WINGS was sentenced to 10 years, 2 months in prison and ordered to pay $8,577,845 in restitution.

AMMONS was sentenced to 5 years, 3 months in prison and ordered to pay $7,549,044 in restitution.

MARTIN was sentenced to 1 year, 1 day in prison and ordered to pay $423,595 in restitution.

From late 2004 through early 2006, NOVRIT, DAVIS, WINGS, AMMONS, and MARTIN participated in a mortgage fraud scheme that involved millions of dollars in fraudulently inflated mortgage loans being provided to unqualified straw borrowers. The straw borrowers were paid as much as $600,000 per property from fraudulently obtained loan proceeds through shell companies. NOVRIT and DAVIS together obtained mortgage loans totaling more than $4 million within a six month period to purchase eight properties. WINGS obtained mortgage loans totaling over $1.2 million to purchase a single property by providing the lender with false qualifying information. WINGS also recruited a number of other unqualified buyers into the scheme and obtained a share of the fraudulently obtained loan proceeds from those transactions for doing so. AMMONS was a loan originator for “Ace Mortgage Funding,” a national mortgage brokerage firm. AMMONS brokered fraudulent mortgages totalling over $7 million. MARTIN was paid $75,000 to act as a straw buyer and submit a fraudulent loan application for one property.

Kansas City, Kansas: Bonds Revoked in Mortgage Fraud Case: Wildor Washington, Jr. and Victoria Bennett were charged in November 2007 in an indictment alleging that Washington, Bennett and four co-defendants took part in a mortgage fraud scheme through businesses Washington owned including Heritage Financial Investments, Legacy Enterprises, B&L Custom Development and Liberty Escrow. According to the indictment, Hamilton and the conspirators prepared fraudulent loan applications and submitted them to lenders in Kansas, Texas, Ohio, Missouri and Michigan.

On Nov. 8, 2007, Washington and Bennett were released on bond subject to conditions including a prohibition against taking part in any illegal activities while on release. Subsequently, investigators obtained evidence that while on release Washington and Bennett were involved in further incidents of bank fraud and conspiracy to commit mail and wire fraud. Hence the two were taken into custody after their bonds were revoked.

Minnesota: Real Estate Owners Plead Guilty to Mortgage Fraud: Jonathan Edward Helgason, 45, Chisago City, and Thomas Joseph Balko, 37, Rogers, along with their company, TJ Waconia LLC, entered their guilty pleas to a scheme involving at least 162 properties, principally in north Minneapolis, and mortgage proceeds of approximately $35 million.

From approximately 2005 to 2007, Helgason and Balko executed a scheme to defraud and to obtain money by means of false and fraudulent pretenses. Using the TJ Group, Helgason and Balko purchased approximately 162 properties throughout the Twin Cities metropolitan area, principally in north Minneapolis. They would then resell the property within a few weeks to an “investor” who would purchase the property, sight unseen, at a price set by Helgason and Balko without negotiation, oftentimes $20,000 to $60,000 more than that the TJ Group had paid.

People were told by Helgason and Balko that the investors were simply “lending” his or her credit to TJ Waconia. In exchange for “lending” their credit, the investor would receive a kickback payment of about $2,500 and a promise of an additional payment after two years when the TJ Group was to repurchase the property from the investor.

Through the scheme, the defendants perpetrated a fraud on the lenders who were led to believe that the “investors” were the actual owners of the properties, when, in fact, the “investors’” ownership was in name only. During the two-year period during which the investor owned the property, the TJ Group was responsible for all payments and maintenance on the property. In some instances, Helgason and Balko also provided investors with funds to pay the buyer’s portion of the property purchase price and worked with others to provide lenders with false loan applications on behalf of the investors so that they would qualify for the loan.

The two men, on behalf of the investors, obtained approximately $35 million in mortgage proceeds to purchase the properties from the TJ Group. Ultimately, the scheme collapsed, and the TJ Group did not repurchase the properties or continue making payments to the investors in order to pay their mortgages. The investors were left owning properties with mortgages that exceeded their property’s market value.

Newark, New Jersey: Ex-Mayor Convicted of Flipping: As reported earlier, Sharpe James was convicted by a Newark, New Jersey, jury on all corruption charges against him in connection with a scheme that enabled his girlfriend, Tamika Riley, to fraudulently obtain steeply discounted city-owned land and resell it for hundreds of thousands of dollars in profits.

Riley was convicted with James on the same five charges: three counts of mail fraud related to the sale of the city lots to Riley, one count of fraud involving a local government receiving federal funds, and one count of conspiracy to defraud the public of James‘ honest services.

The prosecution was built around the sale to Riley of municipally-owned properties in Newark, New Jersey. The properties, according to evidence and testimony, were steered to Riley by James, who had a long-running romantic relationship with her. Riley paid only $46,000 for a total of nine properties, and then quickly resold, or “flipped” the properties for more than $600,000.

Summary and Comments:

Issues related to the mortgage crisis and melt down of the sub-prime market is all over the media. The FBI has reported that resources are being diverted to handle the up serge of complaints and abuse that seems to arise daily. The map below was provided by the FBI to show the dominate areas for mortgage fraud.

Every choice has a consequence. As a white collar crime and business ethics speaker, I speak from first hand experience about the truth about consequences. Reality is - no one escapes the consequences of their choices. More and more, I find that my newest presentation is in demand: MORTGAGE FRAUD: Fact from Fiction. Prison is no fun and most of those mentioned above are facing several years plus substantial restitution for mortgage fraud conviction(s). It is true, you reap what you sow and in the environment we formerly came from, it seemed that the cards were stacked in favor of mortgage fraud.

IF you feel you’ve been a victim of mortgage fraud - please share your experience so other may benefit.

Mortgage Fraud Speaker - Chuck Gallagher - signing off…

Mortgage Fraud - FBI Expects Dramatic Rise of Unprecendented Scope! Mortgage Fraud Speaker Chuck Gallagher Comments!

Quoted as being far worse in scope than the Savings and Loan crisis of the 1980’s, the FBI is dealing with a flood of mortgage fraud cases of unprecedented scope.

The picture below is from the FBI’s web site - which show an actual property used in a Mortgage Fraud Scheme. No wonder the problem is what it is today…

An Associated Press report stated the following:

FBI Director Robert Mueller says there has been a “tremendous surge” in mortgage fraud investigations, and he expects it to keep growing.

At a Senate hearing Wednesday, Mueller estimated that the FBI has 1,300 investigations underway, 19 of them involving sub-prime lending practices by U.S. financial institutions.

That’s up from three months ago, when FBI officials said they were investigating 14 companies for possible fraud or insider trading violations.

Mueller says the number of inquiries has increased to a level that required shifting agents from other projects onto mortgage fraud.

The New York Times reported that losses from fraud are surging. “It’s looking like a record-breaking year already,” said Stephen Kodak, a spokesman for the FBI. Kodak said that in first half of the 2008 fiscal year, which ended last month, the FBI received nearly 30,000 “suspicious activity reports.” The 2007 fiscal year ended with 46,000 reports and 260 convictions.

The biggest surge in federal law enforcement activity has focused on “fraud for profit” schemes, in which mortgage insiders - appraisers, real estate agents, loan officers, and lawyers - often work in teams. They falsely inflate a home’s value, get a huge mortgage to buy it (usually using false identities), split the profits, and then disappear.

In an article for GC California Magazine, author David Bayless stated, “To put this situation into historical perspective, the savings-and-loan crisis of the late 1980s and early 1990s ultimately cost an estimated $160 billion and affected more than 1,600 U.S. banks insured by the Federal Deposit Insurance Corp. It was one of the worst financial scandals in history. But the S&L crisis, while costly, was limited to only a section of U.S. financial institutions. In contrast, the breadth and the depth of the subprime mortgage crisis will likely far exceed that of the S&L crisis. Standard & Poor’s has estimated that losses from securities linked to subprime mortgages will exceed $265 billion as financial institutions worldwide write down the value of their holdings. And the breadth and depth of regulatory investigations and private litigation, as discussed in this column, is unprecedented.”

Bayless stated further, “The current wave of government investigations and litigation surrounding the subprime crisis will not be short-lived. Companies should brace themselves and prepare for a prolonged wave of attacks and actively seek legal advice. More lawsuits can be expected, particularly against deep-pocket underwriters and financial institutions (and their officers and directors) involved in the securitization of subprime loans. More regulatory and criminal investigations are guaranteed. Many laws firms have set up subprime task forces or have coordinated their internal expertise in various practice areas to address issues affecting clients caught up in the crisis.”

Along with these reports, CNN reports today (April 22, 2008 full report here) that among the nightmares lurking around the corner for the already battered housing and credit markets would be a meltdown at mortgage financing giants Fannie Mae and Freddie Mac.

Although few are predicting an imminent need for a bailout just yet, credit rating agency Standard & Poor’s recently placed an estimated price tag on this worst case scenario — $420 billion to $1.1 trillion of taxpayer’s money.

This dwarfs how much it cost to help banks during the savings and loan crisis of the late 1980’s and early 1990’s. That cost taxpayers about $250 billion in today’s dollars.

As a speaker on business ethics and mortgage fraud, I hate to say, but this is just the tip of the iceberg of what is moving our way. Sadly, few voices were heard when it came to the ethics ramifications of making loans to people who obviously could not afford to pay for their purchase. Years before, no one would have considered making such a loan. Yet, as the market flourished the tide of easy money and greed took hold. Today, we are beginning to see the first phase of the dramatic cost of the choices made.

In every presentation I state boldly: Every choice has a consequence! The unfortunate cost here will affect many people in ways they never considered. It is easy to talk about the obvious, but the less obvious secondary costs will be staggering.

Here are some of todays headlines and links to the stories. If this won’t get your attention, I don’t know what will. And this is just the beginning.

Bank of America profit plunges 77%

National City to raise $7 Billion

Bad Quarter? Time to Swing the Job Ax?

With headlines like these - we can only assume that from every indicator possible, we might be in for a long ride. Perhaps, the reason I see inquiries for ethics presentations increase is due to the realization that we need something to get us back on the right track.

Business Ethics and Mortgage Fraud speaker - Chuck Gallagher - signing off…

White Collar Crime - A Week in Review - 1st Week April, 2008. Comments by Business Ethics Speaker Chuck Gallagher

Spring has sprung and it seems that white collar crime is in full bloom - either in the form of indictments, convictions or sentences. As a business ethics and white collar crime speaker, I say on a regular basis - Every choice has a consequence. The following demonstrate the effect of choices and consequences.

MONTGOMERY, ALABAMA: Seems that John W. Goff decided to use his license and influence to defraud others and then made false statements about his actions. A federal grand jury charged Goff with embezzlement, mail fraud and making false statements. The US Attorneys News Release states: the indictment alleges that from on or about January 1, 2002, through on or about April 30, 2003, Goff, while the sole owner of The Goff Group and the program manager and a fiduciary for XL Speciality Insurance Company (“XL Speciality”) and Greenwich Insurance Company (“Greenwich”), collected worker’s compensation insurance premiums for these insurance companies, but willfully failed to remit to XL Speciality and Greenwich their share of the premiums. Instead, Goff kept the premiums and spent the money for his own personal expenditures, including his exorbitant salary, lavish lifestyle, corporate aircraft, and real estate investments, and the expenses of The Goff Group.

The indictment alleges that Goff unlawfully and illegally withheld approximately $3,000,000 in premiums from XL Speciality and Greenwich. The indictment further provides that Goff unlawfully and illegally withheld approximately $25,000 in commissions he owed to independent agents located throughout the Southeast who Goff had used to sell worker’s compensation insurance policies issued by XL Speciality and Greenwich.

An indictment is merely an accusation of a criminal offense and the charged defendant is
presumed innocent until and unless proven guilty.

SACRAMENTO, CALIFORNIA: I guess there was just not enough profit in death, as former funeral director, Mark Davis, was indicted and arrested for 21 counts of bank fraud. Apparently, Davis formerly with Sacramento Memorial Lawn, stole a series of checks totaling more than $85,000 that had been submitted by customers and deposited them into his bank account at U.S. Bank. Keeping in mind innocence till guilt is proven, Davis plead not guilty.

PHOENIX, ARIZONA: If you’re going to prepare tax returns you need to do them right (at least to the best of your knowledge!) Guess that’s something that Maria Orona missed as a federal grand jury indicted her on charges of Aiding and Assisting in the Presentation of False and Fraudulent Individual Income Tax Returns.

The Indictment also indicates that between March 21, 2006 and April 4, 2006 the Criminal Investigation unit of IRS conducted three separate undercover operations in which IRS agents posed as clients in order to have Orona prepare their Federal Income Tax Returns for the year 2005. The Indictment states that in each undercover contact, Orona prepared tax returns in which she falsely reduced the tax due. These undercover contacts resulted in false returns being prepared that collectively claimed a total of approximately $44,853 in false expenses and a reduced tax liability of approximately $3,406. The undercover agents did not provide Orona with any indication that they had incurred any of the false deductions that were placed upon the completed income tax returns.

While Orona is innocent till proven guilty, I would suspect in this case guilt might not be hard to prove. Wonder if defrauding the government was worth an active prison sentence which could follow a guilty verdict?

MIAMI, FLORDIA: People get older and have health needs - that’s true. But, just because there are needs doesn’t mean you can get by with fraud. Every choice has a consequence and in these cases the consequences are severe. Michael Labrada, 27, of Miami was sentenced to a 97 month prison term and Miguel Castillo, 42, of Miami, to a 57 month prison term for their participation in a multi-million dollar health care fraud and money laundering scheme. OUCH!

Labrada was sentenced in connection with two criminal cases. In the first case, Labrada was convicted of conspiring with Angel Castillo, Jr. to commit health care fraud by serving as a straw owner of a medical equipment company known as JJ & D Medical Equipment, Inc. The company submitted more than $6.8 million dollars in bogus claims and received approximately $1.6 million in payments. In the second case, Labrada was convicted of money laundering charges in connection with a $2.3 million laundering scheme orchestrated by his co-defendant, Angel Castillo, Jr.

Miguel Castillo was also convicted of related health care fraud and money laundering conspiracy charges. In addition to serving as a straw owner of a medical equipment company, Miguel Castillo collected hundreds of thousands of dollars in fraud proceeds from check cashers at the direction of his cousin and co-conspirator, Angel Castillo, Jr.

Last month, Angel Castillo, Jr. was sentenced to a 235 month term in connection with his ownership of more than eight durable medical equipment companies in Miami during 2005 and 2006.

The companies collectively submitted in excess of $48,000,000 in false claims by way of two Miami based medical billing companies. WOW!

WEST PALM BEACH, FLORIDA: Indicted for a host of crimes related to Mortgage Fraud, it seems that Gregory Claude Brown has also been charged with failing to timely file his federal income tax returns for the 2001 through 2005 tax years, and with income tax evasion with regard to his 1998, 1999, and 2001 through 2005 taxes. According to the superseding indictment, Brown failed to pay his 1998, 1999, and 2001 through 2005 income tax liabilities, which totaled approximately $214,299, and engaged in affirmative acts of evasion, including concealing his income and assets, filing false documents with the Internal Revenue Service, and placing funds and property in the names of nominees.

Should Brown be convicted, he faces up to one year in prison on the failure to timely file federal income tax return counts, and up to five years on the tax evasion count. The conspiracy to commit wire fraud, wire fraud, and mail fraud charges each carry a maximum penalty of 20 years imprisonment.

MARIETTA, GEORGIA: There always has to be a first. In Georgia this is it for Governor’s Secure Identity Initiative. Seems that AL AMIN PATNI, 47, of Marietta, Georgia, has been indicted by a federal grand jury on charges of misuse of a social security number, aggravated identity theft, and illegal reentry. According to the indictment, PATNI, a Pakistani national who illegally reentered the United States after a previous deportation, misused the social security number of someone else to open up a checking account.

It seems that it is alway something simple that is the trigger to catch someone doing wrong. Needless to say, opening that account might have been one of the most costly mistakes of Patni’s life.

ST. TAMMANY PARISH, LOUISIANA: I guess Hurricane Katrina just posed too much of an opportunity in a state known for corruption. Joseph Anthony Impastato, for St. Tammany Parish Councilman, (Yes…a public official), age 36 entered a guilty plea to federal bribery through the illegal solicitation and receipt of payments in connection with a Hurricane Katrina debris removal contract, and making false statements in his 2001 federal income tax return.

Impastato was caught on tape related to conversations and meetings in which he gave instructions for how to disburse payments through a convicted co-conspirator to conceal his share. Likewise, he under-reported his income by 34% in 2001. Impastato is facing a two year prison sentence under a plea agreement.

NEW YORK, NEW YORK: DENNIS PILOTTI, a Certified Public Accountant (“CPA”), pleaded guilty today in White Plains federal court to evading his income taxes for the years 2001through 2004 and making false statements to Merrill Lynch Business Financial Services, Inc. (“Merrill Lynch”) in connection with a $5.1 million loan.

As a result of his tax evasion scheme, PILOTTI understated his taxable income by more than $1,226,284 in total, and understated his tax liability by approximately $365,000 for the years 2001 through 2004. PILOTTI faces five years in prison and substantial fines. He is scheduled to be sentenced on July 8, 2008.

ROCKY MOUNT, NORTH CAROLINA: On April 2, 2008 a 45 count indictment was unsealed charging PAMELA D. EVANS, 33; GWENDOLYN P. EVANS, 49; TASHA BATTLE, 28; and BERTHA BATTLE, 28, all of Rocky Mount, North Carolina, with conspiracy to defraud the United States by obtaining fraudulent claims from the Internal Revenue Service.

According to the US Attorney’s news release - from January, 2004, to April 15, 2004, the defendants, while employees of Independent Tax Service located in Rocky Mount, North Carolina conspired to make, and did make, false claims for refunds from the Internal Revenue Service (“IRS”) by filing or causing others to file false 2003 federal income tax returns. It is alleged that the defendants inflated wages and/or withholdings and listed false dependants and/or false dependant information to qualify clients for the head of household filing status and earned income credit in IRS Forms 1040 and 1040A individual tax returns. It is further alleged the defendants sold fraudulent dependent information to some clients so they would qualify for a larger refund and claimed education credits their clients were not entitled to claim.

“As another year’s tax deadline rapidly approaches, please heed the lesson of this case: knowingly falsifying documents filed with the Internal Revenue Service is a criminal act, and once found, will be prosecuted,” stated United States Attorney George E.B. Holding.

As a side note - Wesley Snipes will be sentenced this month for his conviction for failure to file tax returns.

DAYTON, OHIO: Wow…this deserves a post of its own. Nicole Johnson, age 42, of Trotwood, was sentenced to a total of 100 months imprisonment for stealing millions of dollars from her employer and her employer’s company. Johnson stole millions from J.P. Morgan Bank and its customers between June 2001 and July 2005, using her position as Vice President of Operations to steal customer identity information and secure fraudulent lines of credit in their names, and then diverting the borrowed funds for her own personal use. At least 30 customers were affected by the scheme and more than $1 million was transferred into Johnson’s personal accounts during the four-year period.

“Johnson’s sentence reflects the severity of the loss to J.P. Morgan Bank and the complexity of the fraud scheme,” said US Attorney Gregory Lockhart. “White collar criminals must be deterred from committing similar offenses.” Johnson was also ordered to pay restitution of more than $2.8 million to J.P. Morgan Chase Bank, pay $1.067 million in taxes to the IRS, and she must serve three years of supervised release at the conclusion of her prison term.

One reasonable question is, once someone finishing an eight year prison term, how or where would they ever get the funds to make the restitution required? You do reap what you sow.

SALEM, OREGON: Facing up to 10 years in prison, Brent Edward Crosson, 36, of Salem, Oregon admitted stealing $925,000 from the Oregon Department of Education (ODOE) between June 2006 and June 2007. The theft occurred while he was employed as Director of Accounting Services for the ODOE.

Now, as a former CPA and convicted felon, I understand now that every choice has a consequence. However, it makes you wonder what he was thinking about? He had to have known that a theft of almost $1,000,000 would go NOTICED! Then again, while in the midst of the crime you don’t think clearly - I know from experience.

PITTSBURG, PENNSYLVANIA: Mortgage Fraud is rampant these days. Five Pennsylvania individuals have pleaded guilty to mortgage fraud charges. Sharon Chamberlain, age 40, of Pittsburgh, Pennsylvania, and Ericka Stanford, age 35, of Carnegie, Pennsylvania, pleaded guilty to Wire Fraud Conspiracy. Stanford also pleaded guilty to one count of Money Laundering. Likewise, Andrea Revak, age 47, of Pittsburgh, Pennsylvania, Aaron McCarthy, age 43, of Pittsburgh, Pennsylvania, and Marlin Sprouts, Jr., age 52, of Uniontown, Pennsylvania, pleaded guilty to a Wire Fraud Conspiracy.

By pleading guilty they may minimize the overall impact of their sentence. However, the law provides for a total sentence of 20 years in prison, a fine of $250,000, or both for all of the defendants except for Stanford, who faces a maximum possible sentence of 30 years in prison, a fine of $500,000, or both.

SURFSIDE BEACH, SOUTH CAROLINA: Young and foolish, that’s how Meghan Renee Morris, age 23, could be described as she pled guilty to unauthorized use of a credit card. While working at Coastline Reporting in Conway between October 2006 and March 2007, Morris used her employer’s personal information to apply for several credit cards, and charged more than $28,000.00 in personal expenses. She then paid the resulting credit card bills by electronically transferring funds out of the employer’s bank account to the credit card companies. She faces up to 10 years in prison.

MEMPHIS, TENNESSEE: It’s tax time and a Memphis woman just got a prison sentence for her efforts to illegally reduce her taxes. Tanisha Burris, 30, pled guilty to filing false claims against the government. From January 2001 until approximately April 2002, Burris conspired with others to file false, fictitious, and fraudulent claims for payment by causing others to file false 2000 and 2001 federal income tax returns claiming refunds with the Internal Revenue Service. The indictment alleges that Burris prepared the returns that claimed larger refunds than the individuals were entitled to receive. The false returns allegedly contained either inflated or completely bogus W-2 forms, false Education Tax Credits, false Schedule C businesses, false Itemized Deductions, false Child Tax Credit, or false Earned Income Credit to boost the refund amounts.

PLANO, TEXAS: Sherman Ted Solomon, 64, pled guilty to one count of conspiracy to distribute Schedule III and IV controlled substances and one count of conspiracy to launder the illegally obtained proceeds, in relation to his operation of an Internet Facilitation Center (IFC) website.

While the crime was more complicated than we have space for here, according to the US Attorney’s news release during the pendency of the conspiracy and while Solomon was a participant in the conspiracy, the government can readily prove that Solomon could reasonably foresee the possession with intent to distribute or the distribution in excess of two million hydrocodone pills. 2,000,000 - an astonishing amount of drugs distributed which will net Solomon seven years in federal prison.

From October 2004 through September 21, 2005, Solomon’s IFC and affiliates received approximately $13,139,535 from Internet customers for the distribution of controlled substances.

So, at age 64, Solomon who should be facing a pleasant retirement will be spending the latter years of his life in federal prison. Speaking from experience, he will certainly have time to reflect on his activity and will, no doubt, come to the conclusion that the short term gain will not be worth the price.

ALEXANDRIA, VIRGINIA: Sentenced to 16 months in federal prison and $650,000+ in restitution, Khalil Salim Arbid, 35, of Washington, D.C., received his sentence for his role in a mortgage refinancing scheme.

Arbid fraudulently attempted to obtain approximately $1,996,131.02, and successfully obtained $670,132.02, through the refinancing scheme. To carry out the scheme, Arbid took ownership of a residential property located in Vienna, Virginia by deed of gift. When Arbid obtained the property, it was encumbered by a pre-existing mortgage loan. Then, on three occasions, he attempted to obtain additional mortgage loans on the property, using the property as collateral. In applying for the loans, he provided the would-be lenders with false documentation. For example, Arbid provided false loan-payoff statements purporting to be from current mortgagees, and false Certificates and Affidavits of Satisfaction purporting to be from prior mortgagees. On one occasion, he successfully refinanced the property and obtained a loan in the amount of $670,132.02. He then arranged for $376,191.87 of the loan proceeds to be misdirected to himself by causing the title company closing the loan to send a check for the proceeds, which were ostensibly to be used to pay off the pre-existing mortgage on the property, to a false address. In reality, the address was a commercial mail drop located in the District of Columbia. The check was endorsed and deposited into a bank account that Arbid had previously opened.

FINALLY - SEATTLE, WASHINGTON: Now this is priceless. How many times have you flown and due to various reasons you felt you would not make your connections? Weather, a mechanical, a delay in one place causes your flight to be delayed - all have happened to those of us who are road warriors. But this story is a fitting end to a week in review.

Seems that KOU WEI CHIU, 32, of Nashville, Tennessee, was sentenced in Seattle to three years of probation, 500 hours of community service, and $81,249 in restitution for the felony offense of False Information and Threats. On July 25, 2007, CHIU, a physician, (yes a medical doctor) arrived at Sea-Tac airport and was late for his flight home to Memphis, Tennessee. The flight was Northwest Airlines flight 980. CHIU made three calls to 9-1-1 from a payphone near the gate. On each call CHIU falsely reported that there was a bomb on Flight 980. During his first call CHIU told the 9-1-1 operator “Flight 980 Memphis. There may be a bomb on board.” After the first call CHIU saw that the call had “no effect” so he made a second call. When that call too had no effect, CHIU made a third call. At that point, the plane returned to the gate. CHIU admits that he made the calls thinking that the plane would be held in Seattle for a few hours while it was searched, which would allow him to get on the plane.

Hum…guess he had never heard of the three strike and you’re out rule. Northwest Flight 980 was grounded for several hours. CHIU was arrested at the airport after passengers who had been nearby identified him to police as the person who was heard calling in bomb threats from the payphone.

At the sentencing hearing Dr. David L. Dunner, the former Director of the University of Washington Center for Anxiety and Depression, told the court that CHIU had stopped taking an anti-depressant in the days before the incident, and that CHIU entered a manic phase that “impaired his judgement.” CHIU told the court he realized “depression is not the common cold,” and vowed he “will be taking medication for the rest of his life. This will never happen again,” CHIU told the court.

Assistant United States Attorney Mike Lang agreed to recommend a probationary sentence after reviewing CHIU’s mental health history, and his history of service to his community. “Dr. Chiu has a true sense of wrongdoing and a desire to make it right,” Lang said. “This defendant can do a lot more good outside of jail than inside.”

WEEK IN REVIEW:

Every choice has a consequence. As a white collar crime and business ethics speaker, I speak from first hand experience about the truth about consequences. Reality is - no one escapes the consequences of their choices. Many have tried to avoid consequences for a time but none avoided the consequences all together. Prison is no fun. Serving time will prove to be a dramatic change from the fraudsters prior activities. You do reap what you sow.

COMMENTS ARE WELCOME!

White Collar Crime Speaker - Chuck Gallagher - signing off…

Real Estate Agent - John Turner, Jr. - Sentenced to Prison for Mortgage - Bank Fraud

He walked in the door to Money Stop - a check cashing business - handed over a check for $62,000 and walked out with fifty-one $1,000 money orders, a money order for $365 and $9,992 in cash. When he walked out he had completed all that was necessary to effect bank fraud and earn a slot in federal prison.

Licensed real estate agent John Turner Jr., 52, has been sentenced to 18 months in federal prison for bank fraud and engaging in monetary transactions with criminally derived property stemming from a mortgage fraud investigation. In addition, Turner was ordered to pay a fine of $2,000 and serve a term of 3 years supervised release.

According to the US Attorney’s news release:

Turner arranged for a straw borrower to purchase the residence located on the 1600 block of Cherry Ridge Drive in Houston. Turner amended the purchase contract, instructing the title company to disburse $62,000 of the loan proceeds to a remodeling company of the buyer’s choice, ostensibly for repairs and upgrades to be made at the residence.

First National Bank of Arizona funded the $213,377 mortgage loan Nov. 17, 2006. At closing, Turner submitted a $62,000 false invoice in the name of First Class Construction Inc., for repairs and remodeling. The title company and First National Bank of Arizona were unaware that First Class Construction, Inc., was owned by Turner nor that the repairs and remodeling had not been done and would never be done.

Every choice has a consequence. As a white collar crime and business ethics speaker, I speak from first hand experience about the truth about consequences. Reality is - no one escapes the consequences of their choices. While Turner may have looked good for a time and avoided the consequences - he did not avoid the consequences all together. Prison is no fun and Turner is facing over a year in prison for his conviction. Serving time will prove to be a dramatic change from his prior activities. You do reap what you sow.

If anyone reading has any background on Turner - feel free to comment as I study the behaviors and backgrounds of those convicted of white collar crime.

White Collar Crime Speaker - Chuck Gallagher - signing off…