John C.McBride – Disbarred Attorney Guilty of Bank Fraud

January 27, 2015

A Marblehead man pleaded guilty to tax and bank fraud violations, primarily for recording fraudulent federal tax lien releases on properties he owned in Marblehead and Edgartown.

Bank Fraud 1John C. McBride, 65, pleaded guilty before U.S. District Chief Judge Patti B. Saris to endeavoring to obstruct and impede the due administrations of the Internal Revenue laws and bank fraud.  McBride, who was indicted in June 2013, is scheduled to be sentenced on April 28, 2015.

In early 2008, McBride, a now-disbarred criminal defense lawyer, recorded six fraudulent federal tax lien releases against his Marblehead home, in order to obtain a $288,000 loan secured by that property and deprive the IRS of its nearly $700,000 secured interest.  McBride prepared the releases himself, without the knowledge or authorization of the IRS, and forged the signatures of IRS officials on them.  In March 2008, McBride attempted, unsuccessfully, to record two similar fraudulent tax lien releases against a second home he owned in Edgartown, on Martha’s Vineyard.  In 2011, McBride attempted to obtain a $387,000 reverse mortgage loan from Bank of America, which was to have been secured by his Edgartown property.  In connection with that loan application, McBride falsely told the bank that there were no liens on the Edgartown property and that he was not then in bankruptcy.  In fact, there were substantial liens on the property and McBride’s bankruptcy case, which he had filed in 2009, was still ongoing.  In furtherance of his effort to obtain the bank loan, McBride prepared and recorded a fraudulent and unauthorized discharge of mortgage which purported to discharge a more than $700,000 existing mortgage on his Edgartown property.  Bank of America discovered that the discharge was fraudulent before the loan closed, and no funds were disbursed to McBride.

The charge of bank fraud provides a sentence of no greater than 30 years in prison and three years of supervised release.  The charge of endeavoring to obstruct and impede the due administrations of the Internal Revenue laws is three years in prison and one year of supervised release.  Actual sentences for federal crimes are typically less than the maximum penalties.  Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.


Bank Fraud earn prison sentence for Maria Rosa Esteves

January 20, 2015

MARIA ROSA ESTEVES, 41, of Bridgeport, was sentenced to 12 months and one day of imprisonment, followed by six months of home confinement and three years of supervised release, for embezzling more than $450,000 from the bank where she was Fraudemployed.  ESTEVES also was ordered to pay full restitution, and to perform 60 hours of community service during her term of supervised release.

According to court documents and statements made in court, ESTEVES was employed by People’s United Bank from 1993 to 2014.  Beginning in 2006, ESTEVES worked primarily in the bank’s Adjustments Department, ultimately holding the title of Lead Adjuster with responsibilities that included arranging for bank cashiers’ checks to be issued to customers when a customer’s account needed to be adjusted.  ESTEVES used her position in the Adjustments Department to embezzle $452.122.08 from the bank by causing the bank to issue cashiers’ checks that ESTEVES would then use to pay persons or entities that she owed money to, including her utility company, homeowner’s insurance company and mortgage providers.  ESTEVES also embezzled money by depositing cashiers’ checks into bank accounts she controlled and from which she, or others associated with her, were able to access the funds.  In total, ESTEVES misappropriated more than 300 cashiers’ checks.

ESTEVES was ordered to report to prison on March 2, 2015.

On August 14, 2014, ESTEVES pleaded guilty to one count of embezzlement from a federally insured bank.


Bank Fraud – William R. “Rusty” Beamon convicted of scheme to defraud Appalachian Community Bank

January 17, 2015

William R. Beamon, Jr., a/k/a “Rusty” Beamon, has been convicted by a federal jury of carrying out a scheme to defraud Appalachian Community Bank, in Ellijay, Ga.

bank fraud“Bank fraud is a critical problem throughout the United States, but it has hit Georgia especially hard,” said United States Attorney Sally Quillian Yates.  “Georgia leads the nation in bank failures since 2008, with 88 banks failing—including Appalachian Community Bank, the bank this defendant defrauded.  These failures have significantly affected the economy, making these cases important to safeguard the nation’s financial health.”

J. Britt Johnson, Special Agent in Charge, FBI Atlanta Field Office, stated: “Bank fraud comes in many forms but when it comes in the form of the bank’s own vice president, it becomes all the more intolerable.  Mr. Beamon, as a banking executive, should have protected his bank and its assets from fraud but instead he saw an opportunity to enrich his own bank account.  The federal sentencing handed down to Mr. Beamon will be not only the closing note to one man’s banking career but also to the bank that he caused to fail.”

“Beamon was convicted after a jury found him guilty of using his position at TARP-applicant Appalachian Community Bank to defraud the bank in order to line his own pockets,” said Christy Romero, Special Inspector General for TARP (SIGTARP).  “Beamon’s greed and self-dealing at the expense of the bank left holes in the bank’s books that the bank tried to fill when it applied for TARP funds.  SIGTARP and our law enforcement partners will ensure that justice is served for perpetrators of fraud related to TARP.”

According to United States Attorney Yates, the charges and other information presented in court:  Beamon was Vice President of Appalachian Community Bank in Ellijay, Ga.  Due to its poor financial condition, Appalachian was forced to close on March 19, 2010, and the FDIC was appointed receiver.

Beamon was in charge of the Appalachian’s foreclosure liquidation department.  In 2009, he represented to a real estate agent that he personally owned a house in Cumming, Ga.  Beamon hired that agent to market and lease the property on his behalf.  In truth, however, the property was owned by Appalachian and was part of the bank’s foreclosure inventory.  Beamon’s real estate agent found someone to lease the property and negotiated a lease on Beamon’s behalf.  Beamon then deposited into his personal bank account more than $20,000 in rent payments and security deposits that he obtained by leasing out the bank’s property as if he were the owner.  Beamon also caused Appalachian to sell bank-owned properties to his wife and to a shell company that he owned—all at prices that were substantially below what other buyers were ready, willing, and able to pay the bank.

William R. Beamon, Jr., a/k/a “Rusty” Beamon, 54, of Atlanta, Ga., was convicted on five counts of bank fraud.  Sentencing has not yet been scheduled.


Former Wachovia Financial Advisor – Lazaro E. Salado – Pleads guilty to Bank Fraud – what was his motivation?

July 13, 2011

Since every choice has a consequence – the consequences of Lazaro Salado’s fraud will be significant and impactful.  The prison sentence that he will receive will be life changing and the restitution that follows may be impossible.  But at a deeper level the question might be what motivated his behavior?

Former Wachovia financial advisor, Lazaro E. Salado, 42, of Palmetto Bay, Florida, pled guilty to a Criminal Information charging him with one count of bank fraud for stealing client funds.

According to the Criminal Information, Salado was a financial advisor at Wachovia in Miami, Florida, responsible for assisting clients in investments and financial planning. From February 2004 to May 2009, Salado stole more than $1.45 million from five of his clients at Wachovia by causing checks to be issued on client accounts, without the knowledge or authorization of these clients, for payment to a bank account controlled by Salado. Salado concealed the fraud by providing false and fraudulent statement to clients and also by transferring money between client accounts through unauthorized wire transfers.

As part of the plea agreement announced in court today, Salado agreed to make mandatory restitution of $1,457,309 to Wachovia (now Wells Fargo).

Sentencing is scheduled for September 14, 2011 before U.S. District Judge Marcia G. Cooke. Salado faces a maximum statutory sentence of up to 30 years in prison, a fine of up to $1,000,000, and restitution.

QUESTIONS: 

In any fraud there are three components that come together:  (1) Need; (2) Opportunity and (3) Rationalization.  While it might seem obvious that Salado had a need for money (since that is what he stole) – the bigger question might be – FOR WHAT?  Did his lifestyle reflect the use of the stolen money?  Should have it been noticeable by his co-workers?

He had opportunity through Wachovia – yet the question looms – where did the internal controls fail that allowed Salado to embezzle such large sums of money?  Surely the systems were in place to detect activity like this that took place over 5 years.

Lastly, wonder what was in Salado’s mind that allowed him to rationalize his behavior?

If you know Lazaro Salado and/or have any insight into these or other questions that may arise feel free to comment.

YOUR COMMENTS ARE WELCOME!


Oh what a tangled web we weave – SUSAN A. CURTIS, GARY J. STOCKING, and KEVIN W. CAFFREY charged with Bank Fraud

February 4, 2010

SUSAN A. CURTIS, 48, her husband GARY J. STOCKING, 43, both of Naugatuck, and CURTIS’ former husband, KEVIN W. CAFFREY, 45, of Wolcott, with one count of bank fraud and one count of conspiracy to commit bank fraud.

The indictment alleges that CURTIS was employed in the Property Services Division of Webster Bank with responsibilities that included negotiating and managing bank property leases where Webster Bank was a landlord or tenant.  The indictment further alleges that CURTIS, STOCKING and CAFFREY established two companies called New House, LLC and Equity Realty, LLC, which CURTIS falsely represented to Webster Bank’s Vendor Management Department were landlords, an exempted category for due diligence and annual review.

As part of the alleged scheme, CURTIS submitted paperwork to Webster Bank’s Accounts Payable Department in which she falsely represented that New House and Equity Realty were due a fee in approximately 109 real estate related transactions involving 67 properties.  As a result, Webster Bank made payments of approximately $5.04 million to New House and Equity Realty.  In addition, the indictment alleges that CURTIS caused a landlord, who was a lessor of property leased to Webster Bank, to send approximately $703,620 in lease improvement payments directly to CURTIS.  CURTIS and STOCKING are alleged to have altered the checks from the landlord to make them payable to Webster Bank c/o Equity Realty, and then deposited the checks to an Equity Realty account at another bank.

The indictment also alleges that CURTIS falsely represented to other landlords or their counsel, who were dealing with Webster Bank, that a $450,000 check for property improvements should be paid directly to Equity Realty c/o Webster Bank.  CURTIS and STOCKING then deposited the check into the Equity Realty bank account.

Finally, the indictment seeks the forfeiture of an interest up to an amount of $456,790.79 in real property in East Hampton, Connecticut, three automobiles, two Harley Davidson motorcycles, a Steinway piano, and $746,977.03.

If convicted, each of the defendants faces a maximum term of imprisonment of 30 years on each count.

Keep in mind…an indictment is not a conviction and all parties are considered innocent until proven guilty.


Clifford Wayne Robertson – Real Estate Radio Talk Show Host Pleads Guilty to Bank Fraud

January 18, 2010

He was heard on CNN 1190 in the Dallas, TX marketplace.  His topic – real estate investment strategies.  What folks apparently did not hear was “the rest of the story.”  It seems that, now former Dallas radio host, Clifford Wayne Robertson, 43, pleaded guilty to  charges of bank fraud.

The original indictment alleged that Robertson admitted to using the identity of another person to send fraudulent personal financial statements to a lending institution, the U.S. Attorney’s Office alleged. He submitted the statement to obtain money under false pretenses, prosecutors said in a statement.

The loss caused by his actions is estimated to be in the $3 million range.

Robertson was indicted by a federal grand jury on Sept. 10, 2009. He faces a maximum sentence of up to 32 years in prison. A sentencing date is still to be determined.

COMMENTS:  Since there are three components to the commission of a white collar crime like this – NEED, OPPORTUNITY and RATIONALIZATION – the question is, first, what motivated Robertson to commit such a fraud?  And, equally as important, how could he rationalize that statements issued under false pretenses would be O.K.?

I’m interested in your thoughts.

As a business ethics speaker and author, I know what Robertson is facing.  I, too, faced federal prison for crimes committed in the ’80’s.  Speaking from experience, the consequences of fraudulent actions are no fun.  And, the higher your profile the more likely you are to receive a more severe sentence – just ask Bernie Madoff.

If you have insight into what Robertson might have been thinking…feel free to share.


Madoff – Grigg – Dryer: Investment Fraud Victims Tax Relief Through IRC SECTION 165 (c)(2)

March 2, 2009

misc-pics-2008-073Moira Souza Shiver, expert on the application of IRC Section 165, has been asked by me to write this guest blog.  The benefits of Section 165 can be substantial, yet there are few who are qualified to understand how to effectively navigate the regulatory maze to gain maximum benefit.  As a business ethics and fraud prevention speaker, I try, through this blog, to provide a useful forum for discussing issues, and there is none more important at this time than the effective use of legal methods to recover loss.

Facts, Fiction and Future

Victims, taxpayers and citizens, in general, are experiencing an extraordinary chapter in American financial history.  Economic challenges, budget deficits and tax implications lead the list of many issues confronting citizens and legislators.  Surfacing in the midst of what appears to be mass chaos is yet another disturbing issue – victims of investment theft suffering irrecoverable losses in their life savings.  One bright spot, with the uncovering of these massive investment scams, the media is finally bringing attention to the fact that there are hundreds of thousands of people across this great country who are suffering tremendously at no fault of their own.

For the last ten years, I have been fighting for financial recovery for victims of investment theft.  There’s been a law on the books since 1954 that helps some victims, but most often it ignores the truly needy in favor of the wealthy.  Unfortunately, it also requires a monumental struggle with the IRS to get the deserved relief.  The pain and suffering these issues caused demanded I shift my focus and become an advocate for victims in three ways:

Investment Fraud Prevention Through Education
Maximize Recovery Through Legitimate Sources
Changes in the Tax Code to Carry Out the Intention of the Law

PROBLEM – LACK OF CLARITY, COUNTLESS (MIS)INTERPRETATIONS & INEXPERIENCED PROFESSIONALS

The $50 billion dollar Bernard Madoff Ponzi Scheme brought this subject to the public, but sadly, and very importantly, it also surfaced so-called experts that began advising victims on the recovery option under Internal Revenue Code Section 165 (c)(2).  Adding to the tragedy of these losses is the fact that those same experts are supplying incorrect information.  As an example: Stanford Law School and a former senior tax attorney for the IRS are both normally sources you can depend on for tax law advice.  They are both valuable sources of information, but in trying to help victims of investment fraud, they recently published information that could cause more problems than they solve.

An article, Long And Winding Path To Tax Relief For Madoff Victims, appeared on accountingweb.com dated February 19, 2009.  Stanford University provided information on the IRC 165 (c)(2) tax deduction, quoting a former IRS official.  This article is an example of a long list of experts serving up misconceptions, serious omissions, wrong answers and lost opportunities.  Add The Wall Street Journal, MSN, the New York Times and even the IRS to your list of experts providing incorrect information, and you begin to understand the seriousness of the problem.

FACTS – CURRENT TAX LAW HELPING VICTIMS OF INVESTMENT THEFT

Current law includes but is not limited to, the following facts:

IRC 165 (c)(2)
•    Law was established in 1954 to help investment fraud victims recover a portion of their losses through tax benefits (much like that of natural disaster loss victims or casualty losses such as a destroyed automobile not covered by insurance).  It was readdressed in 1984 by the Tax Reform Act, which did away with the 10% exclusion/$100 per item reduction.
•    Deduction allows qualifying victims to take their total net loss against ordinary income in a single year.
•    Deduction allows for the taxpayer to go back three years after declaring the loss in the “Year of Discovery” if a Net Operating Loss (NOL) remains, or, they can waive their right to go back, and carry the NOL forward up to 20 years.
•    Deduction allows for up to a 20 year carry forward, with the exception of when the 3 year carry back is utilized, which subsequently creates the potential for a 23 year benefit.
•    Losses in IRA and Pension Funds Do Not Qualify.
•    The taxpayer must prove the investment was made and lost by reasons of theft as defined in the state where the transaction took place.
•    Taxpayer must exhaust all reasonable means of recovery.
•    Taxpayer must be able to prove privity (Private or joint knowledge of a private matter; especially: cognizance implying concurrence (Merriam-Webster) or in practical terms, there was a first hand relationship between the thief and the victim) in order to qualify.  Ponzi scheme victims are generally not held to this requirement but that I’m aware, that exception is not written as fact.
•    (Some) IRS agents consider any form of pending legal action (individual, class action, federal indictments, bankruptcy or receivership) as potential recovery and will deny a claim until such time as that open pursuit of recovery is resolved.
•    IRS requires a victim to provide proof of cost basis (copies of checks, front and back, wire transfer confirmations, disbursements, withdrawals, recovery, etc.).
•    Taxes on phantom income are recoverable in full but are only allowed to be carried back 3 years.  The balance (NOL) can be carried forward up to 20 years.

FICTION – MISINFORMATION COMMONLY GIVEN TO THE PUBLIC

•    Before a taxpayer can claim a deduction, they must first exclude 10% of their Adjusted Gross Income and $100 per item – Wrong.  Although originally an aspect of the deduction, this exclusion was eliminated 25 years ago by the Tax Reform Act of 1984.
•    2 Year Net Operating Loss Carry Back – Common misconception.  Other than in 2002, when Congress allowed an exception allowing for 5 years, the carry back has always been 3.  The 2 year carry back does not apply to investment losses caused by theft.
•    Up to 50% recovery of loss – Misleading.  In my experience, taxpayers should expect to receive a total benefit between 10 – 20% of their loss.  Although there may be an exception out there somewhere, I’ve never seen any victims receive even close to a 50% benefit.
•    The deduction is taken in the year victims discover the money is gone – Maybe but not likely.  Convincing the IRS of the right year to take the deduction is complicated.  The big issue is the taxpayer having “exhausted all reasonable means of recovery”.  The “year of discovery” determination will vary from agent to agent.
•    The deduction is simple to obtain – Really?  It takes a knowledgeable and experienced 165 tax preparer to guide both taxpayers and the IRS agents through this process.  I promise you, you should be prepared to be fully prepared.  Taxpayers should expect to be reviewed carefully.

FUTURE – NEW PROPOSED LEGISLATION

For some time, I have been trying to get Congress to see the need for changes in the law.  The size of the Madoff ponzi scheme helped me with my mission to get congresses attention.  In doing so, they are now discovering how prevalent investment theft and ponzi schemes are in America.  Congressman Kendrick Meek of Florida’s 17th district moved quickly and proposed new legislation on February 24, 2009.  I’m thrilled to see it happen, but it did not go far enough.

Proposed changes to current tax law.

•    Will allow a 10 year carry back (or length of time in fraudulent investment, whichever is lesser) on cost basis and taxes paid on phantom income verses the current carry back of 3 years.  Given the fact that a great deal of injured investors are in the retiree/elder categories and have had little to no income over the last several years, this change will hopefully increase the chance of them reaching a year where significant taxes were paid.
•    Proposes to provide assistance to individuals who contributed to charitable organizations.  This is a new aspect to the law and it needs to be further examined in order to determine just who gets what benefits?  It’s not clear on how this will work and I’ll have to wait for more details before I can comment.
•    New legislation uses the word “estimate” verses “ascertained”.  This may be a big help in the filing of the claims in a reasonable amount of time, but it is not definitive and more work needs to be done.

FUTURE – CONTINUED – QUESTIONS NOT ADDRESSED

•    Will the complicated terms “Year of Discovery, Privity, Scienter, Cost Basis and Complete and Final Transaction” be defined in a way that makes it reasonable for the taxpayer to meet the requirements for filing?  Regardless of what legislation is proposed or passed, unless these issues are defined in a way that tax payers, their tax professionals and the IRS alike can understand, little if any of this assistance will reach the intended recipients.
•    Why is this limited to just ponzi schemes?  Although certainly less publicized, other forms of investment fraud are still investment fraud and all qualifying victims should be given the same consideration,
•    Will the new legislation actually limit the amount of time before a victim can claim the deduction and the IRS can take to approve it? The current process often takes so long that victims lose everything, including benefits, their homes and even their lives, before the help arrives.
•    Will IRA and pension savings be added to the forms of acceptable losses/victims?  A huge constituency of victims falls into this category and although technically they never paid taxes, they still worked hard for their money and would have paid them when the time arose.  The money was withdrawn, the perpetrator was enriched and he or she should owe the taxes.  Regardless of whether the IRS actually receives them, the victim should be entitled.
•    Would a uniform tax rate potentially be the better and fairer way to go?  Although the current proposed legislation goes far in trying to help, there are still a group of individuals that will be left helpless.  As many of these individuals paid on average 15 – 20 % in taxes when the money was made, it doesn’t seem quite fair that they are penalized for having grown older or now having no income.

SOLUTION

I’d start with definable (and reasonable) guidelines for tax payers and professionals.  Next would be setting up fair opportunities for recovery across the board, regardless of tax bracket or age.  And finally would be the creation of an organization, or an IRS qualifying exam, that sets the standards for professional services.  Setting these guidelines and standards, much the same as what CPAs, doctors, attorneys, etc. must adhere to or lose their standing, would help satisfy the IRS that the claims are legitimate, would provide the relief that so far is nearly impossible to receive and insure that the professionals assisting these victims are qualified and making claims in good faith.  By enacting legislation that gives the IRS authority to qualify those who represent taxpayers, they’d not only protect the victims, they’d protect all taxpayers against fraudulent or unworthy claims.

It was a breath of fresh air to finally see someone step up and try to help these people and I applaud Congressman Meek.  He’s taken the first step, and with a few additions, he could make this law something to be proud of.

Join my voice and let Congressman Meek know that these other issues are important and will make a big difference.

Congressman Meek can be contacted at:

Kendrickmeek.house.gov
Washington, DC
1039 Longworth House Office Building
Washington, DC 20515
Phone: 202-225-4506
Fax: 202-226-0777
Monday–Friday, 9 AM – 6 PM

Moira Souza Shiver
MSS Advocacy Group
mss165.com


Antonio Stone – GUILTY! More Time in Prison for Identity Theft. Comments by Fraud Speaker Chuck Gallagher

September 19, 2008

There are some people who learn from there mistakes and others, it seems, can’t learn!  Apparently Antonio Stone is yet too young to get the concept that crime does not pay.

But, let’s spend a moment with a simple fraud lesson.  It takes three things to truly create an effective fraud:  (1) need; (2) opportunity and (3) rationalization.  Now of the three – OPPORTUNITY – is critical.  Without the big “O” it is not practical or possible to pull off the fraud.

Case in point – Antonio Stone in 2002 pled guilty to possession of counterfeit checks and received 50 months in federal prison. He served that time and was on supervised release.  It will soon be obvious that he didn’t get it – the message that every choice has a consequence didn’t sink in.  I guess almost four years in federal prison wasn’t enough for Antonio.

The ringleader in a counterfeit check and identity theft operation, Antonio Desmond Stone, 32, of Dallas, was sentenced today by U.S. Chief District Judge Sidney A. Fitzwater, to a total of 105 months in federal prison.  Stone, was convicted at trial in June of conspiracy to commit bank fraud, multiple counts of bank fraud and aggravated identity theft.  Stone was sentenced to 105 months in prison.

OUCH!

Well…how did this seasoned former inmate accomplish his new fraud.   Ah…it was the OPPORTUNITY that made it possible.

As the ringleader of the counterfeit check and identity theft operation, Stone recruited bank insiders to obtain confidential bank customer information and used this information to produce counterfeit checks, produce phony ID’s to pass the checks, and recruited others to pass the counterfeit checks.
Three of Stone’s co-defendants, Williana Sharee Johnson, Natasha Toinette McGruder and Meoshia Christine Guidry, pled guilty to bank fraud, and have been sentenced. Johnson was an employee of First Convenience Bank and provided customer account information through others to Stone.
As you read this you might assume that Stone and other co-defendants made off with massive amounts.  I honestly don’t know, but since Stone was ordered to pay restitution of $26,482 one might assume that he got all that time for very little money.
As a business ethics and fraud speaker (see my web site) I often speak to groups about how simple it is to get caught up in behavior that can ultimately have profound consequences.  Most white collar crimes start with a simple wrong that compounded can send one to prison.  In this case, it appears that Antonio Stone made a clear choice.
And – EVERY CHOICE DOES HAVE A CONSEQUENCE.

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

May 12, 2008

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…


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

April 27, 2008

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…