Acting United States Attorney Robert S Cessar announced today, July 26, 2010, that on July 23, 2010, Amber Johnston, a resident of Pittsburgh, Pennsylvania, was sentenced in federal court in Pittsburgh to time served, eight months home detention and three years of supervised release on her conviction of conspiracy to pass counterfeit currency and wire fraud conspiracy. United States District Judge Arthur J Schwab imposed the sentence on Johnston, age 34. According to information presented to the court by Assistant United States Attorney Brendan T Conway, Johnston participated in two different conspiracies. In one conspiracy, she passed two counterfeit $100 bills and possessed 10 other counterfeit $100 bills that had been manufactured by another member of the conspiracy.

In a second conspiracy, Johnston participated in a mortgage fraud conspiracy in which she was the seller of a property, and she agreed to represent to the lender that the sales price was far in excess of the actual sales price. She also participated in a closing in which false representations were made to the lender about her receipt of a deposit and a second mortgage. Mr Cessar commended The Mortgage Fraud Task Force for conducting the investigation that led to the prosecution of Johnston. The Mortgage Fraud Task Force is comprised of investigators from federal, state, and local law enforcement agencies and others involved in the mortgage industry.

Federal law enforcement agencies participating in the Mortgage Task Force include the Federal Bureau of Investigation; the Internal Revenue Service, Criminal Investigation; the United States Department of Housing and Urban Development, Office of Inspector General; the United States Postal Inspection Service; and the United States Secret Service. Other Mortgage Fraud Task Force members include the Allegheny County Sheriff’s Office; the Pennsylvania Attorney General’s Office, Bureau of Consumer Protection; the Pennsylvania Department of Banking; the Pennsylvania Department of State, Bureau of Enforcement and Investigation; and the United States Trustee’s Office. Mortgage industry members with knowledge of fraudulent activity are encouraged to call the Mortgage Fraud Task Force at (412) 894‑7550. Consumers are encouraged to report suspected mortgage fraud by calling the Pennsylvania Attorney General’s Consumer Protection Hotline at (800) 441‑2555.
http://7thspace.com/headlines/352309/pennsylvania_woman_sentenced_for_wire_fraud_and_counterfeiting_schemes.html

A Kansas City, Mo., woman has been sentenced to one year and one day in federal prison for taking part in a mortgage fraud scheme.

U.S. Attorney Lanny Welch said Tuesday that 52-year-old Emma Jean Holmes was sentenced for obtaining mortgage loans by submitting false loan applications. She pleaded guilty in March to one count each of conspiracy, mail fraud and money laundering.

Prosecutors said her applications grossly overstated her income, falsely claimed that Holmes intended to live in the houses and that she was using her own money for the down payments.

Welch says the fraud involved applications for homes in Overland Park, Kan.

A co-defendant, Wildor Washington Sr., of Kansas City, Mo., was sentenced in June to three years in federal prison after being found guilty of the same charges.

http://www.businessweek.com/ap/financialnews/D9H7G9EO0.htm

A fourth person connected with a broad North Texas mortgage fraud investigation has pleaded guilty and been sentenced to 28 years in prison.

Darrell Marriott, 57, of Gun Barrel City, admitted to a count of execution of a document by deception. Marriott joined his wife, Kandace Marriott, 54, Kandace Marriott’s sister Karen Hayes, and the Marriott’s daughter, Kally Marriott, in creating false mortgage applications in Navarro County.

Kandace Marriott is serving a 99 year prison sentence; Hayes, 59, is serving an 18-year sentence, and Kally Marriott, 24, served four months in prison as part of her probation.

The Marriott’s scam extended into Ellis, Kaufman and Henderson counties, and the pleading and sentencing Wednesday brings to a close the investigation conducted by Texas Attorney General Greg Abbott’s White Collar Crime and Public Integrity Section.

http://www.dallasnews.com/sharedcontent/dws/bus/stories/072110dnbusmortfraud.55cd872.html

A Houston-area man who used a child’s Social Security number to secure funds in an alleged $10 million mortgage fraud scheme has pleaded guilty.

Prosecutors in Houston say 39-year-old Adrian Levale Cole pleaded guilty Tuesday to committing wire fraud and false representation of a Social Security number.

Sentencing is Sept. 23 for Cole, who faces up to 20 years in prison. Two co-defendants face trial in July.

Investigators say Cole, who was indicted last June, used several business names to fraudulently secure mortgage loans.

Details on the minor, whose Social Security number turned up on a loan application to create a line of credit, were not released.

Investigators say the mortgage fraud scheme ran from mid-2003 until July 2006.

http://www.businessweek.com/ap/financialnews/D9GL3HGG0.htm

 Goldman Sachs has been ordered to pay $20.58 million to creditors of a failed hedge fund to settle claims that the bank helped the fund perpetrate a Ponzi scheme.

The award represents the first time that a bank has been held accountable for a Ponzi scheme because of its role as a middleman, The New York Times’s Louise Story and Gretchen Morgenson reported.

Goldman cleared trades and lent money to the Bayou Group, a Connecticut hedge fund that collapsed in 2005, when state and federal investigators said the firm defrauded investors of hundreds of millions of dollars.

The Bayou fraud resurfaced in 2008 when its founder, Samuel Israel III, faked his own suicide after being sentenced to 20 years in prison for fraud. He later turned himself in and is now serving 22 years.

Bayou’s creditors filed a complaint against Goldman two years ago, saying the bank either knew or should have known of Bayou’s fraud. Goldman, the complaint said, had access to Bayou’s trading records, which showed losses, as well as its marketing materials, which showed profits.

The award, in a decision by an arbitration panel of the Financial Industry Regulatory Authority issued on Thursday, may put other banks on notice to better scrutinize their hedge fund clients’ activities.

“This case shows that you can’t just stick your head in the sand when a fraud is going on in your shop,” said Ross B. Intelisano, a lawyer at Rich & Intelisano, who brought the arbitration against Goldman. The bank “argued that you could, and the panel disagreed.”

A Goldman spokesman pointed to the bank’s filing in the case, which questioned whether the creditors could use bankruptcy laws to hold Goldman accountable for the $20.58 million of investor money that Bayou transferred among its Goldman accounts. The money was never actually conveyed to Goldman, the bank said, so it should not be considered a fraudulent transfer.

The arbitration panel does not determine whether wrongdoing occurred, but merely decides on compensation.

“We are disappointed with the award and are considering our options,” said Ed Canaday, a spokesman for Goldman.

Goldman has limited grounds for vacating an arbitration award, however.

The award to Bayou’s creditors is yet another legal woe for Goldman. The bank is also the target of a Securities and Exchange Commission investigation of its mortgage operations before and during the financial crisis, and Goldman is fighting an S.E.C. complaint and private lawsuits about mortgage securities it created. Goldman has defended its actions in the mortgage market and said the parties that purchased its mortgage deals should have known what they were dealing with.

Although the Bayou case dates long before the financial crisis and has nothing to do with mortgage bonds, Goldman made similar claims in its reply. The bank, for instance, said the creditors of Bayou were “highly sophisticated investors.” Goldman also said it had no duty to monitor the “honesty and the finances” of its account holders.

Goldman served as Bayou’s main prime broker from 1999 to 2005, meaning that the bank had a wide view of the hedge fund’s activities, according to the creditors’ complaint. In that role, Goldman was the custodian of Bayou’s assets and a lender to the fund. Goldman also prepared Bayou’s account statements, the creditors said.

The award represents the amount of money that was put into the Bayou funds held at Goldman between March 2003 and June 2005. It accounts for just over 8 percent of the $250 million in losses that Bayou investors incurred in the fraud. If this award is included in the total recovered by Bayou investors, it will rise to more than half of their losses.

Bayou began losing money long before it went bust, for more than $88 million in losses during its association with Goldman. At the same time, Bayou told prospective investors that it had positive returns. During those years, Bayou marketed its relationship with Goldman as a mark of legitimacy, the creditors said.

Goldman was aware that Bayou was losing money, the creditors said. In 2004, Goldman’s risk managers created a list of the top 10 money losers among its clients. The No. 1 loser was a Bayou fund, and two other Bayou funds were ranker lower. The list, the complaint said, was circulated among Goldman executives.

A month after that list was circulated, Goldman requested and received a copy of Bayou’s marketing materials, which falsely claimed positive returns. Goldman also was warned about Bayou by an outside firm in 2002, the complaint said.

Goldman’s employees, the complaint said, “have repeatedly claimed that they had no obligation to concern themselves with what had occurred at the Bayou Hedge Fund at anytime.”

http://dealbook.blogs.nytimes.com/2010/06/28/goldman-told-to-pay-creditors-in-bayou-scam/

A federal jury has convicted Robert Dewain Venson of Fort Washington, Md., for mail and wire fraud, money laundering and failing to file tax returns in connection with a three-year mortgage fraud scheme involving 13 residential properties. The conviction was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation (FBI); Assistant Director in Charge Shawn Henry of the Federal Bureau of Investigation-Washington Field Office; Special Agent in Charge Rebecca Sparkman of the Internal Revenue Service (IRS)-Criminal Investigation, Washington D.C. Field Office; and Postal Inspector in Charge Daniel S. Cortez of the U.S. Postal Inspection Service-Washington Division.

According to evidence presented at the two-week long trial, from 2004-2007, Venson negotiated the purchase of 13 residential properties in Maryland and the District of Columbia, including houses in Hyattsville, Ocean City, Fort Washington and Salisbury, Md. Rather than purchase the properties in his own name, the evidence proved that Venson paid straw buyers to appear at the settlement posing as the buyer. Witnesses testified that Venson typically would represent to the straw buyer that he would pay the loan obligation. Venson inflated the price listed on the sales documents to an amount substantially larger than the actual price, causing the mortgage lender to provide funds for the purchase substantially in excess of the actual price. Venson misrepresented and concealed the true purchase price, his arrangement with the straw buyer and other material information from the mortgage lender. Under this scheme, the trial evidence showed that Venson reaped hundreds of thousands of dollars.

Evidence showed that Venson failed to file individual federal income tax returns for 2004, 2005 and 2006, during the period of the scheme. Based on the mortgage fraud scheme, the indictment seeks forfeiture of property, including a money judgment of $892,371.

“The IRS-Criminal Investigation, in partnership with other law enforcement agencies, vigorously pursues individuals who commit crimes against our community and economy,” said Sparkman of the IRS-Criminal Investigation Special Agent in Charge, Washington D.C. Field Office. “Convictions, like the one just returned against Robert Venson, send a loud and clear message that people who willfully defy the laws, including tax laws, will be fully investigated and prosecuted for their actions.”

Venson faces a maximum sentence of 20 years in prison for each of the eight counts of mail fraud, each of the eight counts of wire fraud, and each of the seven counts of money laundering; and one year in prison for each of the three counts of failure to file tax returns. 

The Maryland Mortgage Fraud Task Force was established to unify the agencies that regulate and investigate mortgage fraud and promote the early detection, identification, prevention, and prosecution of mortgage fraud schemes.

http://nationalmortgageprofessional.com/news18342/maryland-man-busted-three-year-long-mortgage-fraud-scheme

Members of the Financial Fraud Enforcement Task Force released the results of a nationwide dragnet, “Operation Stolen Dreams,” which targeted mortgage fraudsters throughout the country and is the largest collective enforcement effort ever brought to bear in confronting mortgage fraud.  The White Collar Crime Committee of the National Association of Chiefs of Police obtained relevant documents describing this enormous operation.

The sweep was organized by President Barack Obama’s interagency Financial Fraud Enforcement Task Force, which was established “to lead an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes.”

Starting on March 1 through June 17, Operation Stolen Dreams has involved 1,215 criminal defendants nationwide, including 485 arrests, who are allegedly responsible for more than $2.3 billion in losses. Additionally, to date the operation has resulted in 191 civil enforcement actions, which have resulted in the recovery of more than $147 million, according to the Federal Bureau of Investigation. 

“From home buyers to lenders, mortgage fraud has had a resounding impact on the nation’s economy,” said FBI Director Robert S. Mueller, III. “Those who prey on the housing market should know that hundreds of FBI agents on task forces and their law enforcement partners are tracking down your schemes and you will be brought to justice.”

Unlike previous mortgage fraud sweeps, Operation Stolen Dreams focused not only on federal criminal cases, but also on civil enforcement, recovering money for victims and increasing cooperation with state and local partners.

The operation was conducted in conjunction with the Department of Justice — including the FBI, U.S. Attorneys Offices, the U.S. Trustee Program, and other components — as well as the Department of Housing and Urban Development, the Department of the Treasury, the Federal Trade Commission, the Internal Revenue Service, the U.S. Postal Inspection Service, the U.S. Secret Service, the National Association of Attorneys General, and the National District Attorneys Association.

The President’s Financial Fraud Enforcement Task Force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources, according to officials. 

MORTGAGE FRAUD REPORT

According to the Federal Bureau of Investigation’s 2009 Mortgage Fraud Report, released today, mortgage fraud suspicious activity reports referred to law enforcement increased 5 percent to 67,190 during fiscal year 2009.

 It’s estimated that $14 billion in fraudulent loans originated in 2009. The total dollar loss attributed to mortgage fraud is unknown.

Other key findings presented in the report include:

• There are more than 2.8 million properties with foreclosure filings, a 120 percent increase from 2007 to 2009. The Las Vegas area reported the most significant rate of foreclosures, with more than 12 percent of housing units there receiving a foreclosure notice.
• The top 10 states ranked by the number of foreclosure filings per housing unit were California, Florida, Arizona, Michigan, Nevada, Georgia, Ohio, Texas, and New Jersey. In April 2010, one in every 386 housing units received a foreclosure filing.
• Prevalent mortgage fraud schemes in fiscal year 2009 include loan origination, foreclosure rescue, builder bailout, equity skimming, short sale, illegal property flipping, reverse mortgage fraud and loan modifications. Emerging trends include fraud involving economic stimulus plans/programs, property theft/fraudulent leasing of foreclosed properties and tax-related fraud.

http://www.examiner.com/x-2684-Law-Enforcement-Examiner~y2010m6d25-Corruption-Feds-conclude-biggest-mortgage-fraud-dragnet-in-US-history

David B. Fein, United States Attorney for the District of Connecticut, has announced that a federal grand jury sitting in New Haven has returned 14-count superseding indictment charging six individuals for their participation in an alleged mortgage fraud scheme. The indictment alleges that Syed A. Babar of New London, Conn.; Thomas E. Gallagher of West Haven, Conn.; Morris I. Olmer of New Haven, Conn.; David Avigdor of New Haven, Conn.; Nathan M. Russo of Johnston, R.I. and Rab Nawaz of Waterford, Conn. with conspiring to defraud the United States in connection with mortgage loan insurance issued by the Federal Housing Administration (FHA).

The superseding indictment alleges that Babar was the de facto leader and organizer of the conspiracy. The charges allege that, between February 2007 and April 2010, Babar, along with Russo, a Rhode Island-based mortgage broker; Gallagher, a West Haven-based real estate appraiser; Olmer, a former attorney who has not been licensed to practice since February 2007, but who held himself out to be a lawyer, and Avigdor, an attorney who shared a New Haven office with Olmer, engaged in a scheme to obtain millions of dollars in residential real estate loans through the use of sham sales contracts, false loan applications and fraudulent property appraisals. It is alleged that Nawaz operated a private business in Waterford and purchased and sold real estate to straw buyers and provided other assistance to Babar and the conspiracy.

The charges against the defendants allege that Babar recruited and paid straw purchasers to nominally purchase homes. Members of the conspiracy then directed the straw purchasers to enter into sales contracts with the sellers of homes for a price higher than the actual price that the seller would receive. Members of the conspiracy submitted false documentation in connection with loan applications that were submitted, including fraudulent appraisals of the properties being purchased in order to justify the inflated sales price and the loan amount being sought to fund each purchase. Babar and his co-conspirators allegedly created a fictitious construction company in order to divert fraud proceeds to it and, in some cases, to falsely justify the artificially inflated sales price of houses based on renovations purportedly made to the property that, in fact, did not occur. Members of the conspiracy then split the fraud proceeds.

Contrary to the representations made on the loan applications, it is alleged that the straw purchasers never occupied the houses as their primary residences. They defaulted on the loans they obtained and let the houses go into foreclosure. The government alleges that this mortgage fraud scheme involved approximately 35 properties and loans obtained in the amount of approximately $10 million. Current losses from the scheme are estimated to be at least $3 million.

The defendants are each charged with one count of conspiracy, which carries a maximum term of imprisonment of five years and a fine of up to $250,000; eight counts of wire fraud, which carry a maximum term of imprisonment of 20 years and a fine of up to $250,000, on each count, and four counts of making false statements, which carry a maximum term of imprisonment of five years and a fine of up to $250,000, on each count. In addition, Nawaz is charged with one count of obstruction of justice, which carries a maximum term of imprisonment of 10 years and a fine of up to $250,000.

On April 27, 2010, a federal grand jury returned an indictment charging Babar with wire fraud and conspiracy offenses. He has been detained since his arrest on May 14. The other five defendants were previously arrested on criminal complaints and released on bond.

U.S. Attorney Fein stressed that an indictment is not evidence of guilt. The charges are only allegations, and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt. This matter is being investigated by the Federal Bureau of Investigation (FBI) and the U.S. Department of Housing, Office of Inspector General. The case is being prosecuted by Assistant United States Attorney Eric J. Glover.

In July 2009, the U.S. Attorney’s Office and the FBI announced the formation of the Connecticut Mortgage Fraud Task Force to investigate and prosecute mortgage fraud cases and related financial crimes occurring in Connecticut. In addition to investigating past mortgage fraud schemes, the Task Force is focusing on emerging crime trends that are associated with the growing tide of foreclosures, including foreclosure rescue schemes and short sale schemes.

The Connecticut Mortgage Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service-Criminal Investigation; U.S. Postal Inspection Service; U.S. Department of Housing and Urban Development, Office of Inspector General; Federal Deposit Insurance Corporation, Office of Inspector General, and State of Connecticut Department of Banking.

http://nationalmortgageprofessional.com/news18348/six-indicted-involvement-connecticut-mortgage-fraud-scheme