The Fraud Files I

What? In our own backyard?

"A San Francisco real estate developer will spend eight years in prison and pay more than $17 million in restitution and fines for defrauding more than 700 investors, a judge has ruled."

"U.S. District Judge William Alsup sentenced John A. Hickey, 49, on Thursday to 97 months in prison and ordered him to pay a $15,000 fine and $17.4 million in restitution. The judge told Hickey to begin serving his sentence July 7."

"Federal prosecutors said Hickey raised about $20 million from 724 investors through his company, Continental Capital Financial Group, by offering shares in two limited partnerships. The partnerships were created to develop real estate in Napa and Sonoma, among other locations."

"The investors lost most of their money."


What's in your backyard?

"A Lakewood real estate agent pleaded guilty to wire fraud and money laundering Friday for arranging more than 100 fraudulent loans and mortgages for illegal immigrants and other unqualified recipients."

"William E. Mendez, 41, lead broker for the William E. Mendez Team, will be sentenced June 7.
As part of his plea, Mendez has agreed to pay $1.2 million in restitution to the U.S. Department of Housing and Urban Development and to end his involvement in the real estate business."

"Between January 2000 and November 2002, the Mendez Team allegedly helped clients prepare more than 100 fraudulent home loan applications. The Mendez Team submitted documents that contained false information on income, identity, credit history and immigration status, according to prosecutors."

"The documents included false tax forms and pay stubs, fake Social Security numbers and cards, false letters of credit and fake green cards. Mendez also was accused of bribing loan officers to ensure the approval of the applications for the mortgages, which are insured by the Federal Housing Administration. "

"It was not known Friday how many of the loans or mortgages went into default, but HUD officials contend that the agency lost $1,227,082."


Wait... not done yet.

"A Grosse Ile man has filed a class-action lawsuit against 17 companies and individuals, alleging he was the victim of real estate fraud based on grossly inflated residential property appraisals."

"Blaise Repasky, who filed suit Friday in U.S. District Court in Detroit, alleges he bought eight Detroit homes in 2004 at a total cost of $940,000, based on individual appraisals that showed the homes were worth a total of $967,500."

"An investigation later showed all the homes had changed hands shortly before they were sold to Repasky, and the purchase prices for the transactions totaled $393,150, the lawsuit alleges."

"Repasky believes others have been similarly defrauded and wants his suit certified as a class-action, said his lawyer, Michael Loeckner."

"The FBI recently reported that mortgage fraud losses nationally jumped to $1 billion in 2005 from $429 million a year earlier."

"The lawsuit, which also names a title company and several mortgage companies, is the latest development in a growing number of alleged real estate and mortgage frauds in Metro Detroit."

"Michigan was identified by the FBI as one of the top 10 "hot spots" in 2005 for mortgage and deed fraud."


What? Flipping is a crime?

"The final report on flipping issued Wednesday concludes more than 3,000 houses in Baltimore were flipped in the late 1990s, with the number of foreclosures as high as 6,000."

"Makushamari Gozo spoke with the 11 News I-Team in the fall of 1999 after it uncovered how much money he had made in the flipping scheme that, at the time, was so active around the city."

"WBAL-TV 11 News I-Team lead investigative reporter Jayne Miller reported officials have worked on task forces with federal prosecutors to find those responsible."

"That investigation revealed the widespread impact of flipping on unsuspecting buyers and entire communities."

"Miller said the flipping schemes usually required phony appraisals and fraudulent paperwork. That's what landed Samson Ugorji in trouble. He was a real estate appraiser who was prosecuted criminally for writing inflated appraisals, one of which included more than 100 people involved in flipping, who have since been prosecuted by federal authorities over the past six years."

"Maryland's two U.S. senators, a congressman and the U.S. attorney declared success in the six-year effort to bring real estate flipping under control."

"We worked together and we've made change," said U.S. Sen. Barbara Mikulski, D-Md. "We were able to reduce flipping in Baltimore by 80 percent."

Still paying attention?

"A Westmoreland County man pleaded guilty Thursday in federal court to being one of the ringleaders of a $1.7 million mortgage fraud scheme to "flip" houses at artificially inflated prices in the Wilkinsburg area."

"Robert Lee Kohlman, 37, of Murrysville, pleaded guilty to bank fraud and income tax fraud. He faces between 33 and 41 months in prison and will be sentenced June 12 by Senior U.S. District Judge Maurice B. Cohill Jr."

"Federal prosecutors claim Kohlman, Lavelle Snead, of East Liberty, and David Jackson, 44, of New Kensington, Westmoreland County, participated in bogus house sales for 27 properties in poor neighborhoods between 1998 and 2002."

"The men used straw buyers to submit fraudulent bank loan applications at inflated prices with overstated incomes and assets of the buyers. The buyers were paid kickbacks for their help."


Good... read this one too.

"According to the U.S. Attorney's Office - Southern District of Mississippi, FBI and IRS, Michael T. Cox and Jacqueline B. Mosely have pleaded guilty for their part in a mortgage fraud conspiracy involving properties in Laurel and Hattiesburg."

"As part of their pleas, both defendants admitted to conspiring with Richard Lucas, who is charged separately, along with nine others in a conspiracy to commit bank and wire fraud. Cox admitted preparing fraudulent financial statements at the request of Lucas."

"These financial statements included false pay stubs, false W2s and false bank statements showing income or assets that mortgage loan applicants did not in fact have."

"Cox said he knew these false statements were being used to enhance the apparent credit worthiness of borrowers who were mortgage loan clients of Lucas."

"Mosely admitted that at various times she prepared false appraisals for real property to be acquired by associates and clients of Lucas. These inflated appraisals gave the false impression that the properties were worth more than they actually were, which led financial institutions to lend more than they would have had they known the properties' real worth."

"Mosely admitted that she was aware these false appraisals were being used to enhance the amount loaned on properties of associates and clients of Lucas."


Don't Steal! The Government Hates Competition.

"Once again, San Francisco is on the cutting edge. A first of its kind ordinance took affect today allowing the city to give rewards to whistleblowers who report property tax fraud."

"Any time you sell your house or a piece of real estate changes hands in California, you're required to report it so the property can be re-assessed, usually at a higher tax rate. That's the law but apparently not everyone is playing by the rules."

"Officials say most homeowners willingly report to City Hall to make sure their name is on the title. But surprisingly there is almost no paper trail for corporations. That's the reason for a new city law encouraging whistleblowers."

Aaron Peskin, San Francisco supervisor: "Primarily it's large corporations. They don't actually transfer title, but transfer interest internally, changes of stock ownership and those are accessible events that are meant to be taxed."


Scams for everyone...

"A friend introduced Kim to Seng Tan, an elegant Cambodian-American woman who said she wanted to help her people live the American dream. If he invested $131,933 in her vitamin and cosmetics company, World Marketing Direct Selling Inc. (WMDS), he would get $2,500 a month for life, she said."

"Many of Kim's friends in Lowell, which is home to more than 30,000 Cambodians, had invested and were getting checks regularly. Kim thought: Why not?"

"With Tan's help, he refinanced his house in April, 2003. The bank she recommended approved his $145,000 home-equity loan in just a week, with no appraisal. Kim gave her $131,933, and for two years, $2,500 checks rolled in monthly."

"Last July they stopped. Tan offered excuses: a computer glitch, Hurricane Katrina. But in November, Kim learned that WMDS was a sham. On Nov. 15, the Securities & Exchange Commission filed a complaint against Tan and two associates."

Federal prosecutors in Boston have since filed 11 counts of mail fraud against the trio. Investigators say the three bilked $30 million from hundreds of Cambodian-American investors from Massachusetts to Minnesota. Lawyers for all three deny the charges.Like Kim, many of the alleged victims invested funds from home-equity loans.

"Affinity fraud is rampant," says Alabama Securities Commission Director Joseph P. Borg. "It seems like every third case has some affinity element to it."

"One reason is the growing affluence of immigrants and other religious and social groups, fueled by the real estate boom."

"More people have accumulated wealth but lack the educational background to know who to trust for investment advice and opportunities," says Lisa Fairfax, associate professor of law at the University of Maryland.

Kim anguishes about how he will make home loan payments that have nearly tripled. "What will happen to my family, here and in Cambodia?" he wonders. "This is very painful. I will carry it with me my whole life."

Well, then who can you trust?

"A Homeland Security employee is charged with mortgage fraud after closing on a $3.3 million home in Duluth. Federal officer Brinson Allen is accused of falsifying mortgage documents to get mortgages on the home."


Questionable lending practices? (gasp) Say it isn't so!

"The Grand Strand's hot housing market has fueled a growing concern about mortgage fraud, according to law enforcement officials, especially as it relates to manufactured homes. In an ongoing investigation, The Sun News has reviewed thousands of pages of documents and interviewed dozens of homeowners to reveal questionable lending practices in the manufactured home industry."

"Among the findings are allegations of falsified down payments, appraisals with inflated home values, misleading information on loan applications and high-interest loans that leave homeowners owing more than their property is worth."