FBI Arrests Hundreds In Mortgage Fraud Case
Losses Total About $1 Billion
POSTED: 9:10 am CDT June 19, 2008
UPDATED: 12:53 pm CDT June 19, 2008
The FBI said Thursday that it has arrested more than 400 real estate brokers since March -- including dozens over the last two days -- in its crackdown on incidents of mortgage fraud that have contributed to the country's housing crisis.
One law enforcement official put the losses to homeowners and other borrowers who were victims in the schemes at more than $1 billion.
The Justice Department and FBI announced the recent arrests at a news conference Thursday afternoon in Washington. Apprehensions were made in Chicago, Atlanta, Miami and suburban Maryland.
"Operation Malicious Mortgage" resulted in 144 mortgage fraud cases in which 406 defendants were charged. On Wednesday, 60 arrests were made in mortgage fraud-related cases in 15 districts. Charges were brought in every region of the United States and in more than 50 judicial districts by U.S. Attorneys' offices based upon the law enforcement and investigative efforts of participating law enforcement agencies.
"Mortgage fraud and related securities fraud pose a significant threat to our economy, to the stability of our nation's housing market and to the peace of mind of millions of American homeowners," said Deputy Attorney General Mark R. Filip. "'Operation Malicious Mortgage' and our other mortgage-related enforcement actions demonstrate the Justice Department's commitment and determination to combat these criminal schemes, hold their perpetrators accountable and help restore stability and confidence in our housing and credit markets."
FBI Director Robert Mueller said that the FBI will continue to direct resources to prosecuting mortgage fraud.
"This operation is an example of our unified commitment to address this significant crime problem," Mueller said. "The FBI will continue to direct investigative and analytic resources towards mortgage fraud and corporate securities fraud that threaten our nation's economy."
Also a part of the operation was the indictment of two former Bear Stearns managers in New York, becoming the first executives to face criminal charges related to the collapse of the subprime mortgage market.
Ralph Cioffi and Matthew Tannin, who have been the target of a probe by Brooklyn federal prosecutors, are suspected of misleading investors about the risky market.
Houston Arrests
A group of Houstonians are accused of defrauding banks and stealing $24 million in a fraudulent mortgage scam, KPRC-TV in Houston reported.
Six defendants are suspected of recruiting people with good credit to act as buyers in fraudulent mortgage deals, prosecutors said.
Federal agents began making arrests early Wednesday morning, delivering defendants to the federal courthouse who are alleged to have operated the massive mortgage fraud ring.
Officials said they were identified as mortgage loan officers or straw buyers who defrauded lenders of $24 million. The defendants were charged with conspiracy, fraud and money laundering.
Named in the indictment were Latasha Bellow, Frankthea Williams, Ishmael Laryea, Charles Joseph Deshawn Wilson, Kristen Way and Robert Stanley.
The indictment alleges phony buyers were recruited to apply for loans to buy pricey condominiums in Houston and surrounding suburbs. The loan applications allegedly used fraudulent information to obtain millions of dollars that the defendants then pocketed, the indictment said.
Attorney Ed O'Suji represents Williams.
"She's not guilty. She's been in real estate for the last five to six years. This is something she makes a living off of like any other real estate agent or broker," O'Suji said.
Williams and two other defendants made federal court appearances Wednesday. Their bond was set at $50,000.
END
The link: http://www.nbc5.com/money/16652452/detail.html?dl=mainclick
I could almost swear that somewhere here on BTF you said Real Estate Brokers had NOTHING to do with Mortgage Fraud or something like that. Guess you were wrong on that one.
Well, I think Tony saw this post cause I saw him logged in. Geez, I hope he isn't hiding from this subject. I didn't figure him to do that.
I doubt it. He's not a lender. He's probably just not in the mood to get beat up on for others evil ways. The people involved in this should be hung by their shriveled little scrotums though.
I can't speak for a whole nation of Realtors. But I will say that I will be suprised if any of this sticks to many Realtors. We are pretty much at the crime scene just by being there at the time of sale. If a fraudulant mortgage broker who is licensed by the state gives me a pre-approval affidavit signed off by him and his president. An appraiser appraised the property. A title company insured the title. Two attorneys represented their clients. I would say there is a lot involved. They could easily be involved but no way by themselves.
If a buyer produces a preapproval and wants to buy say, your home, at the price you are asking, are you going to say no I can't sell it to you because I think you are a straw buyer. The Realtor is usually the last person to make that decision. That loan had to go thru alot before it got to the Realtor. Now if the Realtor was acting in a dual capacity say Mortgage Broker and Realtor it could happen. If the Realtor had knowledge of this and it could be proved, then they should go to jail...period. Of the millions or Realtors across America you are bound to find a bad one. But you won't find one around me because I have no problem finding a rat and smashing them. There is no room in this business for that. I can't speak for Texas. But in Illinois we are constantly under audit from the state, our board, and continuing education monitored by the state. Their main purpose is to proactivly sniff out fraud.
Many time the press gets Mortgage Broker and Real estate Broker mixed up. Let's see what happens. I have never had a problem with admiting I was wrong. And if I am here I will admit it also. I'm not a hide and seek kind of guy. I'm like pop eye the sailor man. What you see is what you get. I am what I am.
http://www.msnbc.msn.com/id/25251684/
After reading more. It looks to me like they are Mortgage Brokers not Realtors. They would have to be Mortgage Brokers to originate the loan. But.......we will see. It looks like her own lawyer got it wrong.
Quote from: tony la on June 19, 2008, 04:19:40 PM
http://www.msnbc.msn.com/id/25251684/
After reading more. It looks to me like they are Mortgage Brokers not Realtors. They would have to be Mortgage Brokers to originate the loan. But.......we will see. It looks like her own lawyer got it wrong.
Hey Tony...don't sweat it. We got a big basement you can hide in, and nobody would think to look for you there because it's unfinished.
...and there's always Bonster's garage.
Tony, the FBI doesn't play to lose and I will venture to guess the press made no mistake. It's been all over the TV today. They have had ample time to correct.
Quote from: apatriot on June 19, 2008, 10:57:06 PM
Tony, the FBI doesn't play to loose and I will venture to guess the press made no mistake. It's been all over the TV today. They have had ample time to correct.
Why do you bring Tony into this? So that you can try and dirty his name?
apat,
I'm not certain about this one, but my guess would be that there were a hell of a lot more MORTGAGE BROKERS involved than REAL ESTATE BROKERS. After all, the title of the operation is Malicious MORTGAGE.
Realtors may have aided and/or abetted the scams in some instances, but I would bet that most of the plots originated from and were spearheaded by MORTGAGE brokers.
OP, it's his field of experience, and it was all over the news. That's all. Why would you say I want to dirty his name?
Silk, I just posted the article, that's all. We all have to wait and see on the updates.
Quote from: Boris on June 19, 2008, 07:36:21 PM
Quote from: tony la on June 19, 2008, 04:19:40 PM
http://www.msnbc.msn.com/id/25251684/
After reading more. It looks to me like they are Mortgage Brokers not Realtors. They would have to be Mortgage Brokers to originate the loan. But.......we will see. It looks like her own lawyer got it wrong.
Hey Tony...don't sweat it. We got a big basement you can hide in, and nobody would think to look for you there because it's unfinished.
...and there's always Bonster's garage.
Thanks, I may take you up on that.
Quote from: apatriot on June 20, 2008, 12:02:13 AM
OP, it's his field of experience, and it was all over the news. That's all. Why would you say I want to dirty his name?
Silk, I just posted the article, that's all. We all have to wait and see on the updates.
You came across as poking at him for a reaction based on this quote...
"Well, I think Tony saw this post cause I saw him logged in. Geez, I hope he isn't hiding from this subject. I didn't figure him to do that."
I really don't get the impression you were just wanting to chat about it and get an inside opinion on the matter. Seemed to be a bit of venom in it.
Alan Colmes
Hog, don't try to figure what my intents are. This story was splattered all over the news yesterday. It's real estate. Tony has a prominent spot here in the real estate arena. I'm sure the whole topic is a black eye for the real estate industry, but it doesn't mean, and nowhere did I ever imply that Tony is part of anything like this. Just was looking to see if he had any comments on it. He usually jumps right in when real estate is the topic, and other topics too, but he seemed quiet on this one. Perhaps he needed the time to read up and find out for himself what was going on.
That said ... Venom? Yes. When you destroy families? OF COURSE. When you are helping to destory economy? YES !!
After reading the info at the FBI website, which by the way, has an entire website devoted to mortgage fraud, they tell you that with these bad mortgage companies, the realtors are in bed with the mortgage companies. The realtor brings the lamb to the slaughter. Even Tony said they are at the scene of the crime. Does that make them innocent as they are not the ones who actually do the slaughter, but bring them to the slaughter? I suppose kickbacks from mortage company to realtor isn't out of the picture either. I just know I could never sit there knowing that I brought a family to a closing to be destroyed down the line.
I don't think it's a black-eye for the real-estate industry. I think it's a black-eye and a broken knee cap for the banking industry.
apat,
I have never and will never avoid a subject on this board that has anything to do with real estate or me. There are 1.2 million realtors in the U.S. I have not met all of them yet, but I'm working on it. I can tell you there are probably some bad apples there. Just about anything that has 1.2 million members is going to have that problem. Most of the press has gotten this mortgage crisis wrong from day one. It is no suprise to me that even law enforcement has gotten some of this wrong. I can tell you that I read the diciplines of the Department of Professional Regulation every month and I have never seen a realtor charged with any mortgage fraud in the state of Illinois. It may happen but I have yet to see. Again we are under constant checks and balances from our different board of Realtors, to our Brokers, to the State, and even or franchises to act in a ethical manor at all times. We also carry what is called errors and omissions insurance. So we are being watched from so many angles it kind of makes it tough to act illegally. Again, I am not saying it can't happen. Anything can happen.
For a realtor to take a kickback from a mortgage company is illeagle. And any kickback that a mortgage company can give to a realtor is certainly not worth them loosing their license. I am very anxcious to find these names of people to find where their license was held and in what capacity. Of the six that were charged I can tell you at least two of them had no license at all. In reading further over 300 have been arrested in Texas. And Nevada they say is ground zero. Now it also looks like many of these sales were done on new construction. New construction in this state and many others including Nevada do not require the builder to have a licensed agent to sell the property. Which would make it much easier to commit a crime. In fact our own state did not require licensing of mortgage brokers until a few years ago.
To complete these tasks you need an appraiser that is willing to falsify an appraisal. Without that, this fraud does not happen.
Apat, I have to tell you that this bothers me as much as it bothers you. Nobody wins with this kind of garbage out there. Of those 1.2 million realtors, over 50% of them have been selling for 5 years or less. But I think the bottom line here is the majority of these frauds were started by a dirty appraiser.
Quote from: tony la on June 20, 2008, 05:13:49 PM
For a realtor to take a kickback from a mortgage company is illeagle. And any kickback that a mortgage company can give to a realtor is certainly not worth them loosing their license.
So is this legit?
http://www.berwyntalk.com/smf/index.php?topic=5464.0
Tony, I believe you.
Bon, did you have in mind a particular post under that thread?
Quote from: Bonster on June 20, 2008, 05:23:39 PM
Quote from: tony la on June 20, 2008, 05:13:49 PM
For a realtor to take a kickback from a mortgage company is illeagle. And any kickback that a mortgage company can give to a realtor is certainly not worth them loosing their license.
So is this legit?
http://www.berwyntalk.com/smf/index.php?topic=5464.0
I have only seen this on new construction condos and apartment buildings that have been turned into condos. However , I do not have all the answers on every program, but I know where to find the answer. It is a legitimate program that is out there. Again a underwriter has to sign off on these programs. That underwriter is at the discretion of the appraiser for their information. Then this loan is 99% of the time sold on the secondary market.
Like Tony said, every loan comes down to an underwriter who approves the loan. The problem can happen when a mortgage company may ask an appraiser to do what they can to increase a value on the appraisal, in order to justify the loan.
I'll bet many of those people who were arrested either falsified loan applications, appraisals or underwriters who turned a blinds eye in order to close a deal.
Bonster, that 6 Month with No Loan Payment is simply a loan that allows for a seller to give a credit to the buyer in order to pay the buyer's first 6 months of loan payments. The credit goes directly to the lender. There are more smaller details, but that's the basics of how it works. The buyer still has to come up with a minimum of a 5% downpayment.
Tony, talk to Phil. He has the details on that program.
Here's a link detailing the scheme and indictments of "Operation Malicious Mortgage". Apat, none of the names are local.
http://www.fraudblogger.com/CHICAGO67CHARGED061908.asp
Tuesday, June 24, 2008
Three OP men indicted for mortgage fraud
Feds allege ongoing fraud committed between 2001 and 2008
By BILL DWYER
Staff Reporter
Tuesday, June 24, 2008
(http://wednesdayjournalonline.com/SiteImages/Article/11598a.jpg)
Closed for good?: Donald Felton started this now shuttered business at 805 South Blvd. that housed his tax preparation service.
BILL DWYER/Staff
(http://wednesdayjournalonline.com/SiteImages/Article/11598b.jpg)
Samuel Shoshoo and Donald Felton Jr.
Felton's son, associate have had problems
Donald Felton Sr. isn't the only member of the family in the real estate business. Donald Felton Sr. recently deeded over operation of the printing business, and a North Side property, to his son, Donald Jr.
Donald Felton, Jr. and his business partner, Samuel Shoshoo, 35, operate a property management business, The Agency of Chicago, out of that house at 2013 Binghan St., Chicago.
State records show that both Felton and Shoshoo, "aka The Agency of Chicago," were fined $3,500 by the Illinois Department of Professional Regulation last August for unlicensed practice of real estate. "A pending application for a broker license shall be issued subject to a Reprimand," the fine notice stated.
On their website, the younger Felton states, "My experience stems from a home-based family business in Oak Park, my hometown, started by my family and I." Felton boasts he helped boost sales "from $50,000 to $200,000 in one year.
What Felton does not say is that he and the business his father founded seven years ago, Pro Print, located at 805 South Blvd., Oak Park, are being sued in Cook County Civil Court for $13,114 by Morlen Reality Corp. and Scoville Square Corp.
Ironically, the leasing agent for the building Pro Print operated out of is Keller Williams. That real estate office lists Donald Felton Jr.'s partner, Shoshoo, as an agent. Keller Williams responded to an inquiry about Shoshoo by giving his "direct line" to call.
Shoshoo has a history of legal problems and business failures. Between 1998 and 2001, Shoshoo operated at least one photography studio, Spotlight Studios, in Highland, Ind. According to news accounts in the Times of Northwest Indiana, Shoshoo's business was the subject of eight formal complaints with the Indiana Attorney General and 38 civil lawsuits filed by unhappy couples who allege Shoshoo bungled their wedding photos.
The Times said Shoshoo blamed his problems on the processing labs he used. He also blamed his financial problems on an employee who he said had passed a several of his company checks. However, the Times quoted a police investigator who stated that Shoshoo, who had filed a report, needed to submit copies of return fraudulently written checks and identify the person responsible, something he never did.
According to the Times, Shoshoo pleaded guilty in 1998 to a charge related to passing a bad check, received a 180 suspended jail sentence and was ordered to pay restitution. In 2001, the Times stated, the Lake County, IN prosecuter's office filed a misdemeanor count of check deception against Shoshoo.
In 2005, Shoshoo filed for Chapter 7 bankrupty protection, listing $3,800 in assets and over $90,000 in debts.
Two former and one current Oak Park businessmen were named in separate criminal indictments Thursday as part of a massive federal assault on widespread mortgage fraud.
The indictments, collectively referred to as Operation Malicious Mortgage, were part of a nationwide crackdown on mortgage fraud announced at a news conference, June 19, at the Dirksen Federal Building in Chicago. Locally, 67 individuals were charged and over 400 nationally.
All involved face prison sentences of up to 20 years per offense, as well as fines and asset seizure. The investigations, which officials stressed are ongoing, are being conducted by agents from the Department of Justice, the FBI, the IRS, the Postal Inspection Service, the Secret Service and the Department of Housing and Urban Development's Inspector General.
Accountant provided false documentation
Federal prosecutors contend in a 26-count indictment that Donald Felton Sr., 57, of 300 block of South Clinton Avenue, was one of 21 people who conspired to defraud numerous financial institutions and obtain property through fraudulent means between August 2004 and May 2008.
Felton, an accountant and tax preparer and proprietor of the Pro Print printing and T-shirt business at 805 South Blvd., was charged with one count of conspiracy and two counts of wire fraud for his alleged role in a widespread operation that fraudulently acquired $95 million in mortgages that cost banks $19 million in losses. Numerous homes were foreclosed on and resold for amounts less than the outstanding mortgage loan balance.
Prosecutors allege Felton and others aided the fraud scheme by providing a variety of false documents intended to support false statements made in loan applications regarding loan applicants' income and financial status. Among the documents Felton allegedly provided were bogus verifications of employment, accountant letters, verifications of rent, and leases and tax returns. The documents were created and submitted, the indictment alleges, "for the purpose of inducing the lenders to issue loans to individuals who were not always qualified for the loans."
Prosecutors, additionally, contend Felton engaged in wire fraud on two occasions, taking part in the transfer of $581,463 in funds for a fraudulent mortgage in May 2006, and arranging for the transmission of a fraudulent verification of deposit on another mortgage.
Wednesday Journal has not been able to contact Felton by phone, and his printing business remains closed. No one answered the door at his Clinton Avenue home late Monday afternoon.
A woman who called Wednesday Journal on Friday said Felton is her tax accountant, and that he still has copies of her 2007 income tax materials in his office. Upon hearing of his indictment online Thursday, the woman, who asked to remain anonymous, said she went to the Felton's business to retrieve her papers, but it was locked up.
She said she's unnerved to hear about mortgage fraud being committed with stolen social security numbers and other forms of personal identification. She said she confronted Felton at his home over the weekend, but he denied he was under indictment and refused to turn over her tax materials.
The woman, who said she works at Oak Park and River Forest High School and met Felton through his wife, said she had no inkling there might be a problem.
"He was very nice. He was professional," she said. "I never got any red flags from this guy," she said.
Hon family kept to themselves
In a separate federal indictment, a former Oak Park and River Forest resident was charged with 11 counts of defrauding several banks out of $2.5 million through the use of bogus buyers of houses, including a total of four in Oak Park and River Forest. In addition, he's charged with defrauding the U.S. Department of Housing and Urban Renewal out of $200,000 in rents paid on properties he had ceased to own.
Prosecutors say Jonathan Hon used straw purchasers to purchase a total of seven properties on the 200 block of Gale Street in River Forest, and three Oak Park houses on the 1000 block of South Kenilworth Avenue, and the 1150 blocks of South Wisconsin and Home avenues, as well as three Chicago properties.
Hon did so through Burnham Mortgage, Inc., of which he was the principal, officials say, "well knowing that these individuals were not the true purchasers and would not make the loan payments." Instead, Hon allegedly cashed checks totaling $570,000 in mortgage loans proceeds, and $1.9 million in title company checks intended to pay off lien holders, including various banks.
Burnham Mortgage was involuntarily dissolved in September 2002, according to the Illinois Secretary of State. Hon operated one of his companies, Lucid Muse Corp., on the 1000 block of South Kenilworth Avenue until its involuntary dissolution in 2005.
The Hons applied for village permits to do extensive interior and exterior renovations, then withdrew them. A large three-story oak staircase estimated to cost some $50,000 was all that Hons managed to finish prior to leaving town.
However Laura Maychruk, who bought the Gale Avenue home in 2005 with her husband Andrew, said the house was a mess as a result of the Hon's leaving literally in the middle of the night months prior. Pipes burst and food was left in refrigerators.
One police officer familiar with the case said the house "was a wreck," with dog feces everywhere. Maychruk said there continue to be echoes of the Hons' time in the house. She said Cook County Sheriff officers showed up at her door once looking for Jonathan Hon.
"I had to work to convince them we weren't them," said Maychruk with a nervous laugh, a task she said was made more difficult by the fact that, like the Hons, she and her husband also have four children.
"Jonathan Hon apparently got a speeding ticket in Ottawa, and they were sending the notices here when he didn't pay it," said Maychruk.
Creating condos out of empty basements
The third Oak Park businessman indicted Thursday, Jeff Trochowski, operated Lakeshore Financial Corporation out of offices at 503 S. Oak Park Ave. First U.S. Attorney Gary Shapiro singled out Trochowski and his alleged accomplice, Greg Sarwa, as being particularly audacious in scamming over $750,000 from various banks.
Shapiro said Trochowski and Sarwa used a variety of falsified documents, including bogus appraisals, to apply for loan applications on four supposed condominiums in the basement of a building on the 3200 block of West Polk Street on Chicago's West Side that didn't exist.
"It was an empty basement," said Shapiro. Prosecutors allege the two men also misrepresented improvements at a building on the 3100 block of West Lexington Street to obtain mortgage loans in a similar manner.
The first shoe dropped for Trochowski in August 2007, when the Illinois Department of Financial and Professional Regulation, which had been investigating Lakeshore Financial for some time, revoked the corporation's license after having found it "committed a violation of the Residential Mortgage License Act."
Last Thursday the other shoe fell.