Here are the latest updates from The Mortgage Fraud Reporter

In the State Bar Journal the California State Bar announced that its loan modification task force obtained the resignations of three more California attorneys as a result of misconduct related to their loan modification activities. It also placed another attorney on inactive status, charging his work poses a substantial threat to the public, and has undertaken similar efforts against two other lawyers.

In addition, JAMES PARSA [#153389], a southern California lawyer who advertised his loan modification work on television throughout the state, resigned Oct. 21. He faced interim suspension from practice as a result of a 2001 misdemeanor conviction for sex with a child under 18 that he never reported to the bar.

Parsa, 44, advertised heavily throughout California for the past several months, offering to help homeowners facing foreclosure. Although he provided evidence to the bar that he was in fact working on cases, an investigator uncovered two 2001 misdemeanor convictions for sex with an underage girl. The bar court ordered that Parsa be placed on interim suspension Oct. 16, but his resignation made the suspension moot.

The State Bar created a 10-person loan modification task force in March after receiving thousands of calls from homeowners complaining that lawyers have done no work after taking fees purportedly to help avoid foreclosure. The task force had 738 active investigations underway last month.

It earlier released the names of 16 attorneys it was investigating for possible misconduct related to loan modification. Four of the six who resigned or face inactive enrollment were on that list.

“We are very pleased that we have been able to remove these practitioners from the practice of law quickly in order to protect the public,” said Interim Chief Trial Counsel Russell Weiner.

Until last month, attorneys were able to legally accept advance fees from borrowers for residential loan modification work and other forms of mortgage loan forbearance services. Lawyers’ services were in demand by foreclosure relief companies and operators that could not otherwise receive payment until contracted or promised loan modification work was completed. However, on Oct. 11, Gov. Schwarzenegger signed SB 94, which prohibits attorneys and any other persons from collecting an advance fee for residential loan modification and mortgage loan forbearance services. The measure took effect immediately. Details about the new law are at the Department of Real Estate home page, www.dre.ca.gov.

The attorneys who resigned from the State Bar are:

• CAMERON EDWARDS [#222549], Alliance Law Center in San Diego, resigned Sept. 25.

• RONALD RODIS [#181873], of Rodis Law Group and America’s Law Group in Newport Beach, resigned Oct. 13.

• JEFFREY NEMEROFSKY [#213014], U.S. Advocacy Law Group and U.S.  Financial Products, in Laguna Niguel, resigned Oct. 16.

The three are ineligible to practice law pending a California Supreme Court order accepting the resignations.

Those the bar is seeking to place on involuntary inactive status for posing “a substantial threat of harm to (their) clients or the public” under Business & Professions Code §6007(c) are:

• PAUL LUCAS [#163076], of Lucas Law Center in Aliso Viejo. The bar court petitioned to put him on inactive status Sept. 21; he did not reply to the petition and the State Bar Court took the matter under submission.

• SEAN RUTLEDGE [#255938], of United Law Group in Irvine, had a hearing Oct. 23; the bar filed its petition Sept. 22. The bar earlier charged him with seven counts of misconduct in handling a loan modification for a client who paid an advance $3,500 fee. Rutledge never took any action to negotiate with the client’s mortgage lender, the bar charges. The judge took the matter under submission and had 10 days to rule.

In addition, CHRISTOPHER L. DIENER [#187890] of Irvine, principal attorney for Home Relief Services LLC, was placed on inactive status Oct. 9. Attorney General Jerry Brown sued Diener last summer and accused him of telling homeowners he and his company would act as sole agent and negotiators and directed the homeowners to stop contacting their lender. None of the known victims received a loan modification with the company’s assistance.

The Los Angeles County sheriff last month raided the offices and homes of TANMAY MISTRY [#251425] and KURT ELKINS [#241562], attorneys allegedly affiliated with a Pico Rivera loan modification business alternately called Safe Haven, Home Loan Negotiators, Proteccion Familiar and Your Dreams Come True.

In September, people who had given money to the business to modify their home loans gathered at the office complaining no work had been done. Several in the crowd were in foreclosure.

Both Mistry and Elkins told the authorities their identities had been stolen. Mistry submitted his resignation with charges pending from the bar, but later rescinded it. He did not return a phone call. Bar officials would not comment on Elkins, but he said he has done nothing wrong.

He was hired on a one-month contract about eight months ago by Safe Haven, who he now says “probably lied about who I am and what I do.” He said he believes the company did loan modification work but declined to specify the nature of his work.

“Clearly, I didn’t do anything wrong,” Elkins said. “I’m a victim of identity theft.”

Los Angeles Sheriff Sgt. Dana McCants said Safe Haven’s clients were solicited through a Spanish language Christian radio station, located in the same Pico Rivera building that was home to the loan modification business. Clients generally paid about $2,900 for a loan modification.

But McCants said in a typical scenario, an employee of Safe Haven then filed bankruptcy for the client, adding numerous fictional names to the grant deed for the purpose of stalling the lender from foreclosing. Each individual named in the bankruptcy petition receives a 90-day extension. However, McCants said as the extensions end, “the house of cards starts to collapse.”

 He said about 300 homeowners have filed complaints with the sheriff and estimated another 200 were victimized by Safe Haven.

McCants would not disclose the nature of the evidence seized during the raid; many of the files are under the custody of a special master because they may involve attorney-client relationships. The loan modification business was shut down, but at press time, no arrests had been made.

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In the following press release the Santa Clara County (CA) District Attorney annouced that at arraignment this week, 42-year old Lawrence Maschino pleaded guilty to charges including writing checks with insufficient funds, using a victim’s personal information without authorization, and grand theft of personal property over $400. In addition, Mr. Maschino has three prior felony convictions for similar offenses.

In pleading guilty, Mr. Maschino agreed to a four year prison term. The charges were the result of the San Jose Police Department’s Fraud Unit receiving a tip from a real estate agent. Mr. Maschino attempted to purchase a home worth $760,000. The agent suspected Mr. Maschino was a con artist. When SJPD figured out he had absconded from his parole, they swiftly arrested him. During his arrest, they found in his possession numerous pieces of evidence resulting in an investigation for the above charges. Mr. Maschino wrote a series of bad checks, worth thousands of dollars starting in February 2009 that continued through June 2009. The total loss as a result of the bad checks was more than $17,000.00. He also used the personal information of several victims, including doctors and elders, without authorization.

Mr. Maschino will be sentenced on December 11, 2009, at 9:00am in Dept. 24 of the Hall of Justice.

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Oakland, CA - Press Release

A federal grand jury has returned a 53 count indictment charging seven individuals with conspiracy to commit wire fraud, wire fraud, and money laundering for their roles in a mortgage fraud scheme that involved more than 100 properties in Northern California, United States Attorney Joseph P. Russoniello, Special Agent in Charge, IRS Criminal Investigation, Scott O’Briant, and Special Agent in Charge, FBI, Stephanie Douglas, announced.

The indictment, which was unsealed yesterday, charges Amy Schloemann, aka Amy Kinney; Karim Akil, aka Scott Kinney, aka Scott Kenney; Wonda Louise Kidd; Michelle McGuire; Kaska Clay, aka Mark Lane, aka Michael Lewis; James Ross; and Darnell Thomas.

According to the indictment, from October 2004 through July 2007, the defendants participated in a conspiracy to defraud involving more than 100 properties that provided profits in the millions to members of the conspiracy through the fraudulent purchase of real estate and the laundering of profits.

The indictment alleges that in furtherance of the conspiracy, the defendants and their associates recruited and controlled individuals in key positions, including straw buyers, real estate appraisers, notaries and escrow agents. The defendants encouraged straw buyers and others to purchase homes throughout Northern California by falsely promising: to pay them large sums of money and at times paying them large sums of money, that the real estate transactions were legal, that the buyers would not be responsible for the mortgage payments, and that the mortgage payments would be taken over by another person shortly after the purchase of the property.

The indictment states that the defendants directed straw buyers to sign mortgage loan applications that contained false information and false supporting documentation, and paid the straw buyers thousands of dollars in exchange for allowing the defendants to purchase property in their names. The defendants are also alleged to have hired notary publics who were willing to notarize documents by falsely attesting to having witnessed signatures on loan documents when in fact the documents were not signed in the presence of the notaries. 

According to the indictment, the defendants increased their profits on the purchase of properties by submitting documents to lenders, including purchase and sale agreements that falsely inflated the purchase prices of the properties, thereby causing the lenders to unwittingly provide loans in amounts that exceeded the true purchase prices and values of the properties. Once the properties were purchased, the defendants disbursed funds from the escrow accounts into bank accounts held by the defendants. The defendants also regularly failed to make the mortgage payments on the purchased properties, causing lenders to foreclose on the properties which resulted in financial losses to the lenders and damaged the credit ratings of the buyers. 

Amy Schloemann, aka Amy Kinney, was a licensed realtor and president of Hiddenbrooke Mortgage in Vallejo, Calif.  She completed and caused others to complete false loan application for straw buyers and fictitious buyers. She also acted as a real estate broker for both straw buyers and fictitious buyers. 

Karim Akil, aka Scott Kinney, aka Scott Kenny, was the president of Marsh Group Corporation in Oakland, Calif. He was the husband of Schloemann. Akil employed and paid co-conspirators to recruit individuals to act as straw buyers of real estate. 

Schloemann and Akil held signature authority on business checking accounts in the names of Hiddenbrooke Mortgage Group, Marsh Group, the Brooke Property Management Company and Sanford and Son MTG. Schloemann and Akil used these accounts to launder the profits of the fraudulent scheme, to make deposit payments on real property purchases in the names of straw and fictitious buyers and to make payments to co-conspirators. 

Michelle McGuire worked as a personal assistant for Akil. She was responsible for assisting in the completion of loan applications for straw buyers and fictitious buyers and submitting these loan applications and supporting documentation to lenders. She was paid hundreds of thousands of dollars for her involvement in the fraud scheme.

Wonda Louise Kidd was a manager and escrow officer of Financial Title Company in Castro Valley, Calif. Kidd was the escrow officer on more than 100 properties involved in this scheme, disbursing profits to Schloemann and Akil through wire transfers and checks to their various accounts. 

James Ross and Darnell Thomas worked with Akil to recruit straw buyers to purchase real property. Thomas also falsified information on a loan application submitted to a lender for a property he purchased. They were each paid hundreds of thousands of dollars for their involvement. 

Kashka Clay aka Mark Lane aka Michael Lewis was a real estate agent who purchased two properties using the alias, Mark Lane. Clay also authorized the use of his telephone number to falsely represent to lenders that Clay’s number belonged to a certified public account. 

Schloemann and McGuire were arrested on Nov. 2, 2009 and made their initial appearance in federal court in Oakland on that date. They are currently out on bond. Kidd, Clay and Ross were arraigned today in Oakland federal court and were released on $100,000 bond. Thomas is scheduled to be arraigned tomorrow.  Akil, who is presently serving a sentence in state custody, is scheduled to appear on Nov. 19, 2009 for arraignment. The case is assigned to District Judge Phyllis Hamilton.  The defendants are scheduled to make their initial appearance before Judge Hamilton on Nov. 25, 2009 at 1:30 p.m.

The charges of conspiracy to commit wire fraud and wire fraud each carry a maximum penalty of 20 years in prison and a $250,000 fine. The charge of money laundering carries a maximum prison sentence of 10 years and a fine of $250,000 or twice the amount of the criminally derived property involved in the transaction.

However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. ’ 3553. 

Stephen G. Corrigan is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Kathleen Turner. The prosecution is the result of an investigation by the FBI and IRS-Criminal Investigation with the assistance of the Alameda County District Attorney’s Office.

Please note, an indictment contains only allegations against an individual and, as with all defendants, Schloemann, Akil, Kidd, McGuire, Clay, Ross and Thomas must be presumed innocent unless and until proven guilty.

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In the following press release the United States Attorney’s Office for the Central District of California announced that the former director of sales for a Colorado real estate company that built luxury homes throughout the state agreed in court papers filed today to plead guilty to a federal conspiracy charge, admitting that he and other company officials participated in a $16 million “builder bailout” scheme in which buyers of $1 million-plus homes were paid kickbacks if they purchased homes from the company.

Benjamin Serrano, 47, who until recently lived in Parker, Colorado, was charged in a criminal information filed this morning. In a related plea agreement also filed this morning in United States District Court, Serrano agreed to plead guilty to one count of conspiracy.

In the court documents, Serrano admits his role in a scheme to bring needed revenue to his company and admits working with Kristin A. Clark, a licensed real estate agent in Los Angeles, and Bradley Bishop, a former loan officer at Washington Mutual Bank and, later, Bank of America. Both Clarke and Bishop previously pleaded guilty to bank fraud charges.

In his plea agreement, Serrano admits to participating in a conspiracy with Clark and Bishop, as well as others at the company, to defraud Bank of America, Wells Fargo Bank, Washington Mutual Bank and other federally insured financial institutions. In the scheme, people associated with the company agreed to pay illegal kickbacks to individuals who agreed to buy homes in one of the company’s five developments.

To conceal the illegal kickbacks from the banks, Serrano and others would record bogus second deeds of trust on the company’s properties, according to papers filed in court. The second deeds of trust were recorded in favor of shell corporations controlled by the company for an amount equal to the kickback. Once someone agreed to buy a home, Bishop would tell Clark what information needed to be listed on the buyer’s loan application in order for him or her to qualify for a home loan at Bank of America, and Clark would use that information to obtain the bogus documentation required by the bank. When the properties were sold and loans funded, the banks would use part of the loan proceeds to pay off the bogus second deeds of trust recorded against the property. That money, which was paid to the company’s shell corporations, was then used to pay the kickbacks to the buyers. The kickbacks typically ranged between 20 percent and 23 percent of the homes’ sales price, which all sold for more than $1 million. 

In one instance discussed in Serrano’s plea agreement, a buyer agreed to purchase a home in Parker, Colorado for $1,277,500. In exchange, the company agreed to pay the buyer a kickback of approximately $269,000 out of the loan proceeds. Serrano and others at the company agreed to this sale knowing that the buyer had used a false identity to obtain a home loan from Wells Fargo. In fact, Serrano admitted in the plea agreement, he paid for the buyer to fly to Los Angeles to obtain a better fake identification. FBI agents in Colorado followed up on this sale and discovered that the buyer later defaulted on the loan and the property was sold for $533,000, resulting in a loss of $694,500 to the bank.

Special Agents with the FBI in Los Angeles first began investigating Clark, Bishop, Serrano and others involved in the scheme in April 2008 after a woman contacted Bank of America to report that her identity had been stolen and used to apply for a $1 million home loan for property in Colorado. Bishop and Clark later pleaded guilty to their involvement in the conspiracy and agreed to cooperate with the government in its on-going investigation into Serrano and others at the company. Bishop and Clarke each pleaded guilty earlier this year pursuant to plea agreements that have been partially unsealed. According to Bishop’s plea agreement, between January 2008 and April 2008 – a time when the real estate market was in sharp decline – he processed 11 fraudulent loans worth $12,571,366 that were used to buy properties built by Serrano’s former company. According to Clark’s plea agreement, she prepared the fraudulent loan applications and submitted fictitious tax returns, W-2s and payroll stubs in support of the fraudulent loans. Clark further admitted that she used her two real estate companies, K&K Investments and Cardinal and Gold Investments, to secretly funnel kickbacks to the buyers.

Serrano agreed to plead guilty to one count of conspiracy, which carries a statutory maximum penalty of five years in federal prison. Serrano is scheduled to make his initial court appearance in United States District Court on December 14.

Clark pleaded guilty in January to 13 counts of bank fraud, which each carry a statutory maximum penalty of 30 years in federal prison. Bishop pleaded guilty in September to 11 counts of bank fraud. Clark and Bishop pleaded guilty before United States District Judge Christina A. Snyder.

The cases against Serrano, Clark and Bishop are part of an ongoing investigation being conducted by the Federal Bureau of Investigation’s Los Angeles and Colorado Field Offices.

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In the following press release Michael W. Reap, Acting United States Attorney for the Eastern District of Missouri announced that Susan Feaman, formerly of Perryville, Missouri, has pleaded guilty to charges of interstate transportation of stolen property and identity theft.

On March 6, 2006, a detective from the Perryville, Missouri, Police Department obtained a search warrant for the residence of Susan Feaman in Perryville. The warrant was based upon Feaman’s criminal conduct in using forged prescriptions to obtain controlled substance prescription drugs.  In executing the search warrant, officers seized materials relating to the forged prescription conduct, as well as materials reflecting Feaman’s use of her mother’s name and social security number. Her mother has lived in another state for many years.  In the time frame from October 1, 2005, to December 31, 2005, Feaman used the the name, social security number and credit worthiness of her mother to obtain a loan in the amount of  $145,000, to purchase the residence in Perryville, Missouri.  In addition to the residential loan, Feaman used her mother’s identification information to obtain credit cards and to make credit transactions with approximately twenty-five companies.  She made $271,000 in fraudulent credit purchases and other transactions in 2005 and 2006. 

As part of the investigation in this case, Feaman was prosecuted in Perry County on felony charges relating to the forged prescriptions.  She plead guilty and was sentenced to four years in the Missouri Department of Corrections.  She served that sentence and was paroled.

From April 1, 2009, through April 12, 2009, Feaman stole a series of Steuben Crystal glass figurines from the Sallie Home store in Ladue, Missouri, which she took to her home in Ellis Grove IL.  She sold some of the items on E-Bay and kept some others. The figurines had a value of $15,120.

SUSAN FEAMAN, presently residing in Ellis Grove, Illinois, pleaded guilty to one felony count of interstate transportation of stolen property and one felony count of identity theft.  She appeared before United States District Judge Donald J. Stohr.

She now faces a maximum penalty of ten years in prison and/or fines up to $250,000 for interstate transportation of stolen property and 15 years in prison and/or fines up to $250,000 for identity theft.  Sentencing has been set for February 5, 2010.

Reap commended the work performed on the case by the United States Secret Service, United States Postal Inspection Service, the Perryville and Ladue Police Departments and Assistant United States Attorney James E. Crowe, Jr., who is handling the case for the U.S. Attorney’s Office.

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