Houston Area Law Enforcement Going Undercover To Fight Mortgage Fraud

The division chief over major fraud in the Harris County, Texas District Attorney’s Office has announced that they are beginning to go undercover to infiltrate mortgage fraud groups to fight mortgage fraud. “If you are involved in this type of crime, you just might be dealing with a Houston police officer,” said division chief Lester Blizzard. One undercover bust, involving an investigation of a title closing agent, has recently been made. To read more, see Mortgage fraud: the new white-collar crime, reported by KHOU-TV Channel 11 at their website, KHOU.com.

Click here for KHOU-TV's video report on the new undercover investigations, by Jeff McShan.

For a recent undercover bust involving Boston police and federal investigators, see

• Bid to swindle ex-nun thwarted: Three nabbed in home scam, and
• More busts expected in identity theft, home-sale scam

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New York Lawyer Pleads Guilty To Stealing $20 Million From Clients, Banks

Pleasantville attorney Anthony Bellettieri pleaded guilty in a White Plains Federal Court to one count of bank fraud and one count of mail fraud. A plea agreement entered into with federal prosecutors calls for a likely sentencing range of 10 years and one month to 12 years and seven months. In addition, Bellettieri agreed to pay up to $22 million in restitution to those he bilked and forfeit the properties he purchased with the ill gotten gains. Reportedly, the stolen money was lavishly spent on vacation condos, home improvements, a family wedding, high salaries for his law firm's employees, and new cars. Sentencing is May 18. To read more, see:

• Pleasantville lawyer admits stealing $20 million, reported by The Journal News at thejournalnews.com, and
• Real Estate Lawyer Stole $20 Million for Wedding, Condos and Staff Salaries, reported by the Associated Press and appearing, among a slew of other places, at Law.com.
• The original Bellettieri charges filed by the U.S. Attorney

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Former NBA Great Mentioned In Atlanta Mortgage Fraud Trial

Former Atlanta Hawk great Dominique Wilkins has had his name thrown around in sworn testimony in the Atlanta Federal Court trial of Phillip E. Hill, Sr. and others involving an alleged "straw buyer" mortgage fraud flipping scam that has reportedly cost mortgage lenders tens of millions of dollars. To read more, see:

• NBA All-Star Weekend leads to break for NBA Great Caught Up in Mortgage Fraud Case, and
• Athletes caught up in mortgage fraud case (Two testify that deals with defendant Phil Hill cost a total of $350,000) (link no longer available)
• Federal Grand Jury Indictment (approx. 2 MB) (link no longer available)

Go here for other posts on the Phillip E. Hill property flipping operation.

"Straw Scams" Lure Home Sellers & Buyers

Home sellers can find themselves lured into a "cash back" mortgage fraud "straw scam" by an unethical "buying team" (comprised of an agent, a knowing straw buyer, loan officer, and appraiser) making "above asking price" purchase offers (see for example, "Cash Back" Mortgage Fraudsters Target Home Sellers In Weak Markets).

Home buyers can also get lured into this scam. Sometimes, the scam will involve identity theft (see for example, Two charged with identity theft), where a knowing "straw buyer," when applying for the mortgage loan, uses the stolen identity of someone else who ends up being an "unknowing buyer" (and who only finds out about his/her victimization after the transaction is funded). Other times, the buyer is simply duped into believing that they are making a "hassle-free" real estate investment (see for example, Dayton Area Task Force Fighting Flipping). At times, the buyer will purchase the property and be paid a "fee" after the transaction is funded (see for example, Guilty plea in mortgage scam, where "buyers" were offered $1,000 for each deal they participated in).

These are just some examples of how people can unwittingly find themselves involved in mortgage fraud scams.
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Five Reverse Mortgage Scams To Watch Out For

For those looking for a basic understanding of what to look out for when protecting yourself against a possible reverse mortgage scam, see Five Reverse Home Mortgage Scams To Watch Out For.

Go here for other posts on reverse mortgage problems. zebra
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Two Plead Guilty In Augusta Area "Cash Back" Fraud

Robert C. Thigpen and Erich J. Haskell pleaded guilty in an Augusta, Georgia Federal Court yesterday to a "cash back" scheme where HUD money was obtained and diverted to themselves and third party buyer Vance Johnson. The money was earmarked for repairs that were never done.

Reportedly, Augusta attorney William O. Key Jr. was in on the arrangement and served as the closing attorney on the fraudulent transactions. Mortgage fraud charges against him are currently pending.

To read more, see Two plead guilty to mortgage fraud, reported by The Augusta Chronicle.
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More On Minnesota "Cash Back" Fraud Investigation

This post follows up on the Minnesota mortgage fraud investigation referenced in my Tuesday post, Feds Probing "Cash Back" Scam Involving Over 60 Deals, involving closing agent Jill Lehn.

Reportedly, Ms. Lehn has written a four page article for the upcoming March issue of Minnesota Realtor magazine which details her misdeeds while working as a closing agent at First Advantage Title Company.

Lehn and co-defendant Isadore Stewart, a Bloomington real estate investor who has also pleaded guilty to one count of wire fraud in relation to three properties he purchased at inflated prices, are continuing their cooperation with the Internal Revenue Service in an ongoing investigation expected to net more arrests.

For more, see:

the St. Paul Pioneer Press report (at twincities.com)

Mortgage fraud's 'very hard lesson' (Jill Lehn pleaded guilty and lost her real estate license. Now she's sharing her story in a magazine article) (no longer available online).

and the Star Tribune story (at StarTribune.com)

Anatomy of a real estate fraud (A simple favor plus $3 million in fraud add up to regrets - and a pending prison sentence - for a former metro-area mortgage closer) (no longer available online).

California Home Equity Sales Contract Act - Articles & Cases

The Home Equity Sales Contract Act is the California statute (section 1695 of the California Civil Code) that regulates home sales contracts between home sellers facing foreclosure and their prospective buyers.

For two online articles that refer to this statute, see:

Seller in Default, Buyers Take Care, and
Preforeclosure Sales in California

In addition, for those of you who like reading court cases (available online courtesy of Findlaw.com), see:

Boquilon v. Beckwith, 49 Cal. App. 4th 1697; 57 Cal. Rptr. 2d 503; (Cal. App. Ct., 1st Dist., Div. 2, 1996)

• about a California real estate agent who violated this law. The case involved a husband and wife facing foreclosure who sought out a real estate agent to discuss a refinancing of the home. The agent convinced the homeowners to deed the property over to her, after which the agent refinanced the property, but paid no equity to the homeowners and eventually evicted them. The homeowner was awarded damages against the real estate agent of approximately $39,500. In addition, the court found the real estate agent liable for an additional $19,500 in attorney's fees to be paid to the homeowner's attorney.

In re Phelps (2001) 93 Cal.App.4th 451 , 113 Cal.Rptr.2d 217 (Cal. App. Ct., 4th Dist. Div. 2)

• about an individual who pleaded guilty to criminal violations of the Act. Subsequent thereto, the individual filed a petition for writ of habeas corpus. The court found that the individual's "[c]ounsel rendered constitutionally deficient assistance in advising, or permitting, him to plead guilty to violating the "Home Equity Sales Contracts" law." The appellate court granted the petition for writ of habeas corpus. The individual was permitted to withdraw his plea of guilty and the matter was sent back to the lower court for further proceedings.

Segura v. McBride (1992) 5 Cal.App.4th 1028 , 7 Cal.Rptr.2d 436 (Cal. App. Ct., 1st Dist. Div 4)

• a case which raised "first impression questions concerning the class of persons regulated pursuant to [the Home Equity Sales Contract Act], as well as the measure of damages available thereunder."

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North Carolina "Cash Back", "Straw Buyer" Scam Nets 2

Businessman James Thomas Davis was sentenced to 200 months in prison in Raleigh Federal Court on conspiracy and fraud charges for his role in a mortgage fraud where he would target builders who had new homes on the market and offer them more than the asking price for the homes. In exchange, the builders would allow Davis to keep the difference between the asking price and the inflated offer, according to investigators.

Mr. Davis was convicted after a jury trial. Residential home builder David Layton, who admitted to prosecutors to conspiring with Davis in using phony real estate closing documents in the sale of the homes, was reportedly sentenced to four months in prison.

The scheme:

• involved the use of "straw buyers" in consummating the bogus sales,
• recruited renters to live in the properties and pay rent under a "rent-to-own" arrangement, and
• used what essentially was a pyramid scheme by luring additional straw buyers and tenants to obtain new money to cover the cash shortfall between the monthly rents collected by the scammer and the higher house payments made to mortgage lenders.

To read more, see Two sentenced in mortgage fraud scheme, reported by The News & Observer, at newsobserver.com.

Go here for other posts on "rent to own" scams. rent to own lease purchase option scams zebra

Some NY Attorneys In Hot Water For Real Estate Related Fraud

Eight lawyers or former lawyers from the Lower Hudson Valley have been charged, pleaded guilty, sentenced, or investigated by state or federal prosecutors in the past two months, according to an article in The Journal News, reported at nynews.com.

Among the lawyers in hot water is Pleasantville attorney Anthony Bellettieri, who is currently under a federal investigation in the theft of more than $10 million from real estate escrow accounts of clients. Further, J.P. Morgan Chase has sued him and his firm in December, saying $17 million was stolen through a check-kiting scheme. The attorney representing Bellettieri's law partners - Robert Fonte and Tara Anne Laudonio - claims that his clients are also victims in the case.

For the full story, see Lots of lawyers are making headlines, but as defendants.

For other recent attorney related investigations for real estate fraud, see:

• Lawyer Nailed In Shady "Cash Back" Land Deal
• Theft Of Client Funds Concerns Connecticut Bar Association
• Massachusetts Cops Probe Attorney Involvement In Loan Scams
• Attorney Charged With Theft of 300K+ Home Sale Proceeds
• Westchester DA Nabs Attorneys For Alleged Theft Of "Home Sale Proceeds"
• FBI Investigate NY Attorney For Alleged $600,000+ Theft Of Home Sale Proceeds

For other stories involving real estate related fraud by attorneys and closing agents, see this collection of reports at The Mortgage Fraud Blog, presented by The Prieston Group.
Go here for stories on other alleged escrow agent mishandling of funds. sneaky slick escrow agents alpha

$29 Million In Bad Loans In Chicago "Straw Buyer" Scam; Ringleader, 3 Appraisers Plea Guilty

Mohammad "Mike" Taghie Kakvand pleaded guilty in Chicago Federal Court Monday to one count of wire fraud in a mortgage fraud scam where units in 33 Chicago apartment buildings were sold off as renovated condominiums at artificially inflated prices using "straw buyers" who ultimately defaulted on $29 million in loans. A sentencing agreement with prosecutors has yet to be worked out. Sentencing is scheduled for May 9.

Bogus appraisals misrepresented the condition of the units as being rehabilitated when, in fact, no renovation had ever taken place. Real estate appraisers Thomas M. Groh, Eric L. Dorsey and Britt J. Pierre, have already pleaded guilty for their roles in the operation.

A fifth individual, Syed Ali Mohammed Razvi, was also charged in the fraud and is currently on the lam.

In addition to mortgage lenders such as Washington Mutual and Wells Fargo, the scheme victimized the community by reportedly

• displacing renters,
• leaving decaying, crime-plagued buildings,
• increasing real estate taxes on surrounding property owners as a result of the artificial inflation of home prices, and
• decreasing the amount of available rental housing.

To read more, see Guilty plea in mortgage scam, reported by the Chicago Sun-Times at suntimes.com.
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Feds Probing "Cash Back" Scam Involving Over 60 Deals

Federal investigators in Minnesota are reviewing more than 60 real estate transactions handled by one former closing agent who, authorities say, prepared loan documents that overstated the purchase price of the properties, hid the overpayments from lenders, and allowed buyers to pocket the difference between the actual price paid and the inflated mortgage amounts (adding up to over $3 million).

The closing agent, Jill Lehn, who was the buyer in a half dozen of the transactions, will forego a criminal trial and instead, has pleaded guilty to one count of wire fraud and one count of money laundering in Minneapolis Federal Court. She is currently cooperating with investigators as the investigation continues while she awaits sentencing.

To read more, see the Star Tribune story, reported at StarTribune.com:

Mortgage scam nets $3 million
(A former Prior Lake closing agent has been charged in an investigation of 60 transactions with inflated purchase prices
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Federal Lawsuit Alleges Racketeering Conspiracy

Two Rialto residents have filed suit last week in a Riverside County, California Federal Court claiming that they have been defrauded of over $600,000 by an alleged racketeering conspiracy that is said to have cheated over 700 investors in multiple states, according to an article in The Press Enterprise, reported at PE.com.

The men who have been named as defendants in the suit include James Duncan, Maurice McLeod and Hendrix Montecastro, who are also defendants in a Riverside County Superior Court for their alleged roles in a related mortgage fraud scam affecting hundreds of Filipino investors in southwest Riverside County.

Temecula attorney Richard Ackerman represents the plaintiffs in both Riverside lawsuits, who said that, as of Monday, he had identified 867 victims.

For the whole story, see:

Investors file federal fraud lawsuit
(HUNDREDS AFFECTED: Two Rialto residents say they sustained losses of more than $600,000)

For earlier reports regarding the state court lawsuit, see these reports in The Californian / North County Times:

• Suit alleges massive mortgage scam
• Real-estate investors bought on faith
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Connecticut TV Station Finds Felon Originating Mortgages; State Caught With Pants Down

The WFSB-TV Channel 3 I-Team (Hartford, Connecticut) has found convicted felons originating mortgage loans in the state of Connecticut. They discovered that Kyle Gwynn, a registered felon in Florida, was working as a loan officer in Connecticut. Gwynn had pleaded guilty in Florida to stealing money from a former employer. Reportedly, Gwynn was hired as a loan officer in May 2005, but his registration application was not received for almost 18 months.

For the full story (including a link to the I-Team Video Report by Len Besthoff), reported by WFSB-TV Channel 3 on their website, see:

Conn. Blind To Loan Officers' Backgrounds
(Registered Felon Found Writing Loans)

Senator Troubled By Loan-Officer Registration
(Changes May Be Made To Process Of Registering Loan Officers)
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Michigan Federal Judge Orders Return Of Home By Foreclosure Rescue Operator

This post is a follow up on a prior post dated January 2, 2007 titled Foreclosure Rescue Operator Violates Federal Law, State Usury Law.

In an order and accompanying opinion dated this past Friday (2-9-07), a Michigan Federal judge has officially declared the foreclosure rescue arrangement at issue in the case an equitable mortgage, and has ordered the foreclosure rescue operator to reconvey the title to a house back to the homeowner (the original "rescue" transaction took place in June, 2003). In addition, the judge has ordered that the homeowner is:

• entitled to statutory damages of $2,000 for the rescue operator's failure to comply with the disclosure requirements of the Federal Truth In Lending Act ("TILA"),

• entitled to additional statutory damages of $2,000 for the rescue operator's failure to respond to the homeowner's notice of rescission, in violation of the TILA,

• entitled to a rent credit for $6,700 for rent payments paid to the rescue operator on the leaseback agreement for the period of time immediately after the "rescue" transaction was consummated and the time that the homeowner defaulted on the "leaseback",

• not liable for over $25,000 in "origination fees and other settlement charges" paid on his behalf when the sale leaseback arrangement was consummated.

Implicit in the court order is that the homeowner has obtained the benefit of an interest free loan on the money advanced by the "rescue" operator from the date the initial "foreclosure rescue, sale leaseback" was consummated ( June 11, 2003) until the date of the court order (February 9, 2007), a little over 3 1/2 years.

In addition, the court awarded the operator approximately $6,500 for amounts advanced for property taxes and insurance on behalf of the homeowner, and 7% interest on the equitable mortgage (commencing 2-9-07). The court has given the homeowner 90 days to satisfy the unpaid balance of the court-declared equitable mortgage (approximately $186,000), at which point the "rescue" operator will be free to foreclose on his equitable mortgage.

The amount of attorney's fees that the operator will have to pay to the homeowner's attorney as a result of its losing this case has yet to be determined by the court and, unless the parties reach a settlement on this issue, will be the subject of a future court order.

There is no indication in the record as yet as to whether the operator will appeal this decision.

For the court order and opinion, see

Moore - Summary Judgment Order

Moore - Summary Judgment Opinion

Click here for other Moore v. Cycon court documents in this case. equitable mortgage zebra

Equitable Mortgage Doctrine In Illinois (Updated)

For those readers interested in information on the equitable mortgage doctrine as applied in Illinois, see:

Equitable Mortgage Doctrine In Illinois - Part 1, and

Equitable Mortgage Doctrine In Illinois - Part 2. equitable mortgage zebra

One-Time Hero Sentenced In Mortgage Scam

On Wednesday, a Delaware Federal judge sentenced MacDonald P. Taylor to a year and a day in prison for his involvement in a mortgage fraud scam that allowed him and his family to live in several homes rent free for almost three years, according to an article reported on The News Journal's (Wilmington, Delaware) online presence, delawareonline.com. Mr. MacDonald agreed to plea guilty to five fraud counts (out of a ten count indictment) in lieu of going to trial.

Ten years ago in Philadelphia, Mr. MacDonald played a key role in the apprehension and conviction of a murder suspect who was sought in connection with the murder of a 16 year old Philadelphia police officer's son. This fact, along with medical issues, were cited by the judge in sentencing MacDonald to a term below that called for in Federal sentencing guidelines.

For the whole story, including details of MacDonald's heroics in the Philadelphia incident a decade ago, see

One-time hero to serve year in prison
(Man who helped put killers behind bars sentenced in NCCo homes fraud)

For links to the indictment and plea agreement, see Delaware man sentenced to a year and day in mortgage scheme on the Bankruptcy Fraud Resource Center blog.
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State Of Ohio Starts Foreclosure Rescue Fund

The State of Ohio has started a statewide "foreclosure rescue fund" for homeowners behind on their house payments. To find out more, listen to reporter Karen Kasler's reports at WKSU 89.7 radio, a service of Kent State University and Ohio Public Media.
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