Sunday, March 25, 2012

Use Of Novel Dual Criminal/Civil Prosecution Targeting Sale Leaseback-Peddling Racket Yields Guilty Pleas, Keeps Victims From Getting Boot From Homes

From the Office of the U.S. Attorney (Philadelphia, Pennsylvania):
  • Anthony J. DeMarco, III, 33, of Conshohocken, pleaded guilty [] to conspiracy and fraud charges in connection with a mortgage fraud scheme involving more than $30 million in loans. From 2006 through July 2009, DeMarco owned and operated DeMarco REI, Inc., a foreclosure rescue company.

  • A 15-count indictment charged DeMarco with conspiracy, mail fraud, wire fraud, bank fraud, and money laundering. Three others were charged in the conspiracy with him. Michael Richard Roberts, Sean Ryan McBride, and Eric Bascove previously pleaded guilty. DeMarco will be sentenced on June 27, 2012. He faces approximately 210 to 262 months in prison under sentencing guidelines.

  • DeMarco REI, Inc. was headquartered in Center City and employed Roberts and Bascove. DeMarco’s business claimed to be able to assist homeowners facing imminent foreclosure. Between June and December 2008, the defendants would scour public records filings to find homeowners in financial distress and pitch a “sale-leaseback” arrangement to them.

  • The pitch was that DeMarco REI would buy the homeowner’s house, the homeowner would remain in the house and pay rent to DeMarco REI, and when the homeowner got back on his or her feet financially, the homeowner could buy back the house. The defendants solicited straw buyers for properties, used fraudulent documents to obtain mortgage loans from lenders, stole the sellers’ equity in the homes at closing, and eventually failed to make the monthly mortgage payments. DeMarco used the sellers’ equity to run his company and to pay lavish personal expenses.

  • The houses went into foreclosure with the straw buyers listed on the mortgage, the original homeowners facing eviction from their own homes, and the mortgage lenders stuck with loans in default.

  • Only one couple ever acquired the means to repurchase their home but, after they wired approximately $245,000 to DeMarco at his direction and for that purpose, DeMarco instead used their money to purchase a Ferrari for himself and jewelry for his girlfriend, and to pay miscellaneous expenses.

  • McBride was a title agent and Chief Financial Officer at Settlement Engine, Inc. in Pittsburgh, Pennsylvania. Settlement Engine closed approximately 30 loans for DeMarco REI from June 2008 to early December 2008. McBride pleaded guilty to conspiracy, wire fraud, bank fraud, and faces a sentence of approximately 63 to 78 months in prison when sentenced on June 27, 2012; Roberts pleaded guilty to conspiracy, wire fraud, bank fraud and faces approximately 78 to 87 months in prison when sentenced on May 7, 2012; Bascove pleaded guilty to conspiracy and bank fraud and faces approximately 78 to 97 months in prison when sentenced on June 27, 2012.

  • At the time of indictment, the U.S. Attorney's Office Civil Division filed a verified complaint and temporary restraining order to help the original homeowners save their homes. The complaint and temporary restraining order sought novel relief that would bring all the individuals and entities that have a stake in the homes before the Court in an orderly process by which the damage caused by the defendants' alleged fraud could be mitigated.

  • In 2011, U.S. District Court Judge Michael Baylson approved conversion of the temporary restraining order into an injunction that stopped foreclosures and evictions that were related to the alleged fraud, and that set forth the details of the mediation process. Currently, the majority of the banks and the original homeowners are still in the process of attempting to reach resolutions.

For the U.S. Attorney press release, see Foreclosure Rescue Scammer Pleads Guilty.

For the charges brought by the Feds in this criminal/civil, 'dual' prosecution, see: