Sacramento Feds Get Guilty Pleas From Foreclosure Rescue Operator; Two Straw Borrowers

Christopher Craig, of Auburn, California, pleaded guilty in a Sacramento Federal Court last week to bank fraud relating to foreclosure rescue deals he entered into with a number of Sacramento-area homeowners facing foreclosure, according to a Sacarmento U.S. Attorney's Office Press Release. In addition, co-defendants Donald Edgecomb, of Trevor, Wisconsin, and Jacob Esteves, of Auburn, who allegedly acted as straw borrowers in the scam, also pleaded guilty today to misprision of a felony, admitting that they knew of Craig's felony bank fraud scheme and took affirmative steps to conceal the scheme from detection by law enforcement.

According to the Press Release, Craig admitted to a scheme in which he approached homeowners facing foreclosure, promised to loan them money, and instead, he created documents deeding away their homes. As part of the scheme, Edgecomb and Esteves acted as straw borrowers and applied for home equity loans from Washington Mutual Bank claiming falsely that they were the true owners of the properties and that there were no pending mortgages on the properties. Only part of the $1.2 million of fraudulently obtained proceeds was paid back; WaMu ultimately was stiffed on approximately $975,000.

The homes used in this scheme are located in Auburn, Lincoln, Stockton, Elk Grove, Sacramento and Manteca. Sentencing is scheduled for July 19, 2007. For more, see:

• U.S. Attorney's Press Release
• Indictment - U.S.A. vs. Christopher Craig, et al.
• Plea Agreement - U.S.A. vs. Craig (see pages 13-14)
• 'Foreclosure specialist' pleads guilty to fraud (Sacramento Business Journal)

Editor's Note

In reading over both the Indictment and the Craig Plea Agreement, it seems that, because the homeowners signed away their homes to the defendants without realizing they were doing so, the Government took the position that the homeowners (and not the defendants) were still the "true owners" of the homes when the defendants applied for the loans from Washington Mutual. Accordingly, when the defendants submitted the loan applications to WaMu holding themselves out as the "true owners" of the homes, that assertion was treated by the Government as a "false statement made on a loan or credit application" (even though legal title was signed over to the defendants at that point), and served as a partial basis for the criminal prosecution.

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California Foreclosure Rescue Operator Gets Five Years In Federal Prison

The Sacramento Business Journal reports that Christopher Craig, 35, of Auburn, California was sentenced in a Sacramento Federal Court yesterday to five years incarceration, followed by five years supervised release, and ordered to pay nearly $1 million in restitution. Craig pleaded guilty to fraudulently collecting $1.2 million in home equity loans from Washington Mutual Bank that were obtained in the course of an equity stripping, foreclosure rescue operation in which he bilked homeowners of their home equity and defrauded WaMu of almost $1 million.

The straw buyers who participated with Craig, Donald Edgecomb, 35 of Trevor, Wisconsin., and Jacob Esteves, 35 of Auburn, also pleaded guilty to misprision of a felony (failing to report a crime) and are scheduled for sentencing next month. For more, see 'Foreclosure help' leads to prison term.

For copy of grand jury charges, see Indictment - U.S.A. vs. Christopher Craig, et al. Go here for other posts on this story.

Go here for U.S. Attorney's Press Release - Man Who Posed As Foreclosure Specialist Sentenced To Over 5 Years In Federal Prison And Ordered To Pay Back Almost A Million Dollars.

Go here for other Criminal Prosecutions Of Foreclosure Rescue Operators.

Foreclosure Rescue - For Criminal Prosecutors Only

(original post 8-29-07)
For criminal prosecutors who are curious about what some of your colleagues are doing around the country in going after those engaged in fraudulent equity stripping arrangements that are typically structured as sale leaseback transactions, and are generally referred to as foreclosure rescue transactions, please feel free to look over the following summary of incidents that have resulted in criminal prosecutions:

1) The U.S. Attorney's Office in Tampa, Florida tried and convicted five individuals working together in foreclosure rescue scam stemming from a federal indictment alleging a scheme to cheat homeowners out of the equity in their homes and to defraud mortgage lenders. They were convicted of multiple counts of mail fraud, wire fraud, bank fraud, and false statements to a federally insured lender. It also obtained a guilty plea from a sixth member of the group. For more, see U.S. Attorney Press Release (3-29-07) - Tampa Federal Jury Convicts five Persons In Home Equity/Bank Fraud Scheme. For a copy of the grand jury indictment in this case, see Indictment - U.S. vs. Moumneh, et al.

2) The U.S. Attorney's Office in Los Angeles, California has obtained guilty pleas from four out of five members of a foreclosure rescue group that were accused of participating in a $12 million foreclosure rescue scam in which over 100 homeowners who were in default on their mortgages were promised refinancing, but ended up having their homes sold to others after the equity had been stripped. The fifth member of the group is currently awaiting trial (see 8-3-07 Findings & Order). The indictment reportedly alleged 19 counts of mail fraud and seven counts of aggravated identity theft. For more, see U.S. Attorney Press Release (7-20-06) - Three Defendants Added To Federal Indictment In Foreclosure Scam Targeting Homeowners In Default. See Stipulation To Continue Sentencing Hearing in connection with the four defendants pleading guilty - hearing set for December 17, 2007. For copy of plea agreement of one of the defendants, see Plea Agreement - U.S. v. Valenzuela.

3) The U.S. Attorney's Office in Sacramento, California obtained a guilty plea from a foreclosure rescue operator for bank fraud, and from two straw buyers for misprision of a felony in a scam where the operator admitted to a scheme in which he approached homeowners on the verge of having their homes foreclosed on by their mortgage lenders, promised to loan them money, and instead, he created documents deeding away their residential properties to the straw buyers who applied for financing from a mortgage lender, claiming falsely that they were the true owners of the properties and that there were no pending mortgages on the properties. For more, see U.S. Attorney Press Release (5-10-07) - Man Posing As Foreclosure Specialist Takes Advantage Of Homeowners To Rip Off Bank For Almost $1 Million. For a copy of the grand jury charges, see Indictment - U.S.A. vs. Christopher Craig, et al. For a copy of the plea agreement, see Plea Agreement - U.S.A. vs. Craig.

4) The U.S. Attorney's Office in Minneapolis, Minnesota obtained indictments of two individuals who were charged with one count of conspiracy, three counts of mail fraud, and one count of engaging in a financial transaction with criminally derived property. Among the allegations was a scheme to defraud homeowners who were either in foreclosure or behind on their mortgage payments. Specifically, they allegedly caused homeowners to refinance their homes and then stole some or all of the equity checks produced through the refinancing process. In some instances, the defendants also allegedly used physical intimidation to force homeowners to endorse equity checks over to them. The matter is currently being prosecuted. According to documents filed this month (August 2007), one of the defendants appears to have reached a resolution with prosecutors and a Change of Plea hearing has been scheduled on her behalf. For more, see U.S. Attorney Press Release (6-21-07) - Local Mortgage Broker and Assistant Indicted for Bilking Homeowners. For a copy of the grand jury charges, see Indictment - United States vs. Fiorito & Jerde.

5) For those prosecutors interested in a case where one of your colleagues successfully convicted a foreclosure rescue operator by first, proving that a foreclosure rescue, sale leaseback transaction should be recharacterized as a secured loan, and then proving that the "interest income" on the recharacterized loan exceeded the maximum amount of interest allowed by law, see Browner v. Dist. of Columbia, 549 A.2d 1107 (D.C. 1988). This case should be of some interest to those in states that have usury statutes. See also:

• Sale Leaseback Recharacterization As Loan Results In Criminal Conviction,
• Usurious Loans Masquerading As Sale Leasebacks?

6) See Criminal Prosecutions Of Foreclosure Rescue Operators for links to other cases involving your colleagues going after foreclosure rescue operators, including online media articles reporting on state court prosecutions.

Re: Metropolitan Money Store

In conclusion, I would be remiss if I didnt include a reference to a civil case currently being litigated in a Federal District Court in Maryland. The complaint, in which class action status is sought, reads a lot like a criminal indictment (ie. it uses words and phrases like, "illegal kickbacks and unearned fees", "false HUD-1s," "wire fraud" and "mail fraud", and that "the false HUD-1 Settlement statements were utilized to launder the money being paid to the RICO defendants for the purpose of evading taxes ..." etc.).

For a copy of the complaint, see Proctor, et al. v. Metropolitan Money Store, et al. - Case # 8:07-cv-01957-RWT (Does not include the 28 exhibits).

It can also be obtained by going here for direct links to the lawsuit (76 pages - $2.40) and the 28 accompanying exhibits (50+ pages - $.08/page) on the U.S. Courts' PACER website. PACER registration required.

In the alternative, you can drop me an e-mail at:

HomeEquityTheft@yahoo.com

and I'll e-mail the complaint to you (sorry, no exhibits - be sure to put "Metropolitan Money Store" in the "Subject" line of the e-mail).

Government Suits Targeting Banksters' Recording Fee Dodge Begin To Attract Interest, Gain Traction

Bloomberg reports:

• Bank of America Corp. is among a group of lenders that may face a wave of new lawsuits claiming cash-strapped counties were cheated out of millions of dollars by a system used for more than a decade to register mortgages.



• Dallas County District Attorney Craig Watkins said state attorneys general and county officials across the U.S. have expressed interest in his lawsuit against Mortgage Electronic Registration Systems Inc. and Bank of America, filed in Texas state court on Sept. 21. Dallas County could be owed as much as $100 million in filing fees, he said.(1)



• “This is a big new front,” said Christopher L. Peterson, associate dean and professor at the University of Utah S.J. Quinney College of Law. “This case is scary because if Dallas wins then there are a lot of other counties around the country that are going to follow.”

***

• Dallas County called that crisis “a direct result of the financial system’s commoditization, packaging, securitization and sale of tens of millions of mortgages throughout the U.S.,” according to the complaint. “Without the fiction of the MERS system, these activities would not have been possible.”

For more, see BofA Case May Be Followed by More Mortgage Suits by Counties.

(1) See also:

• Dallas Observer: Craig Watkins Makes Good on Threat to Sue Mortgage Processor Over "Tens of Millions",
• Reality Check: Dallas County, Texas Sues BofA through MERS for over $2.8 billion,
• For the lawsuit, Dallas County, Texas v. Merscorp Inc., et al.

NJ AG Sends Fair Housing Testers To Sting Landlord Of 17-Unit Building, Tagging Him With Discrimination Suit After Receiving Complaint From Prospective Tenant (Who Wore Islamic Head Covering) Alleging He Told Her "I Don't Rent To Muslims"

In Elizabeth, New Jersey, nj.com reports:

• When Fatma Farghaly responded to a Craigslist ad for a one-bedroom apartment in Elizabeth, authorities say, she was told to come check it out.
  
  But when she arrived the next day wearing a khimar, a Muslim head covering, the landlord allegedly told her: "I don't rent to Muslims."
  
  Now the landlord, William Greda, faces a five-count complaint from the state Division on Civil Rights, which says it sent its own investigators to the Maple Garden apartment complex and substantiated Farghaly's claims.
  
  ***
  Attorney General Christopher Porrino called Greda's behavior "blatantly bias-driven and unacceptable under both state and federal law."
  
  He said the division sent two groups of "testers" to the complex after receiving Farghaly's complaint. The first group consisted of a man and a woman wearing a head scarf, who inquired about a listed apartment using a Muslim-sounding name.
  
  According to the complaint, Greda told the female applicant the basement apartment she was interested in was "not good for you."
  
  The second pair did not present themselves as Muslim, according to the complaint, and Greda did not discourage them from renting the apartment.
  
  During their investigation, authorities say Greda and his wife "made several unsupported claims" about why they refused an apartment to Farghaly.
  
  The couple said Farghaly told them she planned to house five people – three adults and two children – inside the one-bedroom apartment, according to the complaint. But authorities said Farghaly has no children and planned on living in the apartment alone.
  
  Civil Rights Director Craig Sashihara said [] that owners of single- or double-family dwellings can refuse to rent to anyone if they live in the building, but large rental complexes are subject to the fair housing laws.
  
  The complaint, filed in state Superior Court in Union County, accuses Greda of violating the state's Law Against Discrimination by refusing to rent to a tenant because of her religion and making discriminatory statements about her religion and gender.

For the story, see N.J. landlord told woman: 'I don't rent to Muslims,' AG says.

For the New Jersey Attorney General press release, see Attorney General, Division on Civil Rights Announce Superior Court Complaint Against Landlord for Rejecting Muslim Apartment Seeker (Landlord Accused of Telling Woman Wearing Khimar: ‘I Don’t Rent to Muslims’):

• The complaint’s fifth count charges that Greda unlawfully transferred ownership of the rental complex he and his wife co-owned in order to hinder, delay or defraud the State. Specifically, the complaint charges that Greda created a corporate entity called Maple Garden LLC, then transferred ownership of the complex – for $1 – to that entity in April 2016 despite an awareness of the Division on Civil Rights’ investigation.

Sticky-Fingered Attorney Gets 11 1/2 To 23 Months Jail Time After Coming Clean To Pilfering Over $96.5K From Clients

In Montgomery County, Pennslyvania, The Times Herald reports:

• An apologetic former Norristown lawyer admitted to stealing more than $90,000 from clients and faces time behind bars for his conduct.
  
  Craig Kellerman, 57, who once had a law office in the first block of East Marshall Street, was sentenced in Montgomery County Court on Tuesday [May 2] to 11 ½ to 23 months in the county jail after he pleaded guilty to two felony counts of theft by failure to make required disposition of funds received in connection with incidents that occurred between 2015 and 2016.
  
  Judge Gary S. Silow, who accepted a plea agreement in the matter, also ordered Kellerman to complete five years’ probation following parole, meaning Kellerman will be under court supervision for about seven years. The judge ordered Kellerman to pay a total of $96,500 in restitution in connection with the case.
  
  As he learned his fate, Kellerman, who is widely known in Montgomery County legal circles, apologized for his conduct but did not offer a reason for the thefts. Kellerman, who was represented by defense lawyer Keith Harbison, declined to comment further as he was escorted from the courtroom by sheriff’s deputies on his way to complete his jail term.
  
  With the charges, prosecutors alleged Kellerman pocketed $40,000 that a client he represented in a criminal matter had turned over to him and which Kellerman was supposed to put toward the client’s restitution in the criminal case. Additionally, Kellerman pocketed more than $50,000 that was part of a settlement awarded to a client he represented in a civil matter, according to prosecutors.
  
  “Mr. Kellerman kept the money and used it for his own benefit,” said county Assistant District Attorney Christopher Daniels, who sought jail time against Kellerman.
  
  “Mr. Kellerman was a respected, long-time lawyer in Norristown and all lawyers, prosecutors, defense attorneys, all of us, we all take oaths and we all have duties to our clients and Mr. Kellerman violated those duties here,” Daniels said.
  
  Kellerman’s conviction will be reported to the Disciplinary Board of the Pennsylvania Supreme Court and he potentially faces being disbarred for his conduct. Currently, Kellerman’s law license is under temporary suspension, officials said.
  
  An investigation began in July 2016 when the client Kellerman represented in a criminal matter reported to Norristown police that he had given $40,000 to Kellerman that was supposed to be held in escrow for future payment of restitution but which was spent by Kellerman, according to a criminal complaint.
  
  Investigators later became aware of the additional civil client who was “defrauded” by Kellerman, according to the arrest affidavit filed by Norristown Detective Corporal Nicholas Dumas.
  
  Kellerman has been in jail since Dec. 15, 2016, and will receive credit for that time served, according to the plea agreement.

Source: Norristown lawyer jailed for stealing $96K from clients.

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(1) The Pennsylvania Lawyers Fund for Client Security was established by the Supreme Court of Pennsylvania in 1982 to reimburse clients (at least partially, if not fully) who have suffered a loss as a result of a misappropriation of funds by their Pennsylvania attorney.

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (February 2017) (includes Canadian recovery funds, courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

Maps available courtesy of The National Client Protection Organization, Inc.

Justice Department Obtains Guilty Pleas In Cross Burning Incidents; Race-Based Harassment, Intimidation Used To Drive Families From Homes, Say Feds

In two separate incidents, the U.S. Department of Justice recently announced:
.
#1: Two Indiana Men Plead Guilty to Cross Burning:

• Richard LaShure, 41, and Aaron Latham, 20, both of Muncie, Ind., pleaded guilty to conspiring to violate the civil rights of an African American family and to interfering with their housing rights by burning a cross in the family’s yard. According to the charging document, on July 25, 2008, the two men, acting with the assistance of a third participant, built a cross and poured gasoline on it, then set it on fire in the yard of an African-American family who lived in the neighborhood. They will be sentenced on Nov. 5, 2009.

• This is the second case in two years in which the Civil Rights Division has brought charges for a cross burning that occurred in Muncie, Ind. Two men were convicted in 2008 for burning a cross at the home of a woman who had biracial children. "These two men used a despicable and unmistakable symbol of hatred, the burning cross, to intimidate a family because they are African American," said Loretta King, Acting Assistant Attorney General for the Civil Rights Division. "The Civil Rights Division will continue to prosecute this type of illegal, hateful behavior to the fullest extent of the law."

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#2: Four Arkansas Men Convicted of Civil Rights Charges in Cross Burning Conspiracy:

• The Justice Department announced that Jacob A. Wingo, Richard W. Robbins, Clayton D. Morrison and Darren E. McKim pleaded guilty [...] to conspiring to drive a woman and her children from their home in Donaldson, Ark., because they associated with African Americans. A fifth defendant, Dustin Nix, 21, pleaded guilty to similar charges in July 2009.

• All defendants pleaded guilty in federal court in Hot Springs, Ark., to civil rights charges and charges of making a false statement to a federal law enforcement officer. Each admitted and pleaded guilty to a felony civil rights charge for conspiring with each other to force a woman and her young children from their home by threats and intimidation because she associated with African Americans. Wingo and Morrison also pleaded guilty to an additional civil rights charge related to their direct involvement in an attempt to burn a cross at the victims’ home to intimidate the victims into leaving. All four defendants also pleaded guilty to a related charge of lying to agents of the FBI in an attempt to cover their conduct.(1)

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(1) In other related press releases from the U.S. Justice Department in connection with those charged with the use of fire to interfere with housing rights of others, a felony:

• (4-27-2009) Anderson County Man Indicted for Cross-Burning: Steven D. Archer, 49, Heiskell, Tennessee, has been indicted by a federal grand jury on charges of willfully interfering with a couple's federal housing rights because of their race by burning a wooden cross, in violation of Title 42, U.S. Code § 3631(a), outside the residence in Anderson County that the victims were occupying.

• (11-26-2008) West Virginia Man Indicted on Federal Civil Rights Charges for Allegedly Burning a Home: Daryl Lee Fierce, 69, of Charleston, W.Va., was indicted by a federal grand jury for using fire to intimidate and interfere with a person’s housing rights because African-American and biracial individuals visited the person in her home.

• (11-21-2008) Rutherford County Man Sentenced In U.S. District Court In Asheville In Connection With Cross Burning Incident (Defendant to Serve More Than Two Years in Federal Prison): Curtis Gene Worley, 51, of Spindale, North Carolina, was sentenced Wednesday to serve 28 months in federal prison, followed by two years of supervised release. Worley was indicted in October 2007 on one count alleging use of fire to injure, intimidate, and interfere with rights to occupy a dwelling because of race or color. According to information presented in open court during the hearings, Worley built and burned a cross on or near the property occupied by his neighbor, an adult African American female. See also: (10-25-2007) North Carolina Man Indicted In Cross-Burning Case: The indictment charged that Worley used a burning cross to intimidate and interfere with an African-American family because of race and because the family was occupying a dwelling. The indictment charges that Worley violated Title 42, U.S. Code § 3631(a), which provides criminal penalties for interference with the rights of citizens under the Fair Housing Act. Since 2001 and up through and including this prosecution, the Civil Rights Division brought 41 cross-burning prosecutions and convicted 60 defendants for these crimes.
  (6-6-2008) Muncie, Indiana, Man Sentenced to 121 Months in Cross Burning Case: Kyle Milbourn of Muncie, Ind., was sentenced by a federal judge [...] for a hate crime stemming from a cross burning last year that was directed at a woman and her three biracial children. Milbourn was convicted by a jury of one count of interfering with the housing rights of another person; one count of conspiring to interfere with civil rights; one count of using fire during the commission of a felony; and one count of tampering with a witness.

• (4-23-2007) Two Men Plead Guilty In Lassen County Cross Burning: Kevin William Ridenour, 21, and Nicholas Edward Craig, 18, both of Westwood, California, each pleaded guilty in Sacramento to interference with housing rights, a felony. The crime relates to the burning of a cross outside the rectory of a Catholic church in Westport, California. The Priest who resides in the rectory is from Rwanda, central Africa, and was assigned to Westport by the Catholic Archdiocese of Sacramento in October, 2006. The defendants admitted that they did so in order to threaten and intimidate the Priest because of his race, and the fact that he was occupying the rectory building. They also admitted that, while building the cross, they discussed the fact that the "KKK" had used burning crosses to intimidate black persons.

• (1-31-2007) Florida Man Sentenced in Cross Burning: Neal Chapman Coombs, a 50-year-old resident of Hastings, Fla., was sentenced to 14 months in prison, to be followed by three years of supervised release. Coombs pleaded guilty to a racially-motivated civil rights crime involving a cross burning. Coombs was charged with knowingly and willfully intimidating an African-American family that was negotiating for the purchase of a house in Hastings, Fla., by threat of force and the use of fire. Specifically, it was alleged that Coombs’ actions were motivated by the family’s race and that he burned a cross on property adjacent to the house. According to the press release, the plea agreement indicatedt that Coombs, who is Caucasian, made a remark about having a “house-warming,” and also made derogatory remarks about the visiting family.

• (9-26-2006): Federal Jury Convicts Two for Cross Burning: A federal jury convicted Christopher Mitchell and James Bradley Weems of burning a cross in front of the home of an African-American man in Fouke, Ark. The jury convicted each defendant of one count of conspiracy to violate the victim’s civil rights. The evidence at trial established that Mitchell and Weems, attended a party where they discussed an African-American man who lived nearby, using racial slurs to describe him. The defendants, along with a third man, Christopher Baird, who had pleaded guilty to his role in the offense, used wooden boards to erect a cross. The defendants then planted the cross near the home of the African-American man and lit it on fire. Witnesses testified that as a result of the cross burning, the African-American victim and the family he lived with all moved from their home because they were too frightened to remain in the town.

• (9-2-2004) Two Men Plead Guilty In Kentucky Cross Burning Case: Matthew Scudder, of Florence, Kentucky, who was 18 at the time the crime was committed, and James Foster, of Independence, Kentucky, who was 19, admitted to conspiring to threaten and intimidate an African-American couple and their two children in order to drive them from their Burlington home. Scudder admitted that on July 2, 2004 he burned a wooden cross on the family's lawn. Foster admitted that he helped carry out the plan.

• (6-15-2004) Indianapolis Man Sentenced For Cross Burning: The Justice Department announced the sentencing of Jerry Dean Landis, of Indianapolis, Indiana, to 18 months in prison for his role in a July 2000 cross burning. Landis participated in the building and burning of a cross in the front yard of an African-American family in Indianapolis. Landis admitted that he and his associates took part in the cross burning in order to “send a message” to the family. Since 2001 and up through and including this 2004 prosecution, the Department prosecuted 29 cross burning cases, filing criminal civil rights charges against 46 defendants.

• (2-9-2004) Macomb, Illinois Man Sentenced For Cross Burning Targeting Interracial Couple: Charles Lambert was sentenced to thirty-seven months in prison for his role in a July 2001 cross burning targeting an interracial couple. Forest Hatley, a co-defendant in this case, was previously sentenced to forty-one months imprisonment and three years of supervised release. Lambert and Hatley each admitted that they agreed to burn a cross at a home in Macomb, Illinois where an interracial couple lived. The defendants constructed a cross and doused it with gasoline. The two men then transported the cross to the victims’ yard, planted it in front of the home and ignited it. Lambert and Hatley also admitted this action was taken to intimidate the couple because of the male’s race and because he was living with a person of another race.

• (1-29-2004) Georgia Man Sentenced For Cross Burning In Moultrie: The Justice Department announced the sentencing of Moultrie, Georgia resident Michael Craig Jordan for his role in an April 2002 cross-burning. Jordan pled guilty to criminal civil rights violations in November 2003. He admitted to participating in the April 2002 burning of a wooden cross with the purpose of preventing a biracial African-American and Hispanic couple - as well as their two young children - from moving into the house next door.