Toledo Woman Charged in Home Loan-Modification Scheme 

A two-count criminal information was filed charging Toledo woman with participating a fraudulent home loan modification conspiracy, said Steven M. Dettelbach, United States Attorney for the Northern District of Ohio.

[FBI Press Release]

Constance Kanary, 52, was charged with one count of conspiracy to commit mail fraud and one count of mail fraud. Kanary operated a purported loan-modification operation called Making Home Affordable USA (MHAUSA) from March 2012 through April 2013. The business was primarily located at 120 10th Street in Toledo and used other names, including Federal Home Savings Solutions, National Mortgage Relief Center, and others, according to the information.

Kanary was a sales agent at the company. As part of her job, she contacted homeowners in need of loan modifications and encouraged them to participate in the company’s “Home Saver Program” in which they were told to stop paying their mortgages and instead pay a percentage to MHAUSA to demonstrate they could reliably make reduced monthly payments. The participants were also told there was a flat fee, between $495 and $795, for the service, according to the information.

Kanary deposited these monies into an account at Bank of America and spent the money on the scheme’s expenses and made cash withdrawals from the account, according to the information.

If convicted, the defendant’s sentence will be determined by the Court after reviewing factors unique to this case, including the defendant’s prior criminal record, if any, the defendant’s role in the offense and the characteristics of the violation. In all cases the sentence will not exceed the statutory maximum and in most cases it will be less than the maximum.

The investigating agency in this case is the Federal Bureau of Investigation, Toledo, Ohio. The case is being handled by Assistant United States Attorney Gene Crawford.

An information is only a charge and is not evidence of guilt. Defendants are entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.

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Former Realtor Pleads Guilty In Connection With Investment Fraud Scheme

Kenneth Manuel Martin, 66, formerly of Modesto, pleaded guilty to one count of wire fraud in connection with a Guatemalan real estate investment scheme, United States Attorney Benjamin B. Wagner announced in the following press release.

Between a date unknown and August 2008, Martin induced individuals to give him money by saying that he would cause the money to be used to fund mortgage loans to borrowers in Guatemala so borrowers could purchase homes in that country. Among several false representations, Martin represented that his company would provide a real estate attorney in Guatemala who would be able to protect investor funds and would hold a grant deed in favor of the investors secured by Guatemalan real estate. He also represented that his company would provide investors who invested in his Guatemalan real estate venture a high interest rate of return and consistent monthly interest payments. Martin provided investors with conflicting explanations concerning the lack of consistent interest payments and his failure to return the investment principal of investors who requested such a return. As a result of Martin’s conduct, investors lost approximately $258,000.

This case is the product of an investigation by the Federal Bureau of Investigation and the Social Security Administration, Office of Inspector General. Assistant United States Attorneys Henry Z. Carbajal III and Grant B. Rabenn are prosecuting the case.

Martin is scheduled to appear before Senior U.S. District Judge Anthony W. Ishii on July 21, 2015, for an evidentiary hearing on sentencing issues. The maximum statutory penalty for a violation of wire fraud is 20 years in prison. The actual sentence will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.


Two Defendants Plead Guilty in (another) Bakersfield Mortgage Fraud Scheme 

In the following press release from the FBI in Sacramento it was announced that Lucia Chavez, 37, and her husband Joseph Chavez, 41, both of Bakersfield, pleaded guilty today to conspiracy to commit bank fraud, mail fraud, and wire fraud, in connection with a mortgage fraud scheme in Bakersfield, U.S. Attorney Benjamin B. Wagner announced. As part of their plea agreements, Lucia Chavez agreed to a personal forfeiture money judgment of $1,624,450, and Joseph Chavez agreed to a personal forfeiture money judgment of $3,092,000.

According to court documents, Lucia Chavez and Joseph Chavez conspired with seven co-defendants from 2007 to 2010 to use straw buyers to purchase residential properties in Bakersfield developed by Pershing Partners LLC, owned by Lucia Chavez, and Jara Brothers Investments (JBI), owned by her brothers, co-defendants Eliseo Jara and Sergio Jara. The conspirators paid straw buyers to purchase the properties from JBI and Pershing Partners, and funded the purchases using loans they obtained for the straw buyers from lenders based on false and fraudulent loan applications. The loan applications the conspirators submitted to lenders frequently contained false statements concerning the straw buyers’ employment status, income, assets, intent to occupy the properties as their personal residences, and source of down payments for the purchase of the properties. The conspirators concealed from the lenders that they funded certain of the straw buyers’ down payments. The conspirators also submitted false supporting documentation to lenders such as false and altered bank account statements purporting to show that the straw buyers had high bank account balances, false verifications of the straw buyers’ bank account funds, false verifications of rent purporting to be from straw buyers’ landlords, false pay stubs, and false verifications of employment.

This case is the product of an investigation by the Internal Revenue Service—Criminal Investigation and the Federal Bureau of Investigation. Assistant U.S. Attorneys Kirk E. Sherriff, Henry Z. Carbajal III, and Megan A.S. Richards are prosecuting the case.

The court set a sentencing hearing for the Chavez defendants on July 20, 2015. The maximum sentence for the conspiracy charge is 30 years in prison and a $1 million fine. The actual sentence will be determined at the discretion of the court after consideration of any applicable statutory sentencing factors and the Federal Sentencing Guidelines, which take into account a number of variables.

The other seven co-defendants all previously pleaded guilty in this case. Co-defendant Antonio Perez-Marcial was sentenced on May 12, 2014 to three years and 10 months in prison for his role in the conspiracy. Co-defendants Eliseo Jara, Sergio Jara, Arlene Mojardin, and Candace Gonzales each pleaded guilty to conspiracy to commit bank fraud, mail fraud, and wire fraud, and are scheduled to be sentenced on the following dates: May 18, 2015 (Arlene Mojardin), June 8, 2015 (Candace Gonzales), and June 22, 2015 (Eliseo Jara and Sergio Jara). Co-defendant Melissa Jara pleaded guilty to wire fraud and is to be sentenced on June 22, 2015. Co-defendant Ricardo Salinas previously pleaded guilty to bank fraud, and his sentencing is set for June 29, 2015.

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Last Two Defendants Sentenced in Bakersfield Mortgage Fraud Scheme 

In the following press release from the FBI’s Sacramento office it was announced that Evelyn Brigget Sanchez, 32, and Darling Arlette Montalvo, 34, both of Bakersfield, were sentenced today to two years in prison each for their involvement in a mortgage fraud scheme that ran from October 2005 to May 2007, United States Attorney Benjamin B. Wagner announced. Sanchez and Montalvo were convicted at trial of conspiracy to commit mail fraud, wire fraud, and bank fraud. Sanchez was also convicted of 11 counts of mail fraud, and Montalvo was also convicted of 10 counts of mail fraud and one count of money laundering.

According to court documents, between October 2005 and May 2007, Sanchez and Montalvo conspired with co-defendants Eric Hernandez, Monica Hernandez, and Patricia King to defraud mortgage lenders by submitting false loan applications and fraudulent supporting documentation, causing the lenders to fund mortgage loans for the defendants’ benefit on the basis of false and misleading information. During this time, Eric Hernandez and Evelyn Sanchez were employed at mortgage brokerages in Bakersfield. The defendants submitted loan applications to lenders that included material misstatements concerning the borrowers’ income, assets, and employment, and false statements concerning the borrowers’ intent to reside in the properties as owner-occupiers, among other false statements. The defendants also fabricated false supporting documentation and submitted it to lenders in support of the loan applications.

The court also ordered the defendants to pay forfeiture money judgments to the United States in the amounts of $1,412,100 for Sanchez and $1,017,100 for Montalvo. The court set a further hearing on June 22, 2015 to determine the restitution amounts owed to victims of the crime.

Eric Hernandez, Monica Hernandez, and Patricia King previously pleaded guilty and were sentenced for their roles in the scheme. Eric Hernandez was sentenced on Sept. 16, 2013, to 10 years and 10 months in prison. King was sentenced on April 23, 2012, to three years and one month in prison. Monica Hernandez was sentenced on January 5, 2015, to one year in prison.

This case is the product of an investigation by the Internal Revenue Service – Criminal Investigation and the Federal Bureau of Investigation. Assistant U.S. Attorneys Kirk Sherriff and Henry Carbajal III prosecuted the case.


NJ man sentenced in Real Estate Investment scam

An Essex County, New Jersey, man was sentenced today to 135 months in prison for running a real estate investment scheme that bilked victims out of more than $5 million,U.S. Attorney Paul J. Fishman announced [in the following press release].

Abbe Edelman, 51, of Livingston, New Jersey, previously pleaded guilty before U.S. District Judge Susan Wigenton to an information charging him with one count of wire fraud. Judge Wigenton imposed the sentence today in Newark federal court.

According to documents filed in this case and statements made in court:
For roughly a decade, Edelman conducted an elaborate real estate investment fraud Ponzi scheme, duping victim-investors to provide him with money purportedly to buy and sell real estate and earn large returns on their investments. Beginning in 2004, Edelman operated through several companies alleged to be in the business of buying and selling real estate. Edelman told investors that he had significant past real estate experience, including a purported history of successfully buying and selling numerous bank foreclosed properties, and an MBA degree from NYU in real estate finance. Edelman claimed that he had longstanding relationships with banks that provided him with unique access to purchase foreclosed properties at below market prices and, in fact, already had negotiated with the banks to purchase certain properties at agreed-upon prices that would guarantee an easy resale and profit for investors.

Edelman promised investors that any investment would be used solely for the purchase, renovation or sale of specific investment properties in, among other places, New York, New Jersey, California, and Florida. Edelman told his investors that he could obtain extraordinary returns – as much as 25 percent – in as little as eight to 12 months. He purportedly told some victims that he had received from other investors, including professional athletes and celebrities, the majority of the capital needed to purchase the investment properties. He also said he had provided cash deposits to the financial institutions to secure the right to purchase the investment
properties and invested his own money in the deals.

In reality, neither Edelman nor any of his real estate companies had a history of purchasing any bank foreclosed properties. Edelman also did not possess even an undergraduate degree. He did not have any deals lined up involving any investment properties, did not have his own money invested in any such deals, and did not have any money from celebrity investors. Edelman induced investors to give him more than $5 million; none of it was used to fund any real estate acquisitions or renovations, but was instead diverted for his own use.

Edelman used his victims’ money for his home mortgage and day-to-day living expenses, such as restaurants, telephone, and gas bills. He purchased merchandise from high-end retailers, such as Gucci and Neiman Marcus, repaid existing investors in Ponzi-scheme fashion, and paid his legal expenses in connection with victims seeking repayment of their investment.

When investors later inquired about the status of their investments, Edelman offered additional misrepresentations, including emails sent from a fake email account that he had created, falsely assuring investors that he and his company had closed on the foreclosed properties, sometimes telling them buyers for the properties already had been identified.

In some cases, to allow the scheme to continue undetected, Edelman made “lulling” payments to investors, ranging from $100 to tens of thousands of dollars, to permit the scheme to continue. When payments were made to any investors, Edelman generally represented that the money was from the sale of investment properties, when, in fact, it came from a new investor.

In addition to the prison term, Judge Wigenton sentenced Edelman to serve three years of supervised release and pay $3,121,279 in restitution to his victims. Judge Wigenton also ordered a money judgment against Edelman in the amount of $3,121,279, representing the proceeds of Edelman’s fraudulent scheme, and forfeiture of Edelman’s interest in certain assets previously seized by the government, including approximately $79,000 and a 2014 Audi.

U.S. Attorney Fishman credited criminal investigators with the U.S. Attorney’s Office and postal inspectors of the U.S. Postal Inspection Service, under the direction of Postal Inspector in Charge Maria L. Kelokates, with the investigation leading to today’s sentencing.

The government is represented by Assistant U.S. Attorney Joseph B. Shumofsky of the Economic Crimes Unit.


Chicago area attorney sentenced for stealing over $2 million in client funds

In the following press release the FBI in Chicago announced that a suburban real estate attorney and radio talk show host was sentenced today to 70 months’ imprisonment for stealing approximately $2.34 million from her clients. The defendant, KATHLEEN NIEW, 59, of Burr Ridge, was also ordered to pay restitution of $2.34 million to the victims of her fraud and forfeit assets related to the crime. “The sentence must promote respect for the law … something has to be done when a case like this comes up.” U.S. District Court Judge Harry Leinenweber said in imposing the sentence. Judge Leinenweber also ordered three years of supervised release, and Niew is to report to the Federal Bureau of Prisons on April 14, 2015.

Kathleen Niew

Niew operated Niew Legal Partners, LLC, in Oak Brook. She was charged with 10 counts of wire fraud by a federal grand jury in August 2013 and pled in June 2014 to all counts of the indictment. She was disbarred in 2013.

According to court records, the victims, a husband and wife, who were Niew’s clients, transferred approximately $2.34 million into Niew’s attorney escrow account to be used for closings on commercial real estate transactions. Niew used the funds for her own benefit, contrary to the false representations she made to the couple. Without the victims’ knowledge, Niew used their funds to finance the purchases of various gold mining operations and not to purchase any commercial property for the victims as originally intended. Further, as part of the fraud scheme, Niew arranged to receive a 20 percent finder’s fee for herself from mining operation investments in exchange for providing approximately $1.5 million in funds that belonged to her clients.

At the sentencing hearing today, Judge Leinenweber also found Niew responsible for defrauding another client out of $500,000. Niew falsely told that victim that she needed to borrow $500,000 to help buy assets in her upcoming divorce proceeding. Niew, however, was not divorcing her husband, and she sent the victim’s funds to one of the same investment operations where she had sent previous victims’ money.

“Niew blatantly stole $2.8 million of her clients’ money, and then lied to cover up the scam. When confronted and caught, Niew undertook acts that can only be described as shocking for an attorney licensed by the bar—creating false cover-up documents, lying to her clients, and lying under oath (once again) to the ARDC,” argued Assistant United States Attorney Sunil Harjani in the government’s sentencing memorandum.

The sentence was announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Robert J. Holley, Special Agent-in-Charge of the Chicago office of the Federal Bureau of Investigation. The case was prosecuted by Assistant United States Attorneys Sunil Harjani and Andrew Boutros.

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Sacramento Man Sentenced to Two Years in Mortgage Fraud Conspiracy

In the following press release Benjamin B. Wagner, United States Attorney for the Eastern District of California, announced that Joshua Clymer, 28, of San Francisco, was sentenced today to two years in prison for conspiracy to commit mail and wire fraud in connection with a mortgage fraud scheme, announced. Clymer previously pleaded guilty pursuant to a plea agreement.

According to court documents and evidence presented at the trial of co-defendant Leonard Williams, from late 2006 into 2008, Clymer and Williams conspired to carry out a loan origination and property flipping mortgage fraud scheme using the companies Diamond Hill Financial and Bay Area Real Estate Holdings. To carry out the scheme, Clymer and Williams recruited underqualified buyers, including family and friends, to purchase homes with promises of cash back, no money down, and illusory equity in the homes. Clymer and others assisted these home buyers in securing loans with fraudulent loan applications that contained lies about the buyers’ employment, income, assets, and intent to occupy the homes as a primary residence. In most cases the loan applications falsely stated that the buyers worked at Diamond Hill Financial, a company associated with Clymer and Williams. Hundreds of thousands of dollars in home loans were issued as a result.  The profit to Clymer and Williams varied from $5,000 to over $30,000 per transaction, with the two of them often splitting the proceeds.

Clymer’s sentencing marks the last of 14 defendants to be sentenced for mortgage fraud offenses in connection with this and related cases.  Others who have already been convicted and sentenced include Garret Gililland (94 months), Leonard Williams (87 months), Niche Fortune (57 months), Kesha Haynie (46 months), Eric Clawson (37 months), Anthony Symmes (35 months), Carlos Chamorro (27 months), Shane Burreson (23 months), Christopher M. Chiavola (22 months), William E. Baker (18 months), Nicole Magpusao (535 days), Brandon Resendez (9 months), and Remy Heng (6 months home detention). Twelve of the defendants pleaded guilty, including Clymer.  Juries have convicted the two defendants who went to trial, Haynie and Clymer’s coconspirator Leonard Williams.

This case is the product of an investigation by the Federal Bureau of Investigation; the Internal Revenue Service, Criminal Investigation; and the Butte County District Attorney’s Office’s Major Crimes Unit. Assistant United States Attorneys Christopher S. Hales and Audrey B. Hemesath prosecuted the case.


Tycoon Owner Sentenced to Prison for Defrauding Mortgage Lenders and IRS

In the following press release Laura E. Duffy, United States Attorney for the Southern District of California announced that Grant McCollough, a real estate investor and owner of Tycoon Investments, along with his wife Marisa McCollough, a former Wells Fargo Bank employee, were sentenced today by U.S. District Judge Michael M. Anello for participating in a mortgage fraud conspiracy involving dozens of properties in Colorado and Maui, Hawaii.
Grant McCollough was sentenced to 10 months in custody; Marisa McCollough was sentenced to four months.  The court also ordered the couple to pay $25,746 in restitution to the IRS.
The McColloughs pleaded guilty on September 30, 2014, and admitted that as part of their conspiracy they recruited investors to act as “straw” buyers in real estate transactions.  The defendants then arranged for false information to be submitted to mortgage lenders in support of the straw buyers’ loan applications.  The McColloughs also fraudulently inflated the value of the homes and disguised the source of the down payments, in order to skim funds from the fraudulent transfer of property among their co-conspirators.  They then hid their skimmed profits from the Internal Revenue Service.
Nearly all of the fraudulent mortgages were arranged by coconspirator Donald Totten, a mortgage loan officer and broker operating from Rancho Santa Fe.  Totten was sentenced in October 2014 to 30 months in prison for his role in the scheme, which included mortgage fraud causing more than $20 million in losses to mortgage lenders, bankruptcy fraud, and filing a false tax return that failed to report more than $3 million in taxable income.  Totten operated the businesses “Money World” and “Integrated Home Loans,” and specialized in brokering a particularly toxic stated-income, stated-asset “negative amortization” loan product, which allowed borrowers to make monthly payments less than the interest charged over the same period and without paying down the principle balance, so that the monthly payments were low but the outstanding balance of the loan increased over time.
Grant McCollough was not the only principal of Tycoon Investments involved in the conspiracy.  McCollough’s business partner, Jason Kent, was also charged in the scheme.  On July 21, 2014, Kent pleaded guilty to wire fraud, and admitted assisting Totten, Grant McCollough, Marisa McCollough, and others with carrying out this mortgage and “kickback” scheme.  Kent’s case was transferred to the District of Hawaii and he is scheduled to be sentenced on February 26, 2015, before United States District Judge Leslie E. Kobayashi.
With Totten’s help, Marisa McCollough bought a $3.4 million oceanfront home in Lahaina, Hawaii.  In order to qualify, she falsely claimed that she earned $90,000 per month, had close to $700,000 in savings, and made a down payment of $630,000.  This was all false, and in fact Ms. McCollough did not contribute any of her own funds to the purchase.  The McColloughs lived in the home for several years, but never made the mortgage payments they owed.
According to court documents, many of the fraudulently-obtained mortgage loans subsequently defaulted, causing mortgage lenders and secondary purchasers, including Fannie Mae and Freddie Mac, to suffer significant losses as a result of the conspiracy.  Fannie Mae and Freddie Mac are government-sponsored enterprises with a mission to provide liquidity, stability, and affordability to the U.S. housing market.  Both enterprises assist mortgage lenders by purchasing the loans they originate, enabling the lenders to replenish their funds to finance additional mortgage loans for American homebuyers.  The statements borrowers make in loan applications are an important factor in Fannie Mae’s and Freddie Mac’s determination whether to purchase a mortgage loan.

DEFENDANTS                                      Case No. 14CR2787-MMA
Grant McCollough                Age: 38         Kearney, Nebraska
Marisa McCollough               Age: 36         Kearney, Nebraska
Conspiracy to commit wire fraud and defraud the United States, in violation of 18 U.S.C. § 371.
Maximum Penalties: 5 years’ imprisonment, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution.
DEFENDANT                                       Case No. 13CR2941-MMA
Donald Totten            Age: 58         Oakland, California
Conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349.
Maximum Penalties: 30 years’ imprisonment, $1,000,000 fine or twice the gain or loss resulting from the offense, $100 special assessment, restitution.
Filing a false tax return, in violation of 26 U.S.C. § 7206(1)
Maximum Penalties: 3 years’ imprisonment, $250,000 fine, $100 special assessment, restitution.
Bankruptcy fraud, in violation of 18 U.S.C. § 152
Maximum Penalties: 5 years’ imprisonment, $250,000 fine or twice the gain or loss resulting from the offense, $100 special assessment, restitution.
DEFENDANT                                       Case No. 14CR1667-MMA
Jason Kent                      Age: 37         Lahaina, HI
Wire fraud affecting a financial institution, in violation of 18 U.S.C. § 1343.
Maximum Penalties: 30 years’ imprisonment, $1,000,000 fine or twice the gain or loss resulting from the offense, $100 special assessment, restitution.
DEFENDANT                                       Case No. 13CR2772-MMA
Shellie Lockard          Age: 44         Ventura, CA
Conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349
Maximum Penalties: 30 years’ imprisonment, $1,000,000 fine or twice the gain or loss resulting from the offense, $100 special assessment, restitution.
Federal Bureau of Investigation
Federal Housing Finance Agency – Office of Inspector General
Internal Revenue Service, Criminal Investigation