7 indicted in Ohio mortgage fraud allegations

In a press release Gregory A. White, United States Attorney for the Northern District of Ohio, announced that a grand jury sitting in Cleveland, Ohio, returned an eleven-count superseding indictment against Darryl G. Moore, Leon S. Heard and Steven I. Helfgott, charging them with one count of conspiracy to commit mail fraud, wire fraud, and securities fraud; one count of securities fraud; one count of wire fraud; one count of money laundering; and one count of conspiracy to commit money laundering resulting from defrauding investors in an extensive “Ponzi” scheme. Moore and Heard, along with Mark C. Olds, Robert E. McNair, Avis D. Scott, Lee A. Granger, and Craig M. Duncan were also charged with a conspiracy to commit mortgage fraud, wire fraud, and interstate transportation of stolen property (ITSP) in connection with a scheme to defraud mortgage companies. Heard is also charged with bank fraud in connection with his false application and statements in obtaining his residence in Richmond Heights, Ohio.

Moore, age 41, lives at 6990 Woodlands Lane, Solon, Ohio; Heard, age 72, resides at 5214 Dickens Drive, Cleveland, Ohio; Helfgott, age 54, resides at 2982 Croydon Road, Cleveland, Ohio; Duncan, age 58, resides at 1907 Knowles Ave., East Cleveland, Ohio; Scott, 48, resides at 21507 Halworth, Beachwood, Ohio. Olds was previously convicted and was sentenced yesterday in a separate case to 92 months imprisonment in connection with a fraud committed against the Ohio Department of Education and the Internal Revenue Service.

The information in relation to the investment scheme has been removed but can be seen in the press release below.

Heard, Moore, McNair, Olds, Scott, Duncan and Granger were charged in a mortgage fraud conspiracy that enabled Moore, who had poor credit, to fraudulently sell his foreclosed residence at 6235 Arbor Glen, Solon, Ohio, and fraudulently purchase a more expensive residence at 6990 Woodlands Lane, Solon, Ohio. This conspiracy also enabled Olds, who also had poor credit, to obtain an interest in the Arbor Glen property through a nominee, and allowed all the defendants to enrich themselves. The indictment charged that McNair was a mortgage broker at Global Mortgage Co., 5311 Northfield Road, Bedford Hts., Ohio, and that Scott was a real estate agent with Realty One in Pepper Pike, Ohio, and that Scott and Duncan were both employed by the Cuyahoga County Auditor’s Office. The indictment charged that Moore, in an effort to move out of his residence at Arbor Glen, sought a straw buyer with good credit to purchase his residence. In order to prevent the filing of additional liens against the Arbor Glen property, Moore and Heard filed a deed on the Arbor Glen property which purported to transfer the title to Moore’s girlfriend. Heard prepared this deed even thought he was a disbarred attorney and not licensed to practice law.

Moore, McNair, Scott, and Olds arranged to bring in Granger as a straw buyer to purportedly purchase the Arbor Glen property. Granger had good credit but little in the way of assets or income, and in fact worked in a donut shop. Olds agreed to pay Granger $20,000 to complete the paperwork to purchase the Arbor Glen property. Moore set the sale price for Arbor Glen property at $545,000 so as to cover his mortgage and to take additional money from this transaction. In order to qualify for a 100 percent loan, and in order to finance that entire amount, Moore, McNair, Scott, Granger, and Olds falsified information as to Granger’s employment, income, and assets.

As a result of this false information, the mortgage company approved Granger’s loan for $545,000 to purchase the Arbor Glen property. These funds were wire transferred from the lender’s bank account in New York, New York, to the title company’s account at National City Bank, Cleveland, Ohio.

Simultaneous to the sale of the Arbor Glen property, Moore sought to purchase a more expensive residence at 6990 Woodlands Lane, Solon, Ohio. Moore offered to pay $725,000 for this property, well above the listed price of $647,500, so as to take additional money from this transaction when Moore was able to finance the purchase price. Moore had a poor credit history, so he and Scott sought out a straw buyer with good credit to purchase this property for Moore. Moore and Scott brought in Duncan to the offices of McNair so that Duncan could secure a loan for 100 percent value of the property. Moore and McNair falsified loan documents to inflate Duncan’s income, assets, and length of employment. The defendant Moore paid Duncan $15,000 to complete this paperwork. The lending company approved Duncan’s loans for $725,000 and wire transferring these funds from New York, New York, to Cleveland, Ohio. Moore directed $69,000 of the proceeds of his loan to purchase the Woodlands Lane property, through Duncan, to Olds so that Olds could make payments on the Arbor Glen property. Moore used the additional funds he received for the Woodlands Lane property to make his loan payments on that property.

The defendant Heard was separately charged with bank fraud in obtaining a mortgage loan to purchase his residence at 5214 Dickens Drive, Richmond Heights, Ohio, by submitting false employment and asset information to the bank.

This case was investigated by the Cleveland Field Offices of the Federal Bureau of Investigation, the United States Postal Inspection Service, the Internal Revenue Service, Criminal Investigation Division, and is being prosecuted by Assistant United States Attorneys Robert J. Patton and Christian H. Stickan.

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


Press Release


Four more indicted in Los Angeles mortgage fraud case

In the following press release George S. Cardona, United States Attorney for the Central District of California announced that two real estate agents, as well as two state-licensed real estate appraisers, were indicted this morning by a federal grand jury for allegedly participating in a massive mortgage fraud scam that caused more than $40 million in losses to federally insured banks.

An 85-page indictment returned this morning by a federal grand jury in Los Angeles charges Joseph Babajian, [ed. note - Joseph Babajian was acquitted by a jury on August 10, 2009] 54, of West Los Angeles; Kyle Grasso, 36, of Santa Monica; Lila Rizk, 40, of Trabuco Canyon; and Scott Robinson, 44, of Dana Point.

During the alleged scheme, Babajian and Grasso worked at, and were part owners of, Prudential California Realty. Rizk and Robinson were appraisers licensed by the State of California. All four defendants were charged with conspiracy, bank fraud, and loan fraud. Additionally, Babajian and Grasso were charged with money laundering.

According to the 35-count indictment, the defendants and others previously charged in the case were involved in a wide-ranging and sophisticated conspiracy to defraud mortgage lenders by obtaining inflated mortgage loans on homes in some of California’s most expensive neighborhoods, including Beverly Hills, Bel Air, Holmby Hills and Malibu. Among those previously charged in the case are:

Charles Elliott Fitzgerald , 47, of Newbury Park;
Mark Alan Abrams , 45, of Los Angeles;
Nicole LaViolette , 37, of Palm Springs;
Jamieson Matykowski , 33, of Laguna Niguel;
Timothy Holland , 35, of Santa Ana.

Fitzgerald, who is in custody, is scheduled to go on trial on November 13 on a host of federal charges related to the alleged scheme. The other four have pleaded guilty to charges related to the scheme and are pending sentencing.

The indictment charges that the defendants and the previously-charged conspirators sent false documentation, including bogus purchase contracts and appraisals, to the victim banks to deceive them into unwittingly funding mortgage loans that were hundreds of thousands of dollars higher than the homes actually cost.

According to the indictment, the alleged scheme was executed through a series of acts:

• Grasso, Fitzgerald and Abrams bought homes at their true market values, requiring the original sellers and their real estate agents to keep the true prices confidential;

• Grasso, Fitzgerald, Abrams and others fabricated inflated purchase contracts to make it look like they were buying the homes for hundreds of thousands – or even millions – of dollars more than their true prices:

• Rizk and Robinson inflated appraisals of the homes to justify the inflated prices:

• schemers sent false loan application packages – many in the names of “straw borrowers” – to victim banks at the inflated prices; and

• In-house escrow companies were used to conceal the true prices of the homes and distribute the excess loan proceeds received from the victim banks.

After purchasing the homes at their lower, true market values, many of the homes were “flipped” by the conspirators, meaning that after they bought homes they staged second sales at inflated prices that were reported to the victim banks to justify the inflated loans. According to the indictment, Lehman Brothers Bank alone was deceived into funding more than 80 such inflated loans from 2000 into 2003, resulting in tens of millions of dollars in losses.

The indictment details the purchase of a Beverly Hills home by Fitzgerald and Abrams in 2000 for $2 million, which they reported to a victim bank as $4.395 million after Rizk and Robinson supplied inflated appraisals. Babajian and Grasso, who had the listing of the home, manipulated the Multiple Listing Service database to falsely report that it was listed and sold at $4.495 million. A bogus loan application package went to Lehman Brothers Bank in the name of a straw borrower, and the bank unwittingly funded a loan of more than $2.8 million on the property – more than $800,000 more than the true $2 million purchase price. The conspirators split the excess loan proceeds from the fraud, including more than $46,000 in commissions to Babajian and Grasso.

The indictment returned today alleges that Babajian and Grasso profited by collecting hundreds of thousands of dollars in commissions and concealed payments. Rizk and Robinson allegedly profited by collecting hundreds of thousands of dollars in inflated appraisal fees.

Lehman Brothers Bank sued Babajian, Grasso, Rizk, Robinson, and others in federal court in Los Angeles in 2003. The federal court appointed David J. Pasternak as receiver to recover assets acquired with proceeds of the fraud. The receiver, as well as his attorneys and forensic accountants, have cooperated extensively with the government’s ongoing criminal investigation.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty.

The charges in the indictment are part of an ongoing investigation being conducted by the Federal Bureau of Investigation and IRS-Criminal Investigation Division.

Press Release
Indictment - to follow


Two arrested in New York real estate investment scheme allegations

In the following press release MICHAEL J. GARCIA, United States Attorney for the Southern District of New York, and MARK J. MERSHON, Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced today the arrests of Michael Hershkowitz and Ivy Woolf-Turk in connection with an elaborate scheme to defraud approximately 70 individuals of over $27 million. As alleged in the Complaint filed in Manhattan federal court:

HERSHKOWITZ and WOOLF-TURK, working through a Manhattan real estate development company, The Kingsland Group, Inc., and related entities (collectively, “The Kingsland Group”), fraudulently induced approximately 70 individuals (the “Investor Victims”) to loan them, in the aggregate, over $27 million, purportedly to fund the renovation of approximately sixteen multi-family apartment buildings located in upper Manhattan.

As part of the fraud, HERSHKOWITZ and WOOLF-TURK falsely represented that the Investor Victims would hold, as collateral for the loans, interests in bona fide first mortgages in the various properties in which they thought they were investing. In fact, the Investor Victims did not hold recorded, first mortgages in the properties. The defendants have defaulted on a number of the loans by failing to make scheduled payments of both interest and principal. To date, the Investor Victims’ losses exceed $27 million.

Beginning in 2003, HERSHKOWITZ and WOOLF-TURK commenced a series of projects to renovate approximately sixteen multifamily apartment buildings in upper Manhattan. The defendants purportedly planned to rent the renovated apartments or ultimately, to refinance, or sell the properties at significantly higher prices. Supposedly to raise an aggregate of approximately $78 million they needed for the renovation projects, the defendants, from September 2003 through March 2007, borrowed a total of approximately $27 million from the Investor Victims, and approximately $51 million from various other investors, including Intervest Mortgage Corporation and Dominion Financial Corporation (collectively, the “Financial Institution Investors”).

The loan agreements with the Investor Victims typically required that The Kingsland Group make interest payments on a monthly basis and that the principal would come due after a period of between 18 months to three years.

In exchange for the loans from the Investor Victims, HERSHKOWITZ and WOOLF-TURK promised above-market rates of return (typically between 11.5% and 13.5%), and represented that the Investor Victims would hold, as collateral, together with one or more other investors, percentage interests in bona fide first mortgages in the particular properties in which they were investing. As part of their effort to obtain financing, HERSHKOWITZ and WOOLF-TURK provided the Investor Victims with mortgage documentation, which falsely represented that Investor Victims held first mortgages in the particular properties. The defendants also provided the Investor Victims with fraudulent copies of title insurance policies for the properties in which they were investing.

The actual mortgages registered with New York City’s Automated City Registration Information System (“ACRIS”) show that the recorded first mortgages in the properties in fact are held solely by other investors (including the Financial Institution Investors) from which HERSHKOWITZ and WOOLF-TURK had obtained financing, and not by the Investor Victims. Moreover, title insurance policies that ERSHKOWITZ and WOOLF-TURK provided to the Investor Victims were never issued by a title insurance company in favor of the Investor Victims, but instead appear to be doctored versions of policies issued in favor of other beneficiaries.

The principal for the first of the loans came due on April 15, 2005. At that time, HERSHKOWITZ and WOOLF-TURK failed to repay the approximately $1,300,000 then due to the Investor Victims. From April 15, 2005, through May 1, 2007, six other loans to the Investor Victims, totaling approximately $7.8 million, also came due and were not paid. From September 2003 until July 2007, HERSHKOWITZ and WOOLF-TURK, through the Kingsland Group, made the required interest payments to the Investor Victims as they came due, but beginning on or about July 1, 2007, HERSHKOWITZ and WOOLF-TURK failed to make a total of over $200,000 in interest payments due to the Investor Victims.

After HERSHKOWITZ and WOOLF-TURK failed to repay loans when they were due, certain of the Investor Victims raised questions concerning the mortgages they believed they held on the subject properties. HERSHKOWITZ and WOOLF-TURK then took elaborate, affirmative steps to conceal the fraud, continue their scheme, and avoid foreclosure on the loans. Among other things, HERSHKOWITZ and WOOLF-TURK provided certain of the Investor Victims with fraudulent ACRIS recording sheets, which falsely state that the Investor Victims hold recorded mortgages on the subject properties.

The properties listed in the Complaint are:
2301-2303 2nd Ave
249 E. 118th St.
528 W. 152nd St.
531 W. 179th St.
283 Audubon Ave
503-505 W. 176th St
70-72 Pinehurst Ave.
2180-82 Amsterdam Ave.
507 W.184th St
559 W. 183rd St
704 W. 180th St.
234-236 E. l l 8t h St.
463, W. 15th St. 
465, W. 15th St. 
467 W. 15th St.
510-516 W. 184th St
500 W. 190th St.
516-520 W. 18Eth St.
515 W. 184th St
520-524 W. 184th St

HERSHKOWITZ and WOOLF-TURK are charged with conspiracy to commit mail fraud and wire fraud. If convicted, the defendants face a maximum sentence of 20 years’ imprisonment. HERSHKOWITZ, 51, resides in Manhattan and Atlantic Beach, New York. WOOLF-TURK, 51, resides in Port Washington, New York.

The defendants will be presented later today before United States Magistrate Judge HENRY B. PITMAN. Mr. GARCIA praised the investigative efforts of the FBI in this case. This investigation is being handled by the Major Crimes Unit of the United States Attorney’s Office. Assistant United States Attorneys MARCUS A. ASNER and HARRY A. CHERNOFF are in charge of the prosecution.

The charges contained in the Complaint are merely accusations and the defendants are presumed innocent unless and until proven guilty.

Press Release
Criminal Complaint


Princeton (Mass) attorney accused of theft in $6.2 scheme

On July 24, 2007 a Criminal Information was filed in the Massachusetts District Court alleging that attorney Alan Mason of Princeton, Mass had engaged in a scheme to defraud lenders by converting portions of loan proceeds for his own use.

Mason was the owner of Alan Mason Legal Services, Inc of 428 Shrewsbury Street, Worcester, MA. He was an agent for Stewart Title and also bought and sold foreclosed properties.

In the scheme Mason is alleged to have prepared false closing docs like HUD-1’s which showed that existent liens had been paid off using loan proceeds when in fact they had not. He allegedly sent copy checks and other documents which purported to prove the non-existent pay offs. He then issued Title Insurance policies knowing that the titles were defective because the liens had not been paid off. He then made regular monthly payments to the liens to avoid defaults and triggering alerts.

During this scheme he is alleged to have defrauded at least 10 lenders of over $6.2 million.

In the process he created real estate trusts that did not identify him as a trustee even though he controlled them. They are listed as:

Z&P Realty Trust
William J. Ziaja Realty Trust
One Princeton Street Realty Trust
16 Delaval Road Realty Trust
94 Cranberry Lane Realty Trust
J and M Realty Trust

He is alleged to have made substantial profits from buying and selling property using these trusts to do so and converting the profits for personal use.

Mason is due to appear in court for a change of plea hearing on September 6th 2007.

Criminal Information


Two men indicted in Kansas mortgage fraud allegations


In the following July 19, 2007 press release the United States Attorney for the District of Kansas announced that a grand jury had indicted Steve C. Middleton, 46, Overland Park, Kan., and Jared Minor, 36, Belton, Mo., who are charged with one count of conspiracy to commit bank fraud, four counts of bank fraud, three counts of money laundering and one count of criminal contempt of court.

According to the indictment:

Doing business as Somerset Homes, Middleton obtained loans and built homes in the greater Kansas City area.

Minor was a construction contractor who worked with Middleton.

As a result of fraud, Middleton received more than $1 million from Bank of the Prairie. On May 17, 2006, Middleton was indicted in another federal case. His co-defendants were F. Jeffrey Miller, Todd Earnshaw, Brian Rouse, Angela Parenza, Elizabeth Hessel, James Moser, and Lanny Ross. Middleton was released on bond after agreeing to comply with the court’s order prohibiting him from engaging in illegal activities. He and Minor violated the court’s order by defrauding the Bank of the Prairie and continuing to receive the proceeds of the fraud.

By submitting false and fraudulent loan documents, Middleton and Minor caused the bank to make loans it would not otherwise have made.

The defendants presented to the bank a copy of a $10,000 check from Minor to Somerset homes, representing it to be a down payment on the purchase of an $823,900 residence at 18882 Travis Lane, Stilwell, Kan. In fact, no down payment was made because Middleton returned the check to Minor.

Submitted to the bank an amendment to the sales contract falsely representing that the purchase price was increased from $823,900 to $1,124,000 and a document falsely stating that Minor had qualified for a $950,000 loan at 7.5 percent interest. A month later, they executed a change in the terms of the agreement to increase the amount borrowed from $659,100 to $899,200.

In the money laundering counts, they are charged with engaging in a series of monetary transactions involving a $656,000 construction loan, a $242,000 construction loan and $2.3 million from the sale of 1821 Travis Lane.

In a forfeiture count, the government seeks a money judgment for $1,424,000 in loan proceeds the defendants obtained from Bank of the Prairie, $22,000 in cash and a residence at 14910 Benson in Overland Park, Kan., which is valued at approximately $289,000.

The crimes are alleged to have occurred at various times in 2005, 2006 and 2007 in Johnson County, Kan.

If convicted, the defendants face a maximum penalty of 5 years and a fine up to $250,000 on the conspiracy charge, a maximum penalty of 30 years and a fine up to $1 million on each bank fraud charge, a maximum penalty of 10 years and a fine up to $250,000 on each of the money laundering charges, and a maximum penalty of 5 years and a fine up to $250,000 on the criminal contempt charge. The U.S. Department of Housing and Urban Development’s Office of Inspector General investigated. Assistant U.S. Attorney Richard Hathaway and Assistant U.S. Attorney Christine Kenney are prosecuting.

Press Release



Two men indicted in Montana fraud allegations

On June 6, 2007 an indictment was filed in the Helena Division of the Montana District Court accusing Scott William Hilgers and Todd Jeremy Rice of a scheme to defraud mortgage lenders.

Hilger was a mortgage broker working for Tri-West Mortgage in Helena, Montana and he is alleged to have falsified income and other details to enable Price to obtain 4 mortgage loans (see below) that he would not normally have qualified for and falsely represented that Price would occupy all four properties. The four mortgages totaled $686,000.

The properties mentioned in the indictment are:

350 Woodson Rd., Helena, Montana
1560 Gallatin Ave., Helena, Montana
1306-1308 Poplar St., Helena. Montana
8560 Applegate Drive, Helena, Montana.

Both men were arraigned on June 28, 2007 when they entered not guilty pleas. Their trials are set to proceed on August 13, 20007.



Lee's Summit (MO) woman charged with ID Theft in relation to 3 mortgages

In a press release earlier today John F. Wood, United States Attorney for the Western District of Missouri, announced today that a Lee’s Summit, Mo., woman has been indicted by a federal grand jury for a mortgage fraud scheme in which she used stolen identities to purchase homes.

Kimberly M. Davis , 42, of Lee’s Summit, was charged in a 14-count indictment returned Tuesday, July 24, 2007, by a federal grand jury in Kansas City.

The federal indictment alleges that Davis used the names, Social Security numbers and birth dates of three separate victims, without their permission, to purchase two homes in Lee’s Summit. Davis is charged with eight counts of wire fraud, one count of mail fraud and five counts of aggravated identity theft.

According to the indictment, Davis worked as a mortgage broker at firms in Liberty and Gladstone from November 2003 through January 2005. Between Nov. 19 and 25, 2003, Davis allegedly used a stolen identity to obtain loans totaling $396,830 from Countrywide Home Loans, Inc., for the purchase of a Lee’s Summit residence (2520 SW Wintercreek Drive , Lee’s Summit). Davis allegedly used the same stolen identity from Jan. 21 through March 10, 2004, to refinance the Countrywide loan and to obtain a home equity line of credit from First Magnus Financial that included a $68,000 payoff to Countrywide.

The indictment also alleges that, between July 2 and Sept. 17, 2004, Davis used another stolen identity to obtain loans totaling $434,133 from Countrywide for the purchase of another Lee’s Summit residence ( 704 SW Winterstar Drive , Lee’s Summit) .

Between Dec. 31, 2004, and Jan. 7, 2005, Davis allegedly used a third stolen identity to obtain loans totaling $452,503 from Accredited Home Lenders, Inc., for the purchase of the second Lee’s Summit residence by the third identity theft victim. Wood cautioned that the charges contained in the indictment are simply accusations, and not evidence of guilt. Evidence supporting the charges must be presented to a federal trial jury, whose duty is to determine guilt or innocence.

This case is being prosecuted by Assistant U.S. Attorney Jess E. Michaelsen. It was investigated by the Federal Bureau of Investigation.

US Attorney’s Press Release
The Indictment


Attorney indicted, accused of Grand Larceny, in Nassau County

In a press release Nassau County District Attorney Kathleen Rice announced this morning the arrests of an attorney in connection with separate thefts of more than $900,000. Barry Chasky , 54, of Point Lookout, who has been charged with Grand Larceny in the Second Degree, after allegedly embezzling nearly $900,000 from the escrow accounts of First American Title Insurance Company.

Chasky will be arraigned later today in First District Court, Hempstead. Mr. Chasky and Mr. Corrado face maximum sentences of 15 and seven years in prison, respectively, if convicted of the charges.

“Attorneys have more than just a professional responsibility to represent their clients’ interests,” said Rice. “These are professionals working in a position of trust, very often for clients who are not familiar with the law and may be going through an incredibly difficult episode in their lives. We will be very aggressive in going after professionals violating this trust and preying upon the vulnerabilities of their clients.”

Barry Chasky is the sole proprietor of Triad Abstract Company (Triad). Triad is an agent of First American Title Insurance Company (First American).
First American is regulated by New York State and is therefore mandated to audit Triad’s accounts on a yearly basis. In December of 2006, the First American auditor, along with his assistants, went to the Triad offices to perform an investigative audit. The auditors began reviewing the files and documents relating to Triad’s work for First American. As the audit commenced, they discovered that since the last yearly audit in January of 2006, Mr. Chasky failed to record many documents. According to First American, this is a serious violation of not only the Agency contracts, but also Triad’s and Ms. Chasky’s fiduciary duty to the insured clients. Knowing that the audit team was about to review all of Triad’s bank records, Mr. Chasky admitted that he had converted funds from Triad’s accounts to a friend and therefore the money was not in the escrow account and not available for transfer to First American.

The money was taken out in a series of checks starting December 1, 2005 and ending October 4, 2006. There were 17 checks written out in varying amounts from $30,000.00 to $100,000.00, totaling a loss of $880,000.00 to First American.

Assistant District Attorney Vickie Curran, of the District Attorney’s Government & Consumer Frauds Bureau, is handling the case for the District Attorney’s Office. Mr. Chasky is being represented by Randy Zelin, Esq. The charges described above are merely accusations and the defendants are presumed innocent until and unless proven guilty.

DA’s Press Release
Nassau County Court Records