Cleveland Attorney indicted for Real Estate thefts

In the following press release Cuyahoga County Prosecutor Bill Mason announced that Attorney Cynthia D. Smith was indicted for stealing $100,000 from the Eternal Security Baptist Church and for stealing $78,000 from a probate estate.

Smith, 53, whose business address is 11811 Shaker Blvd., was hired by the congregation of Eternal Security Baptist Church in the fall of 2005 to represent the church in selling its property for $135,000 to Cleveland Municipal School District.   The congregation intended to use the proceeds to construct a smaller church. 

The sale was closed on February 10, 2006.  After expenses, the balance from the sale was $132, 303, which was transferred by the escrow account agent to Smith’s client trust fund.  Smith returned $32,303 to the church, as agreed, and the church requested that she keep the remaining $100,000 in her trust fund to be used to pay for the new construction costs.  

The congregation requested confirmation from Smith that the $100,000 remained in her client trust fund account.   When the congregation became concerned with the answers provided by her, they filed a complaint with the Cleveland Bar Association.  An investigation revealed the $100,000 was no longer in Smith’s client trust fund account and that she had spent this money for other purposes.   A criminal complaint was then filed with the Cleveland Police Department, and an investigation was conducted by the Financial Crimes Unit.

Attorney Smith stole from another client involving a client trust fund.  In May 2005 she was hired by a representative of the probate estate that was being administered in Connecticut to sell the decedent’s property located in Cleveland.  Smith attended to the sale of that property and deposited the net proceeds of the sale, $78,772.14, into her client trust account for payment to the probate estate.  However, Smith used these funds for other purposes, and despite repeated demands to do so, failed to pay the estate.   Ten months later when Smith received the sale proceeds from the Eternal Security Baptist Church sale, she used the church’s $100,000 to pay the amount due to the probate estate.


Fomer attorney saentenced to prison in mortgage fraud case

In a press release Chuck Rosenberg, United States Attorney for the Eastern District of Virginia announced that Leslie W. Lickstein, age 54, of Fairfax, Virginia, was sentenced today to 12 months and one day in prison following his conviction in May 2007 of conspiracy to commit bank fraud. Lickstein was also ordered to pay $1.1 million in restitution. Chuck Rosenberg, United States Attorney for the Eastern District of Virginia, and Joseph Persichini, Jr., Assistant Director in Charge, Federal Bureau of Investigation, Washington Field Office, made the announcement after the sentencing today by United States District Judge Gerald Bruce Lee.

The charge against Lickstein, a former bankruptcy attorney, and the first President of the Northern Virginia Bankruptcy Bar Association, arose from his conduct in July 2002 as a settlement attorney in the sale of a property located in Great Falls, Virginia. According to court documents, Lickstein acknowledged that he prepared and filed a false [HUD-1] settlement statement with Lehman Brothers Bank [that falsely showed secondary financing from a non-existent lender]. As a result, the bank made a multi-million dollar home mortgage loan to a home buyer who was not creditworthy. When the mortgage went into default, the bank had to sell the property at a loss of approximately $1.1 million.

The investigation was conducted by the Federal Bureau of Investigation. Assistant United States Attorney Thomas H. McQuillan and Special Assistant United States Attorney Dennis J. Early of the Office of the United States Trustee prosecuted this case on behalf of the United States.

Criminal complaint
Press Release


Three sentenced in Georgia mortgage fraud case

In press release United States Attorney David E. Nahmias (Northern District of Georgia) announced that DONNA RENAE WOODS LAWRENCE, 43, of Decatur, Georgia, was sentenced today by United States District Judge Beverly B. Martin on charges of conspiracy to commit mortgage fraud and bankruptcy fraud.

United States Attorney David E. Nahmias said, “This defendant was trusted as a ‘gatekeeper’ for HUD’s guaranteed mortgage loan program. Betraying that trust, she was responsible for hundreds of fraudulent mortgage loans, including some obtained using stolen identities, the erasing of prior security interests, and seven fraudulent bankruptcy filings to stay foreclosures on fraudulently acquired properties. Her misuse of the United States Bankruptcy Court system is of grave concern, especially now while so many lenders need access to their security and legitimate distressed homeowners are seeking second chances through bankruptcy protection.”

LAWRENCE was sentenced to 10 years in prison to be followed by 3 years of supervised release, and ordered to pay restitution of $2,906,176.  LAWRENCE pleaded guilty to these charges on May 16, 2007.

Judge Martin also sentenced two related co-defendants today. KERWANNA LASHON BENNETT WOODS, 33, of Atlanta, Georgia, was sentenced on a charge of  bankruptcy fraud. KERWANNA WOODS was sentenced to serve 1 year, 6 months in prison to be followed by 3 years of supervised release, and ordered to pay restitution of $503,150.

GWENDOLYN RESHELL WOODS, 41, of Decatur, Georgia, was sentenced on a charge of conspiracy to commit mortgage fraud. GWENDOLYN WOODS was sentenced to 3 years probation beginning with 6 months of house arrest, and ordered to pay restitution of $238,079. KERWANNA WOODS pleaded guilty on February 2, 2007 and GWENDOLYN WOODS pleaded guilty on January 24, 2007.

According to United States Attorney Nahmias and the information presented in court: LAWRENCE used her company, “Assurety Mortgage,” and a stolen social security number to obtain loan origination and underwriting authority from the U.S. Department of Housing and Urban Development (HUD) for FHA guaranteed loans.  Thereafter, LAWRENCE originated hundreds of both FHA guaranteed and conventional loans with false income and employment information, including some where she was the borrower but used a stolen social security number and pretended to be her own twin sister.  LAWRENCE also recruited KERWANNA and GWENDOLYN WOODS and other relatives to assume the identities of her minor children and acquire mortgage loans for properties in their names.  In order to keep all of the loan proceeds from these new loans, LAWRENCE caused the security interests of prior lenders to be fraudulently erased.  Finally, LAWRENCE caused seven separate bankruptcy petitions to be filed to stay foreclosure on a number of the fraudulently acquired properties, with four of the petitions filed under the social security numbers of others.  When HUD first learned of this problem and suspended LAWRENCE, she caused a second mortgage brokerage firm, “Accurate Mortgage Group,” to be formed and originated an additional 98 fraudulent loans. 

This case was investigated by Special Agents of the Office of the Inspector General of the United States Department of Housing and Urban Development. The United States Attorney’s Office would also like to acknowledge the assistance of the United States Bankruptcy Court and the United States Trustee.
Assistant United States Attorney Gale McKenzie prosecuted the case.

For further information please contact David E. Nahmias (pronounced NAH-me-us), United States Attorney, or Charysse L. Alexander, Executive Assistant United States Attorney, through Patrick Crosby, Public Affairs Officer, U.S. Attorney’s Office, at (404) 581-6016.  The Internet address for the HomePage for the U.S. Attorney’s Office for the Northern District of Georgia is www.usdoj.gov/usao/gan.


Connecticut AG announced law suit filed in predatory lending scheme

In a press release Connecticut Attorney General Richard Blumenthal announced a lawsuit against several defendants alleging an extensive statewide predatory lending scheme that devastated dozens of consumers.

The defendants are Royal Financial Services, LLC, of Trumbull; First Source Mortgage Solutions, Inc. of Branford; Elizabeth Athan Real Estate, LLC, of Shelton; J.G. Property Management & Investment, LLC, of New London; Brian Guimond, d/b/a Cutting Edge Contracting of Norwich; and Jose Guzman and Mauricio Lancia for allegedly managing the schemes on behalf of the defendant companies.

Blumenthal sued on behalf of Department of Banking Commissioner Howard F. Pitkin and the state in coordination with Department of Consumer Protection Commissioner Jerry Farrell, Jr.

Blumenthal alleges that through a multi-layered scheme, the defendants mislead consumers and mortgage lenders into property purchases that financially destroyed dozens of homebuyers, while benefiting only the defendants, their associates and family members.

“This pervasive predatory lending scheme left a trail of shattered lives and lies – false promises to first-time homebuyers about property values, loan terms, and income levels,” Blumenthal said. “Our investigation has uncovered consumers who sought the American Dream – but bought a financial nightmare. Our lawsuit charges that homebuyers were victimized by a vast scheme with multiple layers of lies and co-conspirators. We allege that this predatory lending scheme enticed consumers with false promises of profits from investment rental properties and nonexistent management services for tax and mortgage payments and other expenses. Homebuyers were purposefully lured to buy properties whose values were inflated, using mortgages with concealed costs that they could never realistically afford, because their incomes and assets were falsified with bogus bank and employer records. They were discouraged from seeking outside assistance from outside home inspectors and lawyers. These practices preyed on the most vulnerable citizens – many of them first-time unsophisticated low-income homebuyers who spoke little or no English. The conspirators were illegally enriched by profits from inflated prices for properties, and fees and commissions.

“Financially battered and blindsided, some consumers face foreclosure and years of damaging credit ratings. They deserve relief immediately.

“Our legal action seeks money back to consumers and severe penalties for practices that undermine an entire industry, endangering not only consumers directly involved, but the economic welfare of the region. This case is only the beginning of a challenging time in the real estate and lending industry. This turmoil and calamity, only one in numerous emerging cases, has revealed the worst of the lending industry.”

Blumenthal’s lawsuit seeks restitution for every consumer harmed; an order preventing further violations; and civil penalties to the state.

“These defendants were conducting illegal business in this state and they misled Connecticut consumers by implementing a predatory lending scheme,” Commissioner Pitkin said. “Through our joint effort with the attorney general and the commissioner of consumer protection, we can ensure that Connecticut consumers are safe once and for all from the illegal conduct of these individuals.”

Commissioner Farrell said, “This lawsuit will serve as a message to the real estate and financial communities that the State of Connecticut considers real estate fraud and predatory lending egregious acts that will not be tolerated. State and federal agencies, working together, are directing their efforts to limit the losses that consumers suffer.”

Blumenthal described how the alleged scheme worked:

· J.G. Management and Guzman, who were not licensed by the state to engage in real estate transactions, and Elizabeth Athan Real Estate, solicited low-income consumers, including renters receiving federal housing assistance, to buy through them multiple or multi-unit residential properties. They promised consumers, among other things, favorable mortgage terms, cash back at closing, and diminished monthly housing expenses.

· J. G. Management and/or Guzman also pledged to provide property management services for rental properties that the consumers purchased through them – services including maintenance, finding renters, collecting rent and making mortgage and tax payments.

· Once a consumer agreed to work with the defendants to purchase properties, the defendants referred consumers to Royal Financial or First Source to act as the mortgage broker.

· J.G. Management, Guzman and the Elizabeth Athan agency would then select the property or properties for purchase from a stock of properties owned by the defendants, their family members or associates. The properties were sold to consumers at inflated prices – often tens of thousands of dollars more than what they were purchased for months earlier. The defendants substantiated the inflated prices to consumers and lenders through bogus and artificially inflated appraisals.

· When consumers inquired about hiring a home inspector, the defendants often convinced them it was unnecessary or potentially adverse to the consumer.

· In order to qualify consumers for mortgages, Royal Financial and First Source falsified information on consumers’ mortgage loan applications, including details about their income and assets. Cutting Edge or another home improvement company involved in the scheme would falsify consumer employment and wage records, indicating the consumers earned money from Cutting Edge and others as employees.

· Royal Financial and First Source also submitted bogus forms to lenders “verifying” bank account balances and rental income to artificially inflate consumer income and assets.

· Once consumers were approved for mortgages, the defendants arranged closings presided over by attorneys who the defendants knew would not alert consumers or lenders to the significance or irregularities of the transactions.

· Many consumers were non-English speaking and first-time buyers so Guzman “translated” and “guided” them through closings. In reality, he misled consumers about the details and nature of the documents that they signed. Royal Financial and First Source blindsided consumers on closing day with previously undisclosed closing costs.

· Because of these practices, consumers misunderstood their financing terms and, in some cases, did not even realize they had purchased more than one property until after the closings.

Law Suit
Press Release


Mortgage fraud task force convened in Texas

In the following press release Texas Attorney General Greg Abbott and key officials from state regulatory agencies today (9/5/2007) convened the Texas Residential Mortgage Fraud Task Force, a strategic partnership intended to improve collaboration among residential mortgage regulators and law enforcement officials. Task force members, including the attorney general and top real estate, banking and consumer credit regulators, will examine how to track and reduce mortgage fraud in Texas.

“Home ownership lies at the heart of the American dream,” Attorney General Abbott said. “To better track and prosecute mortgage fraud, the Texas Residential Mortgage Fraud Task Force will form a strategic alliance between law enforcement and regulatory agencies. We are committed to protecting Texas homeowners and cracking down on mortgage fraud.”

The Texas Residential Mortgage Fraud Task Force was created under House Bill 716, which was authored by Rep. Burt Solomons (R-Carrollton) and Sen. Kip Averitt (R-Waco) during the 80th Legislative Session. The 2007 legislation was intended to reduce false or misleading information on residential home loan applications by increasing cooperation among regulators and requiring new disclosures at closing.

Effective Sept. 1, mortgage lenders, bankers and brokers are required to warn loan applicants about the legal consequences of knowingly supplying false information on a residential loan application. Additionally, with the consent of the local district attorney, the attorney general is granted concurrent jurisdiction to prosecute criminal mortgage fraud cases, including those involving money laundering, loan document falsification, and mail or wire fraud.

“House Bill 716 is designed to more easily catch white collar criminals and put them behind bars where they belong,” State Representative Burt Solomons said. “We must take the necessary steps, including strengthening criminal penalties, to protect consumers and legitimate lenders in the mortgage loan process from fraud.”

“Mortgage fraud is a serious, costly crime, and legitimate home buyers end up paying the price,” State Senator Kip Averitt added. “Through the Residential Mortgage Fraud Task Force, we will form a strategic partnership with local, state and federal officials, enabling law enforcement and state agencies to better track and prosecute mortgage fraud and its perpetrators.”

Criminal mortgage fraud includes illegally inflating property appraisals; concealing a second mortgage from a primary lender; and concealing or stealing a borrower’s identity. Under the Deceptive Trade Practices Act, the OAG has authority to prosecute misleading practices and has recovered millions of dollars for Texans harmed by title scams, undisclosed costs and other unlawful mortgage-related schemes.

State agencies and officials represented on the Texas Residential Mortgage Fraud Task Force include: the Attorney General; the Consumer Credit Commissioner; the Banking Commissioner; the Credit Union Commissioner; the Commissioner of Insurance; the Savings and Mortgage Lending Commissioner; the Texas Real Estate Commission; and the Texas Appraiser Licensing and Certification Board. Under Sec. 402.032 (h) of the Texas Finance Code, the attorney general “shall oversee administration of the task force.”

Earlier this year, the OAG obtained $21 million in restitution for Texans harmed by lending giant Ameriquest Mortgage Co.’s deceptive lending practices. The settlement resolved allegations that Ameriquest and its affiliates did not adequately disclose certain terms to homeowners, including whether loans carried fixed or adjustable rates. According to court documents filed by the OAG, Ameriquest also charged excessive origination fees and prepayment penalties, refinanced borrowers into improper loans and inflated appraisals that qualified borrowers for loans.

In 2006, Attorney General Abbott negotiated a landmark agreement with Green Tree Servicing L.L.C., a Minnesota-based firm that services manufactured housing debts in Texas. Under the settlement, Green Tree agreed to assist more than 1,200 Texas homeowners who may have been issued invalid titles to homes they purchased from more than 115 unlicensed retailers in 2003. In a related move, the Attorney General secured an injunction and asset freeze against the unlicensed sellers.

The Office of the Attorney General has also halted scams purporting to save homeowners’ properties from condemnation. It has also cracked down on various title-related and refinancing scams.

To better assist Texans who are considering a mortgage loan, Attorney General Abbott also added new online resources to the agency’s Web site (www.oag.state.tx.us). The new Web page, “Avoiding Home-Buying Pitfalls and Scams,” provides consumers with specific guidelines about the home-buying process as well as other helpful information. The Web page also helps homeowners recognize “foreclosure rescue” scams, equity-stripping schemes and other pitfalls to avoid when refinancing a home.

The most common pitfalls home buyers should be wary of include:

• Interest rate surprises. Consumers should ask their lenders for written information to help them compare and select a mortgage. Prospective home buyers should not hesitate to ask questions about the various types of home loans. For example, adjustable rate mortgages (ARM), have interest rates that periodically fluctuate, where fixed rate mortgages keep the same rate through the term of the loan. While many consumers are willing to accept loans with variable interest rates, they should be prepared for those rates – and their payments – to climb in the future. An interest rate that increases by even a couple of percentage points could add several hundred dollars to a monthly mortgage payment, especially early on when the borrower is carrying a large balance.

• Undisclosed costs. Not all mortgage loans have property taxes rolled into the monthly payment, so consumers should check before closing on the home whether they will have to pay those taxes separately. Consumers may also contact their county appraisal district for an estimate of property taxes. Similarly, while some mortgage loans include home insurance as part of the monthly payment, others might require consumers to obtain and pay the premium separately. If taxes and insurance are included in the monthly payments, these costs can often increase yearly. Thus, even with a fixed interest rate, the monthly cost of home ownership may rise because of taxes or insurance rate increases.

• Predatory refinancing. Homeowners considering refinancing or the need to take out a home equity loan should carefully read all terms of the agreement. If the new contract is for a variable interest rate, homeowners should ask the lender the amount of monthly payments after the rate has adjusted several times.

• “Credit clean-up” services. Consumers should be wary of “credit clean-up services,” which are marketed to prospective home buyers who have imperfect credit. Many of these services charge hefty fees for merely sending letters to credit bureaus that question all items in a credit report. Credit bureaus may temporarily remove the entries pending further investigation; however, as creditors confirm the accuracy of the data, the items reappear on the report. Prospective home buyers gain little to nothing from these services. If negative items in a consumer’s credit report are accurate, only time and diligent bill-paying will eliminate them.

• Title scams. Aspiring home buyers should always use an independent title company to complete their real estate transactions. Title companies conduct important research regarding a property’s legal status. They confirm that prospective home buyers are working with the legitimate property owners – or their representative – and determine whether the property has any outstanding liens, including unpaid taxes or a previous owner’s unpaid mortgage.

Consumers should deal directly with a title company and not trust a financing company or seller to act as a go-between. For more home buying tips, brochures, consumer columns and additional information on the mortgage industry, visit the Office of the Attorney General’s Web site at www.oag.state.tx.us

Texas House Bill 716
Press Release


Former New Century loan officer indicted in kick-back allegations

In a press release United States Attorney Scott N. Schools announced that Renato Gonzales Quiazon, of Hayward was arrested on felony fraud charges arising from a loan kickback scheme. Yesterday, a federal grand jury indicted Renato Gonzales Quiazon, of Hayward, CA, with 11 counts of wire fraud, 12 counts of money laundering and four counts of filing false tax returns. These charges are the result of an investigation by the Internal Revenue Service - Criminal Investigation.

According to the indictment, Mr. Quiazon is alleged to have devised a scheme to fraudulently obtain payments of loan kickbacks, commissions and cash outs/extraneous line items from borrowers’ escrow accounts. Beginning about January 2000 through October 2004, the defendant was employed as a loan officer with New Century Mortgage, located in Emeryville, CA. During this time, Mr. Quiazon entered into an agreement with an independent mortgage broker to use his name and broker’s license on loans that the defendant processed as the loan officer. By using the mortgage broker’s identity on these particular loans, New Century Mortgage issued a 1% commission (1% of the total loan amount) to the mortgage broker. As part of the agreement with the mortgage broker, the mortgage broker was to retain 20% of the commissions and pay Mr. Quiazon a kickback of 80% of the commissions.

In contrast to his arrangement with the mortgage broker, in about 2002, the defendant started to get the commission checks directly and forged the mortgage broker’s signature on the back and deposited the checks into his bank account.

Mr Quiazon also filed false individual income tax returns for the tax years 2001, 2002, 2003 and 2004. The defendant deducted expenses that did not exist and failed to report the loan kickbacks and other payments that he received which totaled approximately $430,661 for the period under investigation.

The maximum statutory penalty for each count of wire fraud, in violation of Title 18, U.S.C. § 1343 is 20 years and a fine of $250,000. The maximum statutory penalty for each count of money laundering, in violation of Title 18, U.S.C. § 1956(a)(1)(B)(i) is 20 years and a fine of $500,000, or twice the value of the property involved in the transaction.

The maximum statutory penalty for each count of filing a false return in violation of 26 U.S.C. § 7206(1) is three years imprisonment and a fine of $250,000. However, any sentence following conviction would be imposed by the court after consideration of the U.S.

Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553. An indictment contains only allegations against an individual and, as with all defendants, Mr. Quiazon must be presumed innocent unless and until proven guilty.

Thomas Moore is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Kathy Tat. The prosecution is the result of a [one and a half year] investigation by the Internal Revenue Service - Criminal Investigation.

Press Release


Former loan officer pleads guilty in refinance scam

The Columbus Dispatch, (OH) reports that Jason McCord, a former Lewis Center mortgage broker, pleaded guilty in Federal Court to processed refinance applications for his company, JR Lending, and for Q3 Mortgage, where he worked as a consultant.

The loans were processed online. Without the applicant’s knowledge, McCord inflated an applicant’s earnings and the amount of the loan, then pocketed the difference, said Internal Revenue Service spokesman Craig Casserly.

IRS special agent Lisa DiSalvo testified that McCord used the false information to earn commissions totaling $658,343. Some of the victims didn’t know they had been defrauded until IRS agents contacted them during the investigation, Casserly said.

Assistant U.S. Attorney Dan Brown and McCord’s attorney, Alan Pfeuffer, disagreed on how much restitution is owed to victims. Federal Judge Gregory Frost said he will hold a hearing before determining how much should be repaid.

The judge allowed McCord to live with his fiancee in Connecticut while he awaits sentencing. Frost said he allowed the “unusual” arrangement because the prosecutor did not object.

According to the indictment the fraud involved the properties listed below:

500 Woodland Dr
6791 Harrisburg Pike
5245 Friendship Dr.
1304 Bellefair Ave.
3355 Melony Ct.
788 Crall Rd.
7380 Cook Farm Dr
2801 12th St., SW
7581 Swindon St.
4259 Shady Meadows Dr.
3420 McLean Rd.
21 83 Lisa Dr
25600 Narrows Rd.
13 18 W. Coronado Blvd.
1663 Alpine Dr.
3765 Greengold Dr
949 N. Prospect St
195 S. Weyant Ave
3314 Dresden St
7193 Barnhouse Ct.
2007 Prospect Circle
12863 Rupple Rd.
216 S. Plum St
474 Dunkle Rd.
326 Louden St.
4861 W. U.S. 22
6783 Johnsville Rd.
610 Rumsey Rd.
671-673 S. Wheatland Ave.
2193 Hamilton Ave.
85 Mayfair Blvd.
212 E. North St
1808 S. Champion Ave.
152 Rugby Lane
1284 Ann St
349 Barnes Ave.
1382 Somersworth Ct.
286 Chatterly Lane
1109 Sleepy Elm Rd.
22 12 Margaret Ave.
280 Evening Way
5429 Montaine Ave.
206 S. Mill St
592 2ndAve.
28 Stilson St.
2439 Bainstone Ct.
92 Nelson St
15612 Fernway
1213 Clement Ave.
670 Chestershire Rd.
6576 Rocky Den Rd.
198 N. 17th St
3010 Jamestown Dr
608 Berkley Ave.
2989 Cortona Rd.

Columbus Dispatch article


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