The following older entries were updated today. Click on the blue link to read more.
The following older entries were updated today. Click the blue link to read the article.
In the following press release Bud Cummins, United States Attorney for the Eastern District of Arkansas announced that a federal trial jury in Little Rock, Arkansas returned a guilty verdict late Thursday against Debra Jean Price, 52. Price was convicted of one count of conspiracy to commit mortgage loan fraud.
Two other defendants, Debby Cossitt, 53, of Searcy, Arkansas, and Shannon Hill , age unavailable, both pled guilty during the middle of the trial. Cossitt pled guilty to one count of conspiracy to commit mortgage loan fraud and one count of filing a false income tax return for 1998. Shannon Hill pled guilty to once count of conspiracy to commit mortgage loan fraud.
“These cases are difficult to try because of their complexity and the number of documents involved, but they are important,” said Cummins. “The agents and prosecutor who tried the case are to be commended for their sticktoitiveness.”
Cossitt, owner/manager-operator, of several manufactured home sales companies in Searcy, Batesville, Jonesboro, and Harrison, Arkansas, admitted to fraudulently submitting falsified mortgage loan applications and supporting documents to lenders in order to increase sales. These actions allowed higher credit risk customers to appear more qualified for mortgage loans. Additionally, Cossitt admitted to not reporting over $32,000 in income on her 1998 federal income tax return from cash sales for wheels and axles no longer needed once manufactured homes were delivered to customers.
Price and Hill were both employed by Cossitt. From April 22, 2002, until approximately November 2003, all three conspired to submit misleading and false statements to lending institutions. These misrepresentations included falsified customer bank statements with inflated balances, falsified cashier’s checks reflecting an inflated customer down payment, inflated W-2 forms, falsified pay stubs or wage and earning statements, and falsified customer loan applications. Additionally, Hill and Cossitt participated in “telephone audits” with mortgage lenders, impersonating customers and/or directing customers to make misrepresentations directly to lenders.
This investigation was conducted by IRS Criminal Investigation and the Federal Bureau of Investigation.
Click here for the press release
Click here for the indictment.
Jane W. Duke, Acting United States Attorney for the Eastern District of Arkansas, announce that Debby Cossitt, 54, of Searcy, Arkansas, was sentenced to serve 30 months in prison, followed by three years of supervised release. Judge Susan Webber Wright also ordered Cossitt to pay restitution of $120,000 to victims of her fraud and $9,560.00 to the Internal Revenue Service. Judge Wright barred Cossitt from working in the loan industry during her period of supervised release.
In the following press release the United States Attorney for the Central District of California announced on December 12, 2006 that a former Los Angeles-based real estate developer charged with running a $50 million mortgage fraud scheme arrived in the United States this afternoon to face federal criminal charges. Charles Elliott Fitzgerald was arrested and deported by authorities in the Independent State of Samoa, a Pacific island nation where he fled to in June 2003 after he was sued by a mortgage lender he allegedly defrauded.
Samoan law enforcement officials, responding to a request from the United States, arrested the 46-year-old Fitzgerald in the Samoan capital of Apia on December 11. Fitzgerald was deported by Samoa because his United States passport had been revoked after the criminal charges were filed, which in turn subjected him to immediate deportation under Samoan law. Federal authorities in the United States expressed great appreciation for the cooperation of the Government of Samoa and its law enforcement authorities.
Fitzgerald arrived at Los Angeles International Airport at approximately noon today. He is being transported to the Metropolitan Detention Center in downtown Los Angeles, and he is expected to make his initial court appearance in United States District Court tomorrow afternoon.
Fitzgerald is charged with one count of conspiracy to commit bank fraud and loan fraud, four counts of bank fraud, one count of loan fraud, five counts of money laundering and one count of obstruction of justice.
The arrest warrant for Fitzgerald was unsealed today, as well as criminal informations against four co-conspirators. The other four defendants previously charged are:
- Mark Alan Abrams, 45, of Long Beach;
- Nicole LaViolette , 37, of Palm Springs;
- Jamieson Matykowski , 33, of Laguna Niguel; and
- Timothy Holland , 35, of Santa Ana.
Abrams previously pleaded guilty to charges of conspiracy to commit bank fraud and loan fraud, bank fraud, making a false statement on a tax return and obstruction of justice. LaViolette, Matykowski and Holland previously pleaded guilty to charges of conspiracy to commit bank fraud and loan fraud, as well as wire fraud. All four are scheduled to be sentenced next year by United States District Judge Dean D. Pregerson.
Fitzgerald and the others were allegedly involved in a wide-ranging and sophisticated conspiracy to defraud federally insured mortgage lenders out of tens of millions of dollars. As part of the scam, the co-conspirators obtained inflated mortgage loans on expensive homes in some of California’s most exclusive neighborhoods, including Beverly Hills, Bel Air, Holmby Hills, Malibu, Carmel, Mill Valley, Pebble Beach and La Jolla. According to the recently unsealed charges, the conspiracy was spearheaded by Fitzgerald and Abrams.
In the charges filed against the others, Fitzgerald is identified as the “DPF/BHEF Conspirator.” According to these documents, in late 1999 or early 2000, Fitzgerald went into business with Abrams in a mortgage brokering company called Desert Pacific Financial, Inc. (DPF). The company sent mortgage loan applications to lenders for review and funding, and received commissions from those lenders when the loans closed. In late 2001, Fitzgerald and Abrams renamed the company Beverly Hills Estates Funding, Inc. (BHEF).
LaViolette was a loan processor at DPF/BHEF, and Matykowski was a property scout who helped locate homes for potential purchase. Fitzgerald and Abrams also had several in-house escrow companies, in which Holland was the escrow officer. Fitzgerald and Abrams, working with Matykowski and real estate agents, located homes for sale. According to court documents, they primarily looked for homes with purchase prices they could inflate, which generally meant they used homes with good views in expensive neighborhoods throughout California.
As part of the scheme, Fitzgerald and Abrams purchased homes at their real market values. For example, the case against Abrams details the purchase of a home on Roscomare Road in Bel Air, which Fitzgerald and Abrams bought for $735,000 in the name of “Matykowski or his assignee,” even though they were at all times in actual control of the home.
Fitzgerald, Abrams and associates then recruited “straw borrowers” to obtain inflated loans on the properties. The straw borrowers, some of whom received payments, allowed Fitzgerald and Abrams to use their names and credit to obtain mortgages as part of a “property-flipping” process. After obtaining inflated appraisals and other false documentation that were submitted with loan applications, Fitzgerald and Abrams obtained mortgages in the names of the straw borrowers for double or triple the actual values of the homes. For example, when they flipped the Roscomare Road property, they “sold” the residence to the straw borrower for $2,370,000. The Abrams charges allege that a bogus loan application package went to Lehman Brothers Bank seeking a loan of $1,422,000, nearly double the true $735,000 purchase price, and that Lehman Brothers Bank unwittingly funded a loan of more than $1.4 million on the property, almost all of which ended up in one of the in-house escrow companies controlled by Fitzgerald and Abrams.
The victim lenders, having been deceived by the false documentation supplied by Fitzgerald, Abrams, and others, unwittingly funded the inflated loans. According to the Abrams charges, Lehman Brothers Bank alone was deceived into funding about 80 such inflated loans from March 2000 through March 2003. These 80 loans were more than $50 million over the true prices of the homes. Fitzgerald and Abrams allegedly received millions of dollars of these excess loan proceeds, and their associates received kickbacks, inflated appraisal fees, and large commissions.
Lehman Brothers Bank sued Fitzgerald, Abrams and others in federal court in Los Angeles in 2003 and obtained a receivership, temporary restraining orders, and preliminary injunctions against them. Judge Pregerson appointed David J. Pasternak as receiver to recover assets acquired with proceeds of the fraud. The receiver, as well as attorneys and forensic accountants employed by him, have cooperated extensively with the government’s ongoing criminal investigation.
If he is convicted of the 12 counts in the criminal complaint, Fitzgerald faces a maximum possible sentence of 265 years in federal prison. A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
The charges against Fitzgerald and the others are part of an ongoing investigation being conducted by the Federal Bureau of Investigation and IRS-Criminal Investigation Division. Fitzgerald was returned to Los Angeles under escort by a Special Agent assigned to the FBI’s Legal Attache in Canberra, Australia, which provided substantial assistance in facilitating Fitzgerald’s to the United States.
In the following press release the United States Attorney for the Central District of California announced that Charles Elliott Fitzgerald, 48, formerly of Newbury Park and Beverly Hills, was sentenced by United States District Judge Dean D. Pregerson today to 14 years in federal prison for masterminding a scheme that defrauded banks by deceiving them into funding inflated mortgages, the Judge also ordered Fitzgerald to pay $42,676,269 in restitution to two of the victim banks that he defrauded.
At today’s sentencing hearing, Judge Pregerson said, “This is not a case about deregulation or exploiting loopholes. This is a case of good old-fashioned lying and cheating.”
A representative of one of the victim banks, RBC Mortgage Company, told Judge Pregerson that the fraud scheme caused not only the direct financial loss, but also millions of dollars of indirect costs and loss of jobs at the bank.
Fitzgerald pleaded guilty in May to one count of conspiracy to commit bank fraud and loan fraud; three counts of bank fraud; one count of organizing, managing, and supervising a continuing financial crimes enterprise; one count of concealment money laundering; and one count of obstruction of justice.
Fitzgerald has been in federal custody since December 2006, when he was arrested and deported by authorities in the Independent State of Samoa, a Pacific island nation to which he fled in June 2003 after he was sued by the two victim banks.
Fitzgerald was the seventh defendant to plead guilty in the scheme. Previous defendants who pleaded guilty are:
• Mark Alan Abrams, 47, of Los Angeles, who along with Fitzgerald orchestrated the scheme;
• Nicole LaViolette, 38, of Palm Springs;
• Jamieson Matykowski, 35, of Laguna Niguel;
• Timothy Holland, 37, of Santa Ana;
• Richard Maize, 54, of Beverly Hills; and
• L. Scott Robinson, 46, of Dana Point.
Charges are still pending against three other defendants allegedly involved in the scheme. These are real estate agents Joseph Aram Babajian, 55, of Beverly Hills and Kyle Grasso, 37, of Paso Robles; and appraiser Lila Rizk, 41, of Trabuco Canyon. Trial for those defendants is currently set to begin on October 21 before Judge Pregerson.
In another development in this investigation, prosecutors on Tuesday filed a criminal information against mortgage banker Thomas R. Schiff, 47, of Brentwood. Schiff was charged with, and has agreed to plead guilty to, making a false statement on his 2001 federal income tax return. Schiff, along with Maize, was a co-owner of the mortgage brokering company Americorp Funding. In his plea agreement, Schiff admitted that in 2001 he received more than $170,000 in payments from Fitzgerald, Abrams and their companies. He further admitted that he willfully failed to report this income on his 2001 federal income tax return.
The case against Schiff marks the 11 th defendant charged, and he will become the 8 th defendant to plead guilty.
According to court documents, Fitzgerald and the others were involved in a wide-ranging and sophisticated conspiracy to defraud federally insured mortgage lenders out of tens of millions of dollars. As part of the scam, the co-conspirators obtained inflated mortgage loans on expensive homes in some of California’s most exclusive neighborhoods, including Beverly Hills, Bel Air, Holmby Hills, Malibu, Carmel, Mill Valley, Pebble Beach and La Jolla. The court documents charge that the co-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. 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.
Lehman Brothers Bank and RBC Mortgage Company sued Fitzgerald, Abrams and others in federal court in Los Angeles in 2003 and obtained a receivership, temporary restraining orders, and preliminary injunctions against them. Judge Pregerson appointed David J. Pasternak as receiver to recover assets acquired with proceeds of the fraud. The receiver, as well as attorneys and forensic accountants employed by him, have cooperated extensively with the government’s ongoing criminal investigation.
The charges against Fitzgerald and the others are part of an ongoing investigation being conducted by the Federal Bureau of Investigation and IRS-Criminal Investigation.
In the following press release the Georgia Department of Banking and Finance announced that o n December 1, 2006, the Office of State Administrative Hearings accepted the withdrawal of a hearing request filed by Diversified Home Mortgages, Inc. (“Diversified”), thereby making final the decision of the Georgia Department of Banking and Finance (“Department”) to deny that company’s application for the reinstatement of its mortgage lender’s license.
On July 1, 2006, Diversified’s mortgage lender’s license expired because it was not properly renewed. On August 7, 2006, a complete application to reinstate Diversified’s license was filed with the Department. This application subsequently was denied by the Department on September 15, 2006, after this agency obtained information showing that Diversified was engaging in mortgage broker and lending activities while unlicensed. A Cease and Desist Order issued to Diversified by the Department became final on October 16, 2006.
At the present time, Diversified does not hold a mortgage broker or lender’s license issued by the Department. Pursuant to Georgia law, it is prohibited for any person knowingly to purchase, sell, or transfer a mortgage loan or loan application from or to a mortgage broker or mortgage lender who is not licensed or exempt from licensing or registration provisions. Click here for the full press release.
In the following December 12, 2006 press release Kings County (Brooklyn) District Attorney Charles J. Hynes announced the indictment of two licensed stockbrokers, Damascus Lee and Ian Bynoe, who are charged with creating a fake real estate investment firm to launch a million-dollar securities fraud. The case was referred to the District Attorney’s Office by the NASD (National Association of Securities Dealers), a private-sector regulator of the securities industry.
These rogue brokers violated their clients’ trust and emptied their life savings for their own greedy purposes, said District Attorney Hynes. I’d like to thank NASD for bringing this case to our attention, and I promise we will not close this investigation until every penny is recovered for all the victims of these crooked investors.
The indictment charges that Lee and Bynoe, both 34, created a fake real estate development company called Vanguard Development and Management and then sold stock in it. The company was based in Wyoming but did no actual business. However, from the J.P. Turner & Company branch office they operated at 469 Clinton Ave., in Clinton Hill, Lee and Bynoe had other stock brokers working for them contact potential investors around the world. The brokers Lee and Bynoe supervised told potential clients that investments in Vanguard Development were officially approved by J.P. Turner, when no such approval existed. They were also told to say the company had incredible growth potential and was on the verge of taking off.
The investigation is ongoing, and more victims are expected. J.P. Turner & Company cooperated fully in the investigation and is not facing any charges. Led by Fordham Law School Professor Marcella Silverman, students in Fordham’s Securities Arbitration Clinic have begun working to recover the funds one victim lost.
While the Brooklyn District Attorney works to prevent future victims of this securities fraud, one such victim is seeking recovery of her stolen funds through a private arbitration at the NASD filed last Friday, Dec. 8, against the individual brokers and the brokerage firm which empowered them, said Silverman.
Thanks to Professor Silverman and her law students, at least one victim may soon be compensated for the money she lost, said DA Hynes. Fordham’s Securities Arbitration Clinic represents small investors who have lost money through overreaching or criminal activity of brokers. At the clinic, law students handle actual cases under the supervision of a professor, who is a practicing attorney.
Lee and Bynoe are charged with numerous felonies, including Grand Larceny in the Second Degree, Grand Larceny in the Third Degree, Scheme to Defraud in the First Degree, and Money Laundering in the Second Degree. If convicted, they face up to 15 years in prison. NASD has revoked Lee’s license to sell securities in the US.Assistant District Attorney Bryan Wallace is prosecuting the case and is being assisted by Assistant District Attorneys Gavin Miles and Noel Downey. Michael Vecchione is Chief of the Rackets Division.