Anatomy of a Scam
Editor’s Note: A court date is set for October 5, 2005. We’ll keep you informed. Names have been removed to protect the (presumed) innocent.

September 23, 2004

PRESS RELEASE

TEN INDIVIDUALS INDICTED FOR PARTICIPATION
IN MULTI-MILLION DOLLAR MORTGAGE FRAUD SCHEME IN SPRINGFIELD

Springfield , MA ... Ten individuals were arrested today on federal charges in connection with a mortgage fraud land flipping scheme involving approximately 200 properties and $15 million in fraudulently obtained loan proceeds.

United States Attorney Michael J. Sullivan; Kenneth W. Kaiser, Special Agent in Charge of the Federal Bureau of Investigation; Joseph A. Galasso, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation; and Peter Emerzian, Special Agent in Charge of the Department of Housing and Urban Development, announced today that a federal Grand Jury returned an indictment against ten individuals charging them with sixty-two counts of wire fraud and one count of conspiracy to launder money arising out of their participation in the multi-million dollar mortgage fraud scheme. The indictment charges the individuals with multiple counts of wire fraud and conspiracy to launder money:

According to the indictment, it is alleged that from the years 1998 through 2002, several of the defendants purchased distressed properties within low-income neighborhoods and then re-sold the properties rapidly at artificially inflated values. Individuals known as "runners" were used to recruit prospective buyers and were paid finder's fees for the successful sale of property. The defendants induced prospective buyers by telling them that they would not have to make any down payments as well as promising the buyers that they would receive money back at the time of the real estate closing.

The prospective buyers were then referred to mortgage brokers who were also involved in the land-flipping scheme. Since many of the prospective buyers did not have the financial ability to qualify for loans, it is alleged that the defendants generated and then processed false and fraudulent loan applications and other documentation through various lending institutions to obtain loans for the prospective buyers. The false documentation included bogus down payment information, fraudulent income information, and false documentation to show improvements to the properties that were never made. It is alleged that the defendants then used appraisers involved in the scheme to generate false and fraudulent appraisals to support the loan amounts for the artificially inflated property values. In exchange for participating in the fraud scheme, it is alleged that the mortgage brokers and appraisers received not only continued business, but also "incentive" payments such as cash or hidden interests in real estate deals.

Once the unwitting lending institutions approved the loan applications of the prospective buyers, the prospective buyers were referred to attorney X as well as other attorneys. It is alleged that X generated false and fraudulent real estate closing documentation to facilitate and conceal the fraud. It is alleged that in exchange, appraiser H received not only continued business, but also "incentive" payments such as cash or hidden interests in real estate deals. X received the loan proceeds from various out-of-state lending institutions via wire transfer into a client trust account he maintained and then disbursed the net profits from the fraudulent real estate transactions by issuing checks out of that account to the defendants.

"For most people owning a home is the fulfillment of the American dream," stated U.S. Attorney Sullivan. "To exploit such a dream is despicable. The defendants are charged with preying upon inexperienced and unsuspecting home buyers and lying to lending institutions to obtain loan proceeds for their personal profit. Such activity can bankrupt lending institutions and ruin the lives of buyers who unwittingly sign on to a mortgage they can not afford. The U.S. Attorney's Office, along with its law enforcement partners, is committed to doing all in its power to protect the integrity of the mortgage lending system and vulnerable consumers."

According to the indictment, the defendants are alleged to have played the following roles in the land-flipping scheme:

– Attorney X served as the primary real estate attorney for the flipped properties. According to the indictment, X also stole money intended to pay for the buyers' real estate and utility taxes;

– A, B, & C purchased and sold real estate under a various corporate names;

D originally served as a runner but later became a partner in the "land-flipping" scheme;

E, F & G worked in the mortgage business and assisted in finding financing for the prospective buyers;

H & I worked as appraisers.

Mortgage broker E was arrested today in Baltimore and will appear in federal court in Maryland before being brought to Massachusetts . Runner/partner D, an illegal alien from Guyana already in Immigration custody in Miami , Florida undergoing deportation proceedings, will be transported to Massachusetts to appear in federal court at a later date. The other eight defendants were all arrested today in Massachusetts and will appear later today before a U.S. Magistrate Judge. If convicted, the defendants each face a maximum term of imprisonment of 30 years and a fine of $1 million for each wire fraud charge, and a maximum term of imprisonment of 10 years and a fine of twice the amount of funds involved in the money laundering conspiracy.

This case is the result of a joint investigation by the Federal Bureau of Investigation, the Internal Revenue Service's Criminal Investigation and the Department of Housing and Urban Development. The case is being prosecuted by Assistant U.S. Attorney William M. Welch, II in Sullivan's Springfield office.

Press Contact: Samantha Martin, (617) 748-3139

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