press release - US Department of Justice

Document Sample
press release - US Department of Justice Powered By Docstoc
					U.S. Department of Justice
United States Attorney

Southern District of Florida

99 N.E. 4 Street,

Miami, FL 33132


September 30, 2008



      R. Alexander Acosta, United States Attorney for the Southern District of
Florida, Jonathan I. Solomon, Special Agent in Charge, Federal Bureau of
Investigation (FBI), Miami Field Office, Michael Fithen, Special Agent in Charge,
U.S. Secret Service (USSS), Jon Rymer, Inspector General, Federal Deposit
Insurance Corporation - Office of Inspector General (FDIC-OIG), Kenneth M.
Donohue, Inspector General, U.S. Department of Housing and Urban
Development - Office of Inspector General (HUD-OIG), Henry Gutierrez,
Inspector in Charge, U.S. Postal Inspection Service, Michael E. Yasofsky,
Special Agent in Charge, Internal Revenue Service, Anthony V. Mangione,
Special Agent in Charge, U.S. Customs and Immigration Enforcement, Office of
Investigations, Don B. Saxon, Commissioner, Florida Department of Financial
Regulation, and Robert Parker, Director, Miami-Dade Police Department,
gathered today to mark the end of year one of the Federal-State Mortgage Fraud
Initiative, first announced in September 2007.

    On September 27, 2007, U.S. Attorney Acosta announced a joint Federal-
State Mortgage Fraud Initiative, designed to combat the growing mortgage fraud
epidemic in South Florida. The Federal-State Mortgage Fraud Initiative brought
together federal and state law enforcement to investigate and prosecute federally
mortgage fraud offenders. In June 2008, the U.S. Attorney announced the
formation of a Mortgage Fraud Strike Force within the United States Attorney’s
Office (USAO) and the dedication of full-time attorneys and agents to the
investigation and prosecution of mortgage fraud matters.

     Together, the Federal-State Mortgage Fraud Initiative and the USAO
Mortgage Fraud Strike Force have yielded substantial results. To date, 112
individuals have been prosecuted since Sept. 2007 for their involvement in
mortgage fraud schemes that have resulted or were intended to result in the
approval and issuance of more than $176,000,000 in mortgage loans.

     U.S. Attorney Alex Acosta stated, “We have learned the hard way that
mortgage fraud affects each and every one of us. Mortgage fraud undermines
the soundness of our financial markets and shakes public confidence in our
banking system. Although increased prosecutions alone will not solve the
mortgage crisis, we hope that these prosecutions will help deter future fraud.”

     FBI Special Agent in Charge Jonathan I. Solomon said, “Mortgage fraud is a
significant problem that affects our community and the nation. We are working
with task forces and have designated additional resources to combat mortgage
fraud, making it a top priority for the FBI.”

    “In today's uncertainty in the housing market and concurrent efforts to try to
help homeowners in distress, it is all the more important that we remain
dedicated to investigating and prosecuting those that would defraud the Federal
Housing Administration,” said Kenneth M. Donohue, Inspector General of the
Department of Housing and Urban Development. “The HUD Office of Inspector
General remains committed to law enforcement efforts to bring those that would
seek to profit while the American taxpayer is defrauded of critical programs in a
time of extreme need.”

     U.S. Secret Service Special Agent in Charge Michael K. Fithen said, “The
Secret Service Miami Field Office embraces this new initiative to address the full
scope of mortgage fraud schemes that continue to emerge and victimize south
Florida. We will bring to bear our expertise and that of law enforcement partners
from our Electronic Crimes Task Force and Financial Crimes Task Force to
assist in these significant investigations.”

      Henry Gutierrez, Inspector in Charge of the Miami Division of the U.S. Postal
Inspection Service, added, “These investigations and prosecutions illustrate the
South Florida law enforcement community’s commitment to root out those who
perpetrate fraud. Mortgage fraud fuels our nation mortgage crisis, and fraudsters
will be prosecuted.”

     IRS Acting Special Agent in Charge Betty Stewart added, “Mortgage fraud is
detrimental to our economy and erodes the integrity of our tax system. IRS-CI
will continue to work with our law enforcement partners to aggressively uncover
and investigate these types of fraud.”

     “We at ICE are pleased to have been able to assist in today’s arrest of
Sergej Tews and in investigating and combatting mortgage fraud here in South
Florida,” said Anthony Mangione, Special Agent in Charge of the ICE Office of
Investigations in Miami. “Mortgage fraud costs lenders and purchasers millions of
dollars and undermines the credibility of the real estate industry. The Miami ICE
Office of Investigations will continue to work to uncover illicit transactions in the
mortgage industry and together with the law enforcement community is united in
our resolve to disrupt criminal organizations and individuals that commit crimes
against our society and the economy.”

     Director Robert Parker, Miami-Dade Police Department, noted,
“Approximately one year ago, the Miami-Dade Police Department joined Miami-
Dade County Mayor Carlos Alvarez, as he established a county-wide Mortgage
Fraud Task Force, and with the U.S. Attorney’s Office Federal- State Mortgage
Fraud Initiative, to help combat real estate and mortgage fraud in our
community. Today, our commitment continues. Since then, many investigators
and resources have been dedicated to these types of crimes, and results have
been promising. We will continue to do the work needed to re-establish
confidence in the integrity of real estate transactions in our county. ”

    Today, U.S. Attorney Acosta, joined by members of the Federal-State
Mortgage Fraud Initiative, announced a string of recent mortgage fraud
prosecutions, including:

1.  United States v. Alberto Hernandez and John Fraga, Case No. 08-

     On September 8, 2008, two defendants were charged in a 21-count
Indictment for their participation in a mortgage fraud scheme that resulted in the
approval and disbursement of six mortgage loans, totaling approximately
$980,000. According to the Indictment, from August 2003 to April 2004,
defendant Alberto Hernandez, through his company, Ash Homes, sold six
properties in Miami-Dade County to unqualified buyers. The purchases were all
financed through Federal Housing Authority (FHA) loans, which are meant to
provide low and middle income purchasers with an opportunity to purchase
homes at better rates than would otherwise be available. These buyers are able
to obtain better rates because FHA agrees to guarantee repayment of the loans.
     In all six residential property sales, Hernandez, through straw donors,
fraudulently financed the down payments and closing costs of the buyers.
Defendant John Fraga was one of the false donors, as well as a silent investor
with defendant Hernandez. Both defendants received sizable payments once the
properties were sold to the unqualified buyers. In each of the six residential
property sales, defendant Hernandez signed an Addendum to the HUD-1
settlement statement falsely certifying that he, as seller, was not financing the
buyer’s closing contributions. Once the loans were closed, four of the six
properties went into foreclosure. As the guarantor of the loans, HUD was
required to take title to the property and reimburse the banks for their losses.
The approximate aggregate losses to HUD related to these properties is in
excess of $550,000.

     If convicted, the defendants face 20 years’ imprisonment on the wire and
mail fraud charges, 5 years’ imprisonment on the false statement charges, and 2
years’ imprisonment for making false statements to HUD. (AUSA Peter A.

2.   United States v. Sergej Tews, Case No. 08-20883-Cr-King.

     On September 25, 2008, a federal grand jury returned a 22-count Indictment
charging Sergej Tews in a complex fraud scheme involving the abuse of the
State of Florida’s foreclosure process. Through this fraudulent scheme, Tews
defrauded third-party purchasers seeking to buy allegedly foreclosed properties
of approximately $615,900.

     From March 2007 through August 2008, defendant Sergej Tews identified at
least eight homeowners interested in relinquishing their mortgages and induced
them to transfer their properties to him based on a promise that he would
assume the payments on their outstanding mortgage loans. With respect to each
property, the property owner executed a warranty deed, prepared by Tews,
which gave the false appearance that the property was being sold, not just
transferred, to a third party. These third parties were relatives of Tews. In no
instance did Tews’ relatives provide any money to the seller, make any payment
on any outstanding mortgages, or even meet the seller.

     Upon filing the false warranty deeds at the Miami-Dade County Recorder's
Office, Tews a) fabricated the amount paid for each property; b) hid the fact of
the original homeowner’s outstanding mortgages; and c) paid the filing taxes
based on the fabricated purchase price, making it appear as though the property
had been purchased for the fraudulent amount.
     At the same time that Tews filed the warranty deeds, he filed false
mortgages with the Miami-Dade County Recorder’s Office, which were dated the
same date as the warranty deeds. The mortgages made it appear as if each of
the Tews’s relatives had borrowed money from a supposed lending company to
finance the alleged purchase of the property. In each case, the supposed
lending company was a company that Tews incorporated (in some instances,
after the date of the alleged loan) and for which Tews was the owner, officer and
general partner.

     None of Tews’s supposed lending companies were registered to do
business in Florida nor were licensed to operate as a mortgage lender.
Additionally, Tews’s supposed lending companies each had a name notably
similar to the name of an already existing mortgage lender registered to do
business in Florida. For example, he created a supposed lending company
called Argent Mortgages, LLC, closely named after the established lender Argent
Mortgage Company, LLC. As another example, Tews created Fremont Lending,
LLC, a bogus lending company named after the established Freemont
Investment & Loan Company. In no instance did any of Tews’s supposed
lenders loan any money in connection with the false and fraudulent loans.
Regardless, Tews initiated foreclosure actions with respect to each property.

     Tews executed and filed with Miami-Dade County courts a sworn affidavit of
indebtedness claiming that the purported borrower, his relative, was in default of
the fraudulent loan. In each case, the alleged defaulting borrower never
responded to the action, and the court issued a Final Judgment of Foreclosure in
favor of the supposed foreclosing lender and scheduled a foreclosure sale where
the properties were auctioned to the highest bidder.

     At the foreclosure sales, third-party purchasers, deceived by Tews’s
fraudulent warranty deeds and mortgages into believing that there were no pre-
existing mortgages, bid on, and sometimes purchased, the properties. As a
result of his scheme, Tews received approximately $615,900 into his bank
accounts. The actual, outstanding lenders have since foreclosed on the
properties. (AUSA Joseph B. Shumofsky)

3.   United States v. Vaughn Addison, Case No. 08-20912-Cr-Lenard.

      On September 30, 2008, a federal grand jury returned a 4-count Indictment
charging the defendant in a mortgage fraud scheme that resulted in the approval
and disbursement of three mortgage loans, totaling $2,400,000. Defendant
Vaughn Addison used his position as an employee of two separate lenders to
facilitate the approval of fraudulent mortgage loans on the sale of three
residential properties in Marco Island, Florida (“the Marco Island properties”).
     To execute the scheme, the mortgage broker in the transactions identified
the Marco Island properties as residential properties that could be used to
defraud lenders. False mortgage loan applications and other related documents
were prepared by and on behalf of the straw buyers ostensibly recruited to
purchase the properties, and these documents were submitted to the lenders to
induce the lenders to fund mortgage loans on each of the Marco Island
properties. These mortgage loan applications contained false information
regarding the straw buyers’ employment, income, and their intent to live in the
residential property as their primary residence. Each of the straw buyers signed
the false mortgage loan applications.

     Vaughn Addison worked at WMC Mortgage as a business development
associate at the time of the submission of the loan applications for the first two
properties involved in the scheme, and as an area sales manager at Countrywide
Home Loans at the time of the submission of the loan application for the third
property. In each case, Addison reviewed the loan application packages
submitted by the mortgage broker, and counseled the mortgage broker as to how
to structure the fraudulent loan packages to satisfy the lender underwriters
examining the respective loan applications for the Marco Island properties.

     After each of the closings for the Marco Island properties, the
mortgage broker paid Addison $5,000.00, $10,000.00 and $3,000.00,
respectively, for his assistance as a lender insider in obtaining approval for the
three fraudulent loans. In each case, the straw buyers failed to make payments
on the loans obtained as part of the scheme, causing each of the Marco Island
properties to go into foreclosure and causing the lending institutions to suffer
probable losses in excess of $900,000.

     If convicted of the charges conspiracy to commit wire fraud and substantive
wire fraud, the defendant faces a statutory maximum sentence of 20 years’
imprisonment. (AUSA Peter A. Forand)

4.   United States v. Magile Cruz, Case No. 08-20770-Cr-King.

     On August 28, 2008, Magile Cruz, a/k/a Maggie Cruz, a/k/a Magile Cruz-
Rodriguez, a/k/a Magile Araujo, a/k/a Ros Rodriguez, was charged for her
participation in a multi-million fraud scheme that resulted in more than
$24,000,000 in fraudulent mortgage loans, and losses of more than $5,000,000
to lenders. Cruz was charged with conspiracy to commit mail fraud and wire
fraud, and with substantive counts of mail and wire fraud. If convicted, she faces
a maximum sentence of 20 years on the conspiracy charge and on each
substantive charge of mail and wire fraud.
     According to the Indictment, Cruz was the de facto owner of Star Lending
Mortgage, State Mortgage Lending, Sherley Title Services, Doral Title Services,
and Professional Title Express. Star Lending Mortgage was a mortgage
brokerage company; State Mortgage Lending was a mortgage lending business.
Both were licensed to do business in the State of Florida. Sherley Title Services,
Doral Title Services, and Professional Title Express were title agencies and were
not licensed by the State of Florida. Cruz is alleged to have used employees and
friends as the nominee owners for all five companies, and personally managed
the businesses, including all the financial affairs of the companies.

       Between 2005 through 2007, Cruz was engaged in a scheme to obtain
fraudulent mortgage loans for the purchase of 79 properties in Miami-Dade and
Broward Counties. To execute the scheme, Cruz would identify residential
properties for sale through Star Lending Mortgage and State Mortgage. Cruz
and other co-conspirators would recruit and pay straw buyers for the selected
properties. Cruz and her co-conspirators would then prepare and cause to be
prepared fraudulent mortgage loan applications on behalf of the straw buyers.
The applications included false employment verifications, pay stubs, verification
of income and funds on deposit, and IRS Forms W-2.

       Thereafter, Cruz and her co-conspirators, including the straw buyers, would
create and submit to the banks and lending institutions false HUD-Settlement
Statement Forms, also known as HUD-1s, which concealed from the lending
institutions, among other things, the existence of a second HUD-1 prepared for
the same transaction with a lower sales price for the property. In other instances,
Cruz would fraudulently obtain multiple loans from various lenders for the same
parcel of property, all unbeknownst to the lenders involved. Finally, Cruz would
similarly seek and obtain fraudulent loans on properties for which there was no
true sale by stealing the identity of the seller and fabricating a transaction with a
straw buyer.

        According to the charges, the straw buyers would allow their identities and
credit information to be used in the mortgage loan applications, falsely
representing themselves to be the true buyers of the properties and the
individuals responsible for the loan. Cruz and her co-conspirators would create
and submit to banks and lending institutions fraudulent title documentation,
including false closing protection letters, falsely representing that Sherley Title
Services, Doral Title Services and Professional Title Express were agents for
Fidelity National Title and/or Old Republic. In fact, however, these companies
were not authorized by Fidelity National Title and/or Old Republic to act as their
agents and to issue such documentation.

      Once the mortgage applications were approved, the lenders would wire the
loan proceeds to Sherley Title Services, Doral Title Services, and Professional
Title Express for closing. At closing, Cruz and her co-conspirators would receive
a credit for the difference between the inflated price and the actual selling price of
the property. Cruz and her co-conspirators would then execute and file Change
of Address forms with the United States Postal Service on behalf of the straw
buyers, thus concealing from the individual actually living at the address that the
subject property had been fraudulently sold.

       Cruz would make the payments on the mortgage loans to maintain the
loans afloat until the properties could be resold again, often to another straw
buyer. When she failed to make payments on the loans, some properties went
into foreclosure, resulting in substantial losses to the lending institutions. (AUSA
Lois Foster Steers)

     Mr. Acosta commended the investigative efforts of the U.S. Department of
Health and Human Services, Office of Inspector General, the Federal Bureau of
Investigation, Miami Field Office, U.S. Secret Service, Federal Deposit Insurance
Corporation - Office of Inspector General, U.S. Department of Housing and
Urban Development - Office of Inspector General, U.S. Postal Inspection
Service, Internal Revenue Service, U.S. Customs and Immigration Enforcement,
Office of Investigations, Florida Department of Financial Regulation, and Miami-
Dade Police Department.

     A copy of this press release may be found on the website of the United
States Attorney's Office for the Southern District of Florida at Related court documents and information may be
found on the website of the District Court for the Southern District of Florida at or on