Examples of Financial Institution Fraud Investigations - Fiscal Year 2013

The following examples of financial institution fraud investigations are written from public record documents on file in the court records in the judicial district in which the cases were prosecuted.

Pennsylvania Woman Sentenced on Embezzlement and Tax Evasion Charges
On April 19, 2013, in Pittsburgh, Pa., Stacy L. Attisano, of Lawrence County, Pa., was sentenced to 30 months in prison, three years of supervised release and ordered to pay $259,847 in restitution. Attisano pleaded guilty to embezzlement and income tax evasion. According to court documents, from January 2004 until October 2009, Attisano, an employee of Lawrence County School Employees Federal Credit Union, embezzled and willfully misapplied money in the excess of $1,000.  In addition, for the 2006 through 2009 tax years, Attisano filed false and fraudulent income tax returns where she under-reported her taxable income.

Attorney Sentenced for Role in Mortgage Fraud Scheme
On April 17, 2013, in Raleigh, N.C., Jeffrey Scott Taggart, of Wilmington, N.C., was sentenced to 36 months in prison and three years of supervised release on charges of conspiracy to commit mail, wire, and bank fraud and subscribing to a false income tax return. Taggart was also ordered to pay $3,060,896 to 12 banks and lenders who were victims of the fraud. According to court documents, Taggart, in his capacity as a North Carolina attorney, prepared false HUD-1 settlement statements that he sent to banks and lenders on more than 50 loan transactions tied to the scheme. Taggart also participated in the scheme by fronting money from his firm’s escrow account to assist borrowers to appear qualified for loans that he closed. As a result of the scheme, banks and lenders issued loans to the conspirators of approximately $15.8 million, which resulted in $3,060,896 in actual losses to the banks and lenders. Additionally, Taggart falsely listed his taxable income as $80,486, when in fact, his taxable income was $271,003.

Woman Sentenced on Bank Fraud and Identity Theft Charges
On April 15, 2013, in Baltimore, Md., Quanishia Williamson-Ross, aka Quanishia Williamson, aka Quanishia Ross, was sentenced to 42 months in prison and three years of supervised release. Williamson-Ross pleaded guilty to conspiracy to commit bank fraud and aggravated identity theft. In March 2012, Williamson-Ross and others were indicted in connection with a bank fraud scheme to use the personal identifying information of individuals to fraudulently obtain money and property. According to the indictment, from December 2008 through December 22, 2011, in Maryland, Pennsylvania and elsewhere, the defendants opened checking accounts or had others open accounts at banks and obtain check cards, which the conspirators then controlled. The conspirators deposited fraudulent checks into the accounts then used the associated check cards at ATM machines to make cash withdrawals from the accounts. Williamson-Ross and others made fraudulent identification documents using the personal information of others but with their photographs, which they used, along with the check cards, to make purchases at retail stores, later returning the purchased items for cash. In addition, the defendants used the check cards to obtain services, such as utilities, cable, and cellular phone service, and make purchases for their personal benefit at restaurants, drug stores, grocery stores, gas stations and video rentals, and other businesses. Then the defendants would not pay for the services and merchandise obtained through the use of the check cards and checking accounts. The banks suffered a loss when the fraudulent checks deposited by the defendants were returned as unpaid.

North Carolina Mortgage Fraud Promoter Sentenced
On April 9, 2013, in Charlotte, N.C, Kenneth Egri was sentenced to 78 months in prison and two years of supervised release. In July 2011, Egri and a co-conspirator pleaded guilty to conspiracy to commit wire fraud in connection with their operation of a mortgage fraud. In addition, Egri pleaded guilty to two counts of failing to file income tax returns for the 2005 and 2006 tax years. According to court documents, from about 2001 to about 2006, Egri and his co-conspirator owned and operated Direct Home Services (DHS) in Charlotte. The conspirators utilized DHS to generate over $37.4 million in fraudulent loans and to funnel over $5.4 million in fraudulent loan proceeds to themselves. To promote their scheme, the conspirators would agree with a builder to purchase a property at the “true price,” then arrange for a buyer to purchase the property at an inflated price in exchange for a hidden kickback. The difference between the inflated price and the true price would be extracted at closing by the conspirators. To induce lenders to make mortgage loans, the conspirators caused fraudulent loan packages to be submitted. In addition, from 2003 through 2006, Egri failed to file income tax returns reporting $1,288,604 of income from the mortgage fraud scheme.  Egri and his co-conspirator were ordered to pay restitution of $1,335,744 to the victim bank and Egri was ordered to pay $257,721 in restitution to the IRS.

Former Bank Manager Sentenced for Embezzlement, Tax Charges, and Bank Fraud
On March 26, 2013, in Cleveland, Ohio, Kevin J. Moore, of Mansfield, Ohio, was sentenced to 51 months in prison and ordered to pay more than $2 million in restitution. On November 26, 2012, Moore pleaded guilty to bank embezzlement, tax charges and bank fraud. According to court documents, from August 2008 to November 2010, Moore was the manager of a bank in Mansfield, Ohio. During this time he embezzled approximately $1.7 million from the bank by opening or renewing Certificates of Deposits for customers, and then stealing the funds in the accounts. Moore also failed to report and pay taxes on the monies he had embezzled and used for his own benefit. In addition, Moore defrauded an individual of more than $360,000 in a phony investment scheme. Moore was charged with bank fraud for opening lines of credit in another individual's name and fraudulently drawing on those lines while Moore was the manager of another bank from the fall of 2007 to the spring of 2008.

Ohio Man Sentenced for Bank Fraud and Money Laundering Charges
On March 18, 2013, in Cleveland, Ohio, Marko Nikoli was sentenced to 27 months in prison and ordered to pay $1 million in restitution. Nikoli pleaded guilty on bank fraud and money laundering charges. According to court documents, around June 2003, Nikoli presented false documents to St. Paul Croatian Federal Credit Union (SPCFCU) requesting a loan for $250,000 without going through proper procedures and making false representations. The loan was approved by a co-conspirator inside the bank and funds were deposited into a bank account controlled by Nikoli. About June 12, 2003, Nikoli transferred, via international wire transfer, approximately $442,500 from his personal bank account to a bank account controlled by him in Macedonia. Around May 3, 2005, Nikoli again submitted falsified loan documents to SPCFCU. The co-conspirator inside the bank approved a $250,000 loan to Nikoli. On or about May 6, 2005, Nikoli transferred, via international wire transfer, approximately $495,000 from his bank account to an international bank account in Macedonia.

Four Conspirators Sentenced for Widespread Mortgage Fraud Scheme     
On March 6, 2013, in Plano, Texas, four conspirators were sentenced in a mortgage fraud scheme. Davon Willis was sentenced to 48 months in prison, three years of supervised release and ordered to pay $6,744,896 in restitution. Rodney Lavan Giles was sentenced to 46 months in prison, five years of supervised release and ordered to pay $590,781 in restitution. Julila Nicole Allen was sentenced to 24 months in prison and three years of supervised release. Quincy Dynell Harrington was sentenced to 18 months in prison and three years of supervised release. According to court documents, the defendants held various roles in a conspiracy to defraud mortgage companies.  Willis and Harrington were mortgage brokers. Allen and Giles were home buyer recruiters. Each defendant pleaded guilty to conspiracy to commit money laundering. Giles also pleaded guilty to conspiracy to commit bank fraud. As part of the conspiracy, the defendants recruited buyers for properties using falsified mortgage loan applications which overstated the amount of the actual purchase price and loan amounts the buyers needed to purchase certain properties. When the mortgage loans were funded, the excess loan funds were used to pay kickbacks to the co-conspirators. In order to conceal the kickbacks from the lenders, the kickbacks were shown as fees for services on the settlement statements and paid to and from bank accounts of business entities controlled by the co-conspirators.  

Texas Man Sentenced for Multiple Bank Fraud Convictions
On February 25, 2013, in Houston, Texas, Patrick Cody Morgan, of Alvin, Texas, was sentenced to 324 months in prison, five years of supervised release and ordered to pay $25,277,802 in restitution. According to court documents, from July 2004 through September 2007, Morgan and others participated in a scheme to defraud financial institutions insured by the Federal Deposit Insurance Corporation (FDIC) and residential mortgage lenders. Morgan would locate condominium units in the Houston area from a builder or developer. He would then set up trust accounts with names similar to the condominiums through which the title was to pass. Co-defendants would recruit individuals, also known as straw buyers, with good credit to act as borrowers in applications for residential mortgage loans to purchase one or more of the properties, which would ultimately go into foreclosure because of the failure to pay the loans. Within the overall scheme, there were more than 100 properties with a loan amount of more than $39 million.

Virginia Man Sentenced for Multi-Million Dollar Fraud Scheme
On February 15, 2013, in Richmond, Va., Allen Mead Ferguson was sentenced to 14 months in prison, two years of supervised release, ordered to pay $5,652,555 in forfeiture and $2,943,776 in restitution. Ferguson pleaded guilty to mail fraud and money laundering on November 14, 2012. According to court documents, from about February 2006 through April 2010, Ferguson made material misrepresentations and omissions on personal financial statements submitted to various federally insured financial institutions. On these financial statements, he knowingly and intentionally stated, among other things, that he had $1 million in deferred compensation, and/or $2 million in Virginia tax-free bonds.  In fact, as Ferguson was aware, he did not have any deferred compensation since 1998 and did not owned $2 million in Virginia tax-free bonds since at least January 2009.  In reliance on these false financial statements, the federally insured financial institutions extended various promissory notes and loans to Ferguson. In 2011, Ferguson filed for bankruptcy. At that time, the federally insured financial institutions were owed $5,652,555.  As a result of the bankruptcy proceeding, the financial institutions received some compensation, but, at the time of sentencing, still had a loss totaling $2,943,766.

Ohio Man Sentenced for Mortgage Fraud
On February 13, 2013, in Columbus, Ohio, Branden D. Chatman, of Lewis Center, Ohio was sentenced to 21 months in prison, four years of supervised release and ordered to pay $90,678 in restitution to the victims of a mortgage fraud scheme. On August 23, 2012, Chatman pleaded guilty to one count of money laundering and to one count of conspiracy to commit bank fraud. According to court documents, between May 2006 and January 2007 Chatman knowingly conspired with others to devise a scheme to defraud lending institutions of approximately $1.5 million in loans. Chatman recruited property purchasers and sellers and referred those clients to a specific mortgage broker. He and the mortgage broker submitted loan applications with false statements about the purchaser’s income, place of employment, and the cost of renovating the property. At times, Chatman received excess loan proceeds generated by the property purchasers by submitting false invoices to the title companies in the name of his business, Henderson Homes. Chatman knew the HUD-1 settlement statements prepared by the title company stated that the property buyers were paying money out of the sale proceeds to rehabilitate and renovate the home, when in fact these statements were false. Chatman also received excess loan proceeds in the form of kickbacks. Chatman deposited the proceeds of the bank fraud activities in the form of checks that were made payable to Henderson Homes, and wire transfers received in the name of Henderson Homes, in the total amount of $176,498.

North Carolina Man Sentenced on Bank Fraud Charges
On February 8, 2013, in Raleigh, N.C., Loren F. Hamlin was sentenced to 78 months in prison, five years of supervised release and ordered to pay $12,010,536 in restitution. In October 2011, Hamlin pleaded guilty to attempted bank fraud.  According to court documents, Hamlin was employed as a banking center manager for a federally insured financial institution located in Kitty Hawk, N.C.  In connection with an investment deal, Hamlin executed a scheme to defraud his employer by authorizing a cashier’s check for $13,047,907 from an account with a balance of only $9,827,970 without authorization or approval of his employer.  

Phoenix Man Sentenced in Mortgage Scheme
On February 5, 2013, in Phoenix, Ariz., Ernest Babbini was sentenced to 24 months in prison, three years of supervised release and ordered to pay $225,000 in restitution. Babbini pleaded guilty in December 2011 to conspiracy. According to the plea agreement, from February 2006 through May 2007, Babbini and other co-defendants submitted false mortgage loan applications and related documents to banks and other lending institutions to fund real estate purchases. They concealed from the lending institutions portions on the loan proceeds known as "cash back" for their own personal use. To accomplish this they would submit simultaneous loan applications for multiple real estate purchases without disclosing other pending applications. They listed false asset, occupancy, and liability information in the loan applications to obtain the loans. They artificially inflated the sales price of the real estate purchases, in some cases by using "double escrow" transactions in which they transferred or purported to transfer title from the seller to a family trust and then to the buyer. In addition, they directed portions of the proceeds to some of the defendants through the use of entities and concealed material information from the lending institution. During this period Babbini worked as a loan officer and helped the co-defendants obtain the funding to purchase 15 homes and receive more than $2.5 million in "cash back" by submitting loan applications he knew where false.

Ohio Businessman Sentenced for Credit Union Fraud
On February 5, 2013, in Cleveland, Ohio, A. Eddy Zai, of Pepper Pike, Ohio, was sentenced to 87 months in prison, five years of supervised release and ordered to pay more than $23 million in restitution. Zai pleaded guilty to conspiracy to commit bank fraud, bribery, bank fraud, money laundering and making false statements of financial institutions. According to court documents, Zai conspired with others, including Anthony Raguz, the former Chief Operating Officer of the St. Paul Croatian Federal Credit Union (SPCFCU), to submit false loan documents to the credit union, to defraud the credit union of approximately $16.7 million, and to pay bribes and kickbacks to Raguz for using his position at the credit union to approve numerous loans to Zai and the entities and nominee companies he controlled. From December 2003 through March 2010, Zai owned, operated and controlled The Cleveland Group, LLC and its many related entities. Some entities were created primarily to operate as a “safe haven” for credit union proceeds, while others performed little or no legitimate business despite having loan proceeds intended for Zai’s “business” ventures. Zai engaged in a scheme to defraud the credit union by, among other things, submitting loan documents for and receiving loan proceeds on behalf of companies that ceased operations. He continued to seek and obtain loan proceeds in the name of non-operating entities even after he directed that no loan payments be made to the credit union. Zai gave Raguz numerous cash payments, usually in the form of $100 bills concealed in envelopes and hand-delivered to Raguz, totaling more than $5,000. According to court documents, the payments were made to both induce Raguz to approve additional fraudulent loan applications and to reward Raguz for having previously approved false loan applications.

Oklahoma Realtor Sentenced for Mortgage Fraud
On February 1, 2013, in Oklahoma City, Okla., Safiyyah Tahir Battles was sentenced to 30 months in prison and two years of supervised release, including 104 hours of community service. Battles was also ordered to pay $326,902 in restitution and a forfeiture judgment of $102,630.  According to court documents, Battles, a former real estate agent, used her sister’s mortgage brokerage company to apply for a $500,000 loan.  When she was required to provide twelve months of bank statements to support her income and assets, Battles altered the statements by adding more than $100,000 to the ending balance on each statement, deleting her husband’s name as an account holder and removing numerous overdraft fees.  At closing on May 4, 2007, Battles signed a final loan application that stated falsely that she earned $344,677 per year and had $165,907 in her bank account.  According to a tax return that she filed in March 2009, Battles’ adjusted gross income for 2006 was $14,001. According to bank records, her actual account balance on May 4, 2007, was $852. Based on the application information, a forged letter, and communications with the mortgage brokerage on the day of closing, the mortgage company authorized $102,630 from the loan proceeds to be paid to a local builder. Battles took the $102,630 check at closing, deposited into her own bank account and used it for her own purposes.

Father and Son Sentenced in Mortgage Fraud Scheme
On February 1, 2013, in Syracuse, N.Y., Kevin M. O’Connell and Kevin D. O’Connell, both of Albany, N.Y., were each sentenced to 24 months in prison. In addition, Kevin M. O’Connell was ordered to pay $2,275,584 in restitution and to forfeit $4,628,886. Kevin D. O’Connell was ordered to pay $2,136,444 in restitution. According to court documents, Kevin M. O’Connell was a principal of PB Enterprises and employed his father, Kevin D. O’Connell, to assist in a series of transactions that defrauded banks that were offering mortgages. PB Enterprises found inexpensive properties, usually rental properties that were for sale. They then recruited buyers to purchase the property at higher prices. They promised the buyer would pay “no money down” and would instead receive a check at the closing. In dozens of transactions, PB Enterprises fraudulently obtained mortgages for those purchasers at the higher purchase price by providing false information to the lenders. PB Enterprises then arranged with closing agents to submit documents to the lenders that disguised the fact that the purchase prices were inflated and that the purchaser and the principals of PB Enterprises were splitting the excess mortgage money. The mortgage lender was falsely led to believe that the mortgage proceeds were necessary to purchase the property.

Kansas Man Sentenced for Role in Mortgage Fraud Scheme
On January 28, 2013, in Kansas City, Kan., Kevin M. Mahoney, of Stilwell, Kan., was sentenced to 15 months in prison, one year of supervised release and ordered to pay a $5,000 fine. Mahoney pleaded guilty to one count of conspiracy to commit wire fraud. In his plea, Mahoney admitted he conspired with co-defendant Paul Hartfield and others to make false representations to lenders in order to fraudulently obtain funds from mortgage lenders. Hartfield owned two businesses: Hart Investments, Inc., and Diamond Mortgage, both in Overland Park, Kan. Kevin Mahoney was a loan officer for Diamond Mortgage. Hart Investments purchased depressed properties in order to rehabilitate them and sell them at a profit. In October 2006, Hartfield stopped rehabilitating houses. Instead, Hartfield, Mahoney and others made false representations to lenders in order to fraudulently obtain loan funds. Mahoney made false statements on loan applications and submitted them to mortgage lenders to fraudulently obtain loan funds for numerous properties in Missouri. Paul Hartfield was previously sentenced to 78 months in prison and ordered to pay $2.6 million restitution.

Colorado Man Sentenced for Orchestrating Real Estate Scheme
On February 1, 2013, in Denver, Colo., Steven J. Mascarenas, of Westminster, Colo., was sentenced to 72 months in prison, three years of supervised release and ordered to $1,776,152 in restitution. Mascarenas pleaded guilty on July 3, 2012, to wire fraud and making a false statement to a pretrial services officer. According to court documents, in 2004, Mascarenas, then an attorney and licensed real estate broker, orchestrated the purchase and resale of residential properties in “The Broadlands”, a subdivision in  Broomfield, Colorado. He arranged to have individuals serve as “credit buyers” to obtain loans, purchase the properties, and resell them shortly thereafter at inflated prices to other “credit buyers” in his select group. He concealed from the lenders that these “credit buyers” were only acting at his direction and were being compensated for their participation in having obtained the loans and purchased the properties. Mascarenas had Katrina Roberts prepare appraisal reports in which she fraudulently inflated the fair market values of the properties by $100,000 to $325,000. To make the inflated values in all of her reports appear legitimate, she falsely represented that the purchases, which were actually sales at market value, were “distressed” sales or “quick” sales below market value. Based on the fraudulent appraisals, Mascarenas set the prices for the resales far beyond their true market values, and arranged for the buyers to obtain 100% financing for them. To ensure that the desired funding would be approved for the buyers for both the purchases and the resales, Mascarenas caused false information about their qualifications to be incorporated into their loan applications to enable them to qualify for the loans. He caused the proceeds from the second sales to be directed to entities of his choice. Co-defendant Kathy Mascarenas conducted financial transactions as necessary to facilitate, perpetuate, and conceal the fraud. All of the loans went into default, and the loss to the lenders was approximately $1,776,162. In July 2012, Katrina Roberts was sentenced to 20 months in prison. In November 2012, Kathy Mascarenas was sentenced to 24 months in prison.

Former Wisconsin Man Sentenced in Mortgage Fraud Scheme  
On January 29, 2013, Paul Zaleski, formerly of Twin Lakes, Wis., now living in Ojai, Calif., was sentenced to 14 months in prison and three years of supervised release for his part in a mortgage fraud scheme that spanned from 2004 to 2006. Zaleski pleaded guilty to one count of wire fraud and one count of money laundering. According to the indictment, Zaleski, acting as a mortgage broker, orchestrated a scheme which involved straw buyers, fraudulent loan applications, and inflated appraisals. As a result, he was able to arrange in excess of $14 million in loans for the purchase of approximately 51 properties located in southeastern Wisconsin and northern Illinois. More than $2 million of the loan proceeds wired by the various lenders were funneled to shell companies that Zalesk established. In connection with the scheme, Zaleski represented himself as a person involved in the purchase and improvement of real estate for profit and the coordinator of a group of investors engaged in that activity. All but a few of the properties ultimately went into foreclosure resulting in a loss of more than $5 million. Zaleski used the ill-gotten loan proceeds, in part, for the purchase of additional properties and for personal expenses.

Mortgage Broker Sentenced for Role in Mortgage Fraud Scheme
On January 31, 2013 in Columbus, Ohio, Kevin D. Hightower, of Reynoldsburg, Ohio, was sentenced to 30 months in prison, five years of supervised release and ordered to pay $1,941,798 in restitution. Hightower pleaded guilty on October 4, 2012 to one count each of conspiracy to commit money laundering, money laundering, and making a false statement to a lending institution. According to court documents, between April 2006 and August 2007, Hightower worked with several individuals to secure mortgage loan payments that were obtained through false statements to lenders. Hightower, a mortgage broker, purchased properties with the intent to sell the properties for a profit. Hightower used recruiters and mortgage brokers to assist in selling the properties. The mortgage brokers located purchasers for the properties and assisted them in obtaining financing. The recruiters and brokers were paid a fee by Hightower that ultimately came from the mortgage proceeds. Hightower and others provided the down payment funds knowing that they would be reimbursed by the proceeds from the property sale. Hightower maximized the selling prices for the properties so that he could maximize his profit on the sales, cover the purchaser’s down payments, and pay the recruiters for finding loans for the purchasers. The payments to Hightower’s associates were disguised on the HUD-1 Settlement Statements as construction funds, land contract payoffs, and lien payments. In addition, Hightower made false statements to Huntington Bank as the executor of a charitable remainder trust that he was withdrawing money from the trust for charitable purposes. Instead, he used the money to pay personal debts and for his personal use.

Illinois Man Sentenced for Role in Credit Union Collapse  
On January 29, 2013, in Cleveland, Ohio, Bujar Sejdic, of Ottawa, Ill., was sentenced to 24 months in prison and ordered to repay $1.6 million in restitution. Sejdic pleaded guilty to financial institution fraud, giving gifts for procuring loans and money laundering related to his activities at St. Paul Croatian Federal Credit Union (SPCFCU), located in Eastlake, Ohio. According to court documents, between January 2004 through March 2010, Sejdic obtained 25 loans totaling more than $1.6 million from St. Paul Croatian Federal Credit Union. These loans were made under false and fraudulent pretenses and many were made after Sejdic had already defaulted on previous loans. Sejdic obtained these loans with the assistance of the credit union’s then-chief operating officer, Anthony Raguz. In return, Sejdic gave Raguz $40,000 in cash and one check. In 2009 and 2010, Sejdic wired $240,000 from his SPCFCU account to an account in Belgrade, Serbia.

Defendant Sentenced for Multi-State Mortgage Fraud Scheme
On January 23, 2013, in Pensacola, Fla., Lonett Rochell Williams, of Woodland Hills, California, was sentenced to 120 months in prison for her participation in a conspiracy to defraud multiple lenders as part of a scheme to fraudulently purchase thirty-seven properties located in Texas, Georgia, California, and Florida. According to court documents, approximately $20,448,767 in loans were issued by the lenders in connection with the real estate deals. In October 2012, Williams pleaded guilty to conspiracy to commit mail fraud, conspiracy to commit money laundering, and mail fraud. Williams and her company received more than $4.5 million in kickbacks because of the scheme. Williams’ son, Raysean K. Richardson, of New York, N.Y., awaits sentencing for his participation in the same scheme. In September 2012, Richardson was convicted on charges of conspiracy to commit mail fraud, mail fraud, and conspiracy to commit money laundering based on his role in the scheme.   

Registered Nurse Sentenced for Misuse of a Social Security Number, Bank Fraud and Tax Evasion
On January 18, 2013, in San Francisco, Calif., Crystal Ann Poole was sentenced to 27 months in prison, three years of supervised release and ordered to pay $476,444 in restitution. Poole pleaded guilty on September 10, 2012 to tax evasion, bank fraud and Social Security fraud. According to court documents, Poole evaded taxes on more than $1.27 million in income that she earned from 1994 through the present as a registered nurse. During her career as a nurse, Poole failed to file returns with the IRS, failed to pay her taxes, used the Social Security number of another individual to hide income and assets, and filed false documents with her employers to stop them from withholding taxes from her wages. According to the plea agreement, Poole committed bank fraud in 2006 when she applied for a loan of $335,000 from a bank to buy a home in Florence, Miss. In her loan application, Poole misrepresented her financial circumstances by omitting debts and supplying a false Social Security number to conceal a then-pending bankruptcy and at least $150,000 in outstanding debts under her true Social Security number. Poole also submitted a falsified Form W-2, Wage and Tax Statement, that purported to be from her employer. This fraudulent document overstated her income and listed a false Social Security number. Based on her fraudulent loan application, the bank approved the loan. Poole ultimately stopped making payments on the loan, resulting in foreclosure and a loss to the bank of $43,822. In 2007, Poole committed Social Security fraud when she used the Social Security number of an Alabama schoolteacher to obtain a $30,158 loan to purchase a Lexus. Poole ultimately stopped making payments on the car loan, resulting in a loss to the bank of $32,424. Poole purchased the schoolteacher’s Social Security number before 2003 and has used the Social Security number to open and maintain bank accounts, hold property, and purchase assets. In using the schoolteacher’s Social Security number, Poole intended to conceal the nature, extent, and location of her assets from the IRS.

Kansas Man Sentenced on Bank Fraud Charges
On January 14, 2013, in Kansas City, Kan., John T. Bradfield, of Overland Park, was sentenced to 15 months in prison and ordered to pay approximately $1.3 million restitution. Bradfield pleaded guilty to one count of conspiracy to commit bank fraud. In his plea agreement, Bradfield admitted to conspiring with co-defendant Paul Hartfield to make false representations to mortgage lenders in order to fraudulently obtain funds. Hartfield owned two businesses in Overland Park: Hart Investments, Inc., and Diamond Mortgage. Bradfield was the director of Operations of Hart Investments and purchased depressed properties in order to rehabilitate them and sell them at a profit. Starting in October 2006, Hartfield stopped rehabilitating houses, but Bradfield and others made false representations to lenders in order to fraudulently obtain loan funds. Hartfield was sentenced to 78 months in prison and ordered to pay $2.6 million restitution.

Mortgage Broker Sentenced for Federal Offenses
On January 8, 2013, in Honolulu, Hawaii, Estrellita “Esther” Garo Miguel, a Honolulu mortgage broker, was sentenced to 52 months in prison. Restitution will be determined at a  later date. Miguel pleaded guilty to conspiracy to commit wire and mortgage fraud, wire fraud and mortgage fraud, and money laundering. According to information presented in court, Miguel was the owner and operator of the mortgage business titled Easy Mortgage. Miguel and others regularly submitted loan applications to lenders with false employment, income and residential occupancy information in order to induce lenders to fund loans for residential purchase. Miguel and other defendants working for Easy Mortgage also sought to deceive lender underwriters by providing false documentation concerning a borrower’s history of employment, payment of rents and bank account deposit information. During the existence of the five year conspiracy to defraud mortgage lending institutions over 200 fraudulent loans were obtained involving over 100 properties. Miguel and her coconspirators utilized a number of methods to get lender underwriters to authorize loans, including false employment and income information, fake Verification of Rent and Deposit forms, along with bank statements which had been cut and pasted to appear as if they were actual bank statements reflecting bank deposits of loan applicants. Some fraudulently obtained loan proceeds were funneled into a bank account controlled by Miguel and later distributed to her and others.

Former Attorney Sentenced for Mortgage Fraud
On December 20, 2012, in Boston, Mass., Marc D. Foley, a former attorney who operated a real estate practice in Needham, was sentenced to 72 months in prison and three years of supervised release. In September 2012, Foley was convicted by a jury of 33 counts of wire fraud and five counts of money laundering. According to evidence presented at trial, in December 2006 and January 2007, Foley participated in a scheme to defraud six mortgage lenders in connection with $4.9 million in real estate loans for the purchases of 24 condominium units in Dorchester. When Foley and an associate, acting under his direction, closed the loans, documents sent to the mortgage lenders falsely represented that funds ranging from $9,300 to $39,000 had been collected at the closings from the borrowers, when in fact the borrowers made no down payments and paid no funds at the closings. Furthermore, Foley entered into an undisclosed agreement with the seller to subtract from the seller’s proceeds all the funds that were reported to the lenders as coming from the borrowers. Foley also used various other means to conceal from the lenders that the borrowers had not provided funds for the purchases.

Man Sentenced in Mortgage Fraud Scheme
On December 17, 2012, in Springfield, Mass., James June, of Rockville, Md., was sentenced to 81 months in prison, five years of supervised release and ordered to pay $15 million in restitution.  In April 2012, June pleaded guilty to conspiracy, wire fraud, bank fraud, and money laundering charges.  According to court documents, June orchestrated a multi-million dollar mortgage fraud and bank fraud conspiracy involving more than 100 real estate transactions in Florida and western Massachusetts and multiple business lines of credit originating out of a West Springfield bank. The scheme involved an aggregate loan value of at least $75 million in which the vast majority of the loans went into default.

Kansas Man Sentenced for Mortgage Fraud
On December 17, 2012, in Kansas City, Kan., Brian D. Jaimes, of Overland, Kan., was sentenced to 24 months in prison for mortgage fraud. Jaimes pleaded guilty to one count of conspiracy to commit wire fraud and money laundering. According to his plea agreement, Jaimes conspired with co-defendant Paul Hartfield to fraudulently obtain more than $1 million worth of mortgage loans. Hartfield owned Hart Investments, Inc., a company that purchased depressed properties in order to rehabilitate them and sell them at a profit. Hartfield also owned Diamond Mortgage, a company that acted as a mortgage broker for individuals. Jaimes was president of Diamond Mortgage from 2003 to 2006. According to court documents, Hartfield recruited friends and family to purchase some properties. In most cases, the borrowers would not have qualified for a loan to purchase the properties. Hartfield used Diamond Mortgage as the mortgage broker with Brian Jaimes falsifying loan applications and other supporting documents by inflating the borrower’s income and assets to secure loan approval. Jaimes was the loan officer on 11 fraudulently obtained mortgages for properties. The loans totaled more than $1 million.

California Man Sentenced for Role in Indoor Marijuana Growing Scheme
On November 30, 2012, in Sacramento, Calif., Michael Giang was sentenced to 32 months in prison for mortgage fraud in an indoor marijuana growing scheme. According to court documents, in 2006, Giang and others engaged in a scheme to purchase residential properties in Stockton to use for marijuana cultivation. During the scheme, at least 26 homes were bought by straw buyers, who each bought two homes using 100 percent financing. Dickson Hung obtained personal identification information from straw buyers and gave it to Giang for use in the mortgage loan application packages. Giang prepared and submitted false loan applications and other related loan documents to the financial institutions and mortgage lenders on behalf of the straw buyers. The loan applications and other documents contained false representations and omissions regarding the borrower's monthly income, employment history, rental history, assets, and intent to reside at the residence. Most of the homes went into foreclosure. As a result of the scheme, Giang was responsible for a total loss of $7,280,167.

Ohio Woman Sentenced for Mortgage Fraud
On November 29, 2012, in Cleveland, Ohio, Antoinette Payne was sentenced to 27 months in prison and ordered to pay more than $1.3 million in restitution. Payne pleaded guilty to one count each of conspiracy to commit wire fraud and conspiracy to commit money laundering. According to court documents, Payne worked as a mortgage broker and loan officer for Supreme Funding, a mortgage broker in Euclid, Ohio. She was also the owner of TLC Properties and Designer Loan Properties, which were simply sham companies which she used to receive kickbacks and reimbursements for undisclosed down payment assistance she was providing to purchasers from the various loans’ closings she was handling. These funds were in addition to the fees paid to Payne as a mortgage broker and loan officer in handling these transactions. Payne recruited purchasers for properties and promised to pay them money for filling out the paperwork for mortgage loans where the price of the properties had been greatly inflated. She also provided any down payments as necessary. Payne also falsified the income and asset on the loan documents of the purchasers she recruited to ensure their approval. She provided phony lists of improvements to the lender to support the inflated price of the real estate. Once the purchasers stopped making payments on the mortgage loans, the properties went into default, resulting in a loss to lenders in the amount of approximately $1 million.

Former Mortgage Broker Sentenced Role in Mortgage Fraud Scheme
On November 26, 2012, in Phoenix, Ariz., Michele Marie Mitchell, was sentenced to 30 months in prison, three years of supervised release, and ordered to pay $110,490 in restitution. Mitchell pleaded guilty in April 2012 to conspiracy to commit wire fraud. According to court records, Mitchell held herself out to be a mortgage broker, loan officer and real estate investor. Mitchell and an associate, Jeremy West Pratt, recruited people with good credit scores to act as straw buyers to purchase one or more properties as investments. Mitchell and Pratt enticed the straw buyers by offering to pay a kickback of up to $15,000 per property or to make the mortgage payments until the property could be resold for a profit, or both. The defendants submitted false loan applications and supporting documents to induce lenders to fund loans. At the close of escrow they enriched themselves by directing a portion of the loan proceeds, or “cash back,” to a company which one of them controlled. Between October 2005 and February 2007, Mitchell obtained mortgage financing for 17 properties and induced lenders to fund approximately $17 million dollars in loans. Pratt aided Mitchell’s efforts in eight of the 17 properties. The defendants failed to make the mortgage payments as promised and each of the 17 properties went into foreclosure. Pratt was sentenced on July 30, 2012 to six months in prison and three years of supervised release.

Credit Union Executive Sentenced for Role in Massive Fraud
On November 26, 2012, in Cleveland, Ohio, Anthony Raguz, the former Chief Operating Officer of the St. Paul Croatian Federal Credit Union, was sentenced to 168 months in prison and ordered to pay more than $72.5 million. Raguz, of Mentor, Ohio, pleaded guilty in September 2011 to charges of bank fraud, money laundering and bank bribery. According to court documents, Raguz issued more than 1,000 fraudulent loans totaling more than $70 million to over 300 account holders from 2000 to April 2010. In addition, he accepted more than $1 million worth of bribes, kickbacks and gifts in exchange for the fraudulent loans, according to court documents.

Texas Couple Sentenced on Wire Fraud and Money Laundering Charges
On November 26, 2012, in Houston, Texas, Derwin Frazier and his wife, Veronica, both of Pearland, Texas, were sentenced for their roles in the sham sales of condominiums. Derwin pleaded guilty to money laundering and was sentenced to 85 months in prison and ordered to pay $16,316,102 in restitution. Veronica pleaded guilty to wire fraud and was sentenced to 12 months and one day in prison and ordered to pay $321,742 in restitution. According to court documents, from December 2004 to October 2006, the Fraziers defrauded residential lenders using straw borrowers.  Co-conspirator, Brenda East, assisted these straw borrowers by providing false information and documents, including bogus tax letters and false verifications of bank balances and employment. The Fraziers submitted invoices for payment from loan proceeds and used the money to pay themselves and the straw borrowers. East pleaded guilty to conspiracy to commit wire fraud and was sentenced to 57 months in prison. A fifth defendant, Duane Wardell, of Palestine, also pleaded guilty to conspiracy to commit wire fraud and is awaiting sentencing.

Pennsylvania Man Sentenced on Conspiracy, False Statements, and Mail Fraud Charges
On November 14, 2012, in Philadelphia, Pa., Kelly DeFeo was sentenced to 33 months in prison, five years of supervised release and ordered to pay $747,000 in restitution. DeFeo was convicted by a jury in April 2012 on charges involving conspiracy, false statements and mail fraud. According to court documents, DeFeo was a general contractor and real estate developer in the Philadelphia area. DeFeo sought loans from the First National Bank of Chester County to finance various real estate projects he was undertaking. However, as part of the loan approval process, the bank required DeFeo to submit tax returns and other financial information to assess his ability to pay back the loans. DeFeo conspired with his accountant, William Easton, to produce false tax returns and to send those false tax returns to the bank to aid in the loan approval process. These tax returns significantly inflated the income that had been reported to the IRS. In addition, DeFeo devised a scheme to defraud investors and to obtain money by means of false and fraudulent pretenses. DeFeo solicited four individuals to invest $75,000 each in a property in Drexel Hill, Pa. He sent letters to each investor requesting payment, falsely representing that the funds would be used to purchase the property. However, rather than using the monies to purchase the Drexel Hill property, DeFeo transferred the majority of the funds to his personal account, from which he paid personal and unrelated business expenses.

Arizona Man Sentenced for Role in Fraud Scheme
On November 7, 2012, in Phoenix, Ariz., Shannon Robert Kato was sentenced to 24 months in prison, three years of supervised release and ordered to pay $225,000 in restitution. Kato pleaded guilty on October 11, 2012 to conspiracy. According to his plea agreement, from February 2006 through May 2007, Kato and others submitted mortgage loan applications and related documents to banks and lending institutions containing false information. They also induced those institutions to fund residential real estate purchases. In addition, they created a "straw man" double escrow transaction to obtain "cash back" from the financing for the benefit of the purchasers and concealed from the lending institutions the methods and means by which "cash back" flowed to the ultimate purchasers instead of the "straw" buyer/seller. To accomplish this, Kato and others submitted simultaneous loan applications for multiple real estate purchases without fully disclosing other pending applications, provided false information on the loan applications to obtain mortgage loans, inflated the sales price, and directed portions of the lending proceeds to some of the defendants through the use of entities. At least 15 homes were purchased through this process and $2.5 million in "cash back" was obtained. Kato's role was to act as the "straw buyer" using his own name, his company's name, or a fictitious family trust, so that it would appear that he had purchased the property from the seller. Kato then turned around and sold it at a higher price to one of the other defendants. The lending institutions would fund at the higher price and the profit would be diverted to a controlled entity of one of the other defendants.

Mexican Pecan Company Owner Sentenced for Scheme to Defraud the U.S. Export-Import Bank
On November 7, 2012, in El Paso, Texas, Leopoldo Valencia-Urrea, the owner of a pecan brokerage company in Ciudad Juarez, Chihuahua, Mexico, was sentenced to 48 months in prison, three years of supervised release and ordered to pay $58,000 in restitution and $399,075 in forfeiture. Valencia pleaded guilty on October 13, 2011, to one count of conspiracy to commit wire fraud, one count of wire fraud and one count of money laundering conspiracy in connection with the scheme to defraud the Export-Import Bank of the United States (Ex-Im Bank) of approximately $400,000. According to court documents, Valencia, a U.S. citizen, was the owner of a pecan brokerage company in Ciudad Juarez and resided in El Paso. Valencia admitted that in 2006, he applied for an Ex-Im Bank insured loan for $406,258 through a bank in Miami. Valencia and others submitted a fraudulent loan application, financial statements, invoices, letters and bills of lading to falsely represent to the Miami bank and the Ex-Im Bank the purchase and export of U.S. goods to Valencia in Mexico. After the exporter who conspired with Valencia received $399,075 from the Miami bank, Valencia and others diverted the loan proceeds directly to Valencia and others in Mexico. As a result of the fraud, Valencia’s loan defaulted, causing the Ex-Im Bank to pay a claim to the lending bank on a $371,962 loss.

Loan Originator Sentenced for Leading a Multi-Million Dollar Mortgage Fraud Scheme
On November 5, 2012, in Phoenix, Ariz., Thomas Gregory Alexander, of San Diego, Calif., was sentenced to 120 months in prison, five years of supervised release and ordered to pay $5,463,769 in restitution. On June 9, 2011, Alexander pleaded guilty to wire fraud and conspiracy to commit wire fraud. According to court documents, between 2005 and 2007,  Alexander worked as a loan originator for American Mortgage Funding (AMF). Through AMF, Alexander assisted borrowers to qualify for loans from Mesa Bank (now known as Sunrise Bank of Arizona). Borrowers used the loan funds to acquire parcels of land in Maricopa County, and to fund the construction of custom homes on those parcels. Alexander defrauded Mesa Bank by creating fraudulent documents for unqualified borrowers. In many cases, Alexander directed the borrower to sign a blank Uniform Residential Loan Application (URLA), which he and his co-conspirators would then complete by 1) overstating the borrower’s monthly income; 2) overstating the amount of money in the borrower’s bank accounts; 3) misrepresenting that the borrower would make a down payment at closing; and 4) misrepresenting the intent of the borrower to use the property as a primary residence. Alexander and his co-conspirators would also alter Verification of Deposit documents to falsely overstate the amount of money in the borrowers’ bank accounts. In addition, they would alter the borrower’s credit report to falsely represent a higher credit score. Alexander and his co-conspirators also submitted false documents to show that the borrowers had made the required 5 to 10% down payment when, in fact, none of the borrowers ever actually paid a down payment. In addition to submitting false loan documents, Alexander also directed many of the borrowers to acquire loans to purchase lots from Sea Rock, LLC, a company that he owned. The borrowers were unaware that they were purchasing lots owned by their loan originator. Alexander ultimately received a significant amount of profit from the lot sales because he directed a co-conspirator to create false appraisals to inflate the prices of the lots. In total, Alexander’s mortgage fraud scheme induced Mesa Bank to issue over $40 million in loans, and caused tens of millions of dollars in losses to the bank. The substantial loss eventually led to Mesa Bank’s merger into Sunrise Bank of Arizona.

Kansas Man Sentenced on Bank Fraud Charges
On October 24, 2012, in Kansas City, Kan., Paul L. Hartfield, of Overland Park, Kan., was sentenced to 78 months in prison and ordered to pay approximately $2.6 million in restitution. Hartfield pleaded guilty to one count of conspiracy to commit bank fraud and money laundering. According to court documents, Hartfield owned two businesses: Hart Investments, Inc., and Diamond Mortgage. Hart Investments purchased depressed properties in order to rehabilitate the properties and sell them at a profit. Hartfield obtained loans to rehabilitate homes on a “subject to appraisal” basis that allowed him to withdraw money as rehabilitation progressed. Starting in October 2006, Hartfield stopped rehabilitating houses. Instead, he and others made false representations to lenders in order to fraudulently obtain loan funds.

New Jersey Real Estate Developer Sentenced for Bank Fraud
On October 18, 2012, in Newark, N.J., Solomon Dwek, a Monmouth County, New Jersey real estate developer, was sentenced to 72 months in prison, five years of supervised released and ordered to pay $22.8 million in restitution. Dwek pleaded guilty in October 2009 to an Information charging him with one count each of bank fraud and money laundering. According to court documents and statements made in court, Dwek and Joseph S. Kohen, of Deal, schemed to defraud PNC Bank of more than $50 million and to launder approximately $22.8 million of the proceeds through other banks. On April 24, 2006, Dwek and Kohen presented a $25,212,076 check drawn on a Dwek-controlled account in the name of Corbett Holdings at a PNC Bank. Dwek wanted the check deposited into another PNC account that he controlled in the name of SEM Realty Associates LLC. A PNC Bank official advised Dwek that the Corbett Holdings account was closed with a zero balance. Dwek falsely represented that “corporate” was reopening the account and that a wire transfer of funds into the Corbett Holdings account would be forthcoming, which did not occur. Dwek’s check was honored and deposited. The next day, Dwek phoned in four wire transfers out of the SEM Realty account to various other banks, including $20 million and $2.2 million wire transfers to HSBC Bank USA N.A. The $20 million wire transfer to HSBC was to pay off an overdue and fraudulently obtained $20 million line of credit. As a result, the SEM Realty account was overdrawn by $22.8 million. On April 25, 2006, Dwek presented another bogus $25 million check to be drawn on the same Corbett Holdings account for deposit into the same SEM Realty account at a different branch of PNC Bank. The bank did not honor or deposit this check. Dwek made a number of false statements and representations to cover up this scheme, including falsely advising a PNC bank official that he was expecting a wire transfer from an attorney that would cover the $25,212,076 check drawn on the Corbett account. Kohen pleaded guilty to bank fraud on March 21, 2007, and was sentenced to 30 months in prison.  

Virginia Businessman Sentenced for Bank and Tax Fraud
On October 15, 2012, in Norfolk, Va., George P. Hranowskyj, of Chesapeake, Va., was sentenced to 168 months in prison for carrying out fraud schemes that contributed to the failure of the Bank of the Commonwealth and defrauded investors and the government of millions of dollars. Hranowskyj pleaded guilty on July 12, 2012, to conspiracy to commit wire fraud and conspiracy to commit bank fraud. According to court records, from January 2008 through August 2011, Hranowskyj and his business partner, Eric H. Menden performed favors for insiders at the Bank of Commonwealth in exchange for preferential lending treatment. In addition, Hranowskyj was sentenced for a separate scheme aimed at illegally profiting from historic rehabilitation tax credits. In this scheme, Hranowskyj and Menden systematically falsified invoices for large construction projects and used them to apply for federal and state historic tax credits. They had no personal use for the tax credits, but instead sold them to investors who needed to reduce their tax liability. Corporate investors paid Hranowskyj and Menden approximately $8.7 million for illegitimate tax credits. As a result, the U.S. government suffered a loss of approximately $6.2 million and the Commonwealth of Virginia suffered a loss of approximately $6.3 million. Menden was sentenced on September 26, 2012, to 138 months in prison.

Pennsylvania Man Sentenced for Bank Fraud and Money Laundering
On October 3, 2012, in Johnstown, Pa., Holger P. Scheid, of Jennerstown, Pa., was sentenced to 96 months in prison, three years of supervised release and ordered to pay $1,269,190 in restitution following his conviction for fraud and money laundering. According to information presented to the court, on June 20, 2005, Scheid submitted two fraudulent loan applications to Vartan Bank. One was for the conversion of property in Johnstown, Pa., into a long-term care facility. The other was for the conversion of property into luxury condominiums. Both loans were secured by certificates of deposit Scheid fraudulently obtained from the United Methodist Stewardship Foundation of Central Pennsylvania, Mechanicsburg, Pa. The two loans, totaling $1.9 million, were deposited into Scheid's Crown Phynex operating account at First Commonwealth Bank. To conceal the fraudulent nature of the loans, Scheid paid off the first $400,000 loan with part of the money from the second loan. He used the second loan, of $1,500,000, to pay personal credit cards, repay other investors, fund operating expenses for Crown Phynex, and to enrich himself personally. In addition to his bank fraud scheme, Scheid laundered more than $10,000 from the bank fraud offense by transferring $100,000 out of his Crown Phynex operating account into an account at Franklin Johnstown Federal Credit Union. He later withdrew the $100,000 in the form of a cashier's check made payable to the Criminal Division of the Court of Common Pleas of Northampton Co., Pa., to pay restitution to the Commonwealth of Pennsylvania.

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