Many mortgage-related crimes are committed by people who don’t necessarily work for a mortgage lender — though it is often the mortgage firm that takes the hit. Defendants include attorneys, investment bankers and real estate investors.
In a guilty plea announced on April 12 by Preet Bharara, U.S. Attorney for the Southern District of New York, defendant Kareem Serageldin admitted that he fraudulently inflated the prices of bonds backed by subprime residential mortgage-backed securities and commercial MBS in Credit Suisse’s trading book in late 2007 and early 2008. The scheme earned him $6.9 million in extra pay during 2007.
Serageldin, who worked as a managing director/global head of structured credit at Credit Suisse Group’s investment banking division, was extradited from the United Kingdom. Around $2.65 billion in write downs were taken by Credit Suisse as a result of Serageldin’s manipulation of bond prices. He is scheduled for sentencing on Aug. 2.
A superseding indictment was returned on May 8 against Andrew B. Katakis by a federal grand jury in U.S. District Court for the Eastern District of California, according to the Justice Department. Katakis, who was originally indicted on Dec. 7, 2011, is accused along with Donald M. Parker, Anthony B. Joachim and W. Theodore Longley of conspiring with other unnamed co-conspirators to rig bids at foreclosure auctions in San Joaquin County, Calif. The conspiracy allegedly took place from at least September 2008 until at least October 2009.
The superseding indictments added a charge alleging that after Katakis was notified that a federal grand jury had subpoenaed his bank account, he deleted and caused others to delete electronic records and documents related to the conspiracies. So far, 10 defendants have pleaded guilty in the case including Anthony B. Ghio, John R. Vanzetti, Theodore B. Hutz, Richard W. Northcutt, Yama Marifat, Gregory L. Jackson, Walter Daniel Olmstead, Robert Rose, Kenneth Swanger and Chandler.
Bid rigging at foreclosure auctions is a violation of the Sherman Act.
Lorraine Brown, the former owner of DocX who in February agreed to a one-count guilty plea with the state of Michigan, was sentenced on May 2 by Kent County’s 17th Circuit Court Judge Mark Trusock to between 40 months and 20 years in prison. Brown, who previously reached a plea agreement with federal prosecutors, is accused of overseeing a massive robo-signing scheme where signatures and notary seals were forged.
“Internally, DocX identified this practice as ‘facsimile signing’ or ‘surrogate signing,'” Michigan Attorney General Bill Schuette stated in the announcement. “From 2006 through 2009, these improperly executed documents were created and recorded at Brown’s direction.”
Quit claim deeds were filed in 2011 by Devitoe Farmer on three Memphis, Tenn., properties owned by the Department of Housing and Urban Development, an announcement last week from the U.S. Attorney for the Western District of Tennessee indicated. A property management firm working for HUD discovered that Farmer had stolen the titles using a “sovereign citizen” scheme then leased the properties to tenants. Farmer pled guilty on May 6.
The U.S. Attorney’s Office for the District of Utah announced that Wayne Reed Ogden pled guilty on April 12 to one count of wire fraud and one count of securities fraud. Ogden allegedly sought out distressed borrowers and convinced them to pay a $1,500 up-front plus a share of the negotiated debt. At the same time, he solicited investors with promised returns of between 20 percent and 100 percent.
But Ogden, who recruited his brother and co-defendant Terry Ogden for the operation, admitted that he was running a Ponzi scheme — paying investors from new investments. Prosecutors agreed to recommend a 120-month prison sentence to be served concurrently with another 120-month sentence for a separate, similar crime. It’s the third real estate Ponzi scheme for Ogden including a 1998 conviction.
Adan L. Cueva and his sons Adan L. Cueva and Angel C. Cueva-Castro were arrested on April 4, the Bergen County, N.J., prosecutor’s office announced. Led by Adan R., the trio, through Time Consulting & Associates, allegedly collected fees ranging from $3,500 to $5,000 in return for promises of mortgage payment reductions and interest rate reductions to 2 percent.
Clients were told to immediately stop making mortgage payments directly to their lenders and instead make the payments to Time Consulting — which was supposed to forward the payments to the lenders. In addition, customers were instructed to change their contact information with their lenders to Time Consulting’s telephone number.
But the defendants allegedly impersonated the borrowers in phone calls with the banks in order to stall adverse action. They also used client credit card numbers to steal funds. In addition, the payments were never forwarded to the lenders, and the loans weren’t modified. This went on for a year in some cases.
All three defendants were arraigned on April 8.
A guilty plea was made by Francis Santore on April 30, according to the U.S. Attorney for the District of New Jersey. Santore, who was also known as ‘Frank Martin,” admitted that while he worked for the Vacation Ownership Group, he led borrowers on timeshare properties to believe he worked for a lender and that he could reduce their loan balances. He convinced customers to send money to the company.
Former HSBC Mortgage Services employee Michelle Guy and her husband Kevin Guy pled guilty last month to embezzling around $2.2 million from her employer, the Tampa Bay Business Journal reported. Guy, who worked in various administrative positions for HSBC between February 2001 and August 2011, obtained the funds through American Express gift cards, AMEX gift checks and store gift cards.
Jeffrey Garbinski was the operator of Main Street Mortgage Services, a mortgage brokerage that did business as Asset Mortgage and Financial Services Inc. He was also the owner of the Closing Company of PA and a title agent. With the help of attorney Sabrina Spetz, Garbinski was able to siphon off proceeds from loan closing that were intended to pay off old mortgages, according to a news release from the U.S. Attorney for the Western District of Pennsylvania. Proceeds from unrelated subsequent loan closings were used to pay off liens from prior transactions.
Garbinski even used the scheme on a $600,000 loan made by Dollar Bank against his own residence. Dollar Bank expects to take a total loss on the loan, though it will likely be indemnified by the title company.
Garbinski has pled guilty, according to an April 12 announcement from the Justice Department. He is scheduled for sentencing on July 24.
