“Madoff Has Met His Match: Mortgage Fraud Crime of the Century”

October 26, 2012

Forbes on October 26, 2012 released the following:

John Wasik, Contributor

“With less than 88 years left in this century, it’s awful tough to say what the crime of this century will be.

Will it be the $60 billion Madoff Ponzi scam? The Dot-Com bubble? My candidate is a slam dunk so far: Mortgage fraud.

Mortgage fraud took place on so many levels for so many years that it eclipses Madoff by a factor of 100. That’s my humble estimate because nobody really knows how pervasive it was. Prosecutors are still issuing indictments more than six years after the real estate market peaked.

The recent $1 billion suit against Bank of America/Countrywide alleging that the bank sold defective loans to Fannie Mae and Freddie Mac is but a small piece of this unraveling series of financial flim-flams, which rival most scams because of its pervasive nature and involvement of thousands of financial institutions and intermediaries. The bank says the government’s claims are “simply false.”

Why is mortgage fraud such a Tyrannosaurus Rex in the world of scamdom? Because it combined easy money, greed and securitizing that avarice all over the world. It was based on the myth that home prices don’t decline and quick profits could be had by nearly anyone. You, too, could become an investment banker! More importantly, it may prove to be the mother of all swindles because it nearly took down the world’s largest financial system. And we’re not out of the woods yet.

We have some idea of how many mortgage crimes were out there thanks to the suspicious activity reports supplied to the FBI by banks, starting in the first quarter of 2006. These weren’t necessarily fraud cases that resulted in prosecution. In fact, very few ended up as court cases in which people went to jail, which has been a widespread problem in mortgage fraud.

Starting in 2006, the FBI got wind of some 7,500 suspicious mortgage activities. By 2008, that figure doubled and peaked in the second quarter of last year at nearly 30,000, according to the Financial Crimes Enforcement Network or FinCen. The number of fraud filings dropped 41 percent from the second quarter of last year through this year’s second quarter.

What do these numbers mean? That bankers suspected foul play in the origination or refinancing of mortgages. And these reports were the proverbial tip of the iceberg, because they only looked at the problem from one step in the process. Here’s what else was going on, although we don’t have any hard numbers:

  • Mortgage Foreclosure “Rescues.” Companies would set up shop to promise defaulting homeowners that they could halt the foreclosure process. They’d fleece the hapless homeowner for a steep fee, then move on.
  • Appraisal Scams. Individuals would hire crooked appraisers to under-appraise a home, obtain a mortgage, then sell it at a much-higher price.
  • Securitization Swindles. This may be the biggest scam of all. Junk mortgages were bundled, given the highest credit ratings, then sold to investors in vehicles like collateralized mortgage obligations. These “sub-prime loans” are still on the books of some of our largest banks, Fannie Mae and Freddie Mac.
  • Robo-Signing. Banks eager to sell loans to Wall Street hurried the process along by creating automated, illegitimate pipelines. State attorneys general settled with the banks on this issue, although no one seems to have been prosecuted for these crimes and it’s done little to stem the foreclosure wave.
  • Predatory Lending. Low-income areas were targeted by rapacious brokers and bankers to sell mortgages and home-equity loans with high rates and fees to people who couldn’t afford them.

How much did all of this cost Americans? Again, there’s no reliable estimate, but when this massive house of cards came tumbling down at the end of 2008, trillions were lost. Wall Street and AIG insurance got a $700-billion-plus bailout and American homeowners are still down some $7 trillion in terms of lost equity, according to Robert Reich, an economist and former labor secretary.

While a handful of hedge fund gurus and contrarian investors won big on betting against this mammoth mortgage swindle, “Wall Street’s excesses almost ruined the economy,” Reich said. If the Federal Reserve, U.S. Treasury, Congress, George W. Bush and President Obama hadn’t teamed up to bail out the banks, this year would’ve been worse than 1932, instead of a sluggish 2012.

And the beat goes on as prosecutors dig through layers of the mortgage fraud. Here’s just a typical sampling of some recent activity from the FBI and federal prosecutors:

“A federal indictment charged 17 defendants in Charlotte, North Carolina, and elsewhere with racketeering, investment fraud, mortgage fraud, bank bribery, and money laundering. The government alleges a criminal enterprise engaged in an extensive pattern of racketeering activities, consisting of investment fraud, mortgage fraud, bank fraud, money laundering, and distribution of illegal drugs. Members of the enterprise also bribed bank officials and committed perjury before the grand jury. The co-conspirators stole more than $27 million from more than 50 investor victims. Rather than investing victims’ money as promised, the enterprise diverted victims’ money to finance its mortgage fraud operations and to support its members’ lifestyles.”

I wouldn’t be exaggerating if I predicted that there are hundreds more mortgage frauds yet to be discovered and prosecuted. The states are finding them all the time, some four years after the collapse of Lehman Brothers.

The larger problem is that the perpetrators are still at large and the system that allowed huge derivative gambles on mortgages is still in place. The mega-banks behind this devilish casino got larger, and still need to be broken up. Fannie Mae and Freddie Mac, the two quasi-public mortgage insurers that bought warehouses of bad mortgages, are still wards of the state. And foreclosures continue to ravage communities from California to Florida.

After what will certainly be one of the closest and contentious elections in decades, Congress needs to get to work to bust up hobbled giants like Bank and America and Citigroup. Then it needs to institute the Volcker rule to isolate speculation from federally insured banking activities or bring back Glass-Steagall, which completely separated trading from regulated lending as part of New Deal reforms.

A tax on speculative trading would also reduce systemic risk. I don’t care if banks gamble on their trading desks, but they shouldn’t do it expecting a big bailout on the taxpayers’ backs.

What can you do? You can report suspicious activity to your state attorney general or the Department of Justice, through its financial crimes site stopfraud.gov. You may not help the government land a big crook — they all seem to be enjoying their fat compensation packages in the Hamptons — but you could give prosecutors a leg up on shutting down an ongoing scam.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

————————————————————–

To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Seventeen Members of an Alleged North Carolina Racketeering Enterprise Indicted on Investment Fraud, Mortgage Fraud, and Related Charges

October 25, 2012

The Federal Bureau of Investigation (FBI) on October 24, 2012 released the following:

“Fourteen Others to Plead Guilty on Related Charges; Total of 81 Defendants Have Been Charged to Date in Operation Wax House

CHARLOTTE, NC— A federal indictment charging 17 defendants in Charlotte and elsewhere with racketeering, investment fraud, mortgage fraud, bank bribery, and money laundering was unsealed today in U.S. District Court, announced the U.S. Attorney’s Office for the Western District of North Carolina. Fourteen additional defendants have agreed to plead guilty in connection with the latest round of criminal charges resulting from Operation Wax House, a mortgage fraud investigation that began in the Western District of North Carolina in 2007.

Chris Briese, Special Agent in Charge of the FBI, Charlotte Division; Jeannine A. Hammett, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation (IRS-CI); and Elaine Marshall, North Carolina Secretary of State join the U.S. Attorney’s Office in making today’s announcement.

The federal racketeering indictment was returned by a federal grand jury sitting in Charlotte on July 26, 2012, but remained sealed until today. The indictment alleges that the 17 defendants and others were part of a criminal organization (the Enterprise) that operated principally in the cities of Charlotte and Waxhaw, North Carolina, and stole more than $75 million from investors and mortgage lenders. The indictment was unsealed following the arrests this week of 11 members of the Enterprise, including three of its leaders, James Tyson, Jr.; his mother, Carrie Tyson; and Victoria Hunt. James Tyson, Jr. was arrested on Sunday, October 21, 2012, at Washington Dulles International Airport upon arrival in the United States from a flight originating in Dakar, Senegal, which is Tyson’s last known residence.

The racketeering charges contained in the indictment are the result of Operation Wax House, an ongoing investigation into securities and mortgage fraud targeting communities in the Mecklenburg and Union Counties of North Carolina’s Western District. The investigation was conducted jointly by the FBI and IRS-CI, along with the North Carolina Secretary of State, Securities Division.

According to allegations contained in the unsealed indictment:

The Enterprise, which operated from about 2005 through the present, engaged in an extensive pattern of racketeering activities, consisting of investment fraud, mortgage fraud, bank fraud, money laundering, and distribution of illegal drugs. Members of the Enterprise also bribed bank officials and committed perjury before the grand jury. The co-conspirators targeted professional athletes and doctors as well as their personal and professional acquaintances and convinced them to invest in a series of sham corporations controlled by the Enterprise. The co-conspirators stole over $27 million from more than 50 investor victims, including money that the investor victims were induced to obtain as loans from financial institutions. Rather than investing victims’ money as promised, the Enterprise diverted victims’ money to finance its mortgage fraud operations and to support its members’ lifestyles. For example, members of the Enterprise used the stolen money to purchase luxury vehicles, take lavish vacations, organize extravagant dinners and parties, and invest in other sham businesses or investments. In addition, the conspirators made Ponzi-style payments to other victims.

The Enterprise’s mortgage fraud operations involved acquiring luxury homes in neighborhoods in Charlotte and Waxhaw. One member of the Enterprise would agree with a builder to purchase a property at the “true price.” The Enterprise would then arrange for a buyer to purchase the property at an inflated price. In most circumstances, the buyer would agree to purchase the property in his or her own name and sign whatever documents were necessary, in exchange for a hidden kickback. The builder would sell the property at the inflated price, the lender would make a mortgage loan on the basis of that inflated price, and the difference between the inflated price and the true price would be extracted at closing by the Enterprise.

The 17 defendants charged in today’s indictment and the 14 defendants who have agreed to plead guilty bring the total number of defendants charged to date in connection with Operation Wax Houseto to 81. Charged in the indictment are:

  • Ramin Amini, 44, of Tehran, Iran, is charged with racketeering conspiracy, mortgage fraud, and money laundering conspiracy. Role: Leader and promoter in the scheme. Status: Fugitive.
  • Vonetta Tyson Barnes, 38, of Wahiawa, Hawaii, is charged with racketeering conspiracy, securities fraud, wire fraud to defraud investors, and money laundering conspiracy. Role: Promoter. Status: Released following arrest and initial appearance.
  • Travis Bumpers, 36, of Charlotte, is charged with racketeering conspiracy, securities fraud, mortgage fraud, wire fraud to defraud investors, bank bribery, and money laundering conspiracy. Role: Promoter. Status: Fugitive.
  • Glynn Hubbard, 35, of Charlotte, is charged with racketeering conspiracy, mortgage fraud, and money laundering conspiracy. Role: Promoter. Status: In federal custody, pending release on conditions, following arrest and initial appearance.
  • Victoria Hunt, 36, of Charlotte, is charged with racketeering conspiracy, securities fraud, mortgage fraud, wire fraud to defraud investors, and money laundering. Role: Leader and promoter. Status: Currently in federal custody pending detention hearing.
  • Toby Hunter, 37, of Fort Mill, South Carolina, is charged with racketeering conspiracy, securities fraud, wire fraud to defraud investors, and money laundering. Role: Promoter. Status: Released following arrest and initial appearance.
  • Steven Jones, 44, of Waxhaw, is charged with securities fraud, wire fraud to defraud investors, and money laundering conspiracy. Role: Promoter. Status: Currently in federal custody pending detention hearing.
  • John McDowell, 40, of Dunn, North Carolina, is charged with racketeering conspiracy, securities fraud, mortgage fraud, wire fraud to defraud investors, and money laundering. Role: Promoter. Status: Arrest warrant issued.
  • Kurosh Mehr, 52, of Charlotte, is charged with racketeering conspiracy, mortgage fraud, and money laundering. Role: Promoter and buyer. Status: Currently in federal custody pending detention hearing.
  • Ann Tyson Mitchell, 61, of Charlotte, is charged with racketeering conspiracy, mortgage fraud, and money laundering. Role: Facilitator. Status: Released following arrest and initial appearance.
  • John Wayne Perry, Jr., 31, of Charlotte, is charged with racketeering conspiracy, and money laundering conspiracy. Role: Promoter. Status: Released following arrest and initial appearance.
  • Donte Thorogood, 34, of Durham, North Carolina, is charged with racketeering conspiracy, mortgage fraud, and money laundering. Role: Promoter. Status: To appear for an initial appearance pursuant to a summons.
  • Carrie Tyson, 58, of Winterville, North Carolina, is charged with racketeering conspiracy, securities fraud, mortgage fraud, wire fraud to defraud investors, and money laundering. Role: Leader and promoter. Status: Released following arrest and initial appearance.
  • James Tyson, Jr., 32, of Dakar, Senegal, is charged with racketeering conspiracy, securities fraud, mortgage fraud, wire fraud to defraud investors, bank bribery, and money laundering. Role: Leader and promoter. Status: Currently in federal custody pending detention hearing.
  • James Tyson, Sr., 61, of Charlotte, is charged with racketeering conspiracy, securities fraud, wire fraud to defraud investors, and money laundering. Role: Promoter. Status: Currently in federal custody pending detention hearing.
  • Nathan Shane Wolf, 41, of Charlotte, is charged with racketeering conspiracy, mortgage fraud and money laundering. Role: Real estate agent. Status: To appear for an initial appearance pursuant to a summons.
  • Purnell Wood, 41, of Palmyra, New Jersey, is charged with racketeering conspiracy, mortgage fraud, and money laundering. Role: Promoter. Status: Arrest warrant issued.

Today, the U.S. Attorney’s Office also filed criminal bills of information and plea agreements against 14 other defendants who acted as mortgage brokers, real estate agents, straw buyers, and a home builder in the scheme. They acknowledge taking part in the mortgage fraud conspiracy and have agreed to plead guilty. They are:

  • Crystal Goodson-Hudson, 44, of Kannapolis, North Carolina, is charged with mortgage fraud conspiracy and money laundering conspiracy. Role: Mortgage broker. Status: To appear for initial appearance upon a summons.
  • Shannon Lee (Somer Bey), 47, of Charlotte, is charged with mortgage fraud conspiracy and money laundering conspiracy. Role: Real estate agent. Status: To appear for initial appearance upon a summons.
  • Robert Mahaney, 52, of Ridgeway, South Carolina, is charged with mortgage fraud conspiracy and money laundering conspiracy. Role: Mortgage broker. Status: To appear for initial appearance upon a summons.
  • George Moore, 44, of Charlotte, is charged with mortgage fraud conspiracy. Role: Buyer. Status: To appear for initial appearance upon a summons.
  • Kevin Smith, 46, of Oxford, North Carolina, is charged with mortgage fraud conspiracy. Role: Buyer. Status: To appear for initial appearance upon a summons.
  • Holly Pasut, 56, of Charlotte, is charged with mortgage fraud conspiracy and money laundering conspiracy. Role: Real estate agent. Status: To appear for initial appearance upon a summons.
  • Danielle Vaughn, 34, of Greenbelt, Maryland, is charged with mortgage fraud conspiracy and money laundering conspiracy. Role: Mortgage broker. Status: To appear for initial appearance upon a summons.
  • Mary Vaughn, 58, of Charlotte, is charged with mortgage fraud conspiracy. Role: Buyer. Status: To appear for initial appearance upon a summons.
  • Jamaine Wallace, 41, of Conyers, Georgia, is charged with mortgage fraud conspiracy. Role: Buyer. Status: To appear for initial appearance upon a summons.
  • Phillip Wellington, 46, of Charlotte, is charged with mortgage fraud conspiracy and money laundering conspiracy. Role: Promoter. Status: To appear for initial appearance upon a summons.
  • William Wellington, 30, of Amityville, New York, is charged with mortgage fraud conspiracy. Role: Buyer. Status: To appear for initial appearance upon a summons.
  • Marcia Williams, 36, of York, South Carolina, is charged with mortgage fraud conspiracy and money laundering conspiracy. Role: Mortgage broker. Status: To appear for initial appearance upon a summons.
  • Sean Williams, 41, of Orangeburg, South Carolina, is charged with mortgage fraud conspiracy and money laundering conspiracy. Role: Mortgage broker. Status: To appear for initial appearance upon a summons.
  • Mark, Wittig, 41, of Matthews, North Carolina, is charged with mortgage fraud conspiracy. Role: Builder. Status: To appear for initial appearance upon a summons.

The conspiracy to participate in the racketeering activities charge carries a maximum term of 20 years in prison and a $250,000 fine or twice the gross profits or other proceeds. The securities fraud charge carries a maximum term of 20 years in prison and a $250,000 fine. The bank fraud charge carries a maximum term of 30 years in prison and a $1 million fine. The wire fraud charge carries a maximum term of 20 years in prison and a $250,000 fine. The money laundering conspiracy charge carries a maximum term of 20 years in prison and a $500,000 fine or twice the amount of criminally derived proceeds. The bank bribery conspiracy charge carries a maximum term of five years in prison and a $250,000 fine.

An indictment is merely an allegation, and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law. In addition, the guilty plea of any other person is not relevant to the guilt of any indicted person.

Operation Wax House in the Western District of North Carolina is being handled by the Charlotte Division of the FBI, the Criminal Division of the IRS for the Financial Fraud Enforcement Task Force, and the Securities Division of the North Carolina Secretary of State. The prosecution for the government is being handled by Assistant United States Attorneys Kurt W. Meyers and Maria K. Vento and Special Assistant United States Attorney Kevin M. Harrington.

The President’s Financial Fraud Enforcement Task Force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit http://www.stopfraud.gov.

The names and case numbers of all the defendants charged to date in Operation Wax House are listed below, organized by their alleged role in the scheme.

Attorneys and Paralegals
Crawford/Mallard, Michelle 3:11cr374
Gates, Christine 3:09cr100
Norwood, Kelli, 3:09cr162
Rainer, Demetrius 3:08cr239/241
Smith, Troy, 3:08cr264

Bank Insiders
Brown, Jamilia, 3:10cr124
Eason, Danyelle, 3:10cr116
Henson, Vic. F., 3:10cr124
Jackson, Mitzi, 3:11cr374
Ramey, Bonnie Sue, 3:10cr124

Builders and Sellers
Fink, James, 3:11cr374
Jackson, Jennifer, 3:09cr241
Smith, Kelvis, 3:12cr238
Viegas, Jeffrey, 3:12cr298
Wittig, Mark, 3:12cr335
Wood, Gary, 3:09cr208

Facilitators and Financiers
Hickey, Denis, 3:09cr103
McClain, Landrick, 3:10cr124
Mitchell, Ann Tyson, 3:12cr239
Panayoton, Sherrill, 3:11cr176
Taylor, Alicia Renee, 3:10cr124
Wilson, Willard, 3:09cr161

Buyers
Banks, Arketa, 3:12cr297
Hillian, Kirk, 3:12cr83
Mathis, Charles, 3:10cr1
Mobley, Sarena, 3:10cr124
Moore, George, 3:12cr337
Richards, Dan, 3:10cr119
Smith, Kevin, 3:12cr341
Tyler, Glenna, 3:11cr200
Vaughn, Mary, 3:12cr329
Wallace, Jamaine, 3:12cr330
Wellington, William, 3:12cr333

Notary Public
Willis, Anthony, 3:09cr218

Appraiser
Darden, Clinton 3:10cr108

Mortgage Brokers
Bradley, Bonnette, 3:12cr299
Clarke, Linda, 3:10cr120
Flood, Ericka, 3:10cr124
Goodson-Hudson, Crystal, 3:12cr339
Mahaney, Robert, 3:12cr34-0
Scagliarini, Coley, 3:11cr374
Staton, Walter, 3:10cr113
Vaughn, Danielle, 3:12cr329
Williams, Marcia, 3:12cr334
Williams, Sean, 3:12cr336

Woods, Joseph, 3:09cr178

Real Estate Agents
Belin, Chris, 3:11cr374
Clark, Christina, 3:09cr44
Lee, Shannon, 3:12cr338
Pasut, Holly Hardy, 3:12cr331
Wolf, Nathan Shane, 3:12cr239
Wood, Gary, 3:09cr208

Promoters
Amini, Ramin, 3:12cr239
Barnes, Vonetta Tyson, 3:12cr239
Bumpers, Travis, 3:12cr239
Carr, Stephen, 3:10cr124
Clarke, Reuben, 3:10cr120
Coleman, Gregory, 3:10cr118
Hitchcock, Jimmy, 3:11cr374
Hubbard, Glynn, 3:12cr239
Hunt, Victoria, 3:12cr239
Hunter, Toby, 3:12cr239
Jones, Steven, 3:12cr239
Jones, Tyree, 3:10cr230
Marshall, Michael, 3:07cr283
McDowell, John, 3:12cr239
McPhaul, Elizabeth, 3:10cr114
Mehr, Kurosh, 3:12cr239
Mitchell, Ann Tyson, 3:12cr239
Perry, John Wayne, Jr., 3:12cr239
Perry, Kim, 3:10cr25
Phillips, Rick, 3:10cr115
Sharreff-El, Drew, 3:10cr124
Sherald, Kiki, 3:10cr117
Simmons, Aaron, 3:09cr240
Snead, Todd, 3:10cr124
Staton, Lisa, 3:10cr113
Thorogood, Donte, 3:12cr239
Tyson, Carrie, 3:12cr239
Tyson, James, Jr. 3:12cr239
Tyson, James, Sr., 3:12cr239
Wellington, Phillip, 3:12cr332
Wood, Purnell, 3:12cr239″

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

Federal Mail Fraud Crimes

————————————————————–

To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.