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Apr-08-2009Two dozen charged in alleged gang-led mortgage fraud(topic overview)
CONTENTS:
- The lead defendant, Darnell Bell, a documented member of the Lincoln Park street gang in Los Angeles, received at least $9 million in proceeds from the enterprise, prosecutors said. (More...)
- The indictment also charges that several real estate professionals were members of the racketeering conspiracy, including: Diana Jaime, a public notary; Jorge Cortez, a licensed real estate agent; Esteban Valenzuela, a licensed real estate appraiser; Anton Ewing, a Certified Public Accountant; and Randolph Hirsch and Dennis Tapia, registered tax preparers. (More...)
- The U.S. Attorney's office alleges the defendants submitted false documents to induce the lenders to provide mortgages for the inflated properties' values, which created kickbacks for the conspirators. (More...)
- In all, the indictment said more than $9 million was deposited in the account from the fraudulent purchases. (More...)
- Billie Bishop was an escrow officer who facilitated the fraudulent purchase of more than 100 properties on behalf of the enterprise. (More...)
- The alleged racketeering activity includes charges of bank fraud, money laundering and wire fraud. (More...)
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The lead defendant, Darnell Bell, a documented member of the Lincoln Park street gang in Los Angeles, received at least $9 million in proceeds from the enterprise, prosecutors said. Bell's status as an active member of the Lincoln Park street gang helped him recruit straw buyers for 220 properties with a total sales price of $100 million, and later maintain discipline among them, according the indictment. "It was relevant not so much to running the (real estate) scheme but to managing (the people)," Assistant U.S. Attorney Nicole Acton Jones said. Another defendant, Stanley Gentry, let the conspirators use his real estate license in exchange for a $10,000 monthly payment and a percentage of the commission and broker's fees from each purchase, prosecutors said. [1] According to Assistant U.S. Attorneys Todd W. Robinson and Nicole Acton Jones, who are prosecuting the case, the lead defendants charged with running the corrupt enterprise are: Darnell Bell, aka D-Bell, Michael Ivy, Stanley Gentry and Billie Bishop. The indictment alleges that Darnell Bell, a documented member of the Lincoln Park street gang, was the leader of the corrupt enterprise and that he received at least $9 million in proceeds from the racketeering conspiracy.[2]
The indictment describes a network of individuals allegedly masterminded by defendant Darnell Bell, or D-Bell. Bell is a documented member of the Lincoln Park street gang and had already been serving time for about a year for narcotics charges when he was arraigned on the racketeering charges in federal court this morning, Hewitt said.[3] The alleged mastermind was Darnell Bell, 38, a member of the Lincoln Park street gang long known to law enforcement for violence and drug sales.Bell, in prison since April 2008 on a conviction for distributing cocaine,was arraigned in federal court today on a racketeering indictment.[4]
FBI Special Agent-in-Charge Keith Slotter commented, "The individuals charged in this indictment have one thing in common: greed. They represent precisely those who have undermined our country's financial system by perpetuating such egregious schemes. The FBI and our law enforcement partners remain vigilant and will pursue those who engage in this type of criminal activity. The extent to which this group of people went to defraud lenders should also serve as a warning to the public. We urge people to come forward with information of suspicious activities they may encounter when engaged in real estate and mortgage transactions." "Today's indictment of this criminal enterprise spearheaded by Darnell Bell speaks volumes to those who choose to engage in organized criminal activity that undermines the financial health of our communities," said Thomas J. Holloman, Acting Special Agent-in-Charge, IRS Criminal Investigation, Los Angeles Field Office. "The racketeering, forfeiture, and money laundering charges are indicative of the joint-agency law enforcement effort that has focused on dismantling this criminal organization that has grossly profited from mortgage fraud."[2] A federal prosecutor said that the 24 were charged under anti-racketeering statutes that would carrying maximum penalties of 20 years in prison. Download the indictment By using the statutes originally adopted to bust organized crime, prosecutors said the government would be able to seek harsher penalties than if they pressed only bank fraud charges. Keith Slotter, a special agent with the FBI who said he has worked white-collar crimes for 22 years, called the case "one of the most significant investigations I have seen" because of the racketeering charges for mortgage fraud activities. According to the 83-page grand jury indictment, the defendants recruited "straw buyers," who lent their credit profiles but put no money down to close the mortgages used to purchase the 220 homes.[5] The straw buyers subsequently defaulted on the mortgages, and the properties were ultimately foreclosed by the lenders. None of the conspirators put any of their money into the deals, prosecutors said. The defendants in the case 'represent precisely those who have undermined our country's financial system by perpetuating such egregious schemes,' said FBI Special Agent in Charge Keith Slotter.[6]
Federal prosecutors on Tuesday announced unprecedented charges against individuals involved in an alleged mortgage fraud ring involving 220 properties in San Diego County, with total purchase prices topping 100 million. The 24 defendants were all charged with participating in a "corrupt enterprise" under a federal law created by the Racketeer Influenced and Corrupt Organizations (RICO) Act, which allows for charging multiple defendants with extended penalties for their participation in an ongoing crime ring. This was the first known time in the country that defendants in an alleged mortgage fraud scheme have been charged in a RICO conspiracy, U.S. Attorney Karen Hewitt said today. This was the largest mortgage fraud uncovered to date in San Diego, Hewitt said.[3] U.S. Attorney Karen Hewitt says the scheme involved 220 properties in San Diego worth a total of $100 million. She says the fake buyers and sellers borrowed money from lenders with no intention of paying the loans back. "The real tragedy I think is in those neighborhoods, those communities, all of these homes fell into foreclosure," Hewitt said. "And for all those people in those streets that paid their mortgages on time, they're affected by this case too."[7] The U.S. Attorney's Office in San Diego unsealed an indictment April 7 charging 24 people with a variety of fraud and racketeering counts in connection with a mortgage fraud conspiracy that involved more than 220 properties with a total sales price of more than $100 million.[6] SAN DIEGO (AP) - Twenty-four people have been indicted on racketeering conspiracy charges in a mortgage fraud scheme in San Diego that collected about $9 million by fraudulently inducing lenders to provide loans to people who didn't qualify. An indictment unsealed Tuesday claims the ringleader was a known gang member who tapped those in the mortgage industry to participate in the scam.[8] LOS ANGELES (Reuters) - Two dozen people were indicted on racketeering and other charges for allegedly conducting a wide-ranging mortgage fraud based in San Diego and led by a street gang member, according an indictment unsealed on Tuesday.[1]
Reporting from San Diego -- Two dozen people have been charged with racketeering in connection with a fraudulent mortgage scheme run by a street gang member, according to an indictment unsealed Tuesday in San Diego federal court.[9]
SAN DIEGO ''' Federal prosecutors unsealed a massive indictment Tuesday morning charging 24 people with a mortgage fraud scheme that netted millions of dollars between 2005 and 2008.[10] SAN DIEGO, April 7 (UPI) -- An indictment unsealed in San Diego Tuesday charges 24 people with taking part in widespread mortgage fraud conspiracy.[11]
Federal authorities say a San Diego gang member masterminded Southern California's largest mortgage fraud scheme. They say the group swindled millions.[7]
Authorities said Tuesday that they arrested 24 people in connection with a wide-ranging real estate fraud that involved 220 properties across San Diego County and loans totaling more than 100 million.[5] The scheme involved not only the buyer, but also real estate agents, appraisers and escrow agents, said Karen Hewitt, the U.S. attorney for San Diego.[5] The U.S. attorney's office in San Diego scheduled a press conference later in the day about the charges.[8]
Karen Hewitt said at a news conference. Keith Slotter, FBI special agent in charge of the San Diego office, said the case showed that gang members had gone "from dealing dope on the street. to delving into this much more sophisticated crime."[9] FBI Special Agent Keith Slotter says Bell and the others are charged with federal racketeering. He says Bell was already in custody on drug charges. "From dealing dope on the streets, perhaps, to delving into this sort of much more sophisticated crime," Slotter said.[7]
FBI Special Agent in Charge Keith Slotter announces charges in an alleged mortgage fraud ring.[3] The RICO Act was passed in 1970 in efforts to eradicate organized crime. It was originally intended to focus on La Cosa Nostra, but its application here is fitting, said local FBI Special Agent in Charge, Keith Slotter.[3]
The indictment also charges that several real estate professionals were members of the racketeering conspiracy, including: Diana Jaime, a public notary; Jorge Cortez, a licensed real estate agent; Esteban Valenzuela, a licensed real estate appraiser; Anton Ewing, a Certified Public Accountant; and Randolph Hirsch and Dennis Tapia, registered tax preparers. [2] All of the properties have fallen into foreclosure. By recruiting members of their organization to cover every piece of the real estate transaction -- from appraiser to escrow to real estate agent to buyer -- the organization allegedly obtained millions of dollars in cash back and fraudulently obtained commissions and fees, according to the indictment.[3]
The defendants allegedly used straw buyers and inflated appraisals to purchase homes that had sat on the market for extended periods and had been reduced in price. They submitted offers that exceeded the homes' asking prices, and had the overage paid to a shell construction company that they claimed would make upgrades or handicap modifications to the properties, prosecutors said. The defendants instead disbursed the "kickback amount" to members and associates of the enterprise as payments for their participation, the indictment said.[1] Between January 2005 and April 2008, Bell and his team worked in concert to find properties that had been sitting on the market for long enough that the sellers had reduced their prices, prosecutors allege. The defendants used straw buyers, individuals who allowed their names and identities to be used, to submit offers on those properties for much more than the asking price, according to the indictment.[3]
Prosecutors say Bell and his associated hired appraisers -- including one of the defendants -- to tell mortgage lenders that the properties were actually worth the higher amount. The straw buyers, who have also been charged, then obtained loans for 100 percent of those purchase prices.[3]
In addition to the above named leaders, defendants included a range of real estate professionals including licensed real estate agents, a public notary, a certified public accountant, tax preparers and about a dozen straw buyers who requested and were loaned millions of dollars to make the house purchases, prosecutors said. Bell was arraigned April 7, while the remaining 23 individuals were arrested then and are expected to make their initial court appearances April 8.[6]
The indictment alleges the defendants schemed to defraud mortgage lenders and to obtain money and property by false and fraudulent means. They allegedly used multiple real estate businesses, including the Ivy House Inc., the Real Estate Center of Southern California and the Real Estate Center of La Mesa, to facilitate the fraudulent purchase of real estate.[11] The indictment alleges that the defendants from January 2005 to April 2008 used multiple real estate businesses to arrange the purchase of multiple properties throughout Southern California.[6]
Defendants hired real estate appraisers, including co-defendant Esteban Valenzuela, to prepare inflated appraisals for the identified properties; the inflated appraisals were then used to fraudulently induce lenders to believe that the loans being given to the "straw buyers" would be fully secured by the value of the properties being purchased.[2] Defendants then recruited "straw buyers" who allowed their names and credit histories to be used to obtain mortgage loans and purchase properties in name only on behalf of the racketeering enterprise. Defendants prepared and submitted offers to purchase the identified properties that substantially exceeded the asking price for those properties.[2] Members of the Enterprise ensured that the "straw buyers" purchased the identified properties with mortgages amounting to 100 percent of the purchase price of the property, thus ensuring that the defendants did not have any money at risk in the fraudulent transactions.[2]
Defendant Billie Bishop was an escrow officer who helped with the enterprise's fraudulent purchases of more than 100 properties, prosecutors said.[1]
The lead defendants accused of being of running the illegal enterprise are Darnell Bell, a member of the Lincoln Park street gang who goes by the nickname D-Bell, Michael Ivy, Stanley Gentry and Billie Bishop, the federal prosecutors said.[11] Bell, identified in the indictment as a member of a Lincoln Park street gang, received at least $9 million in proceeds from the racketeering conspiracy, prosecutors said.[6]
More than $9 million from "illegal activities" was deposited into a bank account controlled by Bell, the indictment said. Bell used his status as a gang member to recruit phony buyers and to "maintain discipline" among the co-conspirators, it said.[9]
The 24 defendants face chargesincludingconspiracy, bank and wire fraud, and money laundering. Bell used his status as a gang member to recruit phony buyers and to "maintain discipline" among the co-conspirators, the indictment said.[4]
Some of the defendants were known street gang members, including the scheme's leader, Darnell Bell, aka "D-Bell," 38, of Chula Vista, authorities said. Another defendant, Ray Logan, used the alias "Jack Nasty."[5] Police say 38-year-old Darnell Bell is a documented member of the Lincoln Street gang. Authorities say he organized a large network of a fake buyers and sellers to defraud mortgage lenders.[7] The alleged mastermind was Darnell Bell, 38, a member of the Lincoln Park street gang long known to law enforcement for violence and drug sales.[9]
In a new low in the implosion of the real estate market, caused in part from bad lending practices, the leader of the group was identified in court papers as a member of a San Diego street gang.[10] Michael Ivy, 43, of San Diego, who prosecutors say negotiated the property transactions. Stanley Gentry, a 49-year-old licensed local real estate broker, allegedly allowed the organization to use his broker's license to facilitate the purchases, in exchange for 10,000 a month and a cut of the commissions and fees on each deal.[3] Michael Ivy was primarily responsible for negotiating the purchase of real estate on behalf of the enterprise. Stanley Gentry, a licensed real estate broker, allowed the corrupt enterprise to use his broker's license to facilitate the fraudulent purchase of property in exchange for a $10,000 monthly payment and a percentage of the real estate commission and broker's fees associated with each fraudulent purchase.[2] Lorena Callu was employed by the corrupt enterprise and facilitated the fraudulent purchase of real estate by, among other things, preparing and submitting false loan applications.[2]
Latashia McKinney and Marcus Dozzell, aka Kali, recruited individuals to obtain fraudulent mortgage loans and purchase properties on behalf of the corrupt enterprise.[2]
Prosecutors also name several straw buyers as participants in the corrupt enterprise: Desiree Holiday, Dexter Holiday, Keith Holiday, Gerard Holiday, Ray Logan aka Jack Nasty, David Lewis, David Lewis, Joseph Lewis, Stevie Frazier, Jorge Magana, Nicoele Watson and Daniel Williams. All of them fraudulently obtained mortgages and purchases properties on behalf of the organization, according to the indictment.[3] Prosecutors said defendants Latashia McKinney, 35, and Marcus Dozzell, 34, rounded up some of the straw buyers.[3] Prosecutors allege defendants fraudulently provided loans to unqualified buyers and funded loans in amounts that exceeded the home value. It wasn't immediately known if any of those charged had retained attorneys. This material may not be published, broadcast, rewritten, or redistributed.[8]
When lenders asked for more verification, Bell and his associates allegedly had tax preparers and a CPA -- three more of the defendants -- respond to the lenders with faked CPA letters and verification of employment forms. The organization told lenders that the extra money would be used to fix up the houses to make them handicapped-accessible. That money, in some cases more than 100,000 in a single transaction, was directed to Bell Construction, a company that prosecutors say was a shell company.[3] The indictment alleges that the defendants devised a scheme to defraud mortgage lenders and to obtain money and property by false and fraudulent means.[2] Based upon the investigation to date, none of the properties that were purchased as part of the enterprise had any handicap accessibility or property upgrades performed by the defendants' shell firm, Bell Construction. Defendants disbursed the "kickback amount" to members and associates of the racketeering enterprise as payment for those individuals' participation in the fraudulent scheme.[2]
Specifically, the defendants are charged with using a corrupt enterprise to conduct a pattern of racketeering activity, namely, wire fraud, bank fraud, and money laundering.[2] The 24 defendants face charges including conspiracy, bank and wire fraud, money laundering and racketeering.[9]
The racketeering charge could lead to much tougher sentences than might be expected in other real estate fraud cases. "That's never been done before in a real estate fraud case," Slotter said.[9] "Not only more sophisticated, but also had the potential to be more profitable." Slotter says this is the first mortgage fraud case in the country resulting in federal racketeering. He says that's because of the size of the operation. He also says prosecutors are being more aggressive in prosecuting real estate schemes.[7] The 24 are charged with racketeering, which could lead to much tougher sentences than other real estate fraud cases. "That's never been done before in a real estate fraud case," Slotter said.[4]
"From top to bottom, as I described the real estate industry, it was all implicated here," Hewitt said, adding that collusion among real estate professionals warranted the racketeering charge. "Everyone served their specific roles to make this enterprise work for the corrupt entities."[5]
The newspaper's investigation focused on the condo complex's development team, which was not mentioned in the indictment. The newspaper reported in August that the team apparently struggled for months to sell the condos, but was later able to find buyers at dramatically higher prices than those of comparable homes in the neighborhood at a time when the local housing market was collapsing. James Tills, one of the real estate agents who helped sell the Escondido condos, told the North County Times last summer that Michael Ivy provided buyers for some of the condos that sold at unusually high prices.[5] The homes were purchased with 100 percent borrowed money, according to the indictment. They also '''owned, established and utilized real estate businesses and escrow companies''' for the scheme, the 83-page indictment says. This allowed them to collect more money through various fees.[10]
The scheme was run out of La Mesa and relied on a network of at least one real estate appraiser who made appraisals that supported the inflated price to secure mortgage loans, an escrow officer and real estate broker.[10]
The other defendants include several real estate professionals: Diana Jaime, 33, a public notary; Jorge Cortez, 39, a licensed real estate agent; Esteban Valenzuela, 28, a licensed real estate appraiser; Anton Ewing, 38, a CPA; and Randolph Hirsch, 43, and Dennis Tapia, 49, both registered tax preparers.[3] Among the co-defendants are people in the real estate, title insurance, appraisal and notary public businesses.FBI agents became concerned when scanning "suspicious activity" reports filed by lenders.[4]
The U.S. Attorney's office alleges the defendants submitted false documents to induce the lenders to provide mortgages for the inflated properties' values, which created kickbacks for the conspirators. [6] U.S. Attorney Karen Hewitt said the indictment represents the largest mortgage fraud case ever prosecuted in the history of the district.[6] The two dozen suspects allegedly committed wire fraud, bank fraud and money laundering, the U.S. attorney's office said.[11]
Bishop's arrest was only linked to work as an escrow officer, not a notary, and the Escondido condominium complex was not involved in the indictment announced Tuesday, said Todd Robinson, assistant U.S. attorney.[5]
In all, the indictment said more than $9 million was deposited in the account from the fraudulent purchases. Bell made an initial appearance in federal court Tuesday morning and had a plea of not guilty entered for him. He is already in custody serving a 30-month sentence on drug charges. [10] More than $9 million from "illegal activities" was deposited into a bank account controlled by Bell, the indictment said.[4]
A federal indictment says a 38-year-old man and 23 co-conspirators built a scam around the sale of 220 San Diego-area homes with mortgages worth more than $100 million.[9] From 2005 to 2008, the scheme involved the sale of 220 homes and mortgages worth more than $100 million issued by 70 lenders, U.S. Atty.[4]
The U.S. Justice Department said the racketeering charges involve 220 properties that had sales prices totaling more than $100 million.[11]
Because prosecutors decided to fuse the alleged actions of all 24 defendants into the overarching racketeering charge, the individuals could each face up to 20 years in prison and fines of 250,000.[3] Defendants arranged to have the amount of money that exceeded the asking price (i.e., the "kickback amount") paid at the close of escrow to a shell construction company maintained by the racketeering enterprise.[2]
Defendants falsely informed the lenders that the "kickback amount" would be used to pay for handicap accessing and property upgrades to the identified properties, thereby falsely inducing the lenders to believe that the entire loan amount would be secured by the value of the identified properties.[2] Defendants prepared and submitted false loan applications for the "straw buyers" in order to induce lenders to make loans to persons and at terms that the lenders otherwise would not have funded.[2]
The defendants used fictitious loan documents and a fake construction company, defrauding banks into making loans for home improvement projects that were never built, officials said.[5]
The group allegedly profited from loans arranged for amounts in excess of the price of the homes, among other tactics. The homes went into foreclosure soon after they were sold, according to the indictment.[9] The indictment says ring members recruited straw buyers to overpay for homes that had been languishing on the market. The ring pocketed the overpayment amount and then walked away from the homes several months later, sending them into foreclosure.[10] The scam involved using straw buyers to submit offers on properties that exceeded the asking price, then using a group of hired appraisers to inflate property values.[6]
Billie Bishop was an escrow officer who facilitated the fraudulent purchase of more than 100 properties on behalf of the enterprise. [2] Authorities said Bell took home at least 9 million in profits through the purchase of the 220 homes.[5] One tipoff, Hewitt said, was that all the loan documents showed that additional funds were necessary to make the homes accessible to the disabled. The work, she said, was to be done by Bell Construction, which proved to be a dummy company created by Bell.[4]
Bell, already serving a jail sentence for distribution of cocaine, was arraigned in federal court Tuesday on the racketeering indictment.[9] An indictment itself is not evidence that the defendants committed the crimes charged. The defendants are presumed innocent until the Government meets its burden in court of proving guilt beyond a reasonable doubt.[2]
The alleged racketeering activity includes charges of bank fraud, money laundering and wire fraud. [3]
SOURCES
1. Two dozen charged in alleged gang-led mortgage fraud | Reuters
2. 24 Charged in Rico Conspiracy Based on Extensive Mortgage Fraud Scheme
3. voiceofsandiego.org: Housing. Mafia-Esque Charges Brought Against Alleged Mortgage Fraud Ring
4. Twenty-four indicted in San Diego in real estate fraud [UPDATED] | L.A. Now | Los Angeles Times
5. REGION: Police say local gang ran 100 million mortgage fraud : North County Times - Californian 04-07-2009
6. San Diego Business Journal Online - business news for San Diego, California
7. KPBS > News > Local News
8. 24 people indicted in mortgage fraud scam | KGET TV 17
9. Gang member accused of leading mortgage fraud scheme - Los Angeles Times
10. 24 indicted in mortgage fraud scheme allegedly led by gang member
11. 24 indicted in San Diego for mortgage scam - UPI.com
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