17 indicted in upscale Missouri mortgage fraud case

Seventeen people have been indicted in what is being called an upscale mortgage fraud ring that included lenders from Missouri, Kansas and Nebraska to California.

According to The Kansas City Star, those indicted by a federal grand jury conspired as part of a $12.6 million scheme that targeted homes in upscale neighborhoods.

The scheme paid kickbacks to homebuyers through shell companies those indicted had created. These kickbacks totaled more than $2.3 million. Also taking in money on this scheme were real estate agents and home builders.

Victims of this scheme and the hundreds, maybe thousands of such schemes operating nationwide – multiple operations running in cities across America – remain the mortgage companies who are duped into believing the information used to obtain the mortgage was true, and neighbors of the homes involved in the fraud.

Key figures in this ring, according to The Star, include real estate agent Angela R. Clark, 40, and former mortgage loan officers Cynthia D. Jordan, 41, and Stefan M. Guerra, 30.

This mortgage fraud scheme ran from June 2005 until May of last year. The buyers in the scheme got loans by providing false information to lenders. They used this loan money to buy 25 homes in a sub-division of a housing development at grossly inflated prices.

A California person involved in the scheme allegedly used fake Social Security numbers to obtain loans. The homeowners would then receive kickbacks on each house, some equaling $125,000.

According to the indictment, defendants secured a $603,000 mortgage in July 2006 for the purchase of a home in Belmont Farms at 509 Southeast Snaffle Bit Court. After subtracting his building costs and profits from the mortgage payout, Emerick allegedly paid a $114,000 kickback to a shell company controlled by Howard, the purchaser, and $30,000 in real estate fees.

The homes involved in the scheme are in foreclosure and have brought down the value of homes in this newly constructed neighborhood.

Lawmaker Cites Concerns Over Mortgage Fraud Investigations

Dow Jones reports that the chairman of the House Judiciary Committee, Rep. John Conyers, D-Mich., expressed concern Tuesday that the Justice Department and the Federal Bureau of Investigation are not doing enough to investigate mortgage fraud.

“A national crisis requires a national response, and the department has yet to convince us that it did, and is doing, its part to adequately and promptly respond,” Conyers, joined by two other House Democrats, said in a letter to Attorney General Michael Mukasey and FBI Director Robert Mueller.

Among other things, Conyers said he was struck by the fact that state attorneys general and not the Justice Department have appeared to take the lead on legal issues with major lenders. He cited a recent settlement agreement between several states and Bank of America Corp. (BAC) to modify certain subprime and adjustable-rate mortgages serviced by Countrywide Financial.

Conyers also demanded information on the amount of resources the FBI is devoting to its investigations of Freddie Mac (FRE), Fannie Mae (FNM), American International Group Inc. (AIG) and Lehman Brothers Holdings Inc. (LEHMQ).

The Michigan congressman said he was concerned that the FBI “might not have sufficient resources to investigate mortgage fraud and is struggling to handle this financial crisis.”

Florida leads nation in mortgage fraud activity

Florida led the nation in mortgage fraud activity during the third quarter, according to Orlando Business Journal.

The Sunshine State accounted for more than $293 million in mortgage fraud activity from July to the end of September, nearly double the next state.

California was second, with at least $160 million in fraud activity. Nevada, Minnesota and Texas rounded out the top 5 in a report published by MortgageDaily.com.

Florida’s activity increased by $86 million as compared to the second quarter total, which is in contrast to the national trend of a decline in reported activity.

In the third quarter there was $1.1 billion in active criminal and civil cases, the Journal reported. That is down $1.7 billion from the second quarter.

Experts, including the publisher at MortgageDaily.com believe that heightened investigations and consumer awareness to fraudulent activity has reduced the amount of fraud occurring.

Identity Theft Immigration Case to be Heard by Supreme Court

The Washington Post reports that the Supreme Court has agreed to hear a case that could impact the government’s crackdown on illegal immigration, agreeing to review whether prosecutors must prove that defendants in aggravated identity theft cases knew they were victimizing real people.

The Supreme Court will hear the appeal of Ignacio Flores-Figueroa, a Mexican illegal immigrant who used false identification to get a job at a steel plant. He was convicted of aggravated identity theft, a charge created in 2004 that carries a mandatory two-year prison term, the Washington Post reports. It is increasingly being used against those picked up in federal raids on work sites that employ illegal immigrants.

The Post reports that Flores-Figueroa argued that the government failed to prove that he knew the fraudulent documents belonged to a real person as opposed to being fabricated. Lower courts in the case, accepting the Justice Department’s position, ruled that the government did not have to prove that.

Overall, three appellate courts have rendered decisions backing the government; three have ruled otherwise. The Supreme Court is expected to resolve the dispute.

Prepaid Phone Card Scams Get Industry Scrutinized

Prepaid phone cards don’t always give the number of minutes they claim. Others have undisclosed fees. MSNBC reports that there are connection fees, hang-up fees, and maintenance fees. Some card companies charge 99 cents per call if you dial from a pay phone. Others round the charge up to the nearest three- or four-minute increment. Make a 30-second call and you could get whacked for four minutes.

Gus West, president of The Hispanic Institute, a non-profit based in Washington, D.C., told MSNBC, “Go to any store where these cards are sold and talk to anyone who uses them, and you will find that 100 percent of the people will tell you they’ve been victimized.”

West’s group tested hundreds of phone cards and found that on average they deliver about half the minutes promised. MSNBC went to a little convenience store in a mostly immigrant neighborhood in Seattle and had no problem finding unhappy customers.

Americans spent about $4 billion on prepaid calling cards in 2007. That figure is expected to surpass $6 billion this year. These cards are used by military families, foreign exchange students, recent immigrants and people with friends overseas.

But complaints are not limited to the Hispanic community. Sally Greenberg, executive director of the National Consumers League, uses prepaid calling cards and finds them “frustratingly unsatisfying.”

Congressman wants investigation into Buffalo gas prices

A Congressman from New York state wants to know why gasoline prices in his district are distinctly higher than others.

Brian Higgins, from the 27th District in western New York (Buffalo area) says the gas prices in his district are nearly 40 cents higher per gallon than other parts of upstate New York.

Prices earlier this week in Buffalo were about $3.40 per gallon. In Albany and Syracuse, areas much farther east (four hours’ drive from Buffalo to Syracuse), the average price was $3.03.

Higgins wrote a letter to Federal Trade Commission Chairman William Kovacic asking him to investigate this price discrepancy.

Further, Higgins gave Kovacic several theories to investigate, all reasons he was given to the drastic price range of gas. He said he was told the distance his district is to oil refineries, its local taxes and the level of retail competition are all reflected on the price at the pump.

His letter reads as follows:

Chairman Kovacic:

I am writing to express my concern about the price of gasoline in Western New York relative to other comparable areas of upstate New York.

Western New York suffers from a weak regional economy relative to most of the nation, and has a disproportionate number of residents on moderate or fixed incomes. Most economists and experts conclude that we are in the beginning stages of a protracted economic recession. While the recession is expected to get much worse, its impacts are already being felt by the Western New York families I represent.

Congress is doing what it can to avert economic disaster by passing legislation to stabilize the credit markets and by laying the groundwork for strengthening the regulation of the financial sector to increase transparency and oversight. We are also working to combat unemployment and economic contraction through the consideration of a stimulus package that will extend unemployment benefits and put people to work on much needed infrastructure projects that will also serve as investments to help our region and our country grow.

That said, both the legislative and executive branches of the federal government must remain especially vigilant to protect consumers during these difficult times. As you know, the high cost of gasoline has put a strain on family budgets in recent years. This pain has been particularly acute in Western New York which, as mentioned above, suffers from high unemployment and moderate wages. It is of particular concern that the retail price of gasoline in the Buffalo area today – $3.40 per gallon – is $.08 more than the nearby community of Rochester, and $.36 and $.38 more than the upstate communities of Syracuse and Albany, respectively.

Given this disturbing information, I respectfully request that you investigate this matter to determine the causes for this discrepancy. Theories have been issued concerning the relative distance to oil refineries, differing local taxes and fees, and the level of local retail competition. Your investigation into exactly why gasoline costs significantly more in the Buffalo area than it does in other upstate communities will assist me and my colleagues as Congress takes further action on gasoline prices next year, and may uncover cause for the Federal Trade Commission to take enforcement action in the meantime.

Thank you in advance for your assistance on this important issue. I look forward to your response.


Brian Higgins

Former Pa. judge faces insurance fraud

A former Pennsylvania Superior Court judge faces insurance fraud charges after he allegedly lied about injuries following a low-speed automobile accident.

Prosecutors in a case set to begin this week must decide if 59-year old Michael Joyce is guilty of fraudulent insurance claims worth $440,000.

The case against Joyce does not look good from the outset. Though he made more than $165,000 a year as a Superior Court judge, he lived well outside his means.

Prosecutors allege Joyce bought a Harley-Davidson motorcycle, a hot tub, plastic surgery for his then-girlfriend and current wife and made “significant down payments” on a home and Cessna plane, according to the Associated Press.

They believe Joyce is lying when he said he was in “constant pain, unable to golf or swim or even .. hold a cup of coffee steady” following an incident where his car was rear-ended by another vehicle moving 5 mph, in 2001.

A year later, however, Joyce was playing golf at his pre-accident level, and piloted a plane more than 50 times, even filling out an FAA physical evaluation form reporting he suffered no injuries or physical problems.

Joyce retired after 10 years on the Superior Court bench, following a 2007 grand jury indictment against him.

Attorneys representing Joyce did not return AP calls for a response. They claim Joyce did not live outside his means, and that neck and shoulder injuries are often hard to physically notice on people.

Aside from being forced to forfeit nearly everything he gained from the alleged fraud, Joyce faces multiple counts of mail fraud and money laundering. Each carries substantial prison time (10-25 years for each count) and a fine of $250,000 on each count.

Ohio Mortgage Fraud Indictments Pending

The Associated Press reports that Cuyahoga County Prosecutor Bill Mason and the Cuyahoga County Mortgage Fraud Task Force plan to announce the indictment of three defendants who are responsible for over $5.8 million in fraudulent loans for 78 houses in the Slavic Village area. The announcement is scheduled to take place at 10:30 a.m. October 15th at 4917 Barkwill in Cleveland.

The investigation was conducted by 16 federal, state and local enforcement agencies known as the Ohio Organized Crime Ivestigations Commission’s Cuyahoga County Mortgage Fraud Task force. The collaborative effort is responsible for forming the task force that is combating mortgage fraud in Cuyahoga County.

Minnesota couple uses rent money as crux of mortgage scheme

A Minnesota couple is being accused of converting apartment buildings into condominiums as part of a healthy mortgage fraud scheme.

According to the Minneapolis Star-Tribune, James and Teresa Hoffman sold dozens of so-called condos for considerable profits, and used phony buyers and falsified bank records to rack up more than $5.5 million in financing.

The couple sold at least a dozen of these properties to a few buyers, actually making the down payment for them, and they never intended to live in the buildings. The couple conspired to falsify their mortgage applications, too, court records indicate.

According to the source, “They then used rent from the condos to cover the straw buyers’ mortgage payments.”

The couple used the money for purposes other than paying the mortgages, and it left straw buyers to account.

The FBI led this investigation of a rather strange and unique case of fraud. Minnesota is among states leading the nation in mortgage fraud cases.

In June, a judge issued an injunction against the Hoffmans, preventing them from continuing their practices.

The couple is not being charged, however, but it appears charges may be forthcoming in the case, according to the Star-Tribune.

Bank of America and Royal Bank of Canada to Buy Back Auction Rate Securities

More auction rate securities to be bought back from banks, this time by Bank of America and Royal Bank of Canada.

The East Bay Business Times reports that Bank of America Corp. has agreed to buy back as much as $4.7 billion in auction-rate securities it sold to about 5,500 investors, small businesses and charities before the market collapsed in February. According to the Securities and Exchange Commission, the settlement also would require BofA to “use its best efforts” to provide up to $5 billion in liquidity to businesses and institutional investors with accounts valued at $15 million or more, and charities with accounts valued at $25 million or more.

The Baltimore Business Journal reports that as part of a settlement with regulators, Royal Bank of Canada is offering to buy back about $850 million in auction-rate securities from its U.S. retail brokerage clients. Royal Bank of Canada is extending the buyback offer to about 2,200 clients of RBC Capital Markets, along with clients of two firms RBC recently acquired: Washington, D.C.’s Ferris Baker Watts and JB Hanauer & Co. RBC did not admit or deny wrongdoing in agreeing to the settlement.

The buyback offer is part of a settlement with the U.S. Securities and Exchange Commission, the New York Attorney General’s Office and the North American Securities Administrators Association. In recent months, several other firms have announced buybacks and settlements related to auction-rate securities, investments that have been frozen by the credit crunch. The securities are long-term investments whose interest rates reset regularly based on the results of auctions. But since credit began tightening, there have been few willing bidders for the securities, leaving the bond auctions in limbo.