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​Home > Investigations
Investigations

SIGTARP, a sophisticated, white-collar criminal investigative agency, is committed to robust criminal and civil enforcement against those who waste, steal, or abuse TARP funds. SIGTARP partners with law enforcement agencies to investigate and prosecute, among other things, TARP-related accounting fraud, securities fraud, insider trading, bank fraud, mortgage fraud, mortgage modification fraud, wire fraud, false statements, obstruction of justice, money laundering, and tax crimes. SIGTARP currently has more than 150 ongoing criminal and civil investigations.

From SIGTARP’s inception through​ April 2, 2014, the agency and its law enforcement partners were responsible for:

  • Criminal charges filed against 188 individuals, including 123 senior officers
  • Criminal convictions of 129 individuals, of whom 80 have been sentenced to prison (others are awaiting sentencing)
  • Civil charges filed against 64 individuals, including 50 corporate or senior officers, and 55 companies
  • Orders temporarily or permanently banning 94 individuals from working in the banking or financial industry, working as a contractor with the Federal Government, or working as a licensed attorney​​
  • Orders of restitution and forfeiture and civil judgments entered for $4.77 billion.  This includes restitution orders entered for $4.2 billion, forfeiture orders entered for $241.6 million, and civil judgments and other orders entered for $353 million. SIGTARP has already assisted in the recovery of $227.4 million in assets
  • Saving $553 million in taxpayer money by preventing TARP funds from going to the now-failed Colonial Bank

SIGTARP Hotline

The SIGTARP Hotline (877-SIG-2009) provides a simple, accessible way for the American public to report concerns, allegations, information, and evidence of violations of criminal and civil laws in connection with TARP. From its formation in February 2009 through September 30, 2011, the SIGTARP Hotline has received and analyzed more than 28,000 contacts. The SIGTARP Hotline can receive information anonymously and protects the confidentiality of whistleblowers to the fullest extent possible.

Investigative Cases

Although the majority of SIGTARP’s investigative activity remains confidential, below is a summary of individual cases in which there have been significant public developments.


  • Taylor, Bean & Whitaker Mortgage Corporation and Colonial Bancgroup
  • On June 15, 2012, Delton de Armas, the former chief financial officer of Taylor, Bean & Whitaker (“TBW”), was sentenced by the U.S. District Court for the Eastern District of Virginia to five years in prison. De Armas previously pled guilty to conspiracy to commit bank and wire fraud and making false statements for his role in a $2.9 billion fraud scheme that led to the failures of TBW and Colonial Bank (“Colonial”). As previously reported, Lee Bentley Farkas, the former chairman of TBW, was convicted at trial in 2011 of 14 counts of conspiracy, and bank, securities, and wire fraud, and sentenced to 30 years imprisonment. On June 20, 2012, the U.S. Court of Appeals for the Fourth Circuit upheld Farkas’ conviction. Colonial Bank was initially approved to receive $553 million in TARP funding that SIGTARP prevented from going to the bank.

    De Armas admitted that he and others engaged in a scheme to defraud financial institutions that had invested in TBW’s wholly-owned lending facility, Ocala Funding (“Ocala”). Shortly after Ocala was established, de Armas learned that inadequate assets were backing its loans. This collateral deficit increased to more than $700 million by June 2008. De Armas knew that a subordinate sent false collateral reports to Ocala investors that misrepresented the collateral deficit. De Armas acknowledged that he and former TBW chief executive officer Paul Allen also provided false explanations to investors and regulators about the deficit in Ocala’s collateral. De Armas further admitted that he directed a subordinate to inflate an accounts receivable balance on the books of TBW, which inflated TBW’s financial statements. De Armas admitted knowing that these false financial statements were provided to the Government National Mortgage Association (“Ginnie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) for their determination to renew TBW’s authority to sell and service securities guaranteed by Ginnie Mae and Freddie Mac. De Armas also admitted to reviewing and editing a letter sent by Allen to Ginnie Mae that contained false statements regarding the reason for TBW’s delay in providing audited financial statements to Ginnie Mae.

    Six additional defendants pled guilty and were sentenced to prison in 2011 for their roles in the fraud scheme. Allen was sentenced to 40 months in prison; Catherine Kissick, the former senior vice president of Colonial Bank, was sentenced to eight years in prison; Desiree Brown, the former treasurer of TBW, was sentenced to six years in prison; Raymond Bowman, the former president of TBW, was sentenced to 30 months in prison; Sean Ragland, a former senior financial analyst at TBW, was sentenced to three months in prison; and Teresa Kelly, the former operations supervisor in Colonial Bank’s Mortgage Warehouse Lending Division, was sentenced to three months in prison.

    This case was investigated by SIGTARP, the FBI, FDIC OIG, the Department of Housing and Urban Development Office of Inspector General (“HUD OIG”), the Federal Housing Finance Agency Office of Inspector General (“FHFA OIG”), the Securities and Exchange Commission (“SEC”), and IRS-CI, and was prosecuted by the U.S. Department of Justice Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Virginia.

    Additional Information:
    June 15, 2012


    SIGTARP: Former CFO of Taylor, Bean & Whitaker Sentenced to 5 Years in Prison for Fraud Scheme which Contributed to the Failures of TBW and Colonial Bank

    March 20, 2012


    SIGTARP: Former Chief Financial Officer of Taylor, Bean & Whitaker Pleads Guilty to Fraud Scheme which Contributed to the Failures of TBW and Colonial Bank

    June 30, 2011


    SIGTARP: Former Chairman of Taylor, Bean & Whitaker Sentenced to 30 Years in Prison and Ordered to Forfeit $38.5 Million

    June 21, 2011


    SIGTARP: Former TBW CEO Sentenced to 40 Months in Prison for Fraud Scheme

    June 17, 2011


    SIGTARP: Former Colonial Bank Senior Vice President Sentenced to 8 Years in Prison for Fraud Scheme

    June 10, 2011


    SIGTARP: Former Treasurer and President of Taylor, Bean & Whitaker Each Sentenced to Prison for Fraud Scheme

    April 20, 2011


    SIGTARP: Former Chairman of Taylor, Bean & Whitaker Convicted for $2.9 Billion Fraud Scheme that Contributed to the Failure of Colonial Bank and Taylor, Bean & Whitaker

    April 1, 2011


    SIGTARP: Former TBW CEO Pleads Guilty to $1.5 Billion Fraud Scheme

    March 31, 2011


    SIGTARP: Former TBW Financial Analyst Pleads Guilty to $1.5 Billion Fraud Scheme

    March 16, 2011


    FBI: Former Colonial Bank Mortgage Lending Supervisor Pleads Guilty in Fraud Scheme

    March 16, 2011


    SEC: SEC Charges Former Supervisor at Colonial Bank for Role in Securities Fraud Scheme

    March 14, 2011


    FBI: Former President of TBW Pleads Guilty in Fraud Scheme

    March 14, 2011


    Court Document: Raymond Bowman Plea Agreement

    March 2, 2011


    SEC: SEC Charges Former Officer of Colonial Bank for Role in Securities Fraud Scheme

    March 2, 2011


    Justice: Former Senior Vice President of Colonial Bank Pleads Guilty to Fraud Scheme

    March 2, 2011


    Court Document: Catherine Kissick Plea Agreement

    February 24, 2011


    SEC: SEC Charges Former Treasurer of Major Mortgage Lender for Role in Securities Fraud and TARP Scheme

    February 24, 2011


    Justice: Former Treasurer of Taylor, Bean & Whitaker Pleads Guilty to $1.9 Billion Fraud Scheme that Contributed to the Failure of Colonial Bank

    February 24, 2011


    Court Document: Desiree Brown Plea Agreement

    June 16, 2010


    Justice: Former Chairman of Taylor, Bean & Whitaker Indicted for His Role in a More Than $1.9 Billion Fraud Scheme that Contributed to the Failure of Colonial Bank

    June 16, 2010


    SEC: SEC Charges Former Chairman of Major Mortgage Lender with $1.5 Billion Securities Fraud and Related TARP Scheme

    June 15, 2010


    Court Document: Lee Bentley Farkas Indictment

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  • United Commercial Bank / UCBH Holdings, Inc.
  • In a recently unsealed court proceeding, Lauren Tran, the former Vice President and Manager of Credit Policy at United Commercial Bank (“UCB”), pled guilty on June 15, 2011, in the U.S. District Court for the Northern District of California to conspiracy to commit securities fraud, falsifying corporate books and records, and lying to auditors. As previously reported, former UCB senior executives, Ebrahib Shabudin and Thomas Yu, were indicted on similar charges in September 2011 and are currently awaiting trial.

    In her guilty plea, Tran admitted to engaging in a conspiracy and fraudulent scheme to conceal UCB’s growing inventory of impaired loans and to avoid disclosing its significant loan losses. Tran admitted to conducting the fraud scheme by knowingly and willingly falsifying UCB’s books and records, over-valuing the collateral securing certain UCB loans, and misleading UCB’s independent auditor by withholding material appraisal information. As a result of the conspiracy and fraud scheme, UCB is alleged to have issued false and misleading public statements and reports in 2009 regarding its 2008 year-end financial condition and performance. The charges carry a maximum penalty of five years imprisonment and a fine. Tran’s plea was unsealed by the court in October 2011.

    In another action related to UCB, on March 27, 2012, former UCB executive vice president, John Cinderey agreed to settle charges brought by the SEC alleging that Cinderey misled the bank’s independent auditors regarding the financial statements of UCB and UCBH Holdings, Inc. (“UCBH”). Cinderey had previously agreed to pay a $40,000 civil penalty in an administrative action brought by the FDIC in connection with the same conduct.

    UCB was a commercial bank headquartered in San Francisco, California. UCB was a subsidiary of UCBH, whose shares were publicly traded. In November 2008, UCBH received approximately $298 million in TARP funds. UCB became the first TARP recipient bank to fail when it closed on November 6, 2009. FDIC, which became the receiver for the bank, estimates that deposit insurance fund losses from UCB’s failure will be $2.5 billion. The total loss to TARP is more than $298 million.

    The investigation is ongoing. The case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Northern District of California, the SEC, the FBI, the FDIC OIG, and the Office of Inspector General of the Board of Governors of the Federal Reserve System (“FRB OIG”).

    Additional Information:
    October 11, 2011


    SIGTARP: Former United Commercial Bank Officials Charged with Securities Fraud

  • Bank of America
  • On October 24, 2012, the U.S. Attorney for the Southern District of New York filed a civil mortgage fraud lawsuit against Bank of America Corporation (“Bank of America”) and its predecessors, Countrywide Financial Corporation and Countrywide Home Loans, Inc. (collectively, “Countrywide”). The complaint alleges that the banks caused U.S. taxpayers losses through the sale of toxic mortgage loans to the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”). The complaint seeks civil penalties and damages of more than $1 billion.

    Fannie Mae and Freddie Mac are government sponsored entities (“GSEs”) that were chartered by Congress to provide liquidity and stability to the U.S. housing and mortgage markets. To fulfill their mission, the GSEs purchase single-family residential mortgages from lenders and pool them into mortgage-backed securities (which they subsequently sell to investors) or hold the mortgages in their invest¬ment portfolios. To ensure that they purchase investment quality mortgages, the GSEs rely on representations and warranties by the lenders that the loans sold to the GSEs comply with certain underwriting standards.

    According to the complaint, for many years Countrywide, on its own and as part of Bank of America, was the largest provider of residential mortgage loans to the GSEs. The complaint alleges that in 2007, Countrywide allegedly created a new loan origination program called the “Hustle” to increase the speed at which it originated and sold loans to the GSEs. According to the complaint, around this same time, mortgage default rates were increasing throughout the country and, in response, the GSEs began to tighten their loan purchasing requirements to reduce risk. Under the Hustle, Countrywide executives allegedly eliminated certain internal quality control processes and fraud prevention measures that had been in place to ensure that its loans were sound. Countrywide executives allegedly ignored repeated warnings that the quality of loans originated under the Hustle would suffer. The complaint alleges Bank of America acquired Countrywide in July 2008, but the Hustle program continued unabated at Bank of America through 2009. According to the complaint the Hustle program was never disclosed to the GSEs. As a result of the Hustle, the complaint alleges that Countrywide and later, Bank of America, funneled loans to the GSEs while misrepresenting to the GSEs that the loans were investment-quality loans that complied with GSE underwriting requirements. After the Hustle loans defaulted, Countrywide and Bank of America allegedly refused to repurchase Hustle loans or reimburse the GSEs for losses incurred on those loans, even where the GSEs identified loans containing material defects or fraudulent misrepresentations.

    Bank of America received a total of $45 billion, in three infusions, in TARP funds in 2008 and 2009. Bank of America repaid the $45 billion TARP investment in full on December 9, 2009.

    The case is being investigated by SIGTARP, the Commercial Litigation Branch of the U.S. Department of Justice’s Civil Division, the U.S. Attorney’s Office for the Southern District of New York, and the Federal Housing Finance Agency Office of Inspector General (“FHFA OIG”)

    On February 4, 2010, the New York Attorney General charged Bank of America Corporation (“Bank of America”), its former Chief Executive Officer Kenneth D. Lewis, and its former Chief Financial Officer Joseph L. Price with civil securities fraud. According to the allegations, in order to complete a merger between Bank of America and Merrill Lynch & Co., Inc. (“Merrill Lynch”), the defendants failed to disclose to shareholders spiraling losses at Merrill Lynch. Additionally, after the merger was approved, it is alleged that Bank of America made misrepresentations to the Federal Government in order to obtain tens of billions of dollars in TARP funds. The investigation was conducted jointly by the New York Attorney General’s Office and SIGTARP, and the case remains pending in New York state court.

    SIGTARP also assisted the Securities and Exchange Commission (“SEC”) with its Bank of America investigation. On February 22, 2010, the Honorable Jed S. Rakoff, United States District Judge for the Southern District of New York, approved a $150 million civil settlement between the SEC and Bank of America to settle all outstanding SEC actions against the firm. The court found that Bank of America failed to disclose adequately to its shareholders, prior to their approval of a merger with Merrill Lynch, the extent of additional material losses that Merrill Lynch had suffered. Additionally, the court found that the proxy statement sent to shareholders in November 2008 failed to disclose adequately Bank of America’s agreement to allow the payment of bonuses to Merrill Lynch employees prior to the merger.

    In addition to the $150 million payment, Bank of America also agreed to the following settlement requirements:

    • Engaging an independent auditor to assess and report on the effectiveness of the company’s disclosure controls and procedures.
    • Furnishing management certifications signed by the chief executive officer and chief financial officer with respect to proxy statements.
    • Retaining disclosure counsel to the audit committee of the company’s board of directors.
    • Adopting independence requirements beyond those already applicable for all members of the compensation committee of the company’s board of directors.
    • Retaining an independent compensation consultant to the compensation committee.
    • Implementing and disclosing written incentive compensation principles on the company’s website and providing the company’s shareholders with an advisory vote concerning any proposed changes to such principles.
    • Providing the company’s shareholders with an annual “say on pay” advisory vote regarding the compensation of executives.
    Additional Information:
    October 25, 2012


    SIGTARP: Bank of America Sued for Over $1 Billion for Multi-Year Mortgage Fraud Against Fannie Mae and Freddie Mac

    June 15, 2010


    New York: The New York State Attorney General Andrew M. Cuomo Files Fraud Charges Against Bank of America, Former CEO Kenneth Lewis, and Former CFO Joseph Price

    February 4, 2010


    Court Document: Bank of America Complaint

    February 4, 2010


    SIGTARP: Remarks Regarding Bank of America

    April 23, 2009


    SIGTARP: Remarks Regarding Bank of America and Merrill Lynch

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  • False Claims Act Lawsuits
  • On February 9, 2012, the Federal Government and 49 State Attorneys General reached a $25 billion settlement with the nation’s five largest mortgage servicers over mortgage loan servicing mishandlings, foreclosure abuses, and fraud. Under the terms of the agreement, Bank of America Corporation (“Bank of America”), JPMorgan Chase & Co. (“JPMorgan”), Wells Fargo & Company, Citigroup Inc., and Ally Financial Inc. (formerly GMAC) will commit $25 billion to resolve certain violations of state and federal law. As part of the global agreement, certain False Claim Act lawsuits being investigated by SIGTARP and its law enforcement partners will be resolved.

    Bank of America

    On February 9, 2012, the U.S. Attorney for the Eastern District of New York announced a $1 billion settlement with Bank of America to resolve allegations that Bank of America, and its Countrywide Financial subsidiaries, among other things, defrauded the Federal Government by failing to determine the eligibility of homeowners to participate in HAMP. A qui tam, or whistleblower, complaint alleged that it was more lucrative for the bank to deliberately force otherwise qualified homeowners to programs outside of HAMP so that it could either profit from foreclosure proceedings, force the homeowner into a more costly proprietary mortgage modification than HAMP would permit, or otherwise profit from continuing to service the defaulting and defaulted mortgage. Gregory Mackler, who filed the complaint under the whistleblower provision of the False Claims Act, will receive a portion of the $1 billion settlement once the agreement is finalized by the court.

    JPMorgan

    On February 10, 2012, the U.S. Attorney for the District of Massachusetts announced a $6.2 million settlement with JPMorgan to resolve allegations that JPMorgan, and institutions acquired by JPMorgan, failed to use adequate loss mitigation efforts as mandated by federal regulation in handling loans with individuals who had fallen behind on their mortgage payments. In addition, the complaint alleges that JPMorgan defrauded HAMP by failing to follow HAMP program guidelines and foreclosing on homeowners in HAMP trial modifications. Robert Harris, as whistleblower, will receive $1.2 million of the $6.2 million settlement.

    Ally Financial

    On March 12, 2012, the U.S. Attorney for the Western District of North Carolina announced a $95 million settlement with Ally Financial, Bank of America, JPMorgan, Wells Fargo & Company, and Citigroup Inc. to resolve allegations that the banks made false claims in connection with their failure to obtain required mortgage assignments, were involved in servicing misconduct and the charging of inappropriate costs, and used false documents in Federal Government mortgage guarantee claims. The defendants, according to the complaint, falsely represented that they held good title to the notes and mortgages in connection with claims they submitted on the mortgage guarantees, resulting in payments from the Government that would not have been made if the Government had been aware of the true facts. Lynn Szymoniak, as whistleblower, will receive $18 million of the $95 million settlement. Ally Financial remains in TARP and the Department of Treasury holds 74% of Ally Financial’s common stock.

    Additional Information:
    March 12, 2012


    WDNC: U.S. Attorney’s Offices Reach $95 Million Settlement in False Claims Case Against Nation’s Five Largest Financial Institutions

    March 12, 2012


    Justice: Federal Government and State Attorneys General Reach $25 Billion Agreement with Five Largest Mortgage Servicers to Address Mortgage Loan Servicing and Foreclosure Abuses

    March 12, 2012


    EDNY: $1 Billion to Be Paid by the Bank of America to the United States; Largest False Claims Act Settlement Relating to Mortgage Fraud

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  • Premier Bank
  • Mainstreet Bank
  • Case Description Forthcoming

    Additional Information:
    August 27, 2013


    SIGTARP: Bank Chairman Admits TARP Funds Used to Purchase Luxury Vacation Property

  • Orion Bank
  • On June 12, 2012, Jerry J. Williams, former president, chief executive officer, and board chairman of Orion Bank (“Orion Bank”) and its holding company, Orion Bancorp, Inc., was sentenced by the U.S. District Court for the Middle District of Florida to 72 months in Federal prison. On August 28, 2012, the same court ordered Williams to pay $31.05 million in restitution to FDIC (as receiver for Orion Bank). This restitution amount is in addition to the $5.76 million in restitution that the court previously ordered Williams to pay to victims. Orion Bancorp unsuccessfully sought $64 million in TARP funds in October 2008. Florida’s Office of Financial Regulation closed Orion Bank on November 13, 2009, and appointed FDIC as receiver. FDIC estimates that Orion Bank’s failure will cost the deposit insurance fund more than $600 million.

    Williams had previously pled guilty to conspiracy to commit bank fraud and making false statements to Federal regulators arising from his participation in a bank fraud scheme involving Orion Bank. Williams admitted that, after Orion Bank failed to raise capital as instructed by Federal banking regulators, he conspired with two other Orion Bank executives, Thomas Hebble, former executive vice president, and Angel Guerzon, former senior vice president, and a former Orion Bank borrower, Francesco Mileto, to mislead state and Federal regulators into believing that Orion Bank was financially healthier than it truly was. Hebble, Guerzon, and Mileto pled guilty to their participation in the fraud and received prison sentences of 30 months, 24 months, and 65 months, respectively. Hebble and Guerzon were each ordered to pay $33.5 million in restitution to FDIC and Mileto was ordered to pay $65.2 million in restitution to FDIC ($33.5 million of which is to be paid jointly and severally with Guerzon and Hebble). The court also ordered Mileto to forfeit $2 million.

    The case was investigated by SIGTARP, the U.S. Attorney’s Office for the Middle District of Florida, the FBI, IRS-CI, the Federal Reserve Board Office of Inspector General, and FDIC OIG.

    Additional Information:
    June 13, 2012


    SIGTARP: Former President of Orion Bank Sentenced to 6 Years in Federal Prison for Conspiracy to Commit Bank Fraud and for Deceiving Regulators

    February 3, 2012


    SIGTARP: Former President of Orion Bank Pleads Guilty to Bank Fraud and Related Charges

    October 27, 2011


    SIGTARP: Top Orion Bank Executives and Borrower Are Sentenced to Federal Prison

  • First Community Bank
  • On April 4, 2013, Reginald R. Harper, former chief executive officer, president and loan officer, of First Community Bank of Hammond, Louisiana (“First Community Bank”), was sentenced to serve 24 months in Federal prison followed by three years of supervised release and ordered to pay a fine of $25,000 for his role in a fraudulent scheme to conceal delinquent, non-performing loans by creating new sham loans at the bank. Additionally, FDIC issued a ban against Harper from working in the banking industry. On the same day, Troy A. Fouquet, a Louisiana real estate developer was sentenced to serve 18 months in Federal prison followed by three years of supervised release. Both Harper and Fouquet were ordered to pay $570,955, jointly and severally, in restitution to victims.

    Previously, Harper and Fouquet each pled guilty to conspiracy to commit bank fraud in Federal court in New Orleans. As part of their fraudulent scheme, Harper arranged for First Community Bank to provide more than $2 million in loans to Fouquet in 2004 to purchase land and build houses on the land. However, they were unable to identify a sufficient number of qualified buyers for the houses. In response, Harper and Fouquet devised various cover-up schemes to avoid reporting the delinquent loans made by Harper to Fouquet. For example, they used “nominee” loans and “straw” borrowers to apply for new loans from First Community Bank, which Harper authorized, and then used the proceeds to pay off the original loans made to Fouquet. Harper and Fouquet’s misconduct caused First Community Bank to suffer large financial losses. As a result of their fraud, First Community Bank submitted a false “call report” (a report meant to disclose the bank’s true financial condition) to its regulator, which later affected the bank’s application for TARP funds. First Community Bank ultimately withdrew its TARP application, despite being approved to receive $3.3 million in TARP funds.

    The case was investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of Louisiana, and the FBI.

    Additional Information:
    April 5, 2013


    SIGTARP: Former Bank President and Conspirator Sentenced to Federal Prison for Bank Fraud Conspiracy

    April 27, 2012


    SIGTARP: Former President of First Community Bank of Louisiana Pleads Guilty to Bank Fraud

    March 16, 2012


    SIGTARP: Louisiana Real Estate Developer Pleads Guilty to Conspiracy to Commit Bank Fraud

    February 16, 2012


    SIGTARP: Former Louisiana Bank President and Conspirator Charged with Bank Fraud

  • Bank of the Commonwealth
  • On May 24, 2013, three top executives at The Bank of the Commonwealth (“BOC”) and a favored borrower were convicted in a jury trial in Federal court in Norfolk, Virginia, on charges relating to their roles in a $41 million bank fraud scheme that masked non-performing assets at the bank for their own personal benefit and contributed to the failure of BOC in 2011.

    Edward J. Woodard, the bank’s former chief executive officer, president, and chairman of the board, was convicted of conspiracy to commit bank fraud, substantive bank fraud, false entry in a bank record, unlawful participation in a loan, and false statement to a financial institution. Stephen G. Fields, the bank’s former executive vice president and commercial loan officer, was convicted of conspiracy to commit bank fraud, false entry in a bank record, false statement to a financial institution, and misapplication of bank funds. Troy Brandon Woodard, the son of Edward Woodard and the former vice president and mortgage loan specialist at a subsidiary of BOC, was convicted of conspiracy to commit bank fraud and unlawful participation in a loan. Dwight A. Etheridge, a favored BOC borrower who owned and operated a residential and commercial development company, was convicted of conspiracy to commit bank fraud, misapplication of bank funds, and false statement to a financial institution. T. Woodard, Fields, and Etheridge are scheduled to be sentenced in September 2013, and E. Woodard is scheduled to be sentenced in November 2013.

    BOC was a community bank headquartered in Norfolk, Virginia, that failed in September 2011. It was the eighth largest bank failure in the country that year and the largest bank failure in Virginia since 2008. The Federal Deposit Insurance Corporation (“FDIC”) estimates that BOC’s failure will cost the deposit insurance fund more than $268 million. In November 2008, BOC sought $28 million in TARP funds. Subsequently, BOC’s Federal banking regulator asked the bank to withdraw the TARP application, which BOC did.

    From 2005 to 2009, BOC more than doubled its assets, largely through brokered deposits, a financial tool that allows investors to pool their money and receive higher rates of returns. Because of the high volatility of these deposits, an institution must remain well-capitalized to accept and renew brokered deposits.

    BOC funded and administered many loans during this period without following industry standards or the bank’s own internal controls, and by 2008, the volume of the bank’s troubled loans and foreclosed real estate soared. From 2008 to 2011, BOC executives used various methods to fraudulently mask the bank’s true financial condition out of fear that the bank’s declining health would negatively impact investor and customer confidence and affect the bank’s ability to accept and renew brokered deposits. To fraudulently hide BOC’s troubled assets, the bank insiders overdrew demand deposit accounts to make loan payments, extended new loans or additional principal on existing loans to cover payment shortfalls, changed the terms of loan agreements to make loans appear current, and used funds from related entities (sometimes without authorization from the borrower) to make loan payments.

    In addition, the BOC executives hid millions of dollars of non-performing loans from the bank’s board of directors. The BOC executives also provided preferential treatment to troubled borrowers, including Etheridge and others, to purchase defaulted property. The borrowers were already having difficulty making payments on their existing loans and the financing allowed the borrowers to convert these non-earning assets into earning assets. In some instances, these new loans exceeded the purchase price of the property, which resulted in the borrowers obtaining cash at closing that they used to make payments on their other loans at the bank and for their own personal purposes. In addition, BOC executives caused the bank to fund loans to troubled borrowers to purchase or attempt to purchase properties owned by Edward Woodard and Troy Brandon Woodard. BOC subsequently charged off $9 million of these loans as a loss. In addition, Edward Woodard and Troy Brandon Woodard caused BOC to pay fraudulent invoices for construction costs for a bank branch when the true costs were incurred for renovations to Troy Brandon Woodard’s personal residence.

    Seven other individuals have been charged (six of whom pled guilty) in connection with the investigation:

    Eric H. Menden and George P. Hranowskyj

    On September 26, 2012, and October 15, 2012, business partners Eric H. Menden and George P. Hranowskyj, respectively, were sentenced to prison for their roles in the bank fraud scheme. Menden was sentenced to 11.5 years in Federal prison followed by three years of supervised release. Hranowskyj was sentenced to 14 years in Federal prison followed by three years of supervised release. Menden and Hranowskyj were ordered to pay $32.8 million in restitution and to forfeit $43.5 million.

    Natalia Green and Maria Pukhova

    On January 25, 2012, Natallia Green, a former employee of Menden and Hranowskyj, was sentenced to five years’ probation and was ordered to pay $106,519 in restitution after pleading guilty to making a false statement to BOC in a loan application. On August 10, 2011, Maria Pukhova, another former employee of Menden and Hranowskyj, was charged with making a false statement on a loan application to BOC in April 2010. Pukhova’s case is pending.

    Thomas E. Arney

    On August 24, 2012, Thomas E. Arney, a BOC customer, pled guilty to conspiracy to commit bank fraud, unlawful monetary transactions, and making false statements to a financial institution. Arney was a real estate developer and businessman in Norfolk, Virginia. Arney admitted performing favors for BOC insiders in exchange for preferential treatment that harmed the bank. Arney also admitted to helping these BOC insiders fraudulently conceal the extent of BOC’s non-performing assets by purchasing BOC-owned properties. Specifically, despite Arney having difficulty staying current on $7 million in loans he guaranteed at BOC, BOC insiders arranged for BOC to fund additional loans to Arney (sometimes through nominee borrowers for Arney), the proceeds of which Arney used to make payments on past-due loans at BOC and for his personal and business expenses. In addition, Arney further admitted that he purchased a condominium owned by Edward Woodard with a BOC loan arranged by BOC executive vice president and commercial loan officer Stephen G. Fields. Arney admitted to purchasing the condominium as a favor to Woodard and in return for preferential treatment on his BOC loans. Arney faces a maximum penalty of 20 years in prison when he is sentenced.

    Jeremy C. Churchill

    On May 9, 2012, Jeremy C. Churchill, a BOC vice president and commercial loan officer, pled guilty to conspiracy to commit bank fraud. Churchill admitted that he submitted loan requests to the bank to provide more than $1 million to companies owned by Etheridge. BOC subsequently fully charged off these $1 million in loans as a loss. Churchill also admitted to requesting that BOC provide a $4.1 million loan to Etheridge’s company to be used to purchase an incomplete condominium project in Virginia Beach from the owners who were delinquent on their loan at the bank. Churchill admitted that he and co-conspirator Fields used approximately half the loan proceeds to pay down the underlying loan on the property. Churchill faces a maximum penalty of five years in prison when he is sentenced on November 1, 2013.

    Recardo S. Lewis

    On July 11, 2013, Recardo S. Lewis, a former vice president of Etheridge’s construction company, was sentenced to six months home detention and five years of probation for his role in the fraud scheme. Lewis was also ordered to pay $855,962 in restitution as well as $2,036,000 in forfeiture, both jointly with any other co-defendants who are ordered to pay restitution or forfeiture for the same losses. Lewis previously pled guilty to conspiracy to defraud BOC by submitting fraudulent draws on the incomplete condominium project in Virginia Beach. Lewis admitted that he submitted eight draw requests to the bank on construction loans that fraudulently inflated the amounts owed to contractors and included costs for work that was not completed.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of Virginia, the Federal Bureau of Investigation, (“FBI”) Internal Revenue Service Criminal Investigation Division (“IRS-CI”), the Securities and Exchange Commission (“SEC”), the Federal Deposit Insurance Corporation Office of Inspector General (“FDIC OIG”) and the Office of the Inspector General-Board of Governors of the Federal Reserve System (“FRB OIG”).

    Additional Information:
    May 24, 2013


    SIGTARP: CEO, Senior Executives, and Borrower Convicted in Massive Fraud Scheme that Led to Collapse of TARP Applicant Bank of the Commonwealth

    May 24, 2013


    SIGTARP: Remarks on Conviction of CEO of Bank of the Commonwealth and Others for Bank Fraud

    October 16, 2012


    SIGTARP: Virginia Businessman Sentenced to 14 Years in Federal Prison for $41 Million Bank Fraud Scheme and Tax Scam

    September 26, 2012


    SIGTARP: Virginia Developer Sentenced to 11½ Years in Federal Prison for $41 Million Bank Fraud Scheme and Tax Scam

    August 27, 2012


    SIGTARP: Virginia Developer and Restaurateur Pleads Guilty to Massive Bank Fraud

    July 12, 2012


    SIGTARP: CEO of Bank of the Commonwealth, Senior Executives, and Borrowers Indicted in Massive Fraud that Led to the Collapse of the Bank

    July 12, 2012


    SIGTARP: Remarks Regarding Indictments of CEO of Bank of the Commonwealth and Bank Officers

    May 15, 2012


    SIGTARP: Virginia Real Estate Project Manager Pleads Guilty to Bank Fraud Conspiracy which Contributed to Collapse of Bank of the Commonwealth

    May 9, 2012


    SIGTARP: Loan Officer at Defunct Bank of the Commonwealth Pleads Guilty to Bank Fraud Conspiracy

    April 20, 2012


    SIGTARP: Virginia Developer Pleads Guilty to Massive Bank Fraud which Contributed to Failure of Bank of the Commonwealth

    April 20, 2012


    SIGTARP: Remarks Regarding Guilty Plea by Virginia Developer Eric Menden

  • American Mortgage Specialists Inc.
  • Two former officers at American Mortgage Specialists (“AMS”) were sentenced to Federal prison for their roles in a fraud scheme that defrauded TARP-recipient BNC National Bank (“BNC”) of approximately $28 million. On July 1, 2013, David E. McMaster, vice president of lending operations of AMS, was sentenced to 188 months in Federal prison followed by five years of supervised release. On June 28, 2013, Scott N. Powers, the former chief executive officer and president of AMS, was sentenced to 96 months in Federal prison followed by five years of supervised release. Restitution and forfeiture in the amount of $28.6 million was ordered against McMaster and Powers. McMaster was also ordered to forfeit his interest in several automobiles, including a 2010 Mercedes-Benz and a 2005 Hummer H2 SUV, and the proceeds held in two personal bank accounts. On May 6, 2013, Lauretta Horton, the former director of accounting for AMS, and David Kaufman, an outside auditor, were also sentenced to 24 months probation each.

    McMaster and Powers each pled guilty in October 2012 to conspiracy to commit bank fraud and wire fraud. In November 2012, Horton pled guilty to conspiracy to commit bank fraud and wire fraud and Kaufman pled guilty to obstructing the Government’s investigation into the fraud perpetrated against BNC.

    AMS was an Arizona company that originated residential mortgage loans and sold the loans to institutional investors. AMS obtained funding for these loans by selling participation interests in the loans to financial institutions, including BNC. BNC’s holding company received approximately $20 million in TARP funds in January 2009, and the holding company subsequently injected $18 million of the TARP funds into BNC. BNC incurred approximately $28 million in losses as a result of the fraud, which exceeded the amount of TARP funds received by BNC. In addition, BNC has failed to make any of its required TARP dividend payments to the U.S. Department of Treasury (“Treasury”).

    BNC entered into a loan participation agreement with AMS in 2006 to provide funding for loans originated by AMS. Under the agreement, when AMS loans were subsequently sold to investors, AMS was required to send “pay down” emails to BNC notifying the bank of the sales and to repay BNC for the funds the bank provided for the loans sold. BNC used the “pay down” information to monitor which loans had and had not been sold to investors. AMS was also required to repurchase any loans funded by BNC if the loans were not sold by the loan maturity date.

    McMaster and Powers admitted to devising and executing a scheme to defraud BNC of the funds provided to AMS for loan origination purposes. AMS began to experience cash shortages in October 2007. Powers and McMaster admitted that without additional funding from BNC, AMS would have been forced to terminate its operations. To enable AMS to continue receiving funding from BNC, Powers and McMaster submitted false loan “pay down” information to BNC. In particular, Powers and McMaster orchestrated a “lapping” scheme by causing employees to delay notification to BNC of loan sales in order to use funding provided by BNC for new loans to repay BNC for loans sold earlier. In addition, Powers, McMaster, and Horton provided BNC materially false information about AMS’s operations and financial condition, including failing to disclose that AMS was suffering a cash shortage and was making payments to the IRS for back payroll taxes. As part of the scheme, McMaster and Horton submitted false financial statements that disguised the IRS payments under “marketing” and “advertising” expenses as well as inflating current cash amounts. Powers and McMaster also used BNC funds to (i) pay for the operations of AMS, (ii) provide hundreds of thousands of dollars in personal benefits to themselves in the form of salary, bonuses, and payment of personal expenses, and (iii) make hundreds of thousands of dollars of personal loans to themselves that were paid off using additional funds diverted from BNC.

    Kaufman, a certified public accountant, falsified AMS’s audited financial statements to prevent BNC from discovering the true extent of AMS’s tax liabilities and terminating its relationship with AMS. Kaufman also lied to Federal agents of SIGTARP and the Federal Housing Finance Agency Office of Inspector General (“FHFA OIG”) and to Federal prosecutors regarding his falsification of AMS’s financial statements.

    The case was investigated by SIGTARP, the U.S. Attorney’s Office for the District of North Dakota, and FHFA OIG.

    Additional Information:
    July 1, 2013


    SIGTARP: Officers of Arizona Mortgage Originator Sentenced for $28 Million Fraud Conspiracy Against TARP Recipient BNC National Bank

    November 30, 2012


    SIGTARP: Former Director of Accounting and Outside Auditor for Arizona Mortgage Originator Plead Guilty to Roles in Fraud Against TARP Recipient BNC National Bank

    October 22, 2012


    SIGTARP: Officers of Arizona Mortgage Originator Plead Guilty to $27M Fraud Conspiracy against TARP Recipient BNC National Bank

  • Jesse C. Litvak
  • On January 28, 2013, SIGTARP agents arrested Jesse C. Litvak, a licensed securities broker, after a 16-count indictment was returned by a Federal grand jury in Connecticut charging Litvak with TARP fraud, securities fraud, and making false statements to the Federal Government. This is the first case brought for fraud relating to trading activity in TARP’s Public-Private Investment Program (“PPIP”) and the first criminal case brought by President Barack Obama’s Residential Mortgage-Backed Securities Working Group.

    The charges allege that Litvak, while a registered broker-dealer and managing director at Jefferies & Co., Inc., engaged in a scheme to defraud customers on residential mortgage-backed securities trades. Litvak’s victims are alleged to have included numerous investment funds, including six funds that the Department of Treasury established in 2009 as part of TARP’s PPIP, which was part of the Government’s response to the financial crisis.

    The purpose of PPIP was to purchase certain troubled real estate-related securities, including types of residential mortgage-backed securities, from financial institutions to allow those financial institutions to free up capital and extend new credit. Beginning in late 2009, the Government used more than $20 billion in TARP money to fund the Public-Private Investment Funds (“PPIFs”) that would purchase the troubled securities.

    The indictment alleges that Litvak’s scheme was based on two types of misrepresentations. In certain transactions, Litvak misrepresented the securities seller’s asking price to the buyer or misrepresented the buyer’s price to the seller, keeping the difference between the price paid by the buyer and the price paid to the seller for Jefferies. In other transactions, Litvak misrepresented to the buyer that bonds held in Jefferies’ inventory were being offered for sale by a fictitious third-party seller invented by Litvak, which allowed Litvak to charge the buyer an extra commission. The charges allege that Litvak defrauded six PPIFs and multiple private investment funds out of more than $2 million.

    Litvak is scheduled for trial in February 2014. If convicted of all 16 counts, he faces a maximum of 250 years in Federal prison, a fine, and restitution.

    Through the Residential Mortgage-Backed Securities Working Group, this case is being investigated by SIGTARP and the U.S. Attorney’s Office for the District of Connecticut.

    Additional Information:

    January 28, 2013


    SIGTARP: Connecticut RMBS Trader Charged with Securities Fraud, Defrauding TARP Program

    January 28, 2013


    SIGTARP: Remarks on Indictment of Former Jefferies & Co. Senior Trader / Managing Director

  • Avondale Investments, LLC
  • On December 11, 2012, at SIGTARP’s request, Treasury issued a one-year suspension against Avondale Investments, LLC (“Avondale”) and its president and sole owner, Donald Dillingham, from participating in Federal Government programs and activities.

    In November 2008, Avondale submitted to Treasury an application to perform asset management services to Treasury, including the ongoing valuation of securities issued to Treasury by certain banks participating in the Capital Purchase Program. Treasury limited these asset manager assignments to companies that manage at least $100 million in assets. In its application to Treasury, Avondale claimed to have $101 million in assets under management. After reviewing Avondale’s application, Treasury selected Avondale as an asset manager and Avondale began providing advisory services to Treasury in December 2009. Treasury later discovered that Avondale had falsely inflated the amount of its assets under management in its application to Treasury and had only about $47 million in assets under management at the time that the application was filed. Treasury terminated Avondale as an asset manager in May 2011. Specifically, the suspension precludes Avondale and Dillingham from participating in transactions with the U.S. Government, including grants, loans, and loan guarantees, and from acting as a principal of an organization participating in such transactions.

  • Tifton Banking Company
  • On June 20, 2013, Gary Patton Hall, Jr., the former president and chief executive officer of Tifton Banking Company (“Tifton”), pled guilty to conspiracy to commit bank fraud in Federal court in Macon, Georgia, for his role in a fraud scheme that caused losses to Tifton as well as the U.S. Small Business Administration (“SBA”). On November 12, 2010, the bank was closed by state and Federal regulators and taken into receivership by the FDIC, causing a complete loss of $3.8 million in TARP funds received in April 2009. Hall continued his illegal activities even during the time that Tifton applied for and received the TARP funds.

    Hall admitted that, from August 2005 to June 2010, he and his co-conspirators made materially misleading representations in order to obtain money, funds, credits, assets, securities, and other property owned by Tifton for their own personal gain. Hall admitted his part in replacing many past-due, non-performing loans with new ones to make the bank look financially sound. Hall had personal business relationships with his co-conspirators and approved loans to them and their affiliates in excess of his lending authority and in violation of Tifton rules. In one instance, Hall renewed a loan without disclosing to the loan committee that his co-conspirator had failed to deliver the collateral to secure the loan. Hall also approved loans to his co-conspirators without disclosing to the Tifton loan committee that he had a personal interest in the transactions. In another instance, Hall assisted in the submission of a fraudulent application to the SBA for a loan guarantee for a $1.5 million loan controlled by a co-conspirator. The application contained false and misleading statements and material omissions concerning the working capital, the business plan, and the appraisal of the property.

    At sentencing on September 30, 2013, Hall faces up to 30 years in Federal prison and a fine of up to $1 million. The plea agreement entered into between Hall and the United States Attorney calls for a sentence of 65 months in Federal prison; the decision as to whether or not to accept the recommendation will be made by the court at the time of sentencing.

    This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Middle District of Georgia, the FBI, FDIC, SBA, and the Tift County Sheriff’s Office.

    Additional Information:
    June 21, 2013


    SIGTARP: Former President of TARP Bank Pleads Guilty to Bank Fraud

  • Oxford Collection Agency
  • On June 17, 2013, Patrick Pinto, a former vice president and son of the former chairman of Oxford Collection Agency, Inc. (“Oxford”), pled guilty in Federal court in Bridgeport, Connecticut, to conspiracy to commit bank bribery for his role in a $12 million scheme to defraud business clients and TARP recipient Webster Bank. At sentencing on September 9, 2013, Pinto faces a maximum penalty of five years in Federal prison to be followed by a period of supervised release, a $250,000 fine, and restitution. Patrick Pinto admitted that, from August 2008 through October 2010, he and other Oxford executives engaged in a multi-year scheme to defraud its lender, TARP recipient Webster Bank, as well as its investors, clients and commercial debtors from which Oxford collected. As part of the scheme, Patrick Pinto and other Oxford executives made monthly cash payments to continue receiving debt collection business from TARP recipient U.S. Bank.

    Previously, on February 27, 2013, Wilbur Tate III was arrested by SIGTARP agents and its law enforcement partners and charged with taking bribes from Oxford executives while he was an assistant vice president at U.S. Bank. On January 30, 2013, Richard Pinto, the now deceased former chairman of Oxford, was sentenced to 60 months in Federal prison and was ordered to pay $12.3 million in restitution. Richard and his son, Peter Pinto, each pled guilty to using Oxford to perpetrate the multi-million dollar fraud scheme. Peter Pinto served as Oxford’s chief executive officer. In December 2012, three more former Oxford senior executives were charged and pled guilty for their roles in the scheme: Randall Silver, chief financial officer; Charles Harris, executive vice president; and Carlos Novelli, chief operations officer. At sentencing on September 20, 2013, Peter Pinto faces a maximum of 35 years in prison and a fine up to $20 million. At sentencing, Silver faces up to 25 years in prison and a $500,000 fine; Harris and Novelli each face up to five years in prison and a $250,000 fine.

    From January 2007 through March 2011, Oxford had agreements with business clients to collect debts from debtors, to report such collections to the clients, and to remit the collected payments back to the clients. The clients would pay Oxford a portion of the monies collected by Oxford as a fee. As assistant vice president at U.S. Bank, Tate was responsible for outsourcing debt collection accounts to collection agencies, including Oxford. Silver, Harris, and Novelli admitted to conspiring with Richard Pinto and Peter Pinto to execute a fraud scheme in which they (i) collected funds from debtors on behalf of clients but did not remit those funds to the clients and (ii) created false documents and used other deceptive means to cover up their failure to remit collected funds to clients and their improper use of the funds. Richard Pinto and Peter Pinto also admitted to causing Oxford to secure a line of credit from TARP recipient Webster Bank without disclosing to the bank that Oxford was defrauding its clients and had significant outstanding payroll taxes. Silver also helped Richard Pinto and Peter Pinto defraud Webster Bank by inducing the bank to increase the line of credit to $6 million by withholding Oxford’s true financial condition and submitting falsified financial records to the bank. Richard Pinto, Peter Pinto, and Silver also admitted to laundering funds from the line of credit by providing those funds to clients to maintain the clients’ business, which continued the scheme. The fraudulent scheme led victims to lose more than $12 million.

    The case is being investigated by SIGTARP, the U.S. Attorney’s Office for the District of Connecticut, the U.S. Attorney’s Office for the Northern District of Georgia, IRS-CI, the FBI, and the Connecticut Securities, Commodities and Investor Fraud Task Force.

    Additional Information:
    June 18, 2013


    SIGTARP: Executive at Debt Collection Agency Pleads Guilty to Bribing Bank Official for Collections Business

    February 27, 2013


    SIGTARP: Former U.S. Bank Manager Charged with Taking Bribes from Collections Agency that Defrauded TARP Banks

    February 1, 2013


    SIGTARP: Chairman of Debt Collection Agency Sentenced to Five Years in Prison for Role in $12 Million Fraud Scheme and TARP Bank Fraud

    December 19, 2012


    SIGTARP: Executives at Debt Collection Agency Admit Roles in $10 Million Fraud Scheme and TARP Bank Fraud

    May 15, 2012


    SIGTARP: Executives at Debt Collection Agency Admit Roles in $10 Million Fraud Scheme and to Defrauding TARP Bank

  • Lynn Nunes
  • On May 3, 2013, Lynn Nunes, a New York mortgage broker, was sentenced to 12 months in Federal prison followed by five years of supervised release for his role in a scheme to defraud mortgage lenders, including subsidiaries of TARP recipient banks Wells Fargo & Company, SunTrust Banks, Inc., and JPMorgan Chase & Co. Nunes was also ordered to pay $580,500 in restitution and to forfeit $40,000.

    On April 24, 2012, Nunes pled guilty in Federal court in Brooklyn, New York, to conspiracy to commit bank and wire fraud against the mortgage lenders. From January 2005 through October 2010, Nunes and others recruited people interested in purchasing property but who had insufficient assets and income to secure a mortgage. Nunes prepared fraudulent mortgage applications for the potential purchasers by falsely inflating their bank account balances and income to make the applicants appear more creditworthy. Nunes submitted these falsified loan applications to the mortgage lenders, which issued mortgage loans in reliance on the false applications. The lenders suffered losses on the properties when many of the purchasers subsequently defaulted on the mortgage loans.

    The case was investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of New York, and the FBI.

  • Robin Brass
  • On July 27, 2012, Robin B. Brass was sentenced by the U.S. District Court for the District of Connecticut to 96 months in Federal prison followed by three years of supervised release for defrauding investors of approximately $2 million. Brass pled guilty to mail fraud in April 2012. A hearing to determine restitution will be scheduled at a future date.

    From March 2009 through November 2011, Brass successfully solicited funds from investors by falsely representing herself as a successful investment advisor, guaranteeing investors against losses, and promising them a good rate of return on their investment. Brass used some of the investor funds to pay off other investors to keep the scheme going and to pay personal expenses for herself and her family, including her mortgage at Bank of America, a TARP-recipient bank. To perpetuate the fraud scheme, Brass sent fraudulent account statements to investors that made it appear that their investments were performing well.

    The case was investigated by SIGTARP, the United States Attorney’s Office for the District of Connecticut, USPIS, the FBI, and with assistance from the State of Connecticut Department of Banking as part of the Connecticut Securities, Commodities and Investor Fraud Task Force.

    Additional Information:
    July 30, 2012


    SIGTARP: Connecticut Woman Who Ran $2 Million Ponzi Scheme Sentenced to Eight Years in Federal Prison for Investor Fraud

  • The Park Avenue Bank
  • On October 1, 2012, SIGTARP agents, along with its law enforcement partners, arrested Matthew L. Morris, a former Park Avenue Bank senior vice president, and Anthony Huff, a businessman from Kentucky, for their roles in an alleged bank fraud scheme that led to the failure of Park Avenue Bank, as well as an alleged insurance fraud scheme. On the same day, the U.S. District Court for the Southern District of New York unsealed the 13-count indictment against Morris and Huff, which charged the defendants with conspiracy to commit bank bribery, bank and insurance fraud, and the theft of $2.3 million from a publicly traded company. Huff was also charged with tax evasion. Allen Reichman, a former executive director of investments at an investment bank and financial services company, was also arrested and charged with conspiracy to commit wire fraud in connection with the alleged insurance fraud.

    On October 8, 2010, Charles Antonucci, the former president and chief executive officer of Park Avenue Bank, pled guilty in the U.S. District Court for the Southern District of New York to offenses including securities fraud, making false statements to bank regulators, bank bribery, and embezzlement of bank funds. Antonucci was arrested in March 2010 after attempting to steal $11 million of TARP funds by, among other things, making fraudulent claims about the bank’s capital position. With his guilty plea, Antonucci became the first defendant convicted of attempting to steal from TARP. Antonucci is scheduled to be sentenced on April 3, 2013.

    According to the indictment, in about October 2008, Morris, Huff, and Antonucci allegedly devised a plan to prevent Park Avenue Bank from being designated as undercapitalized by its regulator, the Federal Deposit Insurance Corporation (“FDIC”). Morris, Huff, Antonucci and other co-conspirators allegedly used a series of fraudulent transactions to make it appear that Antonucci personally invested $6.5 million in Park Avenue Bank when, in actuality, the $6.5 million was part of Park Avenue Bank’s pre-existing capital. Morris, Huff, and Antonucci allegedly further defrauded FDIC by making false statements to, and providing false documents to, FDIC about the true source of the funds used for Antonucci’s purported $6.5 million investment in Park Avenue Bank. Antonucci emphasized to FDIC that his $6.5 million investment had stabilized the bank’s capital problems and should be considered favorably in evaluating the bank’s November 2008 request for $11.35 million in TARP funds through the Capital Purchase Program. Park Avenue Bank specifically referenced Antonucci’s $6.5 million investment in its TARP application.

    In addition, from 2007 through 2009, Huff allegedly provided $400,000 and other benefits in bribes to Morris and Antonucci in exchange for preferential treatment in connection with Huff’s banking relationship with Park Avenue Bank. In exchange for bribes, Morris and Antonucci allegedly (a) caused Park Avenue Bank to issue fraudulent letters of credit totaling $1.75 million to aid Huff in securing an investment in a business he owned, (b) allowed Huff to freely overdraft accounts at Park Avenue Bank in excess of $9 million in violation of bank policy, (c) facilitated intra-bank transfers in furtherance of frauds perpetrated by Huff and (d) fraudulently caused Park Avenue Bank to issue at least $4.5 million in loans to Huff-related businesses by circumventing the bank’s loan review procedures and allowing Huff to submit loan applications containing false statements.

    The charges further allege that, from July 2008 to November 2009, Morris, Huff, and Antonucci conspired with Reichman, an executive director of an investment firm, to defraud Oklahoma insurance regulators into allowing Antonucci to purchase the assets of an Oklahoma insurance company. Huff and Antonucci allegedly funded most of the purchase of the insurance company by convincing Reichman to cause the investment firm to issue a $30 million loan. Huff and Antonucci pledged the insurance company’s own assets as collateral for the loan, which was prohibited under Oklahoma law. To secure regulatory approval of the purchase of the insurance company, Morris, Huff, and Antonucci allegedly falsely represented to regulators that Park Avenue Bank was funding the purchase, thereby concealing the fact that the insurance company’s own assets were pledged as collateral for the loan. After the sale was finalized, Morris, Huff, and Antonucci allegedly took millions of dollars of the insurance company’s assets for themselves. The insurance company later became insolvent and was placed into receivership.

    On Friday, March 12, 2010, The Park Avenue Bank, New York, NY, was closed by the New York State Banking Department, and FDIC was appointed as receiver. FDIC estimates that Park Avenue Bank’s failure will cost the deposit insurance fund $50.7 million.

    The ongoing SIGTARP investigation is being conducted in partnership with the U.S. Attorney’s Office for the Southern District of New York, the FBI, U.S. Immigration and Customs Enforcement, the New York State Banking Department Criminal Investigations Bureau, and FDIC OIG.

    Additional Information:
    October 1, 2012


    SIGTARP: Kentucky Businessman, Senior Park Avenue Bank Official, and Financial Services Executive Charged in Fraud Schemes

    October 8, 2010


    Justice: Former President of The Park Avenue Bank Pleads Guilty in Manhattan Federal Court to Fraud on the TARP, Securities Fraud, Self-Dealing, Bank Bribery, and Embezzlement of Bank Funds

    March 15, 2010


    Justice: Manhattan U.S. Attorney Charges Former President of The Park Avenue Bank with Self-Dealing, Bank Bribery, Embezzlement of Bank Funds, and Fraud

    October 18, 2010


    Court Document: Charles J. Antonucci, Sr. Information

    June 9, 2010


    Court Document: Carlos Peralta Indictment

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  • FirstCity Bank
  • On May 7, 2013, Clayton A. Coe, former vice president and senior commercial loan officer at FirstCity Bank (“FirstCity”), was sentenced to 87 months in Federal prison followed by five years of supervised release, and ordered to pay $19.5 million in restitution, jointly with co-defendants, Mark A. Conner, former president, chief executive officer and chairman of FirstCity, and Robert E. Maloney, Jr., former in-house counsel. Coe was also ordered to pay separately $122,285 in restitution to the IRS. In February 2009, FirstCity unsuccessfully sought $6.1 million in Federal Government assistance through TARP. FirstCity failed and was seized by Federal and state authorities on March 20, 2009.

    Coe previously pled guilty in Federal court in Atlanta, Georgia, to bank fraud and to making a false statement on his tax return. As the senior commercial loan officer at FirstCity, Coe was primarily responsible for recommending to FirstCity’s loan committee whether to approve commercial loans to real estate developers. Coe admitted to defrauding FirstCity by causing FirstCity’s loan committee to approve an $800,000 loan to a borrower in connection with a real estate development transaction that provided a personal financial benefit to Coe. Coe concealed from FirstCity’s loan committee that the borrower used the loan proceeds to purchase land lots from a company owned by Coe and his wife and that the Coes had purchased these lots from the owner at a lower sales price on the same day the loan to the borrower closed. Coe also admitted to failing to report $476,000 in commissions to the Internal Revenue Service that he earned for loans he originated as FirstCity’s senior commercial loan officer.

    Conner and Maloney have each been sentenced, after pleading guilty, for their roles in the scheme to defraud FirstCity. Conner was sentenced to 12 years in Federal prison followed by five years of supervised release, banned for life from the banking industry, agreed to forfeit $7 million, and ordered to pay more than $19.5 million in restitution after pleading guilty to conspiracy to commit bank fraud and perjury for his role in the scheme. Conner admitted to defrauding FirstCity’s loan committee and board of directors into approving multiple multi-million-dollar commercial loans to borrowers who were actually purchasing property owned by Conner or his co-conspirators. Maloney was sentenced to 39 months in Federal prison followed by three years of supervised release and ordered to pay $10.5 million in restitution. Maloney also agreed to a lifetime ban from working in the banking industry. Maloney admitted to disguising the personal financial interests of Conner in a July 2007 real estate loan. Maloney admitted to receiving approximately $483,000 of those loan proceeds into his attorney escrow account that was maintained at FirstCity and using those funds to make payments and transfers to and for Conner’s benefit.

    The case was investigated by SIGTARP, the U.S. Attorney’s Office for the Northern District of Georgia, the FBI, IRS-CI, and FDIC OIG.

    Additional Information:
    August 10, 2012


    SIGTARP: President of FirstCity Bank Sentenced to 12 Years in Federal Prison for Bank Fraud Conspiracy and Perjury

    June 27, 2012


    SIGTARP: Former Top Loan Officer at Failed FirstCity Bank Pleads Guilty to Bank Fraud

    October 21, 2011


    SIGTARP: Former President of FirstCity Bank Pleads Guilty to Multi-Million Dollar Fraud Conspiracy

    June 24, 2011


    SIGTARP: Former Bank Lawyer Indicted in Multi-Million Dollar Fraud and Money Laundering Conspiracies

  • Omni National Bank
  • Omni National Bank (“Omni”), a national bank headquartered in Atlanta, failed and was taken over by the FDIC on March 27, 2009. Prior to its failure, Omni applied for, but did not receive, TARP funding under CPP. SIGTARP’s participation in a mortgage fraud task force, which also includes the U.S. Attorney’s Office for the Northern District of Georgia, FDIC OIG, HUD OIG, the U.S. Postal Inspection Services (“USPIS”), and FBI, has resulted in criminal charges, convictions, and sentencings against multiple individuals concerning Omni.

    Most recently, on June 1, 2011, Karim Walthour Lawrence, a former loan officer of Omni, was sentenced by the U.S. District Court for the Northern District of Georgia to serve 21 months in Federal prison on charges of accepting bribes from contractors he selected to renovate Omni-foreclosed properties while he was an officer for Omni. Lawrence pled guilty in January 2011 to one count of receiving commissions or gifts for procurement of loans. In his role as a bank officer at Omni, from February 2008 to March 2009, Lawrence had the authority to select contractors to perform renovations on foreclosed properties the bank owned. Lawrence corruptly accepted hundreds of thousands of dollars from contractors who wanted to perform work on the Omni houses. Contractors who hoped to influence Lawrence paid him more than $600,000 in cash and services.

    On April 22, 2011, Jeffrey L. Levine, a former executive vice president of Omni and head of the bank’s Community Redevelopment Lending Department, was sentenced by the U.S. District Court for the Northern District of Georgia to serve five years in prison on charges of causing materially false entries to be made on the books, reports, and statements of the bank that overvalued the bank’s assets. Levine and others at Omni failed to disclose many exceptions made to Omni’s policies and procedures that resulted in Omni being exposed to greater risk of loss. Practices that went unreported included: diversion of loan proceeds escrowed for rehab; excessive credit concentrations to a single borrower; funding additional loans for Omni foreclosures at ever-increasing amounts; and failing to create sufficient reserves for those questionable loans or to properly record them on Omni’s books and records.

    Also on April 22, 2011, Delroy Oliver Davy was sentenced by the same court to serve 14 years in prison on charges of bank fraud and conspiring to commit bank, mail, and wire fraud. Davy’s conduct included forming corporations and companies to purchase properties from financial institutions secured by the FDIC, including Omni. Davy would “flip” the properties within a short period of time to unqualified “investors,” and arrange mortgage loans from banks based on false qualifying information, all while concealing from the lenders that his own companies had recently purchased the properties for amounts significantly less than the new loans. Davy paid kickbacks to a loan officer at Omni, as well as to employees at another lender, who approved the funding for his “investors.” Ultimately, Davy’s scheme forced many properties into foreclosure, causing lenders, insurers and others to incur millions of dollars in losses. Davy also collected money from investors by falsely promising they would receive property, which they never received.

    Previously, Brent Merriell was sentenced in August 2010 to 39 months in prison for his role in a scheme to prompt Omni to forgive $2.2 million in loans. Merriell had pled guilty to charges of making false statements to the FDIC and six counts of aggravated identity theft in connection with the scheme. In addition, Christopher Bernard Loving was sentenced in August 2010 to three years of probation for making false statements to agents of SIGTARP and the FDIC in connection with an investigation of kickbacks he paid Lawrence for construction contracts.

    Additional Information:
    June 1, 2011


    SIGTARP: Karim Walthour Lawrence Sentenced to 21 Months in Prison for Accepting Bribes and Other Kickbacks as Loan Officer for Failed TARP Applicant Omni National Bank

    April 22, 2011


    SIGTARP: Delroy Oliver Davy Sentenced to 14 Years in Prison for Defrauding the Failed Omni National Bank and Other Lenders

    April 22, 2011


    SIGTARP: Jeffrey L. Levine, Former Executive of Failed Omni National Bank, Sentenced to Federal Prison

    April 22, 2011


    Court Document Karim Walthour Lawrence Plea Agreement

    August 3, 2010


    Justice: Atlanta Man Sentenced to Prison for Fraud Related to Omni National Bank

    June 24, 2010


    Court Document: Christopher Bernard Loving Plea Agreement

    May 11, 2010


    Court Document: Delroy Oliver Davy Plea Agreement

    April 1, 2010


    Justice: East Point Man Sentenced in Mortgage & Bankruptcy Fraud Related to Loans Funded by Failed Bank

    March 23, 2010


    Justice: Atlanta Man Pleads Guilty to Making False Statements to the FDIC and Aggravated Identity Theft

    May 23, 2010


    Court Document: Brent Merriell Plea Agreement

    January 14, 2010


    Justice: Former Executive of Failed Bank Pleads Guilty

    January 14, 2010


    Justice: Former Executive of Failed Bank Pleads Guilty

    January 14, 2010


    Court Document: Jeffrey L. Levine Plea Agreement

    April 24, 2009


    Court Document: Jeffrey L. Levine Plea Agreement

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  • Appalachian Community Bank
  • On April 5, 2013, Adam Teague, former senior vice president and senior loan officer of Appalachian Community Bank (“Appalachian”) was sentenced to 70 months in Federal prison followed by five years of supervised release, ordered to pay $5.8 million in restitution to the Federal Deposit Insurance Corporation (“FDIC”), and ordered to forfeit $7 million and certain real property in connection with his conviction for conspiracy to commit bank fraud for his participation in a scheme to defraud Appalachian of millions of dollars and hide certain past-due Appalachian loans from FDIC. In February 2012, FDIC issued a lifetime ban against Teague from working in the banking industry.

    Also, on February 26, 2013, William R. Beamon, Jr., a former vice president of Appalachian, was charged in Federal court with six counts of bank fraud. If convicted, Beamon faces a maximum of 30 years in prison and a fine of up to $1 million.

    As vice president at Appalachian, Beamon was in charge of the bank’s foreclosure liquidation department. Beamon was also the sole owner of a shell company, Newmon Properties, LLC (“Newmon Properties”). According to the charges filed in court, Beamon and his co-conspirators allegedly devised and executed a fraudulent scheme in which they diverted funds from the bank. In October 2009, Beamon allegedly lied to a real estate agent by stating that Beamon owned a property that was actually owned by Appalachian as a foreclosed property. Beamon had the real estate agent market and lease that property as if Beamon owned it. From April 2009 through December 2009, Beamon collected and deposited more than $20,000 in illegal rent payments and security deposits into his personal bank account. Further, Beamon allegedly caused Appalachian to make loans to his wife and to Newmon Properties. The loans provided by Appalachian allowed Beamon to purchase properties in the bank’s foreclosure inventory at prices below the fair market value.

    In October 2008, Appalachian applied for, but did not receive, $27 million in TARP funding. On March 19, 2010, Appalachian was closed by the Georgia Department of Banking and Finance, which appointed FDIC as receiver. FDIC estimates that Appalachian’s failure will cost the deposit insurance fund more than $419 million.

    This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Northern District of Georgia, the FBI, and the Federal Housing Finance Agency Office of Inspector General.

    Additional Information:
    April 5, 2013


    SIGTARP: Former Officer of Defunct Bank Sentenced to Federal Prison for Bank Fraud Conspiracy

  • Galleria USA, Inc.
  • On February 25, 2013, and March 12, 2013, wife and husband Cheri Fu (also known as Cheri L. Shyu) and Thomas Chia Fu were sentenced to 36 months and 21 months, respectively, in Federal prison followed by five years of supervised release each for their roles in bilking nearly $5 million from a group of banks, including TARP recipient banks. The Fus were also ordered to jointly pay $4.7 million in restitution.

    On January 26, 2012, the Fus, owners of Galleria USA, Inc. (“Galleria”), pled guilty to bank fraud in Federal court in Santa Ana, California. Galleria imported home decor items manufactured in China for sale in the United States. The Fus obtained a $130 million revolving line of credit for Galleria from seven banks, some of which were TARP recipients, including Bank of America and United Commercial Bank. The Fus admitted to significantly overstating to the banks the amount of Galleria’s accounts receivable in order to be able to continue borrowing funds under the line of credit. The Fus admitted to providing false financial reports to the banks and falsifying Galleria’s computer system to support the exaggerated accounts receivable figures they provided to the banks. The banks suffered an estimated loss of $4.7 million.

    This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Central District of California, the FBI, and the U.S. Secret Service.

    Additional Information:
    March 15, 2013


    SIGTARP: California Couple Sentenced to Federal Prison for Defrauding TARP Banks

    January 26, 2012


    SIGTARP: California Couple Plead Guilty to Federal Fraud Charges for Bilking Banks, Including TARP Banks, Out of Nearly $5 Million

  • 21st Century Real Estate Investment Corp.
  • In September 2012, SIGTARP agents, along with its law enforcement partners, arrested 11 individuals who had been charged by a Federal grand jury in the Central District of California with running a massive fraudulent mortgage modification scheme in Rancho Cucamonga, California, through 21st Century Real Estate Investment Corp. and several related companies (“21st Century”). The indictment charged the defendants with five counts of mail fraud, three counts of wire fraud, and one count of conspiracy. Each count in the indictment carries a statutory maximum penalty of 20 years imprisonment.

    The indictment alleges that, between approximately June 2008 and December 2009, defendant Andrea Ramirez operated 21st Century as a fraudulent mortgage modification business. The charges allege that 21st Century employees (including the defendants) contacted financially distressed homeowners through cold calls, advertisements, mailings, and websites. In solicitations and during conversations with homeowners, 21st Century employees made numerous materially false statements, including: (a) assertions that multiple lawyers were employed with the company to assist in mortgage modifications; (b) false testimonials from 21st Century customers who purportedly received satisfactory modifications through 21st Century; (c) claims that 21st Century had a “98% ratio of success” with loan modifications; (d) assurances that homeowners would receive a refund of fees paid to 21st Century if the company was unable to obtain a loan modification; (e) guarantees that 21st Century could obtain specific interest rates and reduced mortgage payments for homeowners; (f) statements that 21st Century was sponsored by the United States Government; (g) statements that homeowners were preapproved for loan modifications; and (h) assurances that 21st Century would use fees paid by homeowners to pay the homeowners’ mortgage lenders. In truth, according to the indictment, 21st Century rarely was successful in obtaining loan modifications, rarely refunded fees to homeowners, had only one attorney affiliated with the company and this attorney rarely worked on homeowner files, could not know whether and under what terms a mortgage lender would offer a homeowner a modification, was not sponsored by the United States Government, did not use fees received from homeowners to pay the homeowners’ mortgages, and regularly instructed homeowners to stop making mortgage payments to their lenders and to cut off all contact with their lenders because they were represented by 21st Century.

    The indictment further alleges that when 21st Century did submit loan modification applications to lenders, those applications frequently included false information, including forged rental agreements (which created the impression that homeowners were receiving rental income) and false statements exaggerating the homeowners’ financial hardship. Many of the financial institutions to which the 21st Century employees sent this false information were either TARP-recipient banks (including Wells Fargo Bank) or had agreed to otherwise participate in HAMP.

    It is also alleged that on some occasions 21st Century employees told homeowners that 21st Century was using fees paid by the homeowners to make mortgage payments, when in fact they were simply keeping the homeowners’ money. In total, 21st Century fraudulently obtained at least $7 million from more than 4,000 victims, and many homeowners lost their homes to foreclosure.

    The defendants, who were arrested by SIGTARP and its law enforcement partners, are: Andrea R. Ramirez, Christopher P. George, Michael B. Bates, Crystal T. Buck, Michael L. Parker, Catalina Deleon, Hamid R. Shalviri, Yadira G. Padilla, Mindy S. Holt, Iris M. Pelayo, and Albert DiRoberto.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Central District of California, the FBI, IRS-CI, U.S. Postal Inspection Service (“USPIS”), and FHFA OIG.

    Additional Information:
    September 12, 2012


    SIGTARP: Grand Jury Indicts 11 Linked to a California Mortgage Modification Scam that Targeted Financially Distressed Homeowners

  • Alan David Tikal / KATN Trust
  • On October 11, 2012, a grand jury sitting in the Eastern District of California returned a nine-count indictment against Alan David Tikal on charges that Tikal was operating a fraudulent mortgage rescue operation. Previously, on September 28, 2012, SIGTARP, along with its law enforcement partners, arrested Tikal based on a criminal complaint filed in connection with the charges. According to the indictment, from January 2010 through September 2012, Tikal allegedly falsely told distressed homeowners that he was a “registered private banker” who could reduce their outstanding home loans by 75% and that he had a tremendous success rate. Through an entity named KATN Trust, Tikal promised distressed homeowners that, for an upfront fee, he would replace the homeowners’ existing home loan with a new loan in an amount equal to only 25% of the original loan principal. Homeowners were also instructed to send all payments on the new “loan” to Tikal or to a designated recipient and to ignore any demands for payment by the original lenders. As alleged in the criminal complaint, Tikal also allegedly informed homeowners that the Department of Treasury was aware of his program.

    As a result of this scheme, homeowner victims made payments to Tikal rather than their lenders, were delinquent or in default on their mortgages, and did not avail themselves of the opportunity to modify their loans through programs implemented to help such distressed homeowners, such as HAMP. Tikal allegedly never made any payments to financial institutions on behalf of homeowners in satisfaction of their pre-existing mortgages and never extended loans to any homeowners. This resulted in many victims losing their homes to foreclosure. It is alleged that over 1,000 victimized homeowners paid in excess of $3.3 million to KATN and these funds were transferred to accounts controlled by Tikal. If convicted, Tikal faces up to 30 years in prison.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of California, IRS-CI, the California Department of Justice, and the Stanislaus County District Attorney’s Office.

    Additional Information:
    October 1, 2012


    SIGTARP: California Man Charged with Operating Multimillion Dollar Foreclosure Rescue Scheme

  • Timelender et al.
  • Frederic Alan Gladle

    On May 3, 2012, Frederic Alan Gladle was sentenced by the U.S. District Court for the Western District of Texas to 61 months in Federal prison, following his previous guilty plea to bankruptcy fraud and aggravated identity theft. The charges stem from Gladle’s operation of a foreclosure-rescue scam involving more than 1,100 distressed homeowners and several banks, including TARP banks. As part of the sentence, the court also ordered Gladle to pay $214,259 in restitution and to forfeit $87,901.

    Gladle admitted that, from 2007 to 2011, he promised homeowners whose properties were being foreclosed upon that, in exchange for a monthly fee, he would postpone the foreclosure for at least six months. After collecting fees from a homeowner, Gladle would have the homeowner execute a deed granting a small interest in their property to a random debtor in bankruptcy whose name Gladle found in bankruptcy records. Neither the homeowner nor the bankruptcy debtor was aware of Gladle’s misuse of the debtor’s bankruptcy petition. Gladle further defrauded the bank that had issued the loan to the homeowner by providing the bank a copy of the debtor’s bankruptcy petition showing that the debtor owned an interest in the homeowner’s property that the lender was attempting to foreclose upon. Upon receipt of these documents, the lender was legally obligated to and did terminate the foreclosure proceeding against the homeowner. As a result, multiple lenders, including TARP recipient banks Bank of America, Wells Fargo Bank and U.S. Bank, incurred costs and delays while attempting to collect money that was owed to them. Gladle admitted that he collected more than $1.6 million in fees from homeowners through this scam.

    Glen Alan Ward (aka Brandon Michaels)

    On April 8, 2013, Glen Alan Ward (aka Brandon Michaels) pled guilty in Federal court in California to bankruptcy fraud and aggravated identity theft. At sentencing on July 29, 2013, Ward faces a maximum of 12 years in Federal prison and a fine of up to $750,000.

    In August 2012, Ward was charged with bankruptcy fraud, mail fraud, and aggravated identity theft associated with his operation of a foreclosure-rescue scam that illegally postponed foreclosure sales. Ward, who had been a fugitive sought by U.S. Federal authorities since 2000, was arrested in Canada on April 5, 2012, and was returned to the United States on December 21, 2012.

    As part of his guilty plea, Ward admitted that from 1995 through April 2012 he and his co-conspirators solicited homeowners whose properties were facing foreclosure and promised to postpone the foreclosure for six to 36 months in exchange for a monthly fee of approximately $700. After collecting fees from a homeowner, Ward admitted that he would have the homeowner execute and record a deed granting a small interest in the property to a random debtor in bankruptcy whose name Ward found in bankruptcy records. Ward also would retrieve a copy of the debtor’s bankruptcy petition unbeknownst to the debtor. Ward further admitted that he or a co-conspirator then defrauded the bank seeking to foreclose on the homeowner’s property by providing the bank copies of the debtor’s bankruptcy petition and documents showing that the debtor owned an interest in the subject property. Because a bankruptcy filing triggers an automatic stay that protects a debtor’s property, the receipt of the bankruptcy petition and deed in the debtor’s name forced the lender to cancel the foreclosure sale. When a lender would succeed in having a court lift the stay, Ward would arrange another automatic stay by having the homeowner sign another deed transferring a small interest in the property to a different debtor in bankruptcy. Ward would repeat this course of action, continuously delaying sale of the property for as long as the homeowner paid the monthly fee. The fraudulent scheme perpetrated by Ward and his co-conspirators delayed the foreclosure sales of hundreds of distressed properties by using bankruptcies filed in 26 judicial districts. Ward and his co-conspirators collected more than $1 million in fees for illegal foreclosure-delay services. As a result, multiple lenders, including TARP-recipient banks Bank of America and U.S. Bank and other TARP-recipient banks, incurred costs and delays while attempting to collect money that was owed to them.

    Ward also admitted that he worked with Frederic Alan Gladle to perpetrate the foreclosure-rescue fraud. As previously reported, Gladle was charged with and pled guilty to the foreclosure-rescue fraud scheme. On May 3, 2012, Gladle was sentenced to 61 months in Federal prison and ordered to pay $214,259 in restitution and to forfeit $87,901.

    This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Central District of California, the FBI, and the U.S. Trustee’s Office.

    Additional Information:
    August 6, 2013


    SIGTARP: Former 12-Year Federal Fugitive Sentenced to 11 Years in Prison for Nationwide Foreclosure Scam

    April 9, 2013


    SIGTARP: Former 12-Year Federal Fugitive Pleads Guilty to Fraud and ID Theft in Massive, Nationwide Foreclosure Scam

    August 20, 2012


    SIGTARP: 12-Year Federal Fugitive Indicted for Fraud and ID Theft in Nationwide Foreclosure Scam

    May 24, 2012


    SIGTARP: SIGTARP, CFPB, and Treasury Issue a Fraud Alert to the Armed Services Community to Combat HAMP Mortgage Modification Scams

    May 4, 2012


    SIGTARP: Texas Man Sentenced to 61 Months in Federal Prison for Bankruptcy Fraud and Identity Theft in Connection with Nationwide Foreclosure-Rescue Scheme

    January 9, 2012


    SIGTARP: Austin, Texas, man Pleads Guilty to Bankruptcy Fraud and Identity Theft in Connection with Nationwide Foreclosure-Rescue Scheme

    December 9, 2011


    SIGTARP: Nationwide Foreclosure Rescue Scheme Shut Down; Operator Charged with Bankruptcy Fraud and Identity Theft, Agrees to Plead Guilty

  • National Legal Help Center
  • On December 3, 2012, the Consumer Financial Protection Bureau (“CFPB”) filed a civil complaint against National Legal Help Center, Inc. (“NLHC”), its owner, Najia Jalan, and its chief financial officer, Richard K. Nelson, for fraudulently marketing and selling mortgage assistance relief services. CFPB also filed a motion for a temporary restraining order against the defendants. The next day, the U.S. District Court for the Central District of California issued an order freezing the assets of the defendants and appointing a temporary receiver to take control of NLHC.

    The CFPB complaint alleges that the defendants falsely promised mortgage assistance relief services to distressed homeowners in exchange for up-front fees. According to the complaint, the defendants used aggressive marketing tactics through websites, direct mail solicitations, spam emails, and telephone calls to collect advance fees ranging from $1,000 to as much as $10,000 from distressed homeowners by falsely promising to obtain foreclosure relief or mortgage modifications that would make the homeowners’ mortgage payments substantially more affordable. The defendants allegedly misled homeowners by, among other things, misrepresenting NLHC as a government agency or as being approved by or affiliated with the government or government programs, including Treasury, the Making Home Affordable (“MHA”) program and the Home Affordable Modification Program (“HAMP”). For example, the defendants posted a website at “makinghomeaffordable.ca” that was allegedly virtually indistinguishable from the Federal government’s official website for the MHA program. The defendants also allegedly falsely claimed that they had special expertise in negotiating with mortgage lenders, that they had proven prior success in obtaining foreclosure relief or mortgage modifications, and that NLHC was a “full-service law firm” with attorneys experienced in providing such services to homeowners.

    The defendants allegedly collected at least $1.6 million in advance fees from homeowners since early 2010 but failed to provide any meaningful mortgage assistance relief services to homeowners. The defendants allegedly failed to respond to homeowners’ telephone calls and emails and failed to provide homeowners updates about the status of the defendants’ purported communications with lenders. In addition, the defendants allegedly instructed homeowners to stop contacting their lenders and stop paying their mortgages, without advising the homeowners that they could lose their homes and damage their credit rating by doing so. As a result of the defendants’ alleged fraudulent actions, many homeowners suffered significant economic injury, including a damaged credit rating and the loss of their homes.

    The ongoing investigation is being conducted by SIGTARP, CFPB, and the U.S. Attorney’s Office for the Central District of California.

    Additional Information:
    December 12, 2012


    SIGTARP: Alleged California-Based Nationwide Mortgage Modification Scam Shut Down

  • Waikele Properties Corporation
  • Marleen and Winston Shillingford

    On October 12, 2011, Marleen Shillingford pled guilty in the U.S. District Court for the District of Connecticut to conspiracy to commit wire fraud and conspiracy to commit money laundering.

    From approximately April 2004 through August 2011, Shillingford, through the Waikele Properties Corporation, conspired with others to commit a mortgage fraud and money laundering scheme to obtain false mortgages that she and others used to purchase more than 40 multi-family properties and vacant land, in Bridgeport, Connecticut, upon which they built new houses. The scheme involved recruiting straw purchasers for the properties who applied for mortgages from banks, including TARP banks, such as Bank of America. Shillingford and co-conspirators filed loan applications on behalf of the purchasers that contained material misrepresentations regarding the purchasers’ employment, income, assets, and liabilities, and also provided the banks false documentation. Shillingford used the loan proceeds to enrich herself and continue the scheme. Several straw purchasers defaulted on the mortgages resulting in losses of more than $7 million to lenders.

    On October 19, 2011, Shillingford’s husband, Winston Shillingford, pled guilty to conspiracy to commit wire fraud and conspiracy to commit money laundering.

    This case is being investigated by SIGTARP, the United States Attorney’s Office for the District of Connecticut, IRS-CI, the FBI, and Department of Housing and Urban Development Office of Inspector General (“HUD OIG”).

    Robert Ilunga

    On January 18, 2012, Robert Ilunga pled guilty in the U.S. District Court for the District of Connecticut to one count of conspiracy to commit wire fraud and one count of conspiracy to commit money laundering stemming from his involvement in a mortgage fraud scheme.

    Ilunga is the third person to plead guilty in connection with a mortgage fraud scheme committed through Waikele Properties Corporation, a real estate company with offices in New York and Connecticut. From sometime in 2001 through August 2011, Ilunga conspired with Marleen Shillingford, Winston Shillingford, and others to commit a mortgage fraud and money laundering scheme to obtain false mortgages that they used to purchase more than 40 multi-family properties and vacant land. Ilunga and his co-conspirators recruited straw purchasers and filed false mortgage applications on behalf of these purchasers with banks, including TARP recipient banks such as Bank of America. Several straw purchasers subsequently defaulted on the loans. As a result of the scheme, mortgage lenders including TARP banks suffered more than $7 million in losses.

    Ilunga faces a maximum prison term of 40 years at his sentencing, which is scheduled for April 2012. As previously reported, the Shillingfords pled guilty to the same charges in October 2011 and are awaiting sentencing.

    This case was investigated by SIGTARP, the U.S. Attorney’s Office for the District of Connecticut, IRS-CI, the FBI, and HUD OIG.

    Additional Information:
    January 19, 2012


    SIGTARP: Connecticut Man Pleads Guilty to Decade-Long Mortgage Fraud Scheme

    October 13, 2011


    SIGTARP: Woman Admits Role in Mortgage Fraud Against TARP-Funded Banks

  • Mount Vernon Money Center
  • On June 16, 2011, Robert Egan, former president of the Mount Vernon Money Center (“MVMC”), and Bernard McGarry, former chief operating officer of MVMC, were sentenced by the U.S. District Court for the Southern District of New York to 11 and five years in prison, respectively, and three years of supervised release, for their roles in defrauding banks that had received TARP funds and other MVMC clients. An Order of Forfeiture in the amount of $70 million was also entered by the court. Restitution orders will be determined at a later date.

    Egan and McGarry each pled guilty in late 2010 to conspiracy to commit bank fraud and wire fraud. The guilty pleas arose from a scheme in which Egan and McGarry defrauded MVMC clients, including banks that had received TARP funds, universities, and hospitals, out of more than $60 million that had been entrusted to MVMC. MVMC engaged in various cash management businesses, including replenishing cash in more than 5,300 automated teller machines owned by financial institutions. From 2005 through February 2010, Egan and McGarry solicited and collected hundreds of millions of dollars from MVMC’s clients on the false representations that they would not co-mingle clients’ funds or use the funds for purposes other than those specified in the various contracts with their clients. Relying upon the continual influx of funds, Egan and McGarry misappropriated the clients’ funds for their own and MVMC’s use, to cover operating expenses of the MVMC operating entities, to repay prior obligations to clients, or for their own personal enrichment.

    This case was jointly investigated by SIGTARP, FBI and the U.S. Attorney’s Office for the Southern District of New York.

    Additional Information:
    June 16, 2011


    SIGTARP: President and Chief Operating Office of Money Service Company Sentenced to 11 and 5 Years in Prison, Respectively, for Roles in Defrauding Banks, Retailers, Hospitals, and Universities Out of Over $60 Million

    October 14, 2010


    Justice: Chief Operating Officer of Money Service Company Pleads Guilty in Manhattan Federal Court to Defrauding Banks, Retailers, Hospitals, and Universities Out of Over $50 Million

    September 15, 2010


    Justice: Chief Operating Officer of Money Service Company Pleads Guilty in Manhattan Federal Court to Defrauding Banks, Retailers, Hospitals, and Universities Out of Over $50 Million

    September 15, 2010


    Court Document: Robert Egan Consent Order

    March 10, 2010


    Justice: Manhattan U.S. Attorney Charges President and Chief Operating Officer of Mount Vernon Money Center with Defrauding Banks, Retailers, Hospitals, and Universities Out of $50 Million

    March 10, 2010


    Court Document: Robert Egan and Bernard McGarry Indictment

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  • Joseph Terranova and Michael A. Zimmerman
  • Joseph Terranova

    On May 8, 2013, Joseph Terranova, a former senior official at Delaware-based Wilmington Trust Company (“Wilmington Trust”), pled guilty to conspiracy to commit bank fraud for his role in a fraud scheme that concealed the true financial condition of Wilmington Trust, a TARP-recipient bank, by engaging in extend and pretend schemes to keep loans current and to hide past-due loans from regulators and investors. Wilmington Trust received $330 million in TARP funds in December 2008. Terranova faces a maximum penalty of five years in Federal prison and a fine of up to $250,000 at sentencing.

    Terranova was employed by Wilmington Trust as vice president and division manager of a commercial real estate division. Terranova admitted that he conspired with other bank employees to extend credit to bank customers with loan terms that were inconsistent with those approved by the Loan Committee. Terranova also admitted to taking part in a scheme that concealed Wilmington Trust’s true financial condition by misrepresenting over $883 million in loans that were past due in 2009. Terranova also took part in a mass extension of expired and matured loan commitments that resulted in a failure to report over $373 million in past due loans. Finally, Terranova admitted to entering into a Construction Loan Agreement with Delaware real estate developer Michael A. Zimmerman that was inconsistent with a budget originally approved by the Loan Committee. Terranova admitted to facilitating Zimmerman’s receipt of over $2 million in proceeds that he was not entitled to under the terms of the agreement.

    The case is being investigated by SIGTARP, the U.S. Attorney’s Office for the District of Delaware, the FBI, IRS-CI, and FRB OIG.

    Michael A. Zimmerman

    On January 24, 2013, Michael A. Zimmerman, a Delaware real estate developer, was arrested by SIGTARP agents and its law enforcement partners in connection with his alleged role in defrauding Wilmington Trust Co. (“Wilmington Trust”), a TARP-recipient bank. Zimmerman was charged in Federal court with one count of conspiracy to commit bank fraud, seven counts of making a false statement to a financial institution, and one count of money laundering.

    According to the indictment, Zimmerman allegedly defrauded Wilmington Trust by using real estate development loan proceeds for improper purposes, ultimately causing substantial losses to Wilmington Trust. The indictment alleges that from 2007 through 2009, Zimmerman obtained over $37 million in financing from Wilmington Trust for three real estate development projects. Subsequently, Zimmerman and his co-conspirators allegedly submitted to Wilmington Trust numerous fraudulent construction draw requests and requests for the advancement of funds. After the requested funds were disbursed, Zimmerman and his co-conspirators used the funds for purposes other than requested, including for their own personal use. For example, Zimmerman allegedly used loan proceeds to send money to himself and his partners and to personally invest in a development in the Bahamas. Wilmington Trust incurred a loss on the three projects in excess of $26 million.

    If convicted of all nine counts, Zimmerman faces a maximum term of 250 years in prison, a fine, and restitution.

    The case is being investigated by SIGTARP, the U.S. Attorney’s Office for the District of Delaware, the FBI, IRS-CI, and the Office of the Inspector General-Board of Governors of the Federal Reserve System.

    Additional Information:
    May 8, 2013


    SIGTARP: Former Senior Officer at TARP Recipient Wilmington Trust Pleads Guilty to Bank Fraud Conspiracy

    January 30, 2013


    SIGTARP: Delaware Developer Indicted for Defrauding a TARP Bank and for Money Laundering

  • Steven J. Moorhouse
  • On May 7, 2013, Steven J. Moorhouse was charged in Federal court in Rockford, Illinois, with four counts of bank fraud and two counts of making a false statement to a financial institution. Moorhouse, the former president and majority shareholder of Jefsco Manufacturing Co., Inc. (“Jefsco”), allegedly overstated the value of collateral he used to secure loans from Old Second National Bank (“Old Second”). Old Second Bancorp, Inc., the parent company of Old Second, received $73 million in TARP funds in January 2009.

    According to the charges, in 2009, Old Second required Moorhouse to submit certain financial information in order to obtain two loans. Old Second granted Moorhouse a $1 million loan with the condition that Jefsco pledge its accounts receivable as collateral for the loan. Old Second also required that Jefsco open a deposit account at Old Second and deposit all accounts receivable payments into the account. One of the loans provided by Old Second allowed Moorhouse to borrow a percentage of Jefsco’s inventory and account receivables in the form of cash advances. It is alleged that Moorhouse submitted false financial statements to Old Second in order to obtain the loans and that he then knowingly misrepresented the value of Jefsco’s accounts receivable in order to maintain the loans. Also, instead of depositing customer payments to an account at Old Second as promised, Moorhouse allegedly fraudulently transferred the payments to other people and to another bank.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Northern District of Illinois, and the FBI.

    Additional Information:
    May 10, 2013


    SIGTARP: Illinois Businessman Indicted for Defrauding TARP Bank

  • Edward Shannon Polen
  • On December 10, 2012, Edward Shannon Polen pled guilty in the U.S. District Court for the Middle District of Tennessee to bank fraud, mail fraud, wire fraud, and money laundering. The charges stem from his execution of several elaborate Ponzi schemes in which he defrauded investors and several TARP-recipient banks. As previously reported, Polen had been charged in January 2012 in connection with the scheme.

    Polen admitted that from January 2007 through March 2011, he executed several Ponzi schemes in which he solicited and ultimately defrauded investors of more than $16 million. Polen admitted that, in one of those schemes, he falsely represented to victim-investors that he needed money to purchase construction equipment that he was going to sell to Tennessee Emergency Management Agency contractors for a significant profit. Polen further admitted that, when confronted with payment demands, he provided his victims with post-dated checks drawn on accounts at multiple banks, including F&M Bank, U.S. Bank, and Fifth Third Bank, all which received TARP funds. The checks were drawn from accounts that had been closed or did not have sufficient funds to cover the amounts of the checks. Polen further admitted that he used investors’ money for his own personal use, including paying off his gambling debts and repaying prior investment victims to keep the scams going.

    At sentencing on October 11, 2013, Polen faces up to 90 years in prison and a fine of up to $1.75 million. The case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Middle District of Tennessee, and the Tennessee Valley Authority Office of the Inspector General.

  • Joseph D. Wheliss, Jr.
  • On October 5, 2012, Joseph D. Wheliss, Jr., pled guilty in the U.S. District Court for the Middle District of Tennessee to bank fraud. On November 2, 2011, Wheliss was charged with bank fraud for his involvement in a scheme to defraud Pinnacle National Bank (“Pinnacle”). Pinnacle received $95 million in TARP funds in December 2008. Wheliss, the owner and operator of National Embroidery Works, Inc., was a banking customer of Pinnacle. Wheliss admitted that, from approximately 2005 to 2011, he defrauded Pinnacle by submitting false and forged documents to the bank regarding his finances and assets to cause the bank to issue multiple commercial loans to him. Pinnacle suffered a loss of approximately $4.7 million due to Wheliss’ fraud.

    At Wheliss’ sentencing, which is scheduled for January 11, 2013, he faces a maximum of 30 years in prison and $1 million fine.

    The case is being investigated by SIGTARP, the United States Attorney’s Office for the Middle District of Tennessee, and the FBI.

  • Brian W. Cutright
  • On January 7, 2013, Brian W. Cutright was sentenced by the U.S. District Court for the District of Nevada for operating a fraudulent mortgage assistance company, Sterling Mutual LLC (“Sterling”). Cutright was sentenced to probation for five years and was ordered to pay $762,143 in restitution to victims.

    Cutright pled guilty on October 9, 2012, to one count of mail fraud. Cutright admitted to creating and operating Sterling, a Las Vegas company that falsely claimed to have alliances with private investors and equity funds to purchase mortgages from distressed homeowners. Cutright admitted to causing Sterling to send mass mailing advertisements falsely stating that Sterling worked together with investment groups and hedge funds to make millions of dollars available to assist homeowners with principal reduction programs and to purchase client mortgages from lenders at or below market value. Cutright also admitted that Sterling’s false representations persuaded victims to give money to Sterling for the purpose of obtaining principal reductions; principal reductions that homeowners did not, in fact, receive. A Federal grand jury previously had returned a seven-count indictment against Cutright that included charges that Sterling falsely advertised that the U.S. Treasury’s Public-Private Investment Program (which was implemented under TARP) allowed banks to sell homeowner mortgages to investors at below market value, after which the homeowners could receive a principal reduction of 90% to 100% of the home’s current appraised value by negotiating a lower mortgage principal with the investor and Sterling.

    The case was investigated by SIGTARP, the U.S. Attorney’s Office for the District of Nevada, the Department of Housing and Urban Development Office of Inspector General, and the U.S. Postal Inspection Service.

  • Julius C. Blackwelder
  • On June 28, 2013, Julius C. Blackwelder, the former Bishop of the Church of Jesus Christ of Latter-Day Saints congregation in Trumbull, Connecticut, was sentenced to 46 months in Federal prison followed by three years of supervised release for his role in a Ponzi scheme that defrauded investors. Blackwelder had previously pled guilty to wire fraud and money laundering for his role in the fraud scheme.

    Beginning in 2005, Blackwelder solicited victim-investors, including members of his congregation, to invest money with him by misrepresenting himself as an experienced and successful investor and falsely assuring them that their funds would be invested in safe investments. In some instances, Blackwelder also guaranteed the victim-investors their principal and a specific return on their investment. Blackwelder used investor money to pay earlier investors in the scheme, to build a 7,000 square-foot waterfront home for himself, and to repay personal bank loans, including a line of credit from TARP-recipient Bank of America. Blackwelder admitted that he failed to invest victim funds as represented and lied to reassure a victim about the safety of his investment and to delay repaying the victim. Through this scheme, Blackwelder defrauded investors of nearly $500,000.

    This case was investigated by SIGTARP, the U.S. Attorney’s Office for the District of Connecticut, USPIS, IRS-CI, and the State of Connecticut Department of Banking.

    Additional Information:
    June 28, 2013


    SIGTARP: Former Connecticut Bishop Sentenced to Federal Prison for Ponzi Scheme and Laundering Proceeds Through a TARP Bank

    February 20, 2013


    SIGTARP: Former Connecticut Bishop Pleads Guilty to Wire Fraud and to Laundering Proceeds Through a TARP Bank

  • New Point Financial Services, Inc.
  • John Farahi

    On March 18, 2013, John Farahi was sentenced to 120 months in Federal prison followed by three years of supervised release for his role in a fraudulent $20 million Ponzi scheme perpetrated through his investment firm New Point Financial Services, Inc. (“New Point”). Farahi was also ordered to pay more than $24 million in restitution to victims.

    Farahi previously pled guilty on June 4, 2012, to running a Ponzi scheme through New Point from 2005 through 2009. Farahi admitted to convincing potential investors to invest in the corporate bonds of companies backed by TARP and other Federal Government programs, indicating that the investors risked losing their money only if the U.S. Government failed. Many of the defrauded investors were members of the Iranian-Jewish community who listened to Farahi’s daily Farsi-language investment radio show. Farahi admitted that he used investor money to support his lavish lifestyle, to make payments to previous New Point investors in order to perpetuate the Ponzi scheme, and to finance and cover trading losses on speculative options trades. Facing massive trading losses at the end of 2008, Farahi borrowed millions of dollars from TARP recipients Bank of America and U.S. Bank (and other banks) by providing false financial information to these banks.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Central District of California, and the Federal Bureau of Investigation (“FBI”).

    David Tamman

    Additionally, as previously reported, on November 13, 2012, after a two-week criminal trial in Federal court, attorney David Tamman was convicted of 10 counts relating to his role in the Ponzi scheme perpetrated by Farahi. Tamman was convicted of conspiring with Farahi to obstruct the Securities and Exchange Commission’s (“SEC”) investigation into Farahi’s illegal Ponzi scheme by (i) alter¬ing, creating, and backdating documents to make it falsely appear to the SEC that Farahi and New Point had made all the necessary disclosures to investors and that Farahi had properly transferred investor funds to his personal accounts and (ii) aiding and abetting Farahi in providing misleading and evasive testimony under oath to the SEC. Tamman also was convicted of being an accessory after the fact to Farahi’s mail and securities fraud crimes. At sentencing on September 9, 2013, Tamman faces a maximum penalty of 190 years in prison.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Central District of California, and the Federal Bureau of Investigation (“FBI”).

    Additional Information:
    November 14, 2013


    SIGTARP: Former Law Firm Partner Convicted of Obstructing a Federal Investigation

    March 19, 2013


    SIGTARP: California Fund Manager Sentenced to 10 Years in Federal Prison for $24 Million Fraud Scheme Involving Fake TARP-Backed Securities

    June 7, 2012


    SIGTARP: Former Fund Manager Pleads Guilty to Defrauding Investors and TARP Banks; Losses May Exceed $20 Million

    December 8, 2011


    SIGTARP: Former Fund Manager Indicted on Federal Charges of Bilking Investors and TARP-Funded Banks Out of More Than $20 Million

  • Online Mortgage Modification Scams Advertised on Google, Yahoo!, and Bing
  • This quarter, SIGTARP decided to take a 360-degree approach to combating and stopping mortgage modification fraud. In addition to investigations and criminal charges, SIGTARP actively worked to shut down hundreds of these scams advertised on the Internet and formed a joint task force to raise homeowner awareness of these scams. SIGTARP will continue to investigate and hold accountable criminals who defraud homeowners in connection with HAMP, while doing everything it can to stop homeowners from becoming victims in the first place.

    The first place many homeowners turn for help in lowering their mortgage payment is the Internet through online search engines, and that is precisely where they are being targeted. From talking to the victims of these scams, SIGTARP learned that many were enticed by web banner ads and online search advertisements that promised, for a fee, to help lower mortgage payments. These ads offer a false sense of hope that can end up costing homeowners their homes.

    In November 2011, SIGTARP shut down 125 websites that were advertised on Yahoo!, Bing, and Google and evidenced hallmarks of these fraudulent scams. SIGTARP coordinated with Google and Microsoft (which founded Bing and whose technology powers Yahoo!) to shut down the websites. In addition, Google suspended advertising relationships with more than 500 Internet advertisers and agents and Microsoft suspended advertising relationships with more than 400 Internet advertisers and agents connected with the 125 websites.

    SIGTARP’s work in cutting off this primary access to homeowners immediately and dramatically decreases the scope and scale of these scams by limiting their ability to seek out and victimize struggling homeowners. This SIGTARP investigation is ongoing.

    Additional Information:
    May 24, 2012


    SIGTARP: SIGTARP, CFPB, and Treasury Issue a Fraud Alert to the Armed Services Community to Combat HAMP Mortgage Modification Scams

    December 1, 2011


    SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners

    November 21, 2011


    SIGTARP: SIGTARP Shuts Down Online Mortgage Modification Scams Advertised on Yahoo! and Bing

    November 16, 2011


    SIGTARP: SIGTARP Shuts Down 85 Online Mortgage Modification Scams Advertised on Google

  • Distressed Homeowner Initiative
  • This description was updated on September 25, 2013.

    The initial version of this description contained data compiled and provided by the U.S. Department of Justice pertaining to the results of the Distressed Homeowner Initiative during Fiscal Year 2012. That data was later found to be incorrect. This description has been updated to reflect a recalculation of the data by the Justice Department. To view the original source of the information, view the Justice Department press release and disclaimer located here.

    The initial Justice Department press release incorrectly stated that the Distressed Homeowner Initiative netted 530 criminal defendants (revised to 107 criminal defendants) in cases involving more than 73,000 victims (revised to 17,185 victims) and losses of more than $1 billion (revised to $95 million), in FY 2012.

    A subsequent review of the reported cases by the Justice Department concluded that the original figures included in the Distressed Homeowner Initiative included not only criminal defendants who had been charged in Fiscal Year 2012, as reported, but also a number of defendants who were the subject of other prosecutorial actions – such as a conviction or sentence – in Fiscal Year 2012. In addition, the announcement included a number of defendants who were charged in mortgage fraud cases in which the victim(s) did not fit the narrow definition of distressed homeowner that the initiative targeted.

    On October 9, 2012, the U.S. Department of Justice, the U.S. Department of Housing and Urban Development, the FBI and the Federal Trade Commission announced the results of the Distressed Homeowner Initiative, the first-ever nationwide effort to target fraud schemes that prey upon suffering homeowners. The yearlong initiative, launched by the FBI, a co-chair of the Financial Fraud Enforcement Task Force’s Mortgage Fraud Working Group, and supported by SIGTARP, resulted in 107 criminal defendants charged in U.S. District Courts across the country. These cases involved more than 17,185 homeowner victims, and the total loss by those victims is estimated by law enforcement at more than $95 million.

    From October 1, 2011, to September 30, 2012, the Distressed Homeowner Initiative focused on fraud targeting homeowners, such as foreclosure rescue schemes that take advantage of homeowners who have fallen behind on their mortgage payments. Typically, the con artist in such a scheme promises the homeowner that he can prevent foreclosure for a substantial fee by, for example, having so-called investors purchase the mortgage or by transferring title in the home to persons in league with the scammer. In the end, the homeowner can lose everything. Other targets of the Distressed Homeowner Initiative include perpetrators of loan modification schemes who obtained advance fees from homeowners after false promises that they would negotiate more favorable mortgage terms on behalf of the homeowners. Additionally, SIGTARP and the Department of the Treasury (“Treasury”), in order to protect homeowners from fraudulent or confusing websites that misuse the Treasury seal and key TARP housing program names such as the Home Affordable Modification Program (“HAMP”), shut down or forced into compliance more than 900 mortgage rescue websites or web advertisers.

    SIGTARP, the Consumer Financial Protection Bureau, and Treasury have also established a task force to combat mortgage modification scams exploiting HAMP and to raise public awareness of the scams. The task force has issued two consumer fraud alerts, one specifically offering resources for U.S. servicemembers, that offer tips on how to identify and avoid mortgage modification scams. These alerts are reproduced in the back of this report.

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  • The Shmuckler Group, LLC
  • On April 10, 2012, Howard R. Shmuckler pled guilty in the U.S. District Court for the Eastern District of Virginia to wire fraud relating to his ownership and operation of a fraudulent mortgage modification business known as The Shmuckler Group, LLC (“TSG”). Shmuckler admitted to falsely portraying himself to TSG clients as an attorney licensed to practice in Virginia and to misrepresenting to clients that TSG’s loan modification success rate was 97%. Shmuckler also assured clients that their loans would be successfully modified. False representations by Shmuckler and TSG employees induced homeowners to pay TSG fees ranging from $2,500 to $25,000. Court records indicate that Shmuckler instructed clients to terminate contact with their mortgage companies and to stop making payments to their lenders. TSG never facilitated a modification of the mortgages referenced in the statement of facts admitted to by Shmuckler. On June 25, 2012, Shmuckler was sentenced to 90 months in Federal prison, a sentence that will run consecutive to his current term of imprisonment that resulted from a conviction in the U.S. District Court for the District of Columbia. Restitution to FDIC will be set by the court at a later date.

    On November 18, 2010, the Prince George’s County State’s Attorney’s Office in Maryland obtained a 30-count indictment against Shmuckler for conspiracy, theft, and operating a business without a license, in connection with a mortgage modification scam. On February 3, 2012, Shmuckler appeared before a judge in the Circuit Court for Prince George’s County, Maryland, where he waived his right to a jury trial and consented to certain facts in connection with the mortgage modification scam. At the next hearing, which had been postponed pending Shmuckler’s sentencing by the Eastern District of Virginia, the Maryland judge will rule on the charge. Shmuckler faces a maximum sentence of 15 years on the theft charge.

    The case brought in Federal court in Virginia resulted from a joint investigation conducted by SIGTARP, the FBI, FDIC OIG, and the U.S. Attorney’s Office for the Eastern District of Virginia. The case brought in state court in Maryland resulted from a joint investigation by SIGTARP, the Office of the State’s Attorney for Prince George’s County, and the Maryland Department of Labor Licensing and Regulation’s Financial Regulation Division.

    Additional Information:
    June 26, 2012


    SIGTARP: Operator of Virginia-Based Mortgage Modification Scam Sentenced to 7½ Years in Federal Prison

    May 24, 2012


    SIGTARP: SIGTARP, CFPB, and Treasury Issue a Fraud Alert to the Armed Services Community to Combat HAMP Mortgage Modification Scams

    April 10, 2012


    SIGTARP: Operator of Virginia-Based Mortgage Modification Scheme Pleads Guilty to Fraud

    December 1, 2011


    SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners

    November 30, 2010


    Maryland: Alleged Loan Modification Scammer Indicted by Prince George’s Grand Jury

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    If you are not redirected within five seconds, you may follow this link to be redirected now.

    You can also return to the SIGTARP site.

  • Home Owners Protection Economics, Inc.
  • On August 9, 2011, SIGTARP agents, with its law enforcement partners, arrested Christopher S. Godfrey, Dennis Fischer, Vernell Burris, Jr., and Brian M. Kelly. On August 3, 2011, a federal grand jury sitting in the District of Massachusetts returned an indictment against the four defendants for allegedly perpetrating a fraudulent home loan modification scam through a company named Home Owners Protection Economics, Inc. (“HOPE”). The 20-count indictment charges the four with conspiracy, wire fraud, mail fraud, and misuse of a government seal. Godfrey was the president and Fischer was the vice president of HOPE. Burris was the manager and primary trainer of HOPE telemarketers, and Kelly was one of the principal telemarketers and a trainer for other HOPE telemarketers. Godfrey and Fischer were charged with one count of conspiracy, nine counts of wire fraud, nine counts of mail fraud, and one count of misuse of a Government seal. Burris and Kelly were charged with one count of conspiracy, nine counts of wire fraud, and nine counts of mail fraud.

    The indictment alleges that, through a series of misrepresentations, the defendants and their employees induced thousands of financially distressed homeowners to pay HOPE a $400-$900 up-front fee in exchange for HOPE’s home loan modifications, modification services, and “software licenses.” According to the indictment, the defendants misrepresented that, with their assistance, homeowners were virtually guaranteed to receive a loan modification under the Home Affordable Modification Program (“HAMP”), which is a federally-funded mortgage assistance program implemented under TARP. The indictment alleges further misrepresentations by defendants, including that HOPE was affiliated with the homeowner’s mortgage lender, that homeowners had been approved for a home loan modification, that homeowners could stop making mortgage payments while they waited for HOPE to arrange their loan modification, that HOPE would refund the up-front fee if the modification was unsuccessful, and that HOPE was a non-profit organization.

    The indictment further alleges that, in exchange for homeowners paying the up-front fees, HOPE sent homeowners a “do-it-yourself” application package that was nearly identical to the application provided free of charge by the U.S. Government through HAMP. Through these misrepresentations, it is alleged, HOPE was able to persuade thousands of homeowners collectively to pay more than $3 million in fees to HOPE.

    On May 2, 2013, Brian M. Kelly pled guilty in Federal court in Boston, Massachusetts, to one count of conspiracy, nine counts of wire fraud, and nine counts of mail fraud. Kelly faces a maximum sentence of up to 25 years in Federal prison to be followed by a period of supervised release, a fine of up to $500,000, and restitution.

    Kelly admitted his participation in a fraudulent home loan modification scam through HOPE. Kelly admitted that, through a series of misrepresentations, HOPE induced thousands of financially distressed homeowners to pay a $400-$900 up-front fee in exchange for home loan modifications, modification services, and “software licenses.” In exchange for the fee, HOPE sent homeowners a “do-it-yourself” application package that was nearly identical to the application provided free of charge by HAMP. HOPE falsely misrepresented to homeowners that, with HOPE’s assistance, the homeowners were virtually guaranteed to receive a loan modification under HAMP. HOPE lulled the distressed homeowners by telling them that HOPE had an almost perfect record of obtaining home loan modifications. Kelly admitted that, through these misrepresentations, HOPE was able to persuade thousands of homeowners collectively to pay more than $3 million in fees to HOPE.

    On November 28, 2012, Burris pled guilty to conspiracy and wire fraud for his role in the fraud.

    Godfrey and Fischer are scheduled for trial on November 4, 2013.

    This case is being investigated by SIGTARP, the FBI, the United States Attorney’s Office for the District of Massachusetts, and the Computer Crime and Intellectual Property Section of the Department of Justice’s Criminal Division.

    Additional Information:
    December 1, 2011


    SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners

    August 9, 2011


    SIGTARP: Four Florida Men Charged in Boston with Defrauding Homeowners in Home Loan Modification Scam

  • Lori J. Macakanja
  • On February 2, 2012, Lori J. Macakanja was sentenced by the U.S. District Court for the Western District of New York to 72 months in prison and ordered to pay restitution of $298,639, for orchestrating a scheme to defraud struggling homeowners seeking mortgage modifications. Macakanja had been charged in a criminal complaint filed on January 29, 2011, and she pled guilty to mail fraud and theft of government money on October 6, 2011.

    Macakanja was formerly employed as a housing counselor by HomeFront, Inc. (“HomeFront”), a HUD-approved housing counseling agency in Buffalo, New York. Macakanja abused her position of trust by unlawfully soliciting and collecting money from HomeFront clients by falsely claiming that the money would be used to prevent foreclosure on the clients’ homes by obtaining loan modifications, including modifications under HAMP. Instead, Macakanja misused the client funds to gamble at casinos and to pay her own mortgage.

    Macakanja failed to obtain loan modifications for the victims. A total of 136 HomeFront clients were defrauded with losses totaling $300,000.

    This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Western District of New York, the U.S. Postal Inspection Service (“USPIS”), HUD OIG, IRS-CI, Secret Service, and the FBI.

    Additional Information:
    February 2, 2012


    SIGTARP: New York Housing Counselor Sentenced for Defrauding 136 Clients Seeking Mortgage Modifications

    October 6, 2011


    SIGTARP: Former Buffalo Housing Counselor Pleads Guilty in Connection with Defrauding Clients Seeking Mortgage Modifications

  • Flahive Law Corporation
  • The State Bar Court of California (“California Bar”) has disciplined Gregory Flahive and Cynthia Flahive for their roles in perpetrating a fraudulent home loan modification scam through the Flahive Law Corporation (“FLC”), a law firm operated by the Flahives. The Flahives each stipulated to multiple counts of misconduct in connection with the provision of loan modification services to homeowners. Effective July 5, 2012, Cynthia Flahive will serve a 60 day bar suspension while on a two year bar probation and effective August 11, 2012, Gregory Flahive will serve a three year bar suspension while on a five year bar probation. The California Bar also ordered both Flahives to pay restitution to their victims.

    Gregory and Cynthia Flahive and Michael Johnson, FLC’s former managing attorney, were arrested by SIGTARP agents and its law enforcement partners on March 8, 2012, pursuant to an indictment returned by a California grand jury. According to the indictment and court documents, from January 2009 to December 2010, FLC promoted its loan modification services to homeowners through advertisements, including a television infomercial. FLC falsely represented that experienced lawyers would negotiate with banks on behalf of homeowners seeking modifications, including under HAMP, misrepresented that FLC’s law firm status would give them extra leverage when negotiating with such banks, and overstated FLC’s rate of success in obtaining loan modifications on behalf of homeowners. FLC allegedly collected up-front fees of up to $2,500 from homeowners for loan modification services that were never performed.

    On May 16, 2012, in response to the criminal charges, Johnson entered a plea of no contest to misdemeanor conspiracy for his participation in the fraud and was ordered by a California criminal court to serve three years of probation, pay restitution to victims, and to not participate in loan modification services. A California Bar disciplinary proceeding against Johnson is pending.

    The case is being investigated by SIGTARP, the California Attorney General, Folsom Police Department, Rancho Cordova Police Department, and the El Dorado Sheriff’s Department.

    Additional Information:
    May 24, 2012


    SIGTARP: SIGTARP, CFPB, and Treasury Issue a Fraud Alert to the Armed Services Community to Combat HAMP Mortgage Modification Scams

    March 8, 2012


    SIGTARP: 3 Attorney’s Charged in California Loan Modification Scam

    December 1, 2011


    SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners

  • United Law Group
  • In March 2010, SIGTARP, along with USPIS, FBI, ICE, and the Orange County District Attorney’s Office, executed a publicly filed search warrant obtained by the U.S. Attorney for the Central District of California at the offices of United Law Group (“ULG”). This investigation focuses on allegations that ULG, taking advantage of the publicity surrounding HAMP, engaged in a mortgage modification advance-fee scheme. The search warrant affidavit alleges that ULG charged struggling homeowners fees ranging from $1,500 to $12,000 without performing services, while advising victims to stop paying their mortgages and terminate contact with their lenders. The affidavit further alleges that many ULG customers subsequently lost their homes to foreclosure.

    On June 30, 2010, ULG filed for bankruptcy protection. On December 20, 2010, as a direct result of SIGTARP’s investigative efforts, the Honorable Robert Kwan issued a preliminary injunction assigning control of a bank account held by ULG containing client funds to ULG’s bankruptcy trustee. The bankruptcy trustee assigned to wind down the operations of ULG in Irvine, California, estimates that approximately $1 million from the seized account will be returned to the estate to serve as restitution to victims.

    SIGTARP’s investigation with its law enforcement partners is ongoing.

    Additional Information:
    December 1, 2011


    SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners

  • Compliance Audit Solutions, Inc.
  • On February 14, 2012, Ziad al Saffar, Sara Beth Rosengrant, and Daniel al Saffar pled guilty to charges of conspiracy to commit wire fraud and mail fraud for their roles in operating a fraudulent mortgage loan modification business under the names Compliance Audit Solutions, Inc. (“CAS”) and CAS Group, Inc. (“CAS Group”). On July 20, 2012, all three defendants were sentenced by the U.S. District Court for the Southern District of California. Ziad al Saffar was sentenced to 21 months in Federal prison, followed by three years of supervised release, and ordered to pay $270,417 in restitution to victims. Sara Beth Rosengrant was sentenced to 12 months of home detention as part of a three-year probation term, and ordered to pay $101,068 in restitution to victims. Daniel al Saffar was sentenced to six months of home detention as part of a three-year probation term, and ordered to perform 600 hours of community service and pay $46,757 in restitution to victims.

    The defendants admitted targeting homeowners who were unable to afford their mortgage payments and using fraudulent tactics to induce the homeowners to purchase an “audit” of their home mortgage loan. The defendants claimed the “audit,” for which they charged homeowners between $995 and $3,500, could identify “violations” in the homeowners’ loan documents that could be used to force banks to negotiate new terms for the loans. The defendants admitted to publishing numerous misrepresentations in advertisements, including claiming that the defendants were affiliated with or employed by the United States Department of Housing and Urban Development, and that CAS and CAS Group were participating in a Federal Government program called “Hope for Homeowners.” The defendants also used websites named www.obama4homeowners.com and www.hampnow.org, which implied affiliation with HAMP, the housing support program funded by TARP.

    This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Southern District of California and the FBI.

    Additional Information:
    July 23, 2012


    SIGTARP: Operators of California-Based Mortgage Modification Scam Sentenced for Conspiracy to Commit Fraud

    May 24, 2012


    SIGTARP: SIGTARP, CFPB, and Treasury Issue a Fraud Alert to the Armed Services Community to Combat HAMP Mortgage Modification Scams

    February 15, 2012


    SIGTARP: Operators of California-Based Mortgage Modification Scam Plead Guilty to Conspiracy to Commit Fraud

    December 1, 2011


    SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners

    April 29, 2011


    SIGTARP: Operators of Mortgage Loan Modification Business Charged with Conspiracy to Commit Fraud

  • American Home Recovery
  • On May 17, 2012, after a 10-day jury trial in U.S. District Court for the Southern District of New York, Isaak Khafisov was found guilty of conspiracy, mail fraud and wire fraud for perpetrating a scheme to defraud distressed homeowners and lenders. At sentencing on September 6, 2012, Khafisov faces a maximum sentence of 80 years in Federal prison.

    According to court documents and statements made during court proceedings, around spring 2008, Khafisov founded a mortgage modification business named American Home Recovery (“AHR”). Khafisov and AHR salespeople made false assertions to fraudulently induce distressed homeowners to pay AHR thousands of dollars in up-front fees for mortgage modifications. Specifically, Khafisov and AHR informed homeowners that they had been “pre-approved” for a mortgage modification by their lenders; that AHR would ensure participation in the TARP-funded Making Home Affordable program; and that AHR could obtain better interest rates and lower monthly fees on their mortgage. Khafisov and AHR also falsely promised to return the up-front fees if AHR did not secure a mortgage modification desired by the homeowner. They also falsely claimed that AHR was affiliated with government agencies and programs established by the Economic Stimulus Act of 2008 and that AHR possessed unique expertise in mortgage modifications and had special relationships with lenders. Khafisov also directed distressed homeowners to stop paying their mortgages and to pay fees to AHR instead. After receiving up-front fees from the distressed homeowners, Khafisov and AHR did little or no work to try to renegotiate the homeowners’ mortgages. As a result, many AHR clients were foreclosed upon by lenders and lost hundreds of thousands of dollars in fees.

    Jaime Cassuto and David Cassuto founded AHR with Khafisov. As previously reported, they each entered a guilty plea on April 2, 2012, relating to this mortgage modification scheme. In March 2011, Raymond Pampillonio, a former AHR employee, also pled guilty in connection with this scheme.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Southern District of New York, and the FBI.

    Additional Information:
    May 24, 2012


    SIGTARP: SIGTARP, CFPB, and Treasury Issue a Fraud Alert to the Armed Services Community to Combat HAMP Mortgage Modification Scams

    May 18, 2012


    SIGTARP: Operator of National Mortgage Modification Scam Convicted of Fraud

    December 1, 2011


    SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners

    June 17, 2010


    Manhattan U.S. Attorney Charges 38 Defendants as Part of Nationwide Mortgage Fraud Sweep

  • Home Advocate Trustees
  • On May 10, 2013, Mark S. Farhood and Jason S. Sant pled guilty in Federal court in Alexandria, Virginia, to conspiracy to commit mail fraud, wire fraud, and bank fraud for their roles in perpetrating a nationwide online foreclosure rescue scam through their company, Home Advocate Trustees (“HAT”). Each faces a maximum of 30 years in Federal prison, restitution, and forfeiture at sentencing, scheduled for August 2, 2013, and August 9, 2013, respectively.

    Farhood and Sant, co-owners and operators of HAT, admitted that they and their co-conspirators used their website, www.walkawaytoday.org, to fraudulently represent to hundreds of distressed homeowners that they could walk away from their homes and their mortgages without negative effect to their credit by selling their homes to HAT for a nominal fee. Farhood and Sant further admitted that, in order to obtain possession of the distressed homes, they executed quitclaim deeds in favor of HAT and sent the distressed homeowners fraudulent closing documents. The homeowners then stopped paying their mortgages and left their homes in the mistaken belief that they had sold their homes to HAT. Once HAT took possession of the homes, Farhood and Sant admitted to leasing the properties and collecting all rent and security deposit payments for their own personal use. When lenders began foreclosure proceedings on the distressed properties, Farhood and Sant delayed the foreclosure process by submitting to the lenders fraudulent HAMP applications. Through these misrepresentations, HAT fraudulently obtained more than $3 million.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of Virginia, and the FBI.

    Additional Information:
    May 14, 2013


    SIGTARP: Perpetrators of Nationwide Foreclosure Rescue Scam Plead Guilty to Fraud

  • New Jersey Mortgage Fraud Sweep
  • As part of an ongoing wide-scale mortgage fraud investigation in New Jersey, described below, 11 individuals have been arrested, including two individuals who have since pled guilty, by SIGTARP agents and its law enforcement partners and charged with conspiracy to commit bank fraud relating to their roles in fraudulent mortgage schemes. Those arrested were: Christopher Woods, Matthew Amento, Carmine Fusco, Kenneth Sweetman, Joseph Divalli, Paul Chemidlin, Jr., Delio Countinho, Christopher Ju, Jose Luis Salguero Bedoya, Yazmin Soto-Cruz, and Jose Martins.

    Two Individuals Plead Guilty to Wire Fraud in $5 Million Scheme

    Previously, in 2012, Matthew Amento and Christopher Woods pled guilty in Federal court to wire fraud charges in connection with their roles in a fraud scheme running from March 2008 through February 2010 that resulted in significant loses by mortgage lenders, including TARP-recipient banks Bank of America and Wells Fargo.

    Amento and Woods admitted to recruiting straw borrowers to buy residential properties located in New Jersey and submitting fraudulent loan applications to lenders along with false supporting financial information, including financial documents that were altered to reflect inflated income and asset amounts for the applicants. In addition, Amento and Woods caused others to create and submit to lenders inaccurate loan settlement statements that showed fake liens on the subject property purportedly owned by entities controlled by Amento and Woods. After the lenders approved these loans, Amento and Woods caused loan proceeds to be transferred to bank accounts they controlled, to pay off liens purportedly owned by entities they controlled. According to documents filed in court, this scheme caused lenders, including the TARP-recipient banks, to suffer losses totaling approximately $5 million.

    Amento and Woods are scheduled to be sentenced on November 22, 2013. At sentencing, each faces a maximum of 40 years in Federal prison.

    Nine Individuals Arrested and Charged in $10 Million Mortgage Fraud Scheme

    On January 23, 2013, Carmine Fusco, Kenneth Sweetman, Joseph Divalli, Paul Chemidlin, Jr., Delio Countinho, Christopher Ju, Jose Luis Salguero Bedoya, Yazmin Soto-Cruz, and Jose Martins were charged with conspiracy to commit bank fraud in connection with an alleged long-running, large-scale mortgage fraud scheme that caused losses of approximately $10 million.

    According to the charges, from March 2008 to July 2012, the defendants engaged in multiple mortgage fraud conspiracies targeting at least 15 properties in New Jersey. The defendants’ alleged mortgage frauds took several forms, including obtaining control of properties through fraudulent “short sale” transactions, short sale flips, and identity theft. They submitted materially false mortgage loan documents to lenders, including TARP recipient banks, in order to obtain loan proceeds, which the defendants then used for their own financial gain. The defendants also obtained money through various sales to straw buyers.

    These ongoing cases are being investigated by SIGTARP, the U.S. Attorney’s Office for the District of New Jersey, the FBI, the United States Postal Investigation Services (“USPIS”), and the Department of Housing and Urban Development Office of Inspector General as part of the New Jersey Mortgage Fraud Task Force.

  • Walter Bruce Harrell
  • On February 20, 2013, Walter Bruce Harrell was arrested by SIGTARP agents and its law enforcement partners in connection with Harrell’s alleged role in a foreclosure rescue scam. Harrell was charged by a Federal grand jury with eight counts of bankruptcy fraud and two counts of making false statements in bankruptcy proceedings.

    According to the indictment, from March 2011 through January 2013, Harrell perpetrated a scheme to prevent lenders, including TARP-recipient banks, from lawfully foreclosing on properties. Harrell solicited homeowners whose properties were facing foreclosure and promised to postpone the foreclosure in exchange for a monthly fee. After the fees were paid, Harrell allegedly directly or indirectly had the property owners transfer a fractional interest in their distressed property to individuals paid by Harrell to voluntarily file for bankruptcy. As required by law, these bankruptcy filings automatically halted the foreclosure sales until the lenders sought relief from the stay or until the bankruptcy case was dismissed. In circumstances where the bankruptcy court allowed a foreclosure to proceed, Harrell allegedly often had the property owner transfer another fractional share in the distressed property to a different debtor in bankruptcy, which renewed the foreclosure delay process.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Northern District of California, and the FBI.

    Additional Information:
    February 22, 2013


    SIGTARP: California Man Charged with Bankruptcy Fraud Related to Foreclosure-Rescue Scam

  • Nations Housing Modification Center
  • Glenn Rosofsky, Roger Jones, and Michael Trap pled guilty to their involvement in a fraudulent loan-modification scheme. The conspiracy sold loan-modification services to homeowners who were delinquent on their monthly mortgage payments. Using the names “Nations Housing Modification Center” (“NHMC”) and “Federal Housing Modification Department,” the conspiracy used false and fraudulent statements and representations to induce customers to pay advance fees of $2,500 - $3,000 each to purchase loan-modification services from NHMC. The fraud grossed at least $900,000 from more than 300 homeowners.

    On January 24, 2011, Rosofsky was sentenced by the U.S. District Court for the Southern District of California to 63 months incarceration and 36 months of supervised release and ordered to pay restitution of $456,749 following his previous guilty plea to one count of conspiracy to commit wire fraud and money laundering; one count of money laundering; and one count of filing a false tax return.

    On January 18, 2011, Jones was sentenced in the same court to 33 months incarceration and 36 months of supervised release, and ordered to pay restitution of $456,749 following his previous guilty plea to one count of conspiracy to commit wire fraud and money laundering; one count of money laundering; and one count of filing a false tax return. At his guilty plea, Jones admitted not only to participating in the conspiracy, but also to making material false statements to SIGTARP agents that significantly obstructed or impeded an aspect of the SIGTARP investigation.

    Trap, who pled guilty to conspiracy to commit wire fraud and money laundering, is expected to be sentenced later this spring.

    This case was jointly investigated by SIGTARP, IRS-CI, the Federal Trade Commission (“FTC”), the San Diego District Attorney’s Office, and the U.S. Attorney’s Office for the Southern District of California, with the support of FinCEN and the New York High Intensity Financial Crime Area.

    Additional Information:
    December 1, 2011


    SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners

    June 10, 2011


    SIGTARP: Owner of Fraudulent Mortgage Loan Modification Scheme Sentenced

    October 1, 2010


    Court Document: Roger T. Jones Plea Agreement

    June 1, 2010


    Justice: Owner of Fraudulent Mortgage Loan Modification Scheme Pleads Guilty to Conspiracy, Money Laundering and Tax Charges

    June 1, 2010


    Court Document: Glenn Steven Rosofsky Plea Agreement

    March 24, 2010


    Court Document: Michael Trap Plea Agreement

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  • Freedom Companies Marketing
  • On July 23, 2012, the Federal Trade Commission (“FTC”) filed a civil complaint and a motion for a temporary restraining order against Freedom Companies Marketing and its related companies (“FCM”) in connection with an alleged fraudulent mortgage assistance relief scheme that targeted Spanish-speaking homeowners. That same day, the U.S. District Court for the Northern District of Illinois issued an order freezing the assets of FCM.

    The FTC complaint alleges that FCM and its owner David Preiner violated the FTC Act and the Mortgage Assistance Relief Services Rule by promising to dramatically lower homeowners’ monthly mortgage payments in exchange for upfront fees, but failing to provide homeowners with the promised services. According to the complaint, FCM telemarketers called financially distressed Spanish-speaking homeowners and falsely promised them a mortgage modification in 30 to 90 days in exchange for upfront fees of $995 to $1,500. FCM telemarketers would allegedly state during these calls that mortgage modifications were available through a Federal program created by President Obama, state that the homeowner qualified for a modification under this program, and falsely claim that the FCM was affiliated with the United States Government or approved by the Government to obtain modifications for homeowners under this program. FCM also allegedly guaranteed or virtually guaranteed that it would be able to obtain modifications for the homeowners and provided fabricated quotes as to the homeowners’ modified mortgage payment amount or interest rate. To better enable the homeowners to afford to pay FCM the upfront fee, FCM allegedly instructed homeowners to stop paying their mortgages and assured homeowners that their lender would forgive all past-due payments and late fees after the loan modification process was completed. However, FCM allegedly failed to disclose to homeowners that they could lose their homes or damage their credit rating by not paying their mortgage.

    In most or all cases, according to the complaint, FCM failed to provide any service of value to homeowners who paid the upfront fee to FCM. When homeowners contacted FCM to check on the status of their modifications after paying an upfront fee, FCM almost always told the homeowners that they would need to pay additional fees for their loan modifications to be completed. In addition, FCM allegedly sent homeowners letters with the official Government logo of the Making Home Affordable program or the logo of the homeowners’ mortgage lender or servicer. These letters stated that the homeowners’ modifications had been approved and requested that the homeowners pay a closing fee. As a result, many homeowners paid thousands of dollars in additional fees to FCM. In total, FCM collected more than $2 million in fees from homeowners during the last three years.

    This ongoing investigation is being conducted by SIGTARP, the FTC, the FBI and the United States Attorney’s Office for the Northern District of Illinois.

  • Residential Relief Foundation, LLC / Silver Lining Services
  • On September 30, 2011, at the request of the Federal Trade Commission (“FTC”), the U.S. District Court for the District of Maryland shut down the operations of Residential Relief Foundation (“RRF”); Silver Lining Services, LLC; and their owners, James Holderness, Bryan Melanson, Michael Valenti, and Jillian Melanson. The settlement agreement entered into between the FTC and the defendants bans the defendants from participating in the mortgage assistance relief and debt relief industries and imposes a judgment of more than $10.5 million against the defendants, which is the total amount the defendants made through their deceptive conduct.

    The civil complaint filed by the FTC as a result of an in¬vestigation by SIGTARP and the FTC alleged that the defendants violated Federal law by falsely claiming that they would obtain loan modifications, including under HAMP, and significantly lower mortgage payments for consumers in return for upfront fees. Consumers, who were assured quick results and a high success rate, were charged a $1,495 up-front fee. The complaint also charged the defendants with misrepresenting an affiliation with the Federal Government, falsely claiming to have taken reasonable and appropriate measures to protect consumers’ personal information from unauthorized access, and improperly disposing of consumers’ information in unsecured dumpsters, in violation of the FTC Act. The defendants engaged in their conduct amid the publicity surrounding the availability of free mortgage loan assistance and modification programs, including HAMP as imple¬mented under TARP by Treasury.

    The settlement agreement also bars the defendants from making misrepre¬sentations about any product or service, including claims about their government affiliation.

    The case was investigated by SIGTARP and the FTC.

    Additional Information:
    December 1, 2011


    SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners

    October 4, 2011


    FTC: At FTC’s Request, Court Shuts Down Deceptive Mortgage and Debt Relief Operation

    November 15, 2010


    Court Document: Temporary Restraining Order

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  • Clint and Brandi Dukes
  • In November and December 2012, Clint E. Dukes and his former wife, Brandi M. Dukes, respectively, pled guilty in the U.S. District Court for the Western District of Missouri in connection with a bank fraud scheme that caused three banks to lose more than $2 million, including two TARP-recipient banks. Clint Dukes was convicted of bank fraud and Brandi Dukes was convicted of misprision of felony. At sentencing, Clint Dukes faces up to 30 years in prison, a fine of up to $1 million, and restitution, and Brandi Dukes faces up to three years in prison, a $250,000 fine, and restitution.

    Clint Dukes, owner of Dukes Auto Repair, admitted to creating false invoices and contracts from the state of Missouri in order to obtain approximately $3 million in loans from U.S. Bank, First Community Bank and First Central Bank from 2004 to 2011. Brandi Dukes worked as the bookkeeper for his auto repair shop. Brandi Dukes admitted to concealing her husband’s fraud by submitting a fraudulent disbursement request and authorization to First Community Bank in the amount of $397,329.

    Through his fraudulent scheme, Clint Dukes caused losses totaling more than $2 million at U.S. Bank, First Community Bank, and First Central Bank. U.S. Bancorp of Minneapolis, the parent company of U.S. Bank, received $6.6 million in TARP funds and has since repaid the funds. First Community Bancshares, Inc., the parent company of First Community Bank, received $14.8 million in TARP funds that remains outstanding, along with 10 dividend and interest payments totaling more than $2 million.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Western District of Missouri, the FBI and the Higginsville, Missouri, Police Department.

    Additional Information:
    December 28, 2012


    SIGTARP: Missouri Woman Pleads Guilty to Role in $2.8 Million Bank Fraud Against Two TARP Banks

    November 28, 2012


    SIGTARP: Missouri Businessman Pleads Guilty to $2.8 Million Bank Fraud Against Two TARP Banks

  • Improper Use of “MakingHomeAffordable.gov”
  • On Friday, May 15, 2009, at the request of the Federal Trade Commission (“FTC”), a Federal district court issued an order to stop an Internet-based operation that pretended to operate “MakingHomeAffordable.gov,” the official website of the Federal MHA program for mortgage loan assistance. The FTC alleged that the defendants deceptively diverted consumers who searched online for the free Government assistance program to commercial websites that offer loan modification services for a fee.

    According to the FTC’s complaint, the defendants purchased sponsored links for their advertising on the results pages of Internet search engines, including yahoo.com, msn.com, altavista.com, and alltheweb.com. When consumers searched for “making home affordable” or similar search terms, the defendants’ ads prominently and conspicuously displayed the website address “makinghomeaffordable.gov.” Consumers who clicked on this advertised hyperlink were not directed to the official website for the MHA program, but rather were diverted to websites that solicit applicants for paid loan modification services. These commercial websites, which are not part of or affiliated with the U.S. Government, require consumers to enter personally identifying and confidential financial information. The operators of these websites either purport to offer loan modification services themselves or sell the personally identifying information to others.

    The FTC filed an emergency request for a temporary restraining order in the U.S. District Court for the District of Columbia, Civil Case No. 1:09-cv-00894 (CKK). Judge Colleen Kollar-Kotelly entered a temporary restraining order, barring the defendants from using the “MakingHomeAffordable.gov” hyperlink or representing that they are affiliated with the U.S. Government. The order also requires the four search engine providers to identify those who paid them to place the ads and to refuse to place paid ads that contain active hyperlinks that are labeled “MakingHomeAffordable.gov” or any other domain name containing “.gov.”

    SIGTARP is providing assistance and support to the FTC during the investigation.

    Additional Information:
    May 24, 2012


    SIGTARP: SIGTARP, CFPB, and Treasury Issue a Fraud Alert to the Armed Services Community to Combat HAMP Mortgage Modification Scams

    December 1, 2011


    SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners

    June 17, 2010


    FTC: FTC Settlement Orders Ban More Than a Dozen Marketers from Selling Mortgage Relief Services; Repeat Offender Ordered to Pay $11.4 Million for Contempt

    March 12, 2010


    Court Document: Mortgage Relief Scam Permanent Injunction

    July 10, 2009


    Court Document: Mortgage Relief Scam Permanent Injunction

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  • Legacy Home Loans and Real Estate
  • On July 10, 2012, Magdalena Salas, Angelina Mireles, and Julissa Garcia, the owner, manager, and CEO, respectively, of Legacy Home Loans and Real Estate (“Legacy Home Loans”) in Stockton, California, pled guilty in the San Joaquin County, California, Superior Court to charges of running a mortgage modification scam. The court sentenced all three defendants to probation and ordered them to complete 240 hours of community service. Salas was also ordered not to engage in any professional services requiring a license that she does not possess. On October 22, 2012, the same court further ordered the defendants to pay $30,000 in restitution to victims.

    The defendants collected thousands of dollars in up-front fees from distressed homeowners in Central California after making false promises to obtain loan modi¬fications for the homeowners. The defendants falsely promised homeowners that they would receive loan modifications regardless of their financial situation through Federal Government programs referred to as the “Obama Plan.” The defendants also overstated their success rate, made false money-back guarantees, and misrep-resented that attorneys would work on the modifications. The defendants adver¬tised similar false promises in advertisements, in English and Spanish, on flyers, billboards, television, and radio. The modification services promised by the defen¬dants were never carried out and many clients ended up losing their homes.

    This case was investigated by SIGTARP, the California Attorney General’s office, the San Joaquin District Attorney’s office, the California Department of Real Estate, and the Stockton Police Department.

    Additional Information:
    May 24, 2012


    SIGTARP: SIGTARP, CFPB, and Treasury Issue a Fraud Alert to the Armed Services Community to Combat HAMP Mortgage Modification Scams

    December 1, 2011


    SIGTARP: SIGTARP and California Attorney General Kamala D. Harris Announce Arrests in Stockton, California Foreclosure Scam

  • CSFA Home Solutions
  • On May 8, 2013, Jacob J. Cunningham, Justine D. Koelle, John D. Silva, and Dominic A. Nolan pled guilty to charges that stemmed from their roles in operating a mortgage modification scheme that defrauded hundreds of victims. All four defendants were arrested in March 2012 and charged with multiple felony counts of violating California state law, including conspiracy to charge illegal upfront fees for mortgage modifications, conspiracy to commit forgery, grand theft by false pretenses, theft from an elder, and money laundering. Cunningham, Koelle, Silva, and Nolan are all scheduled to be sentenced on July 29, 2013.

    Previously, Andrew M. Phalen pled guilty in May 2012 to felony charges for his role in the fraud scheme. On June 6, 2012, Phalen was sentenced to one year in prison and five years of supervised probation.

    Between January 2009 and March 2012, the defendants admitted to enticing homeowners to participate in a fraudulent loan modification program by making numerous false misrepresentations to homeowners through advertisements, websites, promotional letters, and direct conversations. The misrepresentations included: (i) Treasury’s HAMP would apply to homeowners’ circumstances, (ii) the defendants had a 100% success rate in obtaining mortgage modifications for homeowners, and (iii) that homeowners would be refunded their paid fees if the defendants could not modify a homeowner’s loan. The defendants admitted that they never submitted any loan applications to banks on behalf of any of the homeowners who paid this fee. To evade detection by law enforcement, the defendants are accused of changing the names, phone numbers, and addresses of the sham companies they operated, including CSFA Home Solutions, Mortgage Solution Specialists, Inc., CS & Associates, and National Mortgage Relief Center.

    The case is being investigated by SIGTARP, Orange County, California, District Attorney’s Office, U.S. Secret Service (“Secret Service”), Huntington Beach Police Department, California Department of Real Estate, Orange County Probation Department, Orange County Sheriff’s Department, Costa Mesa Police Department, Irvine Police Department, and Santa Ana Police Department.

    Additional Information:
    August 6, 2013


    SIGTARP: Four Sentenced to Prison for California-Based Mortgage Modification Scheme

    May 24, 2012


    SIGTARP: SIGTARP, CFPB, and Treasury Issue a Fraud Alert to the Armed Services Community to Combat HAMP Mortgage Modification Scams

    March 2, 2012


    SIGTARP: 5 Charged in California-Based Mortgage Modification Fraud Scheme

    December 1, 2011


    SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners

  • ProTrust Management, Inc.
  • On August 6, 2009, Gordon B. Grigg, a financial advisor and owner of ProTrust Management, Inc., formerly based in Franklin, Tennessee, was sentenced to serve a 10-year prison term after pleading guilty to four counts of mail fraud and four counts of wire fraud in the U.S. District Court for the Middle District of Tennessee. The charges stemmed from Grigg’s role in embezzling nearly $11 million from his investor clients through false statements, including claims that Grigg was making investments in fictional “TARP-guaranteed debt.” SIGTARP participated in the investigation of Grigg and supported the prosecution along with its law enforcement partners, the Securities and Exchange Commission (“SEC”), the Federal Bureau of Investigation (“FBI”), USPIS, the Tennessee Department of Commerce and Insurance, and the Franklin, Tennessee, Police Department.

    The prosecution was handled by the United States Attorney’s Office for the Middle District of Tennessee.

    Additional Information:
    August 6, 2009


    FBI: Franklin Financial Adviser Gordon B. Grigg Sentenced to 10 Years in Prison for Investment Fraud in Ponzi Scheme

    April 22, 2009


    FBI: Mail and Wire Fraud Charges Filed Against Franklin Financial Adviser Gordon B. Grigg

    January 28, 2009


    SEC: SEC Charges Nashville-Based Financial Planner with Fraud Involving Purported Investments in TARP

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Additional Activities
  • Rescue Fraud Working Group of the President's Financial Fraud Enforcement Task Force - SIGTARP co-chairs the Rescue Fraud Working Group of the Financial Fraud Enforcement Task Force. President Barack Obama established the government-wide task force to hold accountable those who helped cause the 2008 financial crisis as well as those who attempt to take advantage of economic recovery efforts.

  • SIGTARP/CFPB/Treasury HAMP Mortgage Modification Task Force - SIGTARP has partnered with the Consumer Financial Protection Bureau and the U.S. Department of the Treasury to form a joint task force to combat scams that target homeowners seeking to apply for the Home Affordable Modification Program (HAMP). The task force issued a consumer fraud alert containing tips to help protect homeowners from HAMP-related mortgage modification scams. The fraud alert is provided directly to homeowners eligible to HAMP.

  • TALF/PPIP Task Force - SIGTARP has organized a multi-agency task force to deter, detect, and investigate fraud or abuse in the TARP-funded Term Asset-Backed Securities Loan Facility (TALF) and the Public-Private Investment Program (PPIP). The TALF/PPIP Task Force is comprised of both civil and criminal law enforcement agencies who share expertise in securities fraud to deter potential criminals, to identify and stop fraud schemes before they fully develop, and to bring to justice those who seek to commit fraud through TALF or PPIP.

In addition to SIGTARP, the TALF/PPIP Task Force consists of the Inspector General of the Board of Governors of the Federal Reserve System, FBI, Treasury’s Financial Crimes Enforcement Network, U.S. Immigration and Customs Enforcement, Internal Revenue Service Criminal Investigation Division, SEC, and the U.S. Postal Inspection Service.

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