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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​ September 30, 2014, the agency and its law enforcement partners were responsible for:

  • Criminal charges filed against 212 individuals, including 135 senior officers
  • Criminal convictions of 146 individuals, of whom 87 have been sentenced to prison (others are awaiting sentencing)
  • Civil charges filed against 66 individuals, including 52 corporate or senior officers, and 67 companies
  • Orders temporarily or permanently banning 89 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 $7.38 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 $2.95 billion. SIGTARP has already assisted in the recovery of $1.468 billion 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 - Civil Mortgage Fraud Related to Acquisition of Countrywide Financial
  • On October 23, 2013, after a four-week trial and one day of deliberation, a Federal jury in Manhattan found Bank of America Corporation and its predecessors, Countrywide Financial Corporation and Countrywide Home Loans, Inc. (collectively, “Bank of America”) liable for defrauding the United States, namely the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), by selling thousands of defective loans to them.

    The jury also found Rebecca Mairone, a former senior executive from Countrywide, liable for defrauding the United States in connection with her role in the fraudulent scheme. Civil penalty amounts will be determined by the court at a later date.

    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 investment 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.

    In a civil fraud lawsuit filed by the U.S. Attorney for the Southern District of New York against Bank of America and Mairone, the complaint alleged that the defendants caused U.S. taxpayers losses through the sale of toxic mortgage loans to Fannie Mae and Freddie Mac. The complaint sought civil penalties and damages of more than $1 billion.

    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. In 2007, Countrywide allegedly created a new loan origination program called the “High Speed Swim Lane” or “Hustle” to increase the speed at which it originated and sold loans to the GSEs. 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 eliminated certain internal quality control processes and fraud prevention measures that had been in place to ensure that its loans were sound. Countrywide executives ignored repeated warnings that the quality of loans originated under the Hustle would suffer. As a result of the Hustle program, 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, Bank of America 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 was 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.

    Additional Information:

    July 30, 2014


    SIGTARP: Romero Remarks on $1.27 Billion Civil Penalty Ordered Against $45 Billion TARP Recipient Bank of America

    October 25, 2012


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

  • Bank of America - Civil Securities Fraud Related to Acquisition of Merrill Lynch
  • 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.

    Kenneth Lewis

    On March 25, 2014, Bank of America Corporation (“Bank of America”) and its former CEO, Kenneth Lewis, agreed to settle a lawsuit filed by the New York Attorney General alleging that the bank and its top executives fraudulently withheld from investors forecasted losses in excess of $9 billion at Merrill Lynch & Co., Inc. (“Merrill”) for its 2008 fourth quarter, while at the same time asking shareholders to approve a merger with Merrill. Despite concealing these forecasted losses from investors, Bank of America then immediately sought massive financial assistance from the Federal Government in the form of $20 billion in TARP funds claiming that there had been a “material adverse change” in Merrill’s financial condition over the previous three months. Bank of America continued to conceal Merrill’s forecasted losses until mid-January 2009, when disclosure of Merrill’s multibillion dollar fourth quarter loss led to a $50 billion sell-off in the shares of Bank of America. The lawsuit also alleges that Lewis and the bank’s former CFO, Joe Price, misrepresented to shareholders the impact that the merger would have on Bank of America’s future earnings.

    According to settlement documents, Bank of America agreed to pay $15 million to reimburse the cost of the investigation. Bank of America also agreed to create numerous corporate reforms such as creating a new corporate development committee; enhancing the audit, disclosures, enterprise risk and corporate governance committee charters; revising the corporate governance guidelines; and implementing and maintaining incentive compensation principles that are published on the Bank of America website. As part of the settlement, Kenneth Lewis agreed to a 3-year ban from serving as an officer or director of a public company, and to pay $10 million to the State of New York for his role in the matter.

    This case was investigated by SIGTARP and the Office of the Attorney General for the State of New York.

    Joe L. Price

    On April 17, 2014, Joe L. Price, former CFO of Bank of America Corporation (“Bank of America”), agreed to settle a lawsuit filed by the New York Attorney General for his role in the bank’s actions as it sought to merge with Merrill Lynch & Co. in 2008. As part of the settlement, Price is barred from serving as an officer or director of a public company for 18 months and will pay $7.5 million.

    Despite its top executives’ specific knowledge of mounting losses at Merrill Lynch – forecasted to exceed $9 billion for its 2008 fourth quarter – Bank of America fraudulently withheld the information from shareholders prior to their vote on the proposed merger, and also misrepresented the impact the merger would have on Bank of America’s future earnings. Immediately after concealing these forecasted losses from investors, Bank of America sought massive financial assistance from the Federal Government in the form of $20 billion in TARP funds claiming that there had been a “material adverse change” in Merrill’s financial condition over the previous three months. Bank of America continued to conceal Merrill’s forecasted losses until mid-January 2009, when disclosure of Merrill’s multibillion dollar fourth quarter loss led to a $50 billion sell-off in Bank of America shares.

    As previously reported, on March 26, 2014, the New York Attorney General announced a settlement with Bank of America and its former Chairman and Chief Executive Officer, Kenneth D. Lewis, with respect to the same allegations regarding the bank’s merger with Merrill Lynch. As part of that settlement, Lewis was barred from serving as an officer or director of a public company for three years and will pay $10 million. In addition, the settlement requires Bank of America to implement numerous corporate reforms such as those involving its audit, disclosure, risk, and corporate governance functions, and incentive compensation principles, and will also pay $15 million.

    Bank of America received $15 billion in Federal funds through TARP on October 28, 2008; an additional $10 billion on January 9, 2009; and $20 billion on January 16, 2009. It repaid taxpayers’ combined $45 billion TARP investment on December 9, 2009.

    This case was investigated by SIGTARP and the Office of the Attorney General for the State of New York.

    Additional Information:

    May 2, 2014


    SIGTARP: Former CFO of Massive TARP Recipient Bank of America Barred for 18 Months from Serving as Officer or Director of Any Public Company

    April 2, 2014


    SIGTARP: Former CEO of Massive TARP Recipient Bank of America Barred for Three Years from Serving as Officer or Director of Any Public Company

    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 Joe 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

  • SunTrust Mortgage
  • On July 3, 2014, SunTrust Mortgage, Inc., a subsidiary of TARP recipient and mortgage servicer, SunTrust Banks, Inc. (collectively, “SunTrust”), entered into a non-prosecution agreement with the U.S. Attorney’s Office for the Western District of Virginia, resolving a criminal investigation, by SIGTARP and the U.S. Attorney’s Office, of SunTrust’s administration of the Home Affordable Modification Program (“HAMP”), a foreclosure assistance program created and funded by the Federal Government during the financial crisis. SunTrust agreed to pay $320 million to resolve allegations of mail fraud, wire fraud and false statements to the U.S. Treasury in connection with its HAMP program. To date, SunTrust has paid $195 million and has reserved $95 million for additional victim restitution.

    As detailed in the agreement, from March 2009 to at least December 2010, SunTrust misled numerous mortgage servicing customers who sought mortgage relief through HAMP. Specifically, SunTrust made material misrepresentations and omissions to borrowers in HAMP solicitations and regarding how long SunTrust would take to make a decision on whether borrowers qualified for HAMP. SunTrust also failed to process HAMP applications in a timely manner. So significant was SunTrust’s failure in this regard, that the floor of the room in which the bank dumped the voluminous unopened HAMP applications actually buckled under the packages’ sheer weight. SunTrust admitted that it did not clean up its HAMP program until its regulators and the U.S. Government, through SIGTARP and its partners, intervened through the criminal investigation.

    As a result of SunTrust’s significant mismanagement of HAMP, thousands of homeowners who applied for a HAMP modification with SunTrust suffered serious financial harms, including, among other things:

    • SunTrust mass deceived borrowers for HAMP, without reviewing their applications SunTrust provided false and inaccurate information regarding some of its HAMP denials to Treasury.
    • Some HAMP applications never received a decision from SunTrust on whether they qualified for a HAMP modification.

    • Damage to borrowers’ credit scores through SunTrust’s improper reporting of borrowers as delinquent: SunTrust improperly reported as many as 75% of its customers who were current on their mortgages as being delinquent during the trial period and reported some borrowers as being in greater delinquency than they actually were;
    • Excessive amounts of accumulated mortgage interest which was contrary to HAMP guidelines which required SunTrust to apply the reduced interest rate received through the HAMP modification; and
    • Borrowers were regularly on trial periods for close to, if not more than, a year and in some cases two years; reduced availability of alternative options such as renting or selling one’s home.
    • SunTrust improperly began foreclosure proceedings against certain borrowers while on HAMP trials and improperly foreclosed on some homes while the borrower was in a HAMP trial.

    The $320 million SunTrust agreed to pay, to resolve the criminal investigation, is to be paid as follows:

    • Restitution – SunTrust will pay $179 million in restitution to compensate borrowers for damage caused by its mismanagement of HAMP. That money will be distributed to borrowers in eight pre-determined categories of harm. If more than $179 million is needed, the bank will also guarantee an additional $95 million for additional restitution. SunTrust will also pay $10 million in restitution directly to Fannie Mae and Freddie Mac.
    • Forfeiture – SunTrust will pay $16 million in forfeiture to the Treasury Department forfeiture fund. This money will be available to law enforcement agencies working on mortgage fraud and other matters related to the misuse of TARP funds.
    • Prevention – SunTrust will pay $20 million to establish a fund for distribution to organizations which provide counseling and other services to distressed homeowners. Specifically, SunTrust will pay this amount to a grant administrator selected by the Government. The funds, in turn, will be awarded to housing counseling agencies and other legitimate non-profits devoted to consumer counseling and advocacy.

    Furthermore, SunTrust also agreed to implement corporate remedial measures, including changes to its corporate policy, procedures and organization, such as designating employees to oversee and conduct assessment of, its mortgage modification, loss mitigation, and servicing functions to prevent similar conduct from recurring in the future.

    In November and December 2008, SunTrust Banks, Inc., of Atlanta, Georgia, the parent company of SunTrust, received $4.85 billion in Federal taxpayer funds through TARP. The bank repaid the TARP investment in March 2011.

    This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Western District of Virginia, the Federal Housing Finance Agency Office of Inspector General, and the U.S. Postal Inspection Service.

    Additional Information:

    July 3, 2014


    SIGTARP: $320 Million Non-Prosecution Agreement Reached with TARP Recipient SunTrust Bank

    July 3, 2014


    SIGTARP: Romero Remarks on SunTrust Bank Non-Prosecution Agreement

  • Jesse C. Litvak
  • On July 23, 2014, Jesse C. Litvak, a former senior trader and managing director at the global securities and investment banking firm Jefferies, LLC (“Jefferies”), was sentenced by Chief U.S. District Judge Janet C. Hall to two years in Federal prison, followed by three years of supervised release as well as a $1.75 million fine for defrauding TARP and customers trading in residential mortgage-backed securities (“RMBS”). After a three-week trial in U.S. District Court for the District of Connecticut, a Federal jury convicted Litvak on all 15 counts related to his scheme, including ten counts of securities fraud, one count of defrauding TARP, and four counts of making false statements in a matter within the jurisdiction of the U.S. Government. Victim-customers included funds that were established by the U.S. Department of the Treasury’s Public-Private Investment Program (“PPIP”). Litvak was arrested by SIGTARP agents on January 28, 2013.

    PPIP was intended to purchase certain troubled real estate-related securities, including types of RMBS from financial institutions in order to allow those financial institutions to free up capital and extend new credit. Beginning in late 2009, as part of PPIP, the Federal Government used more than $20 billion in TARP money to fund the Public-Private Investment Funds (“PPIF”) that would purchase the troubled securities. To participate in the PPIP program, PPIF managers agreed to buy or sell only certain types of RMBS, including those in which Litvak specialized. RMBS are bonds that comprise large pools of residential mortgage loans created by banks and other financial institutions. RMBS bonds are sold through broker-dealers, who execute individually negotiated transactions.

    As a broker-dealer in this market, only Litvak – not the bond seller or buyer – knew the sell and buy prices of RMBS bonds. As part of his scheme, Litvak exploited this lack of transparency by misrepresenting the seller’s asking price to the buyer as well as the buyer’s asking price to the seller. Having manufactured the fraudulent buy and sell prices, Litvak illegally increased commissions and kept the profits for Jefferies and, ultimately, himself. Litvak also created fictitious third-party sellers to sell bonds actually held in Jefferies’ inventory. This allowed Litvak to charge the buyer an extra broker commission that Jefferies was not entitled to as Jefferies was the true owner. Through these schemes, Litvak stole more than $2 million from numerous PPIP funds and multiple private investment funds.

    In addition, as previously reported, on January 29, 2014, Jefferies entered into a non-prosecution agreement with the U.S. Attorney’s Office for the District of Connecticut relating to its role in the purchase and sale of RMBS. Specifically, as part of the agreement, Jefferies agreed to pay $25 million: up to $11 million to customers harmed in the fraudulent trades, at least $10 million to the U.S. Treasury, and $4 million to the U.S. Securities and Exchange Commission.

    This case was investigated by SIGTARP, the U.S. Attorney’s Office for the District of Connecticut, and the Federal Bureau of Investigation as part of the Residential Mortgage-Backed Securities Working Group.

    Additional Information:

    July 23, 2014


    SIGTARP: Former Senior RMBS Trader Sentenced to Federal Prison

    July 23, 2014


    SIGTARP: Romero Remarks on the Sentencing of Former Jefferies Senior RMBS Trader Jesse Litvak

    March 12, 2014


    SIGTARP: Jefferies LLC Agrees to Pay $25 Million Related to Fraudulent RMBS Trading Activity

    March 07, 2014


    SIGTARP: Former Senior RMBS Trader Convicted of Defrauding TARP

    March 07, 2014


    SIGTARP: Romero Remarks on the Conviction of Former Jefferies Senior RMBS Trader Jesse Litvak

    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

  • Jefferies LLC
  • On January 29, 2014, Jefferies, LLC (“Jefferies”), an investment bank and broker-dealer, entered into a non-prosecution agreement with the U.S. Attorney’s Office for the District of Connecticut relating to the firm’s purchase and sale of residential mortgage-backed securities (“RMBS”). Jefferies agreed to pay $25 million as part of the agreement related to abuses in the trading of mortgage-backed securities.

    In March 2009, the Department of the Treasury (“Treasury”) announced the creation of the Public-Private Investment Program (“PPIP”), with the goal to create partnerships with private investors to buy certain troubled real-estate securities in the wake of the financial crisis. These partnerships, known as Public-Private Investment Funds (“PPIF”), would invest in mortgage-backed securities using private investments and TARP equity. In response to the financial collapse, the Federal Government used more than $20 billion from TARP to fund the PPIFs. Each PPIF was established and managed by a PPIP fund manager selected by Treasury. Jefferies’ Mortgage and Asset-Backed Securities Trading Group made trades in RMBS with PPIFs, among others.

    Starting in 2009, certain Jefferies traders fraudulently increased the profitability of certain Jefferies trades in various ways, including misrepresenting the RMBS seller’s asking price to the buyer, misrepresenting the buyer’s asking price to the seller, and concealing the fact that some bonds were being sold from Jefferies’ inventory in order to charge buyers an extra commission. The difference in sale and buy prices, and the extra commission charged to customers, were illegal profits obtained through Jefferies fraudulent trading practices. Additionally, some of Jefferies management in the fixed income division were aware of the fraudulent trading practices and failed to stop it. As part of the agreement, Jefferies agreed to pay $25 million: up to $11 million to customers harmed in the fraudulent trades, at least $10 million to the Treasury, and $4 million to the U.S. Securities and Exchange Commission.

    Jesse C. Litvak, a former Jefferies senior trader and managing director, was convicted on March 7, 2014, for TARP fraud, securities fraud, and making false statements to the Federal Government. Litvak was arrested by SIGTARP agents on January 28, 2013, and is scheduled to be sentenced on May 30, 2014.

    This matter is being investigated by SIGTARP, the U.S. Attorney’s Office for the District of Connecticut, and the Federal Bureau of Investigation as part of the Residential Mortgage-Backed Securities Working Group.

    Additional Information:

    July 23, 2014


    SIGTARP: Former Senior RMBS Trader Sentenced to Federal Prison

    March 12, 2014


    SIGTARP: Jefferies LLC Agrees to Pay $25 Million Related to Fraudulent RMBS Trading Activity

    March 7, 2014


    SIGTARP: Former Senior RMBS Trader Convicted of Defrauding TARP

  • Fifth Third Bank
  • On December 4, 2013, the SEC entered an administrative order against Fifth Third Bancorp (“Fifth Third”) and Daniel Poston, its former chief financial officer, for failing to properly report Fifth Third’s non-performing commercial real estate loans in the third quarter of 2008. Fifth Third received $3.4 billion in TARP funds in December 2008.

    According to the SEC’s order, Fifth Third suffered a substantial increase in its non-performing assets due to the decline in the real estate market in 2007 and 2008 and borrowers’ failure to repay their loans as originally required. Ultimately, in the third quarter of 2008, the company decided to pursue a sale of these troubled loans. In September 2008, Fifth Third entered into agreements with two loan brokers to market and sell the loans. When Fifth Third decided to sell the loans, U.S. accounting rules required the company to reclassify the loans from “held for investment” to “held for sale” and to carry them at fair value. Despite the actions taken by Fifth Third to market and sell the non-performing loans, Fifth Third falsely continued to classify the loans as “held for investment,” which incorrectly suggested that the company had not made the decision to sell the loans. As Fifth Third’s chief financial officer, Poston was aware of Fifth Third’s decision to sell the loans as well as the accounting rules governing such a sale. Despite that knowledge, Poston did not direct the company to classify and value the loans as required. He also inaccurately represented Fifth Third’s loan classifications to its auditor, and falsely certified the company’s inaccurate quarterly report submitted to the SEC in November 2008.

    To settle the SEC’s charges, Fifth Third agreed to pay a $6.5 million civil money penalty. Poston agreed to pay a $100,000 civil money penalty and to be suspended from appearing or practicing as an accountant before the SEC for one year.

    This case was investigated by SIGTARP and the SEC.

    Additional Information:

    December 6, 2013


    SIGTARP: TARP Recipient Fifth Third Bank and Former Bank CFO Charged for Improper Accounting of Loan Losses During Financial Crisis

  • Western Asset Management Company (WAMCO)
  • On January 27, 2014, the U.S. Securities and Exchange Commission (SEC) issued sanctions and a cease and desist order against the California based registered investment adviser Western Asset Management Company (“Western Asset”) for conducting illegal cross-trades of residential mortgage-backed securities (“RMBS”) that favored certain clients over others and involved the Public-Private Investment Fund (“PPIF”). In June 2009, Treasury selected Western Asset to establish a PPIF as part of the Public-Private Investment Program of TARP.

    The sanctions against Western Asset include a $1 million civil monetary penalty payable to the U.S. Department of the Treasury (“Treasury”) and $7.4 million payable to Western Asset clients harmed by the illegal scheme.

    A “cross-trade” occurs when an investment advisor sells an RMBS security held by one of its clients directly to one or more of its other clients without exposing the transaction to the market. Although cross-trades can benefit clients in certain circumstances by saving transaction costs, they also represent a potential conflict of interest for the advisor, who has a duty to obtain the best execution prices for both its buying and selling clients. Further, some client accounts are specifically prohibited or restricted from engaging in cross-trades, particularly Registered Investment Companies and accounts regulated by the Employee Retirement Income Security Act of 1974. As a PPIF manager, Western Asset was also prohibited from conducting cross-trades to or from the PPIF and had established internal trading policies and procedures that explicitly prohibited cross-trades involving the PPIF.

    During the height of the financial crisis, many Western Asset clients were forced to liquidate RMBS securities for compliance reasons. At the same time, the PPIF managed by Western Asset had more than $2 billion of capital available for investment in RMBS securities. Investigators discovered that from 2007 through 2010, Western Asset had engaged in a pattern of cross-trades in violation of Section 17(a)(1) and (2) of the Investment Company Act, and Section 206(2) of the Advisors Act and PPIF guidelines.

    To accomplish the cross-trades, Western Asset pre-arranged with a cooperating broker-dealer to sell the RMBS securities to the broker at a price equal to the highest current bid otherwise available. Western Asset then re-purchased the security from the broker at a small pre-arranged markup over the sales price. The inter-positioning of the broker-dealer in these transactions did not remove them from the prohibitions of Section 17(a). By cross-trading the securities for the highest bid price, instead of the average between the bid and the asking price, as would be required under Section 17(a), Western Asset deprived its selling clients of their share of the market savings, an amount totaling approximately $6.2 million.

    This case was investigated by SIGTARP, the U.S. Securities and Exchange Commission, and the Department of Labor - Office of Inspector General.

    Additional Information:

    January 29, 2014


    SIGTARP: TARP Investment Fund Adviser Charged with Illegally Trading Securities

  • 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
  • On August 6, 2013, four former members of the board of directors and senior executives of TARP recipient Premier Bank (“Premier”) in Wilmette, Illinois, were charged in Cook County, Illinois, with operating an alleged long-running criminal scheme that caused the failure of the bank. Premier failed on March 23, 2012. As a result of the scheme, the charges also allege that Treasury was defrauded of nearly $6.8 million in TARP funds. All four defendants were arrested on July 10, 2013, by SIGTARP agents and its law enforcement partners.

    Zulfikar Esmail, former chairman of the board of directors; his wife, Shamim Esmail, former executive vice president and general counsel; Robert McCarty, an attorney and former member of the board; and William Brannin, former member of the board, were all charged for their alleged roles in the scheme. All four defendants are charged with financial institution fraud, continuing a financial crimes enterprise, conspiracy to commit a financial crime and theft by deception.

    In addition to those crimes, Zulfikar Esmail is also charged with organizer of a financial crimes enterprise and commercial bribery of a financial institution. According to the indictment, the defendants allegedly hid the bank’s rapidly declining financial condition from regulators beginning in 2006 until its failure in 2012 by repeatedly submitting allegedly materially false financial reports. By late 2008, the charges allege that the bank was nearing failure and applied for and received the first of two payments from Treasury in connection with the bank’s application for TARP funds in order to further the criminal scheme. To cover up the true condition of the bank, purportedly money from third parties was used to make payments on several loans that were past due, including payments from a limited liability corporation owned in part by the Esmails’ children. It is also alleged that Zulfikar Esmail solicited and demanded bribes from local businesspeople and demanded ownership stakes for his children in customers’ businesses in exchange for loans and lines of credit. It is also alleged that Zulfikar Esmail ordered construction and improvement work done on his home and rental properties that he owned and that the contractor prepare invoices that fraudulently showed the work was done at the bank in order to bill the bank for the work. The estimated cost to the FDIC as a result of the bank’s failure is $64.1 million.

    This case is being investigated by SIGTARP, the Office of the Attorney General for the State of Illinois, and the FDIC OIG.

    Additional Information:
    August 6, 2013


    SIGTARP: Chairman and Senior Executives of TARP Recipient Premier Bank Charged in Criminal Fraud Scheme

    August 6, 2013


    SIGTARP: Romero Remarks on the Indictment of Members of the Board and Senior Executives of Premier Bank

  • Wilmington Trust
  • Salvatore J. Leone

    On October 7, 2013, Salvatore J. Leone pled guilty in Federal court in Delaware to conspiracy to commit bank fraud for his role in a scheme to defraud Delaware-based TARP-recipient bank Wilmington Trust Company (“Wilmington Trust”). Wilmington Trust received $330 million in TARP funds in December 2008. At sentencing on February 13, 2014, Leone faces up to 30 years in Federal prison, a period of supervised release, and a fine.

    Leone, a former project manager and partner in several limited liability companies formed for the purpose of developing real estate in and around Dover, Delaware, admitted that from approximately January 2007 through December 2009, he conspired with Michael A. Zimmerman to defraud Wilmington Trust by submitting fraudulent construction draw requests in order to obtain construction loan proceeds. During that time, Leone acted as project manager and partner with Zimmerman, a Delaware real estate developer. Leone admitted that he and Zimmerman obtained more than $37 million in financing from Wilmington Trust for three real estate development projects. Leone further admitted that he and his co-conspirators submitted to Wilmington Trust numerous fraudulent construction draw requests and requests for the advancement of funds. After the requested funds were disbursed, Leone and his co-conspirators used the funds for purposes other than requested, including for their own personal use.

    Zimmerman, who was arrested on January 24, 2013, by SIGTARP agents and its law enforcement partners, has been charged in a separate indictment with conspiracy to commit bank fraud, eight counts of making a false statement to a financial institution, and two counts of money laundering. He is currently awaiting trial. Also as previously reported, Joseph Terranova, a former senior official at Wilmington Trust, pled guilty on May 8, 2013, to conspiracy to commit bank fraud for his role in a fraud scheme that concealed the true financial condition of Wilmington Trust by engaging in “extend and pretend” schemes to keep loans current and to hide past-due loans from regulators and investors. Terranova admitted to facilitating Zimmerman’s receipt of more than $2 million in proceeds that he was not entitled to under the terms of his loan agreement. Terranova concealed Wilmington Trust’s true financial condition by misrepresenting more than $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 more than $373 million in past due loans.

    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.

    Brian D. Bailey

    On February 4, 2014, Brian D. Bailey, former head of commercial real estate and Delaware market manager at TARP-recipient Wilmington Trust Company (“Wilmington Trust”) was indicted by a Federal grand jury in Wilmington, Delaware. Bailey was charged in a 14-count indictment with nine counts of bank fraud and one count each of conspiracy to commit bank fraud, conspiracy to commit bank bribery, corruptly receiving a gift for procuring a loan, corruptly providing a gift with intent to influence a bank employee, and money laundering. Wilmington Trust received $330 million in TARP funds in December 2008.

    The indictment alleges that Bailey engaged in a 12-year lending relationship with James A. Ladio, former chief lending officer at Artisans’ Bank (“Artisans’”) and former chief executive officer of MidCoast Community Bank (“MidCoast”), that involved bank fraud, bribery, and money laundering. According to the indictment, Bailey and Ladio approved for each other approximately 23 loans and loan modifications through their respective positions at Wilmington Trust, Artisans’, and MidCoast. The indictment further alleges that the aggregate amount of all the loan facilities was in excess of $1.5 million.

    Ladio pled guilty on December 17, 2013, to bank fraud and money laundering. He admitted to using his position at MidCoast to approve business loans to MidCoast customers when in reality he hid the fact that he was scheming to personally receive the loans for his own use. He also admitted to borrowing money from a TARP-recipient bank to fund a number of businesses and investment projects, and securing the loans with investment properties. In March 2009, Ladio sold one investment property without informing the bank or using the proceeds to pay back the loans. For each count of the most serious offense, bank fraud, Ladio faces up to 30 years in prison.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the District of Delaware, the Federal Bureau of Investigation, and Internal Revenue Service Criminal Investigation.

    Peter W. Hayes

    Case description forthcoming

    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:

    August 4, 2014


    SIGTARP: Former Officer at TARP Bank Wilmington Trust Pleads Guilty to Conspiracy Charges

    July 16, 2014


    SIGTARP: Former Lender at TARP Recipient Indicted on Bank Fraud and Illegally Benefiting in Customer Transactions

    February 7, 2014


    SIGTARP: Former Officer at TARP Bank Wilmington Trust Charged with Bank Fraud, Bribery, and Money Laundering

    October 8, 2013


    SIGTARP: Delaware Developer Pleads Guilty to Defrauding TARP Bank

  • MidCoast Community Bank, Inc.
  • On December 17, 2013, James A. Ladio pled guilty in Federal court in Wilmington, Delaware, to perpetrating a fraud scheme that used bank funds to pay off personal debts. Ladio was charged on November 26, 2013, with two counts of bank fraud and two counts of money laundering. At sentencing on April 17, 2014, Ladio faces up to 30 years in Federal prison, a period of supervised release, a fine, and mandatory restitution. According to court documents, Ladio was the founder and former president and chief executive officer of MidCoast Community Bank, Inc. (“MidCoast”), a community bank located in Wilmington, Delaware. From 2004 through 2008, Ladio borrowed money from a TARP-recipient bank to fund a number of business and investment projects, securing the loans with an investment property. In March 2009, Ladio sold the investment property without informing the bank or using the proceeds to pay back the loans. In April 2010, that bank began to consider the loans for restructuring and discovered that Ladio had sold the property. In July 2010, Ladio agreed to a repayment plan.

    In the months that followed, Ladio went on to use his position at MidCoast to persuade two bank customers to borrow money from MidCoast under the guise of business loans and then transfer the proceeds to him in the form of short-term, high-interest loans. In October 2010, the first MidCoast customer obtained a $700,000 line of credit after indicating he intended to use the funds to make improvements on a building project. The same day he received the funds, the customer wired $629,240 to Ladio’s personal checking account. In July 2011, a second MidCoast customer applied for a working line of capital for his various business interests. After successfully obtaining a $650,000 disbursement on a line of credit, that customer then wired $639,000 to Ladio’s personal bank account.

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

    Additional Information:

    December 18, 2013


    SIGTARP: Former Delaware Bank President Pleads Guilty to Bank Fraud and Money Laundering

  • Mainstreet Bank
  • On March 25, 2014, Darryl Layne Woods, the former chairman, president, and majority shareholder of Calvert Financial Corporation (“Calvert”), the bank holding company for Mainstreet Bank (“Mainstreet”), was sentenced to eight months detention in a halfway house followed by four months home detention for lying about the use of TARP funds. Woods, who was also the former chairman and chief financial officer of Mainstreet, was also ordered to pay $96,977 in restitution to Calvert and a $10,000 fine. Woods also agreed to a ban from any future involvement in any banking activities, including but not limited to serving as an officer, director, employee, or affiliated party of any financial institution or agency. In January 2009, Calvert received $1,037,000 through the TARP Capital Purchase Program.

    On August 26, 2013, Woods pled guilty in U.S. District Court for the Western District of Missouri to misleading SIGTARP investigators about his use of TARP funds. On February 2, 2009, shortly after receiving $1,037,000 through the TARP Capital Purchase Program, Woods used $381,487 of the TARP funds received by Calvert to purchase a luxury seaside condominium in Fort Myers, Florida. In February 2009, as part of its oversight function, SIGTARP sent letters to various financial institutions seeking specific information about how TARP funds were used by each institution. As president of Calvert, Woods responded to SIGTARP’s Use of Funds Survey in a letter dated February 10, 2009, and did not disclose the purchase of the condominium, a material misrepresentation relating to the true use of the TARP funds.

    This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Western District of Missouri, the Federal Bureau of Investigation, and Federal Reserve Board Office of Inspector General.

    Additional Information:
    August 27, 2013


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

  • Gateway Bank
  • On March 31, 2014, Poppi Metaxas, former Chief Executive Officer and President of the California headquartered Gateway Bank, FSB (“Gateway”), was indicted for conspiracy to commit bank fraud, bank fraud, and perjury in the U.S. District Court for the Eastern District of New York. According to court documents, Metaxas is accused of engaging in a series of financial transactions to make it appear that Gateway took steps to improve its poor financial condition, when, in reality, those transactions defrauded Gateway, depleted its capital and placed the institution at financial risk. Metaxas surrendered to authorities on April 2, 2014.

    In 2008, Gateway applied for TARP funds through the Capital Purchase Program, and, during that time, the Office of Thrift Supervision (“OTS”), Gateway’s banking regulator, instructed Gateway to improve the bank’s financial condition by increasing capital and reducing the number of problem/ non-performing assets. It was Metaxas’ responsibility to spearhead a plan to raise capital and ensure that a significant portion of problem assets would be sold. According to court filings, Metaxas, along with others, allegedly planned and executed a sham round-trip transaction that caused Gateway to use its own funds to subsidize a sale of Gateway’s nonperforming mortgage loans. Despite the defendant’s scheme to fraudulently improve Gateway’s financial condition, Gateway never received TARP funds.

    In February and March 2009, Metaxas presented to Gateway’s board for its approval a proposal to sell problem assets. Three entities, Cooper Capital Group Ltd., Empower International, Inc., and The Steve Manna Group, LLC (“the Purchasers”) had purportedly agreed to purchase Gateway’s problem assets for approximately $15 million. The sale required the Purchasers to make a 25% down payment of the purchase price with Gateway financing the remaining 75% of the sale. Metaxas and her co-conspirators allegedly had devised a scheme in which Gateway would provide the buyers with the funds necessary to satisfy the 25% down payment. Metaxas allegedly recommended that the board approve the sale without disclosing the relationship and the financing arrangement among the co-conspirators. After the board approved the sale, Metaxas allegedly caused Gateway to extend a sham loan to Ideal Mortgage Bankers Ltd. d/b/a Lend America (“Lend America”), a mortgage lender and Gateway’s largest mortgage lending client, falsely claiming that the loan was to facilitate Lend America’s need for liquidity.

    On March 30, 2009, Gateway transferred $3.64 million to Lend America. The funds were immediately transferred to Lend America’s payroll accounts, and then wired to the Purchasers’ accounts. The Purchasers turned around and used the funds to submit the required 25% down payment. It is alleged that Metaxas failed to disclose the true source of the down payment to the board and lied about the source of the down payment to the OTS when she testified during the formal exam process. The round-trip transaction resulted in significant losses for Gateway. In November 2009, Lend America ceased operations after receiving a court-ordered injunction that prevented it from making loans insured by the Federal Housing Administration. Gateway was forced to write off the entire loan to Lend America.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of New York, the Federal Bureau of Investigation, and the Department of Housing and Urban Development Office of Inspector General.

    Additional Information:

    April 2, 2014


    SIGTARP: Former President and CEO of TARP Applicant Bank Charged with Bank Fraud, Conspiracy, and Perjury

  • One Bank & Trust
  • Gary Alan Rickenbach

    On April 2, 2014, Gary Alan Rickenbach, the former Executive Vice President and Senior Executive Vice President of One Bank & Trust, N.A., (“Onebanc”) and One Financial Corporation, was indicted in the U.S. District Court for the Eastern District of Arkansas on one count each of conspiracy to commit bank fraud, misapplication of bank monies, making false entries to deceive bank regulators, obstructing a bank regulatory examination, and money laundering. One Financial Corporation, the bank holding company for Onebanc, received $17.3 million in TARP funds through the Capital Purchase Program in June 2009.

    In April 2007, Rickenbach arranged for the approval of a $1.5 million line of credit for an associate without going through the formal process of Onebanc’s loan committee, according to court documents. The associate never paid back the line of credit, leaving the bank with at least a $1.5 million loss. Beginning in 2009, Rickenbach allegedly conspired with others to make fraudulent loans and lines of credit in an attempt to hide the loss from bank regulators. Rickenbach also allegedly misled certain members of Onebanc’s Board of Directors concerning the transactions and diverted funds that were due to the bank. He ultimately misapplied the funds as payment on the loans. If convicted of the most serious offense, conspiracy to commit money laundering, Rickenbach faces up to 20 years in Federal prison.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of Arkansas, Internal Revenue Service Criminal Investigation, the Federal Bureau of Investigation, the Federal Reserve Board Office of Inspector General, and the Federal Deposit Insurance Corporation Office of Inspector General.

    Layton Stuart

    On July 12, 2013, $17.9 million in life insurance benefits, several bank accounts, and five vehicles were seized in connection with a SIGTARP civil forfeiture investigation of Layton Stuart, the former CEO of One Bank & Trust of Little Rock, Arkansas (“One Bank”). Layton Stuart was the former owner of One Financial Corporation (“One Financial”), the holding company for One Bank. In October 2008, One Financial applied for $10 million in TARP funds. The request was later amended and increased to $17.3 million. In June 2009, One Financial received the requested $17.3 million in TARP funds. In September 2012, Stuart was officially terminated from functioning in any capacity at One Bank by its board of directors as a result of an order by the Office of the Comptroller of the Currency (“OCC”). Layton Stuart passed away on March 26, 2013.

    The civil forfeiture complaint filed in Federal court in Little Rock, Arkansas, seeks the forfeiture of the proceeds of financial transactions in connection with a bank fraud and money laundering scheme allegedly committed by Stuart and others. The alleged scheme began in 2008 and ran until 2012 when Stuart was terminated as chief executive officer of One Bank. The complaint alleges that Stuart diverted almost $2 million of the TARP money for his personal use. Specifically, more than $1 million in TARP funds went to pay Federal and state taxes owed by Stuart. Stuart allegedly ensured the transactions would go undetected by disguising the payments as associated with a bank account known as the “Interdepartmental Account.” The remaining money was diverted into another bank account allegedly controlled by Stuart. The complaint was filed against the property, alleging that the assets were traceable as proceeds from the bank fraud and money laundering scheme.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of Arkansas, the FBI, IRS-CI, and OCC.

    Matthew D. Sweet

    On November 6, 2013, a former senior executive of One Bank & Trust N.A. (“Onebanc”) and a borrower were charged in Federal Court in Little Rock, Arkansas, in fraud schemes perpetrated against Onebanc. If convicted, the former executive, Matthew D. Sweet, faces up to 30 years in prison, a period of supervised release, and a fine for the bank fraud charges. OneFinancial Corporation (“One Financial”), the parent company of Onebanc, received $17.3 million in TARP funds in June 2009, which remains outstanding as of December 31, 2013.

    Sweet was the vice president and controller of Onebanc until February 2012. The indictment alleges that, while employed with Onebanc, Sweet obtained 30 cashier’s checks from January 2009 to October 2011 drawn on a Onebanc account by using his position as a senior executive to sign cashier’s checks. He would then mail the cashier’s checks to his two personal credit cards to pay off the credit card bills. In total, Sweet is alleged to have stolen almost $75,000. When confronted by Onebanc management, Sweet admitted his actions. He was allowed to resign and he paid back the amount he had stolen with two cashier’s checks from another bank. One check for $9,662.25 was made payable to Onebanc and one for $101,003.49 was made payable to Layton Stuart, former president and CEO of Onebanc. Sweet is scheduled to go on trial on June 23, 2014.

    On July 12, 2013, $17.9 million in life insurance benefits, several bank accounts, and five vehicles were seized in connection with a SIGTARP civil forfeiture investigation of Stuart, the former owner of One Financial. In September 2012, Stuart was officially terminated from functioning in any capacity at Onebanc by its board of directors as a result of an order by the Office of the Comptroller of the Currency. Stuart passed away on March 26, 2013. The civil forfeiture complaint filed in Federal court in Little Rock, Arkansas, seeks the forfeiture of the proceeds of financial transactions in connection with a bank fraud and money laundering scheme allegedly committed by Stuart and others. The alleged scheme began in 2008 and ran until 2012 when Stuart was terminated as CEO of Onebanc. The complaint alleges that Stuart diverted almost $2 million of the TARP money for his personal use. The civil forfeiture case is pending.

    Alberto Solaroli

    Also on November 6, 2013, Onebanc customer Alberto Solaroli was charged with bank fraud for fraudulently obtaining funds from Onebanc. The charges alleged that Solaroli, purporting to be the owner of patents for certain technology, submitted falsified financial documents to Onebanc in order to obtain a $1.5 million loan. As part of the application process, Solaroli fraudulently claimed assets of $170 million and misrepresented his personal net worth to be more than $169 million. Solaroli allegedly used the funds for personal expenses and never made a single payment on the loan. In 2008, Onebanc sued Solaroli and received a civil judgment in Florida for $1.5 million, which Solaroli has not paid.

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

    Additional Information:

    April 3, 2014


    SIGTARP: Former TARP Bank Executive Indicted in Bank Fraud Conspiracy

    November 12, 2013


    SIGTARP: Former TARP Bank Official Charged with Bank Fraud and Money Laundering

  • Anchor BanCorp
  • David Weimert

    On February 19, 2014, David Weimert was charged in the U.S. District Court for the Western District of Wisconsin with six counts of wire fraud for allegedly participating in a scheme to obtain money through fraudulent pretenses. Weimert was the Senior Vice President in Lending Administration at Anchor BanCorp Wisconsin, Inc. (“Anchor”) and the President of Investment Directions, Inc. (“IDI”), a wholly-owned subsidiary of Anchor. If convicted, Weimert faces a maximum of 30 years in Federal prison on each count. A trial date has yet to be set.

    As alleged, from December 2008 through March 31, 2009, while serving in his positions at Anchor and IDI, Weimert misrepresented and omitted material information in order to obtain an ownership interest in a real estate partnership called Chandler Creek and to obtain a 4% commission fee in connection with the sale of Chandler Creek. Chandler Creek was a joint venture partnership formed with the Burke Real Estate Group (“The Burke Group”) to develop an industrial park in Round Rock, Texas. IDI and The Burke Group each owned a 50% interest in Chandler Creek. To further his fraud scheme, Weimert allegedly falsely represented in writing to the IDI Board of Directors that The Burke Group would buy IDI’s share of Chandler Creek contingent on Weimert purchasing a minority interest in Chandler Creek as part of the deal. Weimert failed to disclose that, in actuality, it was only Weimert who desired the minority interest for himself. As a result of his material misrepresentations, the IDI Board of Directors accepted The Burke Group’s offer to purchase Chandler Creek. As part of the purchase deal, Weimert was allegedly granted 4.785% ownership interest in Chandler Creek and was paid a 4% commission, totaling $311,000.

    In January 2009, Anchor received $110 million in TARP funds. The U.S. Department of the Treasury has realized a loss of $104 million of its $110 million TARP principal investment in Anchor and has recouped the remaining $6 million pursuant to Anchor’s “pre-packaged” Chapter 11 bankruptcy reorganization.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Western District of Wisconsin, and the Federal Bureau of Investigation.

    Dale Riggenberg

    On August 14, 2013, Anchor BanCorp Wisconsin, Inc. (“Anchor”), and its former chief financial officer, Dale C. Ringgenberg, agreed to a settlement with the SEC on charges that Anchor and Ringgenberg intentionally or recklessly made material misstatements in Anchor’s quarterly report for the period ending on June 30, 2009, which was required to be filed with the SEC. Anchor received $110 million in TARP funds in October 2008.

    The SEC’s complaint filed in Federal court in the District of Columbia alleged that Ringgenberg took, or failed to take, actions to keep from having to correct earnings that Anchor had already released to its shareholders. Ringgenberg manipulated an estimate to offset an accounting adjustment required by Anchor’s external auditors. He also refused or failed to properly account for real estate appraisals and related information that was available after the quarter closed but before Anchor filed its quarterly report. As part of the settlement, Ringgenberg is barred from serving as an officer or director of a public company for five years and will pay a civil penalty of $75,000. The settlement is subject to the approval of the court.

    Treasury has realized a loss of $104 million of its $110 million TARP principal investment in Anchor and has recouped the remaining $6 million pursuant to a “pre-packaged” Chapter 11 bankruptcy reorganization that Anchor entered on August 13, 2013, and completed on September 27, 2013.

    This case was investigated by SIGTARP, SEC, the U.S. Attorney’s for the Western District of Wisconsin, and the FBI.

    Additional Information:

    February 25, 2014


    SIGTARP: Former Officer of TARP Bank Charged with Fraud in Real Estate Deal

  • 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

  • Sonoma Valley Bank
  • On March 18, 2014, in the U.S. District Court for the Northern District of California, an indictment was filed charging four defendants for their roles in a bank fraud scheme that caused TARP recipient Sonoma Valley Bank (“SVB”) to suffer over $9 million in losses and caused SVB to fail in August 2010. SVB never repaid the $8.65 million in TARP funds it received in February 2009. The Federal Deposit Insurance Corporation (“FDIC”) was named receiver.

    Sean Cutting, the former President and CEO of SVB, was charged with twelve counts of money laundering, six counts of wire fraud, five counts of false bank entries, one count each of conspiracy to commit wire and bank fraud, conspiracy to commit money laundering, conspiracy to misapply bank funds, bank fraud, and making false statements. Brian Melland, the former chief lending officer of SVB, was charged with twelve counts of money laundering, six counts of wire fraud, and one count each of conspiracy to commit wire and bank fraud, conspiracy to make false statements, conspiracy to commit money laundering, conspiracy to misapply bank funds, and bank fraud. Bijan Madjlessi, a commercial real estate developer, and David Lonich, Madjlessi’s attorney and business partner, were each charged with twelve counts of money laundering, five counts of making false bank entries, six counts of wire fraud, and one count each of conspiracy to commit wire and bank fraud, conspiracy to make false statements, conspiracy to commit money laundering, and bank fraud. Madjlessi and Lonich are further charged with obstructing the Federal Government’s investigation into the fraud scheme. If convicted on any of the most serious offenses, each of the defendants faces a maximum of 30 years in Federal prison. In December 2012, the FDIC issued a lifetime ban against Cutting and Melland from working in the banking industry. Cutting was also ordered by the FDIC to pay a $10,000 civil money penalty, while Melland was ordered to pay a civil money penalty of $2,500.

    All four defendants were arrested on April 9, 2014, by SIGTARP agents and their law enforcement partners. According to the indictment, from March 2009 through September 2012, the defendants engaged in multiple bank fraud conspiracies that targeted SVB, the FDIC, and Freddie Mac.

    Between March 2009 and November 2009, as alleged, Melland and Cutting unscrupulously authorized more than $9 million in fraudulent loans to the other two defendants. The two SVB executives are alleged to have skirted the bank’s internal controls and defrauded SVB by authorizing the bank to lend $9.5 million to a straw purchaser so that the funds could be used by Madjlessi to repurchase part of the same condominium project for which Madjlessi had already defaulted on a construction loan. In order to help Madjlessi regain control of residential units in the project that had already been sold and to obtain financing from Freddie Mac, Cutting is alleged to have produced letters, on SVB letterhead, falsely stating that straw buyers had sufficient funds at the bank to purchase the units.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Northern District of California, the Federal Housing Financing Agency – Office of Inspector General, and the Federal Deposit Insurance Corporation – Office of Inspector General.

    Additional Information:

    April 10, 2014


    SIGTARP: Former TARP Bank President/CEO and Chief Lending Officer, Two Others Indicted in Massive Bank Fraud Scheme

    Additional Information:

    April 10, 2014


    SIGTARP: Romero Remarks on Indictment of Former Senior Executives at TARP Recipient Sonoma Valley Bank

  • Bank of the Commonwealth
  • On November 6, 2013, Edward J. Woodard, Jr., the former chief executive officer, president, and chairman of the board at the Bank of the Commonwealth (“BOC”) was sentenced for his role in a $41 million bank fraud scheme that masked nonperforming assets at BOC and contributed to the failure of BOC in 2011. Woodard was sentenced to 23 years in Federal prison, followed by five years of supervised release. He was also ordered to jointly pay restitution of $333 million with other co-defendants and to forfeit $65 million as part of a joint order. In May 2013, after a 10-week trial, a jury convicted Woodard of conspiracy to commit bank fraud, false entry in a bank record, unlawful participation in loans, false statements to a financial institution, misapplication of bank funds, and bank fraud. The evidence presented at trial showed that Woodard engaged in an illegal relationship with certain favored borrowers to mask BOC’s deteriorating financial condition.

    Also this quarter, on November 22, 2013, Jeremy C. Churchill, a former BOC vice president and commercial loan officer, was sentenced to five years of probation, which includes one year of home detention. Churchill was also ordered to pay $5 million in restitution and forfeiture, jointly with the other co-defendants. Churchill pled guilty in May 2012 to conspiracy to commit bank fraud. Churchill admitted that he submitted loan requests to BOC to provide more than $1 million to companies owned by Dwight A. Etheridge, a favored BOC borrower. BOC subsequently fully charged off the 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 Stephen G. Fields, BOC’s former executive vice president and commercial loan officer, who was also convicted in the bank fraud scheme, used approximately half the loan proceeds to pay down the underlying loan on the property.

    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.

    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.

    Eight other individuals have been convicted in connection with the investigation, six of whom have been sentenced to prison; one other individual’s charges are pending:

    • In addition to convicting Edward Woodard, the jury also convicted two other former top BOC bank executives and a favored borrower on conspiracy and fraud charges relating to their roles in the bank fraud scheme. Stephen 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. In September 2013, Fields was sentenced to 204 months in Federal prison, followed by five years of supervised release. He was also ordered to pay $332 million in restitution and forfeit $61.6 million, jointly with the other codefendants. Troy Brandon Woodard, the son of 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. In September 2013, Troy Brandon Woodard was sentenced to 96 months in Federal prison followed by five years of supervised release. He was also ordered to pay $2.4 million in restitution and forfeit $4.3 million as part of the joint restitution and forfeiture orders. 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. In September 2013, Etheridge was sentenced to 50 months in Federal prison, followed by five years of supervised release. Etheridge was also ordered to pay $5 million in restitution and $11 million in forfeiture, jointly with the other co-defendants.
    • In July 2013, Thomas E. Arney, who pled guilty in the case, was sentenced to 27 months in Federal prison, followed by three years of supervised release. He was also ordered to pay $2 million in restitution as part of the joint restitution order and to forfeit $7.5 million, jointly with the other co-defendants, as well as a substantial amount of personal property and real estate. Arney was convicted of conspiracy to commit bank fraud, unlawful monetary transactions, and making false statements to a financial institution. Arney, a real estate developer and businessman, 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.
    • In July 2013, Recardo S. Lewis, a former vice president of Etheridge’s construction company, was sentenced to five years of probation, which includes six months home detention for his role in the fraud scheme. Lewis was also ordered to pay $855,962 in restitution as well as $2 million in forfeiture, as part of the joint restitution and forfeiture orders issued. Lewis previously pled guilty to conspiracy to defraud BOC by submitting fraudulent draws on the incomplete condominium project in Virginia Beach.
    • In September 2012 and October 2012, business partners Eric H. Menden and George P. Hranowskyj were sentenced to prison for their roles in the bank fraud scheme. Menden was sentenced to 11.5 years in prison followed by three years of supervised release. Hranowskyj was sentenced to 14 years in 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 as part of the joint restitution and forfeiture orders. On January 25, 2012, Natallia Green, a former employee of Menden and Hranowskyj, was sentenced to five years of 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.

    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 (“IRS-CI”), the Securities and Exchange Commission (“SEC”), the Federal Deposit Insurance Corporation Office of Inspector General (“FDIC OIG”) and the Office of Inspector General – Board of Governors of the Federal Reserve System (“FRB OIG”).

    Additional Information:
    November 6, 2013


    SIGTARP: Former CEO of TARP Applicant Bank Sentenced to 23 Years in Federal Prison for Massive Bank Fraud

    November 6, 2013


    SIGTARP: Romero Remarks on the Sentencing of Former Bank of the Commonwealth CEO Edward Woodard

    October 1, 2013


    SIGTARP: Son of Bank of the Commonwealth CEO Sentenced to Eight Years in Federal Prison for Massive Fraud that Led to Collapse of the TARP Applicant Bank

    September 18, 2013


    SIGTARP: Virginia Developer Sentenced to 50 Months in Federal Prison for Role in Massive Fraud at TARP Applicant Bank

    September 16, 2013


    SIGTARP: Former Executive of TARP Applicant Bank Sentenced to 17 Years in Federal Prison for Massive Fraud

    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



    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

  • Massive National Mortgage Modification Scam
  • Case description forthcoming.

    Additional Information:

    August 7, 2014


    SIGTARP: Three Charged in Connection with $18.5 Million Mortgage Modification Scheme

  • Nationwide Mortgage Fraud Scheme
  • On October 23, 2013, Guy Samuel, Anthony Blackwell, Angel Gonzalez, Aren Goldfaden, and Jonathan Lyons were charged with allegedly operating a large mortgage modification scheme that defrauded hundreds of victims out of millions of dollars. All five defendants were charged with conspiracy and wire fraud. Also, on October 16, 2013, Scott Schreiber pled guilty to conspiracy to commit wire fraud and wire fraud and on September 19, 2013, Darrell Keys pled guilty to conspiracy to commit wire fraud in connection with their roles in the scheme. Sentencing for Keys is scheduled for March 19, 2014, while Schreiber is scheduled to be sentenced on April 17, 2014.

    Between January 2009 and June 2011, the defendants operated several companies that allegedly falsely promised to help financially struggling homeowners refinance their mortgages for lower interest rates and monthly payments after the homeowners paid upfront fees of thousands of dollars. The defendants allegedly enticed 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 alleged misrepresentations included: (i) the defendants’ companies were associated with HAMP; (ii) a mortgage modification was guaranteed and would only take 30 to 60 days; (iii) mortgage payments submitted to the defendants could “assist” with the modification approval process; and (iv) homeowners would be refunded their paid fees if the defendants could not modify a homeowner’s loan. The defendants are also accused of altering customer financial information used by an online service to determine eligibility for HAMP modifications. This caused false modification approvals to be generated, lulling customers into believing work was actually being done on their behalf. Customers who received the deceptive modification approvals erroneously believed that they were eligible for a modification. After receiving the upfront fees from the struggling homeowners, the defendants allegedly did nothing and used the funds for their own personal use. Through the scheme, the charges allege that the defendants’ companies obtained at least $2.3 million from more than 500 homeowners throughout the United States.

    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:

    October 24, 2013


    SIGTARP: Seven Charged in Connection with Nationwide Multi-Million Dollar Mortgage Fraud Scheme

  • Farmers Bank & Trust
  • Michael W. Yancey

    On June 25, 2014, Michael W. Yancey, former Senior Vice President and loan officer of Farmers Bank & Trust, N.A. (“Farmers”) pled guilty in the U.S. District Court for the District of Kansas to one count of conspiracy to make a false statement on a loan application. At sentencing, Yancey faces up to five years imprisonment. Farmers Enterprises, Inc. (“Farmers Enterprises”), the holding company for Farmers, received $12 million in TARP funds in June 2009. In November 2012, Farmers Enterprises partially repaid the U.S. Treasury to redeem the original TARP funding, resulting in a shortfall of more than $500,000.

    According to court documents, beginning in March 2007, Yancey conspired with a borrower to obtain an $825,000 commercial loan from Farmers for the purchase of real estate in Basehor, Kansas. As part of the borrower’s loan application, Yancey accepted a contract for the purchase of the underlying property falsely stating that the purchase price for the property was $1.1 million, when, as Yancey knew, the actual purchase price was $850,000. Yancey and the borrower claimed that the purchase price was $1.1 million in order to make it appear that the borrower had injected more equity so that the loan would conform to a maximum 75 percent loan-to-value ratio and would be approved by the bank’s loan committee. In reality, however, the $825,000 loan from Farmers accounted for around 97 percent of the actual $850,000 purchase price.

    Additionally, according to court documents, Yancey created a fictitious loan application which he submitted to the Farmers’ loan committee for approval, including the fake purchase price information and false statements that the loan involved an equity injection of $125,000 from the borrower and a $150,000 seller carryback amount. In each of the following three years, through 2010, Yancey recommended the renewal of the loan without correcting the false statements contained in the file.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the District of Kansas, the Federal Bureau of Investigation, and the U.S. Department of Labor Office of Inspector General and Employee Benefits Security Administration.

    Additional Information:

    June 27, 2014


    SIGTARP: Senior Executive at TARP Bank Pleads Guilty to Making False Statements on a Loan Application

  • Broadway Federal Bank
  • Paul Ryan

    On July 7, 2014 Paul Ryan, a loan officer at TARP-recipient Broadway Federal Bank (“Broadway Federal”) pled guilty to one count of bank bribery in the U.S. District Court for the Central District of California for demanding and accepting more than $350,000 in illicit payments from brokers in connection with his review of various churches’ loan applications. At sentencing, Ryan faces a maximum of 30 years in Federal prison.

    According to the plea agreement, between February 2007 and March 2010, Ryan served as Broadway Federal’s loan officer for applications submitted on behalf of numerous churches, predominantly African-American congregations, in the Los Angeles area. Broadway Federal would pay rebates to brokers who brought such loans to the bank and, unbeknownst to Broadway Federal, Ryan abused his position of trust by demanding and accepting the rebate payments from brokers for himself and receiving a kickback to a company he controlled. Ryan also conceded that the rebates and kickback influenced his processing of the churches’ loan applications, which he accepted knowing the financial information had been inflated. In addition, Ryan admitted that he tried to obstruct the investigation into the bribes by telling another individual to lie about the reason the individual provided money to Ryan. As a result of the scheme, Broadway Federal suffered significant losses on loans processed and approved by Ryan.

    In November 2008, Broadway Financial Corporation, the holding company for Broadway Federal, received $9 million in TARP funds, and, in December 2009, it received another $6 million. As of June 30, 2014, the entire $15 million remained outstanding.

    This case is being investigated by SIGTARP, the United States Attorney’s Office for the Central District of California, the Internal Revenue Service – Criminal Investigation, Federal Deposit Insurance Corporation Office of the Inspector General, and the Federal Bureau of Investigation.

  • Bank of Blue Valley
  • Timothy P. Fitzgerald

    On May 13, 2014, Timothy P. Fitzgerald, a former Chief Financial Officer of KC United, LLC, (“KC United”), a construction company in Kansas City, Kansas, was charged in the U.S. District Court for the District of Kansas on one count of conspiracy to commit bank fraud for his scheme to defraud TARP recipient Bank of Blue Valley (“Blue Valley”) of Overland Park, Kansas. Fitzgerald faces up to 30 years in Federal prison when sentenced.

    According to court documents, in 2008, knowing KC United was in financial trouble, Fitzgerald and another KC United executive manipulated the quarterly financial statements to make it appear that KC United was operating at a profit rather than a loss. In November 2008, in accordance with KC United’s loan agreements with Blue Valley, Fitzgerald delivered quarterly financial statements containing the falsified information to the bank in order to renew and increase KC United’s line of credit. In December 2008, knowing that its outside accounting firm would easily discover the fake financial statements, Fitzgerald prepared an annual financial statement incorporating the false quarterly profits, as well as a fake cover letter – to be placed on the letterhead of the outside accounting firm – stating that the accounting firm had reviewed the financial statement. In March 2009, Fitzgerald purportedly delivered to Blue Valley the falsified financial statement and fake letter and letterhead, which, in reality, the outside accounting firm had never seen. Then, each fiscal quarter between August 2009 and March 2011, Fitzgerald prepared falsified quarterly financial statements and delivered them to Blue Valley. In May 2009 and May 2010, Blue Valley relied on the falsified financials to renew KC United’s outstanding loans. In July 2010, Fitzgerald helped prepare and deliver to Blue Valley fake 2009 year-end financial statements which contained another cover letter from the outside accounting firm falsified by Fitzgerald.

    In April 2011, three of KC United’s companies entered bankruptcy and, in March 2012, Blue Valley sold its remaining outstanding loan to KC United, suffering a loss of over $875,000.

    In December 2008, Blue Valley Ban Corp., the holding company for Blue Valley, received $21,750,000 in TARP funds. Between December 2008 and September 2013, Blue Valley BanCorp. failed to make 18 required quarterly dividend payments to the U.S. Treasury, totaling over $4.8 million, and, in October 2013, Treasury sold its stake in the bank for a loss of over $480,000.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the District of Kansas, the Internal Revenue Service – Criminal Investigation, and the U.S. Department of Labor – Office of the Inspector General.

    Additional Information:

    August 5, 2014


    SIGTARP: Kansas Business Executive Pleads Guilty to Defrauding TARP Bank

  • 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
  • Michael Gesimondo

    On January 10, 2014, in U.S. District Court for the District of Connecticut, Michael Gesimondo pled guilty to taking kickbacks while he was a collections manager at Washington Mutual Bank (“Washington Mutual”). On September 25, 2008, Washington Mutual was closed by Federal regulators, and its banking operations were sold to JPMorgan Chase & Co. in a transaction facilitated by regulators. On October 28, 2008, JPMorgan Chase & Co. received $25 billion in TARP. The TARP funds were repaid in full on June 17, 2009. According to court documents Gesimondo was in charge of outsourcing collection accounts to collection agencies. Washington Mutual had a contract with Oxford Collection Agency (“Oxford”) to collect debts owed by its consumers. Gesimondo admitted that, from May 2008 through May 2009, he received kickbacks as reward for providing Oxford with Washington Mutual’s debt collection business.

    Wilbur Tate III

    On November 22, 2013, Wilbur Tate III pled guilty in Federal court in Bridgeport, Connecticut, to receiving bribes while he was employed as an assistant vice president with TARP recipient U.S. Bank. At sentencing on February 14, 2014, Tate faces up to five years in prison, a period of supervised release, and a fine. As previously reported, on February 27, 2013, Tate was arrested by SIGTARP agents and its law enforcement partners and charged with taking bribes from executives at the debt collection agency Oxford Collection Agency (“Oxford”).

    From January 2004 through February 2011, Tate was responsible for outsourcing collection accounts to collection agencies, including Oxford. Tate admitted that, from August 2008 through November 2010, he accepted bribes from several executives at Oxford in exchange for steering bank business to Oxford. Tate took bribes that began with boxes of expensive cigars and escalated to cash payments of as much as $5,000 that were hidden in cigar boxes.

    Other Defendants

    On December 19, 2013, Peter Pinto, the former chief executive officer at Oxford, was sentenced to 48 months in Federal prison, followed by five years of supervised release. Restitution will be determined by the court at a later date. Peter Pinto and his father, Richard Pinto, each had previously pled guilty in May 2012 to one count of conspiracy to commit wire fraud, substantive wire fraud, bank fraud, and money laundering stemming from a $10 million fraud scheme they executed while executives at Oxford. 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.

    On September 9, 2013, Patrick Pinto, a former vice president at Oxford, was sentenced to two years of probation accompanied by six months of home confinement and a $10,000 fine for his role in the fraud scheme perpetrated through Oxford. Three other former Oxford senior executives pled guilty in December 2012 for their roles in the scheme: Randall Silver, chief financial officer, Charles Harris, executive vice president, and Carlos Novelli, chief operations officer. At sentencing, Silver faces up to 25 years in prison and a fine; Harris and Novelli each face up to five years in prison and a 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. 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, Internal Revenue Service Criminal Investigation, the Federal Bureau of Investigation, and the Connecticut Securities, Commodities and Investor Fraud Task Force.

    Additional Information:
    April 9, 2014


    SIGTARP: Former Bank Collections Manager Sentenced for Accepting Bribes

    January 16, 2014


    SIGTARP: Former Bank Collections Manager Pleads Guilty to Taking Bribes from Collections Agency

    December 20, 2013


    SIGTARP: CEO of Debt Collection Agency Sentenced to Four Years in Federal Prison for $10 Million Fraud Scheme

    November 25, 2013


    Former U.S. Bank Manager Pleads Guilty to Taking Bribes from Collections Agency that Defrauded TARP Banks

    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

  • United Credit Recovery
  • On June 4, 2014, Leonard G. Potillo, III, was charged in a 33-count indictment with seven counts of wire fraud, ten counts of bribing a bank official and sixteen counts of money laundering in an alleged $76 million fraud scheme in the U.S. District Court for the Middle District of Florida. The scheme allegedly involved Potillo’s purchase and sale of delinquent debt portfolios from multiple TARP and other banks, and falsification of the quality of the debt to resell it at higher prices. If convicted, Potillo faces up to 30 years in Federal prison for the most serious offense of bank bribery.

    According to the indictment, Potillo owns and manages United Credit Recovery, LLC (“UCR”), of Seminole County, Florida. Since at least as early as January 2008, Potillo and UCR allegedly sold charged-off consumer overdraft debt portfolios to third parties falsely representing the number of times a debt collection agency attempted to collect the debt, and therefore inflating its value. To conceal the quality of the debt accounts, Potillo also allegedly created, on a mass scale, fictitious “Affidavits of Correctness/Assignments” purportedly signed by bank officials and presented on letterhead with a bank’s official trademarked logo.

    Furthermore, in exchange for inside information relating to TARP-recipient U.S. Bank’s auction of the overdraft debt portfolios, Potillo allegedly bribed a U.S. Bank officer on at least ten occasions totaling more than $1 million, which enabled Potillo to purchase 11 portfolios of overdraft debt worth $820 million for $31 million, or less than four cents on the dollar. In November 2008, U.S. Bancorp of Minneapolis, Minnesota, the parent company of U.S. Bank, received approximately $6.6 billion in Federal taxpayer funds through TARP. The bank repaid the funds in full in June 2009

    This case is being investigated by SIGTARP, the United States Attorney’s Office for the Middle District of Florida, the Internal Revenue Service – Criminal Investigation, and the United States Secret Service.

    Additional Information:

    June 11, 2014


    SIGTARP: Owner of Florida Debt Collections Firm Charged in $76 Million Fraud Scheme

  • Alleged Fraud Against Excel Bank
  • James Crews and Michael Hilbert

    On April 7, 2014, business executives James Crews and Michael Hilbert pled guilty in U.S. District Court for the Eastern District of Missouri to bank fraud for their roles in defrauding TARP recipient Excel Bank. For each count of bank fraud, the defendants face a maximum penalty of 30 years in Federal prison when sentenced.

    According to court documents, Crews and Hilbert, who jointly operated a real estate rental business in Missouri, admitted to making several large fraudulent construction draw requests with respect to “rehab” or “fix funds” specifically set aside in escrow for repairs to rental homes. The bank disbursed the “fix funds” in reliance on multiple false claims that work had been done on various rental properties. In reality, however, inspections by the bank revealed that the work was not performed and Crews and Hilbert used the funds for other purposes. Shortly after the funds were disbursed in 2010, the loans—totaling over $2.6 million lent by Excel Bank—went into default.

    In May 2009, Investors Financial Corporation, the parent company of Excel Bank, received $4 million in TARP funds. On October 19, 2012, Excel Bank failed and was closed by state and Federal regulators. As a result of the failure, the entire $4 million TARP investment was lost as was more than $900,000 in TARP-related missed dividend and interest payments the bank owed Treasury. The FDIC, which became Excel Bank’s receiver when it closed, also lost $40.9 million.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of Missouri and the Federal Bureau of Investigation.

    William Glasgow

    On January 10, 2014, the U.S. District Court for the Eastern District of Missouri unsealed two separate indictments against three Missouri businessmen charging them with bank fraud against TARP-recipient Excel Bank. William Glasgow was charged on December 11, 2013, with two counts of bank fraud.

    According to court documents, Glasgow was in the real estate business in Missouri, having owned a number of rental properties. Glasgow allegedly obtained two loans through Excel Bank by submitting falsified loan documents and financial statements.

    Investors Financial Corporation, the parent company of Excel Bank, received $4 million in TARP funds in May 2009. Excel Bank failed on October 19, 2012, and the FDIC was named receiver. The $4 million TARP investment was never repaid. The loss to the FDIC was $40.9 million.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of Missouri, and the Federal Bureau of Investigation.

    Additional Information:

    April 9, 2014


    SIGTARP: Missouri Businessmen Plead Guilty to Defrauding TARP Bank

    January 13, 2014


    SIGTARP: Three Missouri Men Charged with 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 17, 2013, Matthew L. Morris, a former Park Avenue Bank (“Park Avenue”) senior vice president, pled guilty in Federal court in New York, New York, to conspiracy to commit bank bribery, conspiracy to commit fraud on bank regulators, conspiracy to commit wire fraud, and substantive fraud on bank regulators. At sentencing on July 15, 2014, Morris faces up to 30 years in Federal prison, a period of supervised release, a fine, and restitution.

    On October 1, 2012, SIGTARP agents, along with its law enforcement partners, arrested Morris for his role in the bank fraud schemes that led to the failure of Park Avenue Bank, as well as an 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, which charged the defendant with conspiracy to commit bank bribery, bank and insurance fraud, and the theft of $2.3 million from a publicly traded company. Anthony Huff, a businessman from Kentucky, was also arrested and charged in connection with the bank fraud schemes as well as for insurance fraud and 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. Huff and Reichman’s cases are pending.

    Charles Antonucci, the former president and chief executive officer of Park Avenue Bank, previously pled guilty on October 8, 2010, 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.

    As senior vice president at Park Avenue, Morris managed the bank’s relationships with Huff and his business entities. As part of his plea agreement, Morris admitted that, from 2008 through 2009, he and Antonucci accepted up to $400,000 and other benefits in exchange for providing preferential treatment in connection with Huff’s banking relationship. In exchange for bribes, Morris admitted that he and Antonucci (i) 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, (ii) allowed Huff to freely overdraft accounts at Park Avenue Bank in excess of $9 million in violation of bank policy, (iii) facilitated intra-bank transfers in furtherance of frauds perpetrated by Huff, and (iv) 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.

    Morris also admitted that in about October 2008, he devised a plan with Huff and Antonucci to prevent Park Avenue Bank from being designated as undercapitalized by its regulator, FDIC. Morris admitted that he, Huff, Antonucci and other co-conspirators 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 admitted that he, Huff, and Antonucci 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. To further conceal the fraudulent $6.5 million investment, Morris admitted that he and Huff had conspired to steal $2.3 million from a publicly traded company to partially fund the investment, and then attempted to conceal the theft with a fabricated Park Avenue Bank certificate of deposit. 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.

    Morris further admitted that, from July 2008 to November 2009, he conspired with Huff, Antonucci, and Reichman to defraud Oklahoma insurance regulators into allowing Antonucci to purchase the assets of an Oklahoma insurance company. Morris, Huff, and Antonucci 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. Morris admitted that, to secure regulatory approval of the purchase of the insurance company, he, Huff, and Antonucci 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. Morris stated that after the sale was finalized, they took millions of dollars of the insurance company’s assets for themselves. The insurance company later became insolvent and was placed into receivership.

    On March 12, 2010, Park Avenue Bank 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 case is being investigated by SIGTARP, 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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  • Colorado East Bank and Trust
  • Christopher Tumbaga

    On March 24, 2014, Christopher Tumbaga, a former loan officer at Colorado East Bank and Trust (“CEBT”), pled guilty in U.S. District Court for the District of Colorado, to bank fraud and to fraudulently approving loans for co-defendant, Brian Headle, in return for illegal kickbacks. As part of his plea agreement, Tumbaga also agreed to a ban from future involvement in banking activities. Sentencing is set for September 30, 2014. For each count of the most serious offense, bank fraud, Tumbaga faces a maximum of 30 years in Federal prison.

    In February 2009, ColoEast Bankshares, Inc., the parent company of CEBT, received $10 million through the TARP Capital Purchase Program. The bank was later unable to pay more than $1 million in dividends it owed to taxpayers. In July 2013, the U.S. Department of the Treasury sold its stake in the company at auction for approximately $9 million. In total, approximately $2 million owed to Federal taxpayers was lost on the investment.

    Tumbaga admitted that, from March 2009 through July 2011, he used his position as loan officer at CEBT to fraudulently approve more than $1 million in loans for the benefit of Headle. As part of the fraud scheme, Tumbaga admitted that he had Headle submit materially false loan applications, which Tumbaga approved without review. Tumbaga further admitted that he circumvented CEBT’s limits on loans to one person by fraudulently representing that the loans were for Headle’s company, Headle’s wife, or her company. When necessary, Tumbaga stated that he would forge the bank president’s signature to obtain approval for the fraudulent loans. He also admitted to withdrawing $100,000 from another bank client’s account and giving the money to Headle. To cover that theft, Tumbaga obtained another fraudulent loan under Headle’s name. When additional loans were necessary to make payments on the fraudulent earlier loans, Tumbaga admitted to obtaining fraudulent loans in the names of Headle’s parents and step-parents. As part of his plea agreement, Tumbaga admitted to accepting over $60,000 in kickbacks from Headle.

    Tumbaga and Headle were charged jointly on September 25, 2013. Headle was charged with seven counts of bank fraud and eleven counts of bribing a bank official.

    This case was investigated by SIGTARP, the U.S. Attorney’s Office for the District of Colorado, the Federal Deposit Insurance Corporation Office of Inspector General, and the Federal Bureau of Investigation.

    Brian Headle

    On June 26, 2014, Brian Headle, a Colorado business man, pled guilty in U.S. District Court for the District of Colorado, to one count of bank bribery in connection with his scheme to obtain approximately $950,000 in loans from Colorado East Bank and Trust (“CEBT”). Headle used a portion of the loan proceeds to bribe a CEBT loan officer, co-defendant Chris Tumbaga, Headle’s high school friend, to approve the loan applications. At sentencing, Headle faces a maximum of 30 years in Federal prison and a $1 million fine, followed by up to five years of supervised release. Headle also agreed to forfeit $952,079 as a result of his scheme.

    In February 2009, ColoEast Bankshares, Inc., the parent company of CEBT, received $10 million through the TARP Capital Purchase Program. The bank was later unable to pay more than $1 million in dividends it owed to taxpayers. In July 2013, the U.S. Department of the Treasury sold its stake in the company at auction for approximately $9 million. In sum, approximately $2 million owed to Federal taxpayers was lost on the investment.

    Headle admitted that in March 2009, he contacted Tumbaga to secure an initial $250,000 loan from CEBT. In September 2009, Headle began bribing Tumbaga in exchange for additional loans to which Headle was not entitled. Indeed, when interviewed by law enforcement, Headle admitted that he could not have obtained the loans anywhere else, and had to pay Tumbaga a portion of the loan proceeds as a result. To help disguise that the loans were actually for Headle’s benefit and circumvent the bank’s limits on loans to one person, Headle obtained loans in several different names, including four in his wife’s name and the name of her purported company; as well as the name of his limited liability corporation. Later, Headle and Tumbaga concluded that they could not continue obtaining loans in the same names, but needed to obtain additional loans in part to make payments on the fraudulent earlier ones. Accordingly, Headle began to apply for, and Tumbaga processed, still more loans in the names of Headle’s parents and step-parents. Although it appeared as if the loans were benefitting the parents’ business or the parents, the money went to Headle himself. In all, Headle bribed Tumbaga with over $60,000 in kickbacks from fraudulently obtained loan proceeds in exchange for loans totaling $952,079.

    Headle and Tumbaga were charged jointly on September 25, 2013. Tumbaga pleaded guilty on March 24, 2014, to one count of bank fraud and one count of illegally receiving kickbacks for fraudulently procuring loans for Headle. As part of his plea agreement, Tumbaga also agreed to a ban from future involvement in banking activities. Tumbaga’s sentencing is set for September 30, 2014.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the District of Colorado, the Federal Deposit Insurance Corporation Office of Inspector General, and the Federal Bureau of Investigation.

    Additional Information:

    March 27, 2014


    SIGTARP: Loan Officer at TARP Bank Pleads Guilty to Bank Fraud, Accepting Kickbacks

  • 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

  • Alleged Stranger-Originated Life Insurance (“STOLI”) Scheme
  • On May 14, 2014, Daniel Carpenter and Wayne Bursey, senior executives of several companies that marketed, sold, and administered employee welfare benefit plans, were charged by a grand jury in Hartford, Connecticut, in a 57-count indictment with conspiracy, fraud, and money laundering stemming from a scheme to defraud insurance companies into issuing policies on the lives of elderly people for the benefit of defendants and other third-party investors, also known as a stranger-originated life insurance (“STOLI”) scheme. If convicted, Carpenter and Bursey face a maximum of 20 years in Federal prison.

    On December 9, 2013, Joseph Edward Waesche, IV, an insurance agent licensed by the State of Connecticut and charged separately, pled guilty in Federal court in Hartford, Connecticut, for his participation in the fraud scheme and faces up to five years in Federal prison.

    Carpenter and Bursey allegedly defrauded, among other insurance providers, Lincoln National Life Insurance Company (“Lincoln”), a subsidiary of Lincoln National Corporation, a holding company that received $950 million in TARP funds in July 2009.

    According to the May 2014 indictment, Carpenter and Bursey ran a series of companies in Simsbury and Stamford, Connecticut, that developed an employee welfare benefit plan and trust (the “Trust”). The Trust’s primary objective was to secure insurance policies on the lives of elderly individuals that could be held by defendants as other investments, or re-sold on the life settlement market, a third-party market for life insurance policies. Typically, insurance agents working with, for, or on behalf of the defendants, would approach individuals over the age of 70 and promise to provide free life insurance for two years (the “Straw Insureds”). At the end of the two-year period, the agents would try to sell the policies in the life settlement market. In most cases, agents promised the Straw Insureds that they would receive a portion of any sale proceeds. In other cases, the Straw Insureds were offered cash up front to participate.

    As the trustee, Bursey signed all life insurance applications on behalf of the Trust, which would “own” all of the policies. Working with insurance agents, Carpenter and Bursey allegedly caused the submission of insurance applications containing material misrepresentations, including applications falsely: (a) denying that third-parties were paying premiums, (b) denying discussions about policy resale, (c) inflating the insured’s net worth or income, and (d) claiming that the insurance was for legitimate estate-planning needs. However, as the indictment alleges, premiums were in fact funded by loans, typically from another entity owned and/or run by Carpenter and Bursey, and each policy was obtained with the primary intent to resell it. These arrangements were withheld from the insurance providers which likely would not have issued policies had they known the truth.

    In addition, as Carpenter and Bursey well knew, the applications falsely claimed that the Trust was a bona fide welfare benefit trust under the Internal Revenue Code, where employers would make contributions to the Trust to fund life insurance policies for certain employees.

    In all, Carpenter and Bursey’s alleged lies caused eighty-four policies on the lives of seventy-six different Straw Insureds to be issued. According to the indictment, one such individual unexpectedly died within the first two years of two insurance policies having been issued on his life. The policies were issued in 2006 and 2007 based on some of the same misrepresentations including that they were not funded by a third party loan and not for resale. In May 2009, the insurer paid to the Trust the policies’ combined death benefit of $30 million in part based on additional misrepresentations by Carpenter and Bursey. The trust failed to pay the $30 million to the beneficiary’s family, however, instead, as directed by Carpenter and Bursey, the Trust funneled the funds to pay for various expenses including other fraudulent insurance premiums and to purchase a home in Rhode Island.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the District of Connecticut, and the Department of Labor – Office of Inspector General.

    Additional Information:

    June 4, 2014


    SIGTARP: Two Connecticut Men Face Additional Charges in Stranger-Originated Life Insurance Scheme

    January 7, 2014


    SIGTARP: Two Connecticut Men Indicted in Stranger-Originated Life Insurance Scam

  • 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 September 11, 2013, a superseding indictment was returned against Alan David Tikal, his wife Tamara Teresa Tikal, and Ray Jan Kornfeld for their roles in a fraudulent mortgage rescue operation. Tamara Tikal and Kornfeld were arrested by SIGTARP agents and its law enforcement partners on September 12, 2013. It is alleged that Tamara Tikal and Kornfeld continued the scheme after Alan Tikal’s initial arrest in September 2012.

    According to the superseding indictment, from January 2010 through August 20, 2013, the defendants conspired to deceive distressed homeowners throughout California and in other states. Alan David 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 (allegedly short for “Kicking Ass, Taking Names”), distressed homeowners were promised that, for a significant upfront fee, the homeowners’ existing home loan would be replaced with a new loan in an amount equal to only 25% of the original loan principal. Homeowners allegedly 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. In 2011, Alan Tikal filed bankruptcy and allegedly listed the properties of many of his client victims as his personal property, and the financial institutions that extended those mortgage loans as his creditors. The bankruptcy filing initiated an automatic stay of any pending foreclosure actions, and thus, enabled the Tikals, Kornfeld, and his co-conspirators to allege that the mortgage relief program worked, to attract new distressed homeowners and to encourage the distressed homeowners to continue making payments to KATN. Because of the bankruptcy filing, and in spite of Alan Tikal’s arrest in September 2012, the indictment alleges that many homeowners continued to make “loan” payments to KATN. The Tikals, Kornfeld, and their co-conspirators 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 more than 1,000 victimized homeowners paid in excess of $3.3 million to KATN and these funds were transferred to accounts controlled by the Tikals.

    Alan Tikal is scheduled to go on trial on February 3, 2014. If convicted, he faces up to 30 years in prison. Trial dates have not yet been scheduled for Tamara Tikal or Kornfeld.

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

    Additional Information:
    September 13, 2013


    SIGTARP: Two Arrested in Foreclosure Rescue Scam

    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 August 5, 2013, Glen Alan Ward, a former Los Angeles resident who fled to Canada and was a Federal fugitive for 12 years, was sentenced to 11 years in Federal prison followed by three years of supervised release, and ordered to pay approximately $60,000 in restitution for his prominent role in a nearly 15-year foreclosure fraud scheme in California.

    Ward pled guilty to bankruptcy fraud and aggravated identity theft on April 8, 2013. Ward solicited and recruited homeowners whose properties were in danger of imminent foreclosure, including foreclosures by TARP banks, promising to delay the foreclosures for a $700 fee. Ward’s actions victimized more than 800 struggling homeowners, stole the identities of unsuspecting victims involved in bankruptcy proceedings, and exploited bankruptcy laws to defraud lenders, which included numerous TARP banks, including Bank of America and U.S. Bank.

    In order to impede these foreclosure sales, Ward stole identities of unsuspecting debtors who recently filed bankruptcy. He then directed his paying clients to grant an interest in their distressed home to one of those debtors, and subsequently directed the homeowner’s lender to stop the impending foreclosure sale due to the bankruptcy. The fraudulent scheme perpetrated by Ward and his coconspirators delayed the foreclosure sales of hundreds of distressed properties by using bankruptcies filed in 26 judicial districts. As part of the scheme, Ward admitted collecting more than $1.2 million from his clients who paid for his illegal foreclosure-delay service, all of which he agreed to forfeit.

    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 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 U.S. Attorney’s Office for the Northern 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

  • U.S. Homeowners Relief
  • Corporate Funding Solutions
  • On June 11, 2014, Leigh Farrington Fiske pled guilty in U.S. District Court for the Northern District of California, to five counts of wire fraud in connection with a $433,000 fraud scheme that funneled proceeds through a TARP bank. At sentencing, Fiske faces up to 20 years in Federal prison, a fine of up to $866,000, and three years of supervised release.

    In pleading guilty, Fiske admitted that he and his partner, Michael P. Ramdat, operated a business called “Corporate Funding Solutions,” which purportedly sought to obtain business lines of credit for customers in exchange for a fee. Fiske’s role was to solicit customers, which he generally did over the internet and by word-of-mouth. In reality, however, neither Fiske nor Ramdat ever intended to provide any services to their customers. Instead, they accepted approximately $433,000 from at least 30 victims and never in fact helped any of the victims obtain credit. Fiske admitted that he kept $102,000 of the payments for himself and that he passed the remainder to Ramdat.

    On September 16, 2013, and December 2, 2013, respectively, Fiske and Ramdat were arrested by SIGTARP agents and their law enforcement partners. Fiske and Ramdat were indicted by a Federal grand jury on November 21, 2013, and Ramdat pled guilty on February 26, 2014, and is pending sentencing in U.S. District Court for the Northern District of California to conspiracy and multiple counts of wire fraud in connection with the same scheme.

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

    Additional Information:

    June 20, 2014


    SIGTARP: Florida Man Pleads Guilty in Fraud Scheme

  • Greenfield Advisors, LLC
  • On May 21, 2014, an indictment in the U.S. District Court for the Western District of Texas, charged Mark Steven Thompson and his cohorts, Xue Heu, Thomas Dickey Price, and Carla Lee Miller with conspiracy to commit wire fraud and aiding and abetting wire fraud for their alleged participation in a fraud scheme to sell properties allegedly owned by the Government as official “TARP partners.” Thompson was arrested on January 24, 2014. Chan and Price were arrested on May 28, 2014 and, at the time of the indictment, Miller was in county jail in Modesto, California.

    According to court documents, from August 2013 through February 2014, Thompson, Heu, Price and Miller allegedly created fake identities in order to contact real estate investment firms and misrepresent that their affiliated companies, Greenfield Advisors, LLC, and Escrow Professionals, Inc., were authorized by TARP to sell U.S. Government-held properties through a legitimate Federal Government program called HomePath. Court documents allege that, through Greenfield Advisors, defendants entered into contracts with individuals purporting to purchase properties from the HomePath program when, in fact, defendants had no authority to enter into such contracts.

    As alleged, Price and Miller directed investors to funnel the money – intended as earnest money and property payments – through Escrow Professionals, Inc., the escrow company for the sale, and into bank accounts controlled by Thompson and ultimately used by all of the defendants for their own personal benefit. To further the scheme, a real estate closing would purportedly occur, and, if pressed, Hue would create documents falsely purporting to be the deeds. In reality, however, no actual transfer of properties took place because none of the defendants had the actual authority to sell the property.

    Defendants are accused of defrauding victims out of more than $900,000. If convicted, each faces up to 20 years in Federal prison.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Western District of Texas, and the Federal Bureau of Investigation.

  • Waikele Properties Corporation
  • On January 28, 2014, in U.S. District Court for the District of Connecticut, Winston and Marleen Shillingford, husband and wife, were both sentenced for their roles in a mortgage fraud scheme that defrauded mortgage lenders, including TARP recipient banks. Winston Shillingford was sentenced to four years in Federal prison, followed by three years of supervised release. Marleen Shillingford was sentenced to three years in Federal prison, also to be followed with three years of supervised release. On January 31, 2014, their co-conspirator, Robert Ilunga, was sentenced to Federal prison for one year and six months, followed by three years of supervised release.

    All three defendants had previously pled guilty to conspiracy to commit wire fraud and conspiracy to commit money laundering related to their involvement in the mortgage fraud scheme.

    From approximately April 2004 through August 2011, the defendants conspired with others in a mortgage fraud and money laundering scheme to obtain false mortgages. Utilizing a real estate company called Waikele Properties Corporation, they and their co-conspirators purchased more than 40 multi-family and vacant properties in Bridgeport, Connecticut, on which they built new houses. The scheme involved recruiting straw purchasers for the properties who then applied for mortgages from banks, including Bank of America and other TARP banks. The defendants and their co-conspirators filed loan applications on behalf of the purchasers that materially misrepresented their employment, income, assets, and liabilities, and provided the banks with false documentation. As a result of the scheme, the defrauded financial institutions suffered more than $7 million in losses.

    This case was investigated by SIGTARP, the United States Attorney’s Office for the District of Connecticut, Internal Revenue Service Criminal Investigation, the Federal Bureau of Investigation, and the Department of Housing and Urban Development Office of Inspector General.

    Additional Information:
    February 4, 2014


    SIGTARP: Connecticut Man Sentenced to Federal Prison for Mortgage Scam that Defrauded TARP Banks

    January 29, 2014


    SIGTARP: New York Couple Sentenced to Federal Prison for Mortgage Scam that Defrauded TARP Banks

    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

  • Nationwide Mortgage Concepts
  • On May 21, 2014, Steven Pitchersky was sentenced to 51 months in Federal prison, to be followed by five years of supervised release after having pled guilty to wire fraud for his role in a fraudulent lending scheme that resulted in approximately $5.3 million in losses to TARP recipient, GMAC Inc. (since rebranded as Ally Financial Inc. (“Ally”). In addition, the U.S. District Court for the Eastern District of Pennsylvania ordered Pitchersky to pay restitution of more than $3.2 million to Ally.

    In total, $17.2 billion in Federal taxpayer bailout funds were invested in Ally through TARP. As of June 30, 2014, Treasury owned 15.6% of Ally Financial and $4 billion of the TARP investment remained outstanding.

    Pitchersky operated Nationwide Mortgage Concepts (“NMC”), a California mortgage lender licensed in more than 40 states to originate and refinance mortgages. Between August 2009 and January 2011, NMC borrowed from a $10 million line of credit with Ally, NMC’s “warehouse lender” for thousands of mortgage loans, as interim financing so that NMC could refinance home mortgages held by other financial institutions. As part of the agreement to provide the line of credit, Ally retained a security interest in the mortgage loans until the loans were repaid. In most cases, Ally also purchased the NMC refinanced mortgages.

    Pitchersky made misrepresentations to Ally both in his application for approval to sell NMC-originated loans to Ally and secure the warehouse line of credit, including that NMC already had a $10 million warehouse line of credit with a company called “MPL.” Pitchersky provided Ally with contact information for MPL. In reality, however, the phone number was actually Pitchersky’s cell phone, and MPL was the name of another business entity that Pitchersky himself ran. Over the next three years, on multiple occasions, Pitchersky falsely represented to Ally that he had a warehouse relationship with this company, MPL.

    Pitchersky also repeatedly lied to Ally about how he was using the $10 million warehouse line. Under its warehouse line of credit agreement with Pitchersky, funds provided to NMC were required to go through a third-party title company that would then disburse the funds for each NMC loan financed by Ally. Pitchersky used a company called “Hanover” as the title company on his transactions which, unbeknownst to Ally, Pitchersky himself had created. Then, Pitchersky covertly instructed Hanover to forward to NMC all money it received from Ally, which gave Pitchersky complete control over money from Ally’s warehouse line. As a result, from December 2010 to January 2011, Pitchersky misdirected approximately $5.3 million intended to pay off 23 first mortgages for NMC clients and instead used the money to pay off first mortgages for other customers, allowing him to originate more mortgages and earn more fees for himself.

    At the end of January 2011, Ally discovered that Pitchersky and NMC had not used this money to pay off the 23 loans and ended the warehouse agreement with NMC.

    This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of Pennsylvania, the Federal Bureau of Investigation, and the Department of Veterans Affairs Office of Inspector General.

    Additional Information:

    May 28, 2014


    SIGTARP: California Man Sentenced to 51 Months in Federal Prison for Defrauding TARP Recipient

  • 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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  • 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

  • Marvin Solis
  • On June 11, 2014, Marvin Solis was sentenced in the U.S. District Court for the Northern District of California, to 27 months in Federal prison and ordered to pay restitution for his role in an investment fraud scheme he perpetrated against his family members. In addition, as a special condition of his three-year supervised release, Solis is prohibited from acting in any fiduciary position.

    As previously reported, Solis was indicted on September 5, 2013, by a Federal grand jury on two counts of wire fraud as a result of the scheme, and was arrested by SIGTARP agents and our law enforcement partners on September 11, 2013.

    Solis pled guilty to both wire fraud counts on January 29, 2014. According to the plea agreement, Solis admitted to defrauding his then-wife’s family members out of approximately $244,000 from September 2008 through March 2009. The fraud consisted of three parts: First, Solis solicited approximately $207,000 from several of his wife’s relatives promising them he would invest in real estate on their behalf. In reality, however, Solis never invested in real estate, rather, Solis used the funds to pay his own expenses and make risky commodities trades running the funds through accounts held at a TARP recipient bank. Second, he encouraged his victims to use their good credit scores and open credit card accounts to fund renovations to the properties he had promised them. Instead, he ran up approximately $10,000 in charges – not related to renovations – on these credit cards at different banks, including a TARP bank. Finally, Solis used the personal information of one of his victims without the victim’s knowledge to open a credit card account in the name of Solis’s company and, again without authorization, charged approximately $26,700 on the card.

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

    Additional Information:

    June 17, 2014


    SIGTARP: California Man Sentenced to 27 Months in Federal Prison for Investment Scheme

  • Edward Shannon Polen
  • On December 19, 2013, Edward Shannon Polen was sentenced to 71 months in Federal prison, followed by five years of supervised release, for his role in executing several elaborate Ponzi schemes in which he defrauded investors and several TARP-recipient banks. Previously, Polen pled guilty in December 2012 in Federal court in Nashville, Tennessee, to bank fraud, mail fraud, wire fraud, and money laundering.

    From January 2007 through March 2011, Polen executed several Ponzi schemes in which he solicited and ultimately defrauded more than 50 investors of more than $16 million. 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. When confronted with payment demands, Polen 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 admitted to using investors’ money for his own personal use, including paying off his gambling debts and repaying prior investment victims to keep the scams going.

    The case was investigated by SIGTARP, the U.S. Attorney’s Office for the Middle District of Tennessee, IRS-CI, the FBI, the Tennessee Valley Authority Office of Inspector General, and the Tennessee Bureau of Investigation.

    Additional Information:
    December 23, 2013


    SIGTARP: Former Tennessee Commissioner Sentenced to 71 Months in Federal Prison for $16 Million Ponzi Scheme

  • Joseph D. Wheliss, Jr.
  • On October 25, 2013, Joseph D. Wheliss, Jr., the owner and operator of National Embroidery Works, Inc., was sentenced to two years in Federal prison followed by five years of supervised release for his involvement in a scheme to defraud TARP recipient Pinnacle National Bank (“Pinnacle”). Wheliss was also ordered to pay restitution and forfeiture in the amount of $4.8 million.

    Wheliss pled guilty in Federal court in Nashville, Tennessee, to bank fraud on October 5, 2012. From approximately 2005 to 2011, Wheliss, a former banking customer of Pinnacle, defrauded Pinnacle by submitting false and forged documents to the bank regarding his finances and assets, causing the bank to give him multiple commercial loans totaling more than $5.6 million. In order to obtain the commercial loans, Wheliss claimed to be the beneficiary of a trust fund that he at one point valued at nearly $20 million, and he pledged this “asset” as collateral for the loans. The trust fund did not exist, and Wheliss was not the beneficiary of such a trust. Pinnacle, a recipient of $95 million in TARP funds, suffered a loss of approximately $4.8 million due to Wheliss’ fraud.

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

    Additional Information:
    October 31, 2013


    SIGTARP: Tennessee Businessman Sentenced to Two Years in Federal Prison for Defrauding TARP Bank

  • 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 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

    On September 23, 2013, David Tamman, a lawyer who was a partner at the Nixon Peabody law firm, was sentenced to seven years in Federal prison followed by three years of supervised release and was ordered to pay a $2,500 fine for his role in obstructing two separate investigations into a fraudulent $22 million Ponzi scheme. Tamman was also suspended from practicing law by the state bar of California and has been banned from appearing before the SEC.

    On November 13, 2012, after a two-week criminal trial in Federal court in Los Angeles, California, Tamman was convicted of 10 counts relating to his role in the Ponzi scheme perpetrated by his client, New Point Financial Services, Inc., (“New Point”) and its owner, John Farahi. Tamman was convicted of conspiring with Farahi to obstruct the SEC’s investigation into Farahi’s illegal Ponzi scheme by (i) altering, 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 Tamman’s sentencing hearing, the court found that Tamman additionally altered documents that caused the National Association of Securities Dealers (now known as FINRA) to close an investigation, lied to federal investigators, gave false testimony at trial, and lied to a probation officer who was preparing a pre-sentence report after he was found guilty.

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

    Additional Information:
    November 14, 2013


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

    September 23, 2013


    SIGTARP: California Attorney Sentenced to Seven Years in Federal Prison for Obstructing Investigation into $22 Million Ponzi Scheme

    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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  • Home Owners Protection Economics (“HOPE”)
  • On April 24, 2014, Brian M. Kelly, a chief telemarketer and trainer of other telemarketers at Home Owners Protection Economics (“HOPE”) was sentenced to one year and one day in Federal prison to be followed by three years of supervised release, and a $1,900 penalty after pleading guilty to one count of conspiracy, nine counts of wire fraud, and nine counts of mail fraud, for his role in defrauding thousands of homeowners in a nationwide $4 million mortgage modification scam.

    In August 2011, SIGTARP agents, and their law enforcement partners, arrested Kelly along with Christopher S. Godfrey, Dennis Fischer, and Vernell Burris, Jr., HOPE’s president, vice president and primary telemarketer trainer, respectively. On November 14, 2013, after a two-week trial, a Federal jury in Massachusetts convicted Godfrey and Fischer of all eighteen counts, including one count of conspiracy, eight counts of wire fraud, eight counts of mail fraud, and one count of misuse of a Government seal. On February 20, 2014, Godfrey and Fischer were each sentenced to seven years in Federal prison, followed by three years of supervised release, for their leading roles in the $4 million mortgage modification scheme. On February 25, 2014, Burris was sentenced to one year and one day in Federal prison, followed by two years of supervised release, after pleading guilty to conspiracy and wire fraud for his role in the mortgage modification scam.

    Through a series of misrepresentations, the defendants induced thousands of financially distressed homeowners to pay up-front fees of up to $2,000 each 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 U.S. Government’s free application through the Home Affordable Modification Program (“HAMP”), a Federally funded mortgage assistance program implemented under TARP. HOPE falsely represented to homeowners that, with HOPE’s assistance, the homeowners were virtually guaranteed to receive a loan modification under HAMP. For example, the defendants lulled these distressed homeowners by routinely telling homeowners that they had already been approved for a loan modification, that the defendants were “underwriters” or were otherwise affiliated with the homeowners’ mortgage companies, and that HOPE had an almost perfect record of obtaining home loan modifications. HOPE customers had no advantage in the applications process; however, and, in fact, most of their applications were denied. Through these misrepresentations, HOPE was able to persuade thousands of homeowners collectively to pay more than $4 million in fees to HOPE. Victims of HOPE lived in all 50 states and Washington, DC.

    This case was investigated by SIGTARP, the U.S. Attorney’s Office for the District of Massachusetts, and the Computer Crime and Intellectual Property Section of the U.S. Department of Justice’s Criminal Division.

    Christopher S. Godfrey and Dennis Fischer

    On February 20, 2014, Christopher S. Godfrey and Dennis Fischer, president and vice president, respectively, of Home Owners Protection Economics, Inc. (“HOPE”) were each sentenced to seven years in Federal prison, followed by three years of supervised release, for defrauding homeowners in a mortgage modification scam perpetrated through their company, HOPE. Additionally, on February 25, 2014, Vernell Burris, Jr., manager and primary trainer of HOPE telemarketers, was sentenced to one year and one day in Federal prison, followed by two years of supervised release, after pleading guilty to conspiracy and wire fraud for his role in the mortgage modification scam. On May 2, 2013, Brian M. Kelly, a telemarketer and trainer of HOPE telemarketers, pled guilty to conspiracy, nine counts of wire fraud, and nine counts of mail fraud. Kelly’s sentencing is scheduled for April, 24, 2014.

    In August 2011, SIGTARP agents, along with its law enforcement partners, arrested Godfrey, Fischer, Burris, and Kelly for their roles in the mortgage modification fraud scheme. On November 14, 2013, after a two-week trial, a Federal jury in Massachusetts convicted Godfrey and Fischer of all counts, including one count of conspiracy, eight counts of wire fraud, eight counts of mail fraud, and one count of misuse of a Government seal.

    Through a series of misrepresentations, HOPE induced thousands of financially distressed homeowners to pay up-front fees of up to $900 each 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 U.S. Government’s free application through the Home Affordable Modification Program (“HAMP”), a Federally funded mortgage assistance program implemented under TARP. HOPE falsely represented 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. HOPE customers, however, had no advantage in the application process and, in fact, most of their applications were denied. Through these misrepresentations, HOPE was able to persuade thousands of homeowners collectively to pay more than $4 million in fees to HOPE. Victims of HOPE lived in all 50 states and Washington, DC.

    This case was investigated by SIGTARP, the U.S. Attorney’s Office for the District of Massachusetts, and the Computer Crime and Intellectual Property Section of the U.S. Department of Justice’s Criminal Division.

    Additional Information:
    April 25, 2014


    SIGTARP: Maryland Man Sentenced to Federal Prison for Defrauding Thousands of Homeowners in $4 Million Nationwide Home Loan Modification Scam

    February 26, 2014


    SIGTARP: Florida Man Sentenced to Federal Prison for Defrauding Thousands of Homeowners in $4 Million Nationwide Home Loan Modification Scam

    February 20, 2014


    SIGTARP: Two Florida Men Sentenced to Seven Years in Federal Prison for Defrauding Thousands of Homeowners in $4 Million Nationwide Home Loan Modification Scam

    November 19, 2013


    SIGTARP: Two Florida Men Convicted of Defrauding Homeowners in Home 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

    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 March 20, 2014, Isaak Khafizov, the former owner of American Home Recovery (“AHR”), was sentenced to nine years in Federal prison followed by three years of supervised release for operating a mortgage modification scheme that defrauded hundreds of struggling homeowners and their lenders. Khavizov was also required to pay $399,999 in both forfeiture and restitution to his victims.

    Following a 10-day jury trial in U.S. District Court for the Southern District of New York, Khafizov was found guilty in May 2012 of conspiracy, mail fraud and wire fraud for perpetrating a scheme to defraud distressed homeowners and lenders. Khafizov founded AHR, a New York-based mortgage modification loan business, in the spring of 2008. He and AHR salespeople made fraudulent assertions to induce distressed homeowners to pay AHR thousands of dollars in up-front fees for mortgage modifications. Specifically, Khafizov and AHR informed homeowners that: they had been “pre-approved” for a mortgage modification by their lenders; AHR would ensure participation in the TARP-funded Making Home Affordable program; and AHR could obtain better interest rates and lower monthly fees on their mortgage. Khafizov and AHR falsely promised to return the up-front fees if AHR did not secure a mortgage modification desired by the homeowner. Khafizov and AHR also falsely claimed that: AHR was affiliated with Government agencies and programs established by the Emergency Economic Stabilization Act of 2008; AHR possessed unique expertise in mortgage modifications; and AHR had special relationships with lenders. Khafizov also directed distressed homeowners to stop paying their mortgages and to instead pay fees to AHR. After receiving up-front fees from the distressed homeowners, Khafizov and AHR did little or no work to try to renegotiate the homeowners’ mortgages. As a result, many AHR clients lost their homes in foreclosure by lenders and hundreds of thousands of dollars in up-front fees.

    JIn addition to Khafizov, AHR was also founded by Jaime Cassuto and David Cassuto. Each entered a guilty plea on April 2, 2012, relating to this mortgage modification scheme and are awaiting sentencing. In March 2011, Raymond Pampillonio, a former AHR employee, also pled guilty in connection with this scheme and is awaiting sentencing.

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

    Additional Information:
    March 21, 2014


    SIGTARP: New York Man Sentenced to Nine Years in Federal Prison for Operating Mortgage Modification 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 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 September 13, 2013, Mark S. Farhood and Jason S. Sant were sentenced to Federal prison for their roles in operating a nationwide online foreclosure rescue scam that went by various names, including Home Advocate Trustees (“HAT”) and Walk Away Today, and used various websites, including walkawaytoday.org and seefastusa.com, to deceive hundreds of vulnerable, distressed homeowners into surrendering their properties to the company. Farhood was sentenced to 11 years in prison, followed by three years of supervised release. Sant was sentenced to six years in prison, followed by two years of supervised release. Farhood and Sant were both barred from working in the real estate industry as part of their supervised release. Farhood was ordered to forfeit his interest in real property located in Costa Rica as well as his interest in several Peruvian businesses. The defendants were ordered to forfeit approximately $2 million in fraud proceeds as well as their interests in several bank accounts, silver coins and bars, and other assets.

    Farhood and Sant each pled guilty in May 2013 to conspiracy to commit wire fraud, wire fraud, and bank fraud in Federal court in Alexandria, Virginia. Farhood and Sant, co-owners and operators of HAT, admitted that they and their co-conspirators used their website walkawaytoday.org and other websites 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 $2.8 million.

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

    Additional Information:
    September 13, 2013


    SIGTARP: Perpetrators of Nationwide Foreclosure Rescue Scam Sentenced to Federal Prison

    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 November 26, 2013, Walter Bruce Harrell was sentenced to 10 months in Federal prison followed by three years of supervised release for his role in carrying out a foreclosure rescue fraud scheme. Harrell previously pled guilty in Federal court in San Francisco, California, on August 2, 2013, to bankruptcy fraud and making false statements in bankruptcy proceedings. Harrell admitted that from March 2011 through January 2013, he perpetrated a scheme to prevent lenders, including TARP-recipient banks, from lawfully foreclosing on properties. Harrell admitted to soliciting homeowners whose properties were facing foreclosure and promising to postpone the foreclosure in exchange for a monthly fee. After the fees were paid, Harrell admitted that he 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 admitted that he paid an individual to file bankruptcy petitions in which he could execute the scheme to defraud creditors who were attempting to lawfully foreclose on numerous properties. In doing so, he delayed and obstructed foreclosure sales by creditors, including TARP banks, through improper use of the Federal bankruptcy process.

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

    Additional Information:
    December 05, 2013


    SIGTARP: California Man Sentenced to Federal Prison for Foreclosure Rescue Scam

    February 22, 2013


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

  • Delio Coutinho
  • On April 22, 2014, Delio Coutinho, a former loan officer at a northern New Jersey mortgage brokerage company, pled guilty in the U.S. District Court in Newark, New Jersey to a criminal information charging him with conspiracy to commit wire fraud for his role in a large-scale mortgage fraud scheme that caused millions of dollars of losses. As part of his plea, Coutinho also agreed to make full restitution for the losses resulting from the conspiracy. At sentencing, Coutinho faces up to 30 years in Federal prison.

    According to court documents, from March 2008 through June 2012, Coutinho and his co-defendants conspired to release liens on encumbered properties via fraudulently arranged short sale transactions by concealing the identity of the buyer who was actually a co-conspirator and the source of funds. A few months after completing the fake short sales, Coutinho and his co-defendants submitted false loan applications, including fake employment records and altered bank account statements, to other mortgage lenders, including TARP banks, in order to obtain new mortgages on the same properties. Coutinho and his codefendants profited from the scheme—in all, approximately $2 million in illegal mortgage proceeds—by disbursing the new mortgage proceeds to themselves.

    This case is being investigated by SIGTARP, the Federal Bureau of Investigation, the U.S. Postal Inspection Service, the U.S. Department of Housing and Urban Development Office of Inspector General, the Federal Housing Finance Agency Office of Inspector General, the Internal Revenue Service – Criminal Investigation, and the Prosecutor’s Office for Hudson County, New Jersey.

    Additional Information:

    April 24, 2014


    SIGTARP: Former Loan Officer Admits Role in Multi-Million Dollar Mortgage Fraud Scheme

  • Michael E. Filmore
  • On May 22, 2014, Michael Edward Filmore, who operated a medical equipment sales firm, was sentenced to four years in Federal prison to be followed by three years of supervised release for carrying out a multi-year fraud scheme against TARP recipient, Pulaski Bank (“Pulaski”), of Creve Coeur, Missouri. Filmore also was ordered to pay more than $6.3 million in restitution to Pulaski and currently owes Pulaski more than $5 million. On December 20, 2013, Filmore pled guilty in the United States District Court for the Eastern District of Missouri to one felony count of bank fraud as a result of his scheme.

    Filmore, a long-time customer of Pulaski, defrauded Pulaski in a multi-year scheme involving at least 15 loans and more than $6 million. Filmore brokered medical equipment and needed to finance his acquisition of the equipment, which he later sold and leased to customers. To obtain financing from Pulaski, Filmore fabricated and altered brokerage account records which purportedly showed that he had millions of dollars in securities he had agreed to pledge as collateral for outstanding loans, including a $1 million line of credit. However, in reality, none of the collateral – in the form of securities or valuable medical equipment – existed. In November 2013, Pulaski discovered that Filmore had provided a fictitious purchase order for medical equipment with wiring instructions to a company Filmore controlled.

    In January 2009, Pulaski Financial Corp., Pulaski Bank’s parent company, received approximately $32.5 million in Federal taxpayer funds through TARP. Treasury sold its stake in Pulaski at auction in July 2012, realizing a loss of approximately $3.6 million on taxpayers’ principal investment.

    This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of Missouri , the Federal Bureau of Investigation, and the U.S. Postal Inspection Service.

    Additional Information:

    May 29, 2014


    SIGTARP: Missouri Man Sentenced to Four Years in Federal Prison for Defrauding TARP Bank

  • Tariq Khan
  • On June 24, 2014, in the United States District Court for the Northern District of Illinois, and, as previously reported, following his September 3, 2013, guilty plea to one count of bank fraud, Tariq Khan was sentenced to one year of confinement (six months’ each of community and home confinement) followed by five years of supervised release for defrauding Old Second National Bank (“Old Second”) out of more than $340,069. Khan also was ordered to make full restitution of $340,069 to Old Second.

    Khan, the owner of Urban Motors Corporation (“Urban Motors”), a car and motorcycle dealership with three locations in Illinois, secured a line of credit through Old Second. Under the agreement with Old Second, the proceeds of the line of credit were to be used to purchase used vehicles for resale. The proceeds from the sale of each vehicle were then to be applied against the outstanding loan balance. Additionally, Urban Motors was to provide the bank with the titles of the vehicles it acquired for resale. Khan also agreed to update this information as necessary and provide the bank with certain financial reports that would be true and accurate, and Old Second relied on these reports when making decisions regarding the line of credit.

    According to court documents, Khan admitted that from December 2008 through November 2009, he failed to notify Old Second that Urban Motors sold specific vehicles, failed to pay the loan amounts corresponding to those vehicles, and caused reports to be prepared that contained misrepresentations about the status of those vehicles. Khan also failed to provide Old Second with the titles of certain vehicles so that Urban Motors could sell those vehicles without notifying the bank of the sales. These actions allowed Khan to avoid paying off the principal balance of the specific vehicle sold and instead keep the sales proceeds for himself. As a result of the scheme, Khan obtained $357,268 in funds that he was required to — but did not — apply to the amounts owned on the Old Second line of credit. Khan also admitted that, on more than one occasion, he lied to bank auditors about the status of particular vehicles so that the bank would continue to permit Urban Motors to access its line of credit.

    In January 2009, Old Second Bancorp, Inc., of Aurora, Illinois, the parent company of Old Second National Bank, received $73 million in Federal taxpayer funds through the U.S. Department of the Treasury Troubled Asset Relief Program (“TARP”). The bank was subsequently unable to make required TARP dividend and interest payments totaling approximately $9.1 million, and in March 2013, Treasury sold its stake in the bank at auction for approximately $25.5 million, resulting in a combined principal and dividend loss of approximately $56.5 million.

    This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Northern District of Illinois, and the Federal Bureau of Investigation.

    Additional Information:

    July 10, 2014


    SIGTARP: Chicago Car Dealer Sentenced for Defrauding TARP Bank

  • Eduardo Garcia Sabag
  • On April 29, 2014, Eduardo Garcia Sabag, of Wichita, Kansas, was charged in U.S. District Court for the District of Kansas on one count of submitting false mortgage and mortgage modification applications to a Federally insured bank, one count of misusing a social security number, and one count of aggravated identity theft for his scheme to defraud TARP recipient Bank of America when applying for the U.S. Treasury’s housing assistance program, the Home Affordable Modification Program (“HAMP”), which is funded by TARP. Sabag faces up to 30 years in Federal prison as well as a separate two year prison term that may be served consecutively for identity theft.

    According to the indictment, in 2002, Sabag submitted a loan application in order to purchase a home in Wichita, Kansas, and intentionally provided another person’s social security number. Using this false information, Sabag obtained a mortgage on the home from TARP recipient Bank of America, N.A. Later, in August 2010, Sabag applied for—and ultimately received—a mortgage modification through the U.S. Treasury’s HAMP program, a Federally-funded mortgage assistance program designed to reduce struggling homeowners’ mortgage payments primarily by lowering their interest rates or extending the repayment period for the loan. To qualify for assistance through HAMP, a homeowner must complete and return to the mortgage servicer a Request for Modification and Affidavit (“RMA”), which is a three-page application. The RMA requires identifying information as well as details about the applicant’s income and assets; it also includes a certification, signed by the homeowner, that all information submitted on the application is truthful and an acknowledgement that knowingly submitting false information may be a violation of Federal law. Despite this, Sabag completed an RMA application and, once again, provided false identifying information by misusing the same social security number from his original mortgage application.

    Bank of America received $15 billion in Federal funds through TARP on October 28, 2008; an additional $10 billion on January 9, 2009; and $20 billion on January 16, 2009. It repaid taxpayers’ combined $45 billion TARP investment on December 9, 2009.

    This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the District of Kansas, the Social Security Administration’s Office of the Inspector General, and The Department of Homeland Security’s Immigration and Customs Enforcement.

  • Brenda Wood
  • Case description forthcoming

    Additional Information:

    August 14, 2014


    SIGTARP: Kansas City-Area Businesswoman Charged with Defrauding TARP Bank

  • Sathish Rajendran
  • Lawrence Allen Wright
  • On January 14, 2014, Lawrence Allen Wright was sentenced to six years and three months in Federal prison to be followed by five years of supervised release. Wright was ordered to pay more than $3.7 million in restitution for carrying out a series of fraud schemes against several banks, including TARP-recipients GulfSouth Private Bank (“GulfSouth”), Regions Bank, and Bank of America. Wright pled guilty in Federal court in Pensacola, Florida, on October 29, 2013, to charges that included conspiracy to commit fraud, conspiracy to commit money laundering, bank fraud, mail fraud, aggravated identity theft, and making a false statement to a Federally insured bank.

    From November 2006 through January 2010, Wright engaged in a scheme where an individual’s identity was used without that individual’s knowledge or permission on mortgage and tax documents to obtain bank loans. After obtaining the loans, Wright stopped making payments, which resulted in foreclosure on the mortgaged properties and a civil action against the person whose identity was used by Wright. Wright engaged in this conduct to obtain loans on several properties, which resulted in losses to several banks. During this time, Wright also recruited individuals to purchase unimproved lots by promising that his company, Wright & Associates, would make the monthly loan payments. The purchasers’ incomes were inflated on the loan applications, and ultimately, no payments were made on the loans, and the properties went into foreclosure.

    On October 19, 2012, GulfSouth failed, and the FDIC was named as receiver. At the time, $7.5 million in TARP funds had not been repaid. In addition, the FDIC estimates the cost to its Deposit Insurance Fund from the bank failure to be in excess of $36.1 million.

    This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Northern District of Florida, Internal Revenue Service Criminal Investigation, Federal Deposit Insurance Corporation Office of the Inspector General, and the Okaloosa County Sheriff’s Office as part of the Northwest Florida Financial Crimes Task Force.

    Additional Information:

    January 16, 2014


    SIGTARP: Florida Man Sentenced to 75 Months in Federal Prison for Bank Fraud, Money Laundering, and ID Theft

  • 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
  • On August 29, 2013, Clint E. Dukes was sentenced in Federal court in Kansas City, Missouri, for his role in a bank fraud scheme that caused three banks, including two TARP-recipient banks, to lose more than $2 million. Clint Dukes was sentenced to 24 months in Federal prison followed by five years of supervised release, and ordered to pay $2.1 million in restitution to the victim banks U.S. Bank, Equity Bank (formerly 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. Brandi Dukes, the former wife of Clint Dukes, was sentenced to five years of probation and ordered to pay $14,181 in restitution jointly with Clint Dukes to Equity Bank.

    In November and December 2012, Clint Dukes and Brandi Dukes, respectively, pled guilty for their roles in the bank fraud scheme. Clint Dukes was convicted of bank fraud and Brandi Dukes was convicted of misprision of felony. 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 then-husband’s fraud by submitting a fraudulent disbursement request and authorization to First Community Bank. Through his fraudulent scheme, Clint Dukes caused losses totaling more than $2 million at U.S. Bank, First Community Bank, and First Central Bank.

    This case was 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 July 29, 2013, Justin D. Koelle, Jacob J. Cunningham, John D. Silva, and Dominic A. Nolan were sentenced for their roles in operating a mortgage modification scheme that defrauded hundreds of victims. Koelle was sentenced to nine months in prison, followed by five years of probation. Cunningham and Silva were each sentenced to eight months in prison, followed by five years of probation, and jointly paid $40,000 in restitution. Nolan was sentenced to six months in prison, followed by five years of probation. Additional restitution for all four defendants will be determined at a later court hearing. All defendants were also prohibited from engaging in loan modification or loan consulting practices for the duration of their sentences.

    Koelle, Cunningham, Silva, and Nolan pled guilty in May 2013 to charges that stemmed from their roles in the fraud scheme. Also, in June 2012, co-defendant Andrew M. Phalen was sentenced to one year in prison followed by five years of probation for his role in the fraud scheme. All five 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.

    Between January 2009 and March 2012, the defendants enticed 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 program 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 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 changed 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 was investigated by SIGTARP, Orange County, California, District Attorney’s Office, U.S. 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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