4 Convicted of Stealing Under Guise of Loan Mod Business

admin —  May 10, 2013 — Leave a comment

Jacob John Cunningham, 26, and John D. Silva, 28, both from Irvine, California, Justin Dennis Koelle, 23, Costa Mesa, California, and Dominic Adam Nolan, 32, Irvine, were convicted on May 8, 2013, of defrauding hundreds of victims in a real estate scam that included fraudulently collecting upfront fees for loan modification services and sending fake letters with the CitiFinancial or CitiMortgage logos offering home loan modification assistance.

Victim losses in this case are estimated to be in excess of $130,000. All four defendants are scheduled to be sentenced July 29, 2013, at 1:30 p.m. in Department C-57, Central Justice Center, Santa Ana.

Defendants

Cunningham and Silva pleaded guilty to one felony count each of conspiracy to collect illegal upfront fees and conspiracy to commit theft by false pretenses. They are each expected to be sentenced to six months in jail and five years formal probation, during which they will be prohibited from engaging in loan modification or loan consulting practices. They are also ordered to jointly pay $60,000 toward restitution by their sentencing date and will be ordered to pay additional restitution in an amount to be determined at a later hearing.

Koelle pleaded guilty to one felony count each of conspiracy to collect illegal upfront fees and conspiracy to commit theft by false pretenses. He is expected to be sentenced to nine months in jail, five years of formal probation, during which he will be prohibited from engaging in loan modification or loan consulting practices, and ordered to pay restitution in an amount to be determined at a later hearing.

Nolan pleaded guilty to one felony count of conspiracy to collect illegal upfront fees. He is expected to be sentenced to six months in jail, five years of formal probation, during which he will be prohibited from engaging in loan modification or loan consulting practices, and ordered to pay restitution in an amount to be determined at a later hearing.

Andrew Michael Phalen, 26, Mission Viejo, California, pleaded guilty June 4, 2012, to one felony count each of conspiracy to collect illegal upfront fees and conspiracy to commit fraud. He was sentenced to one year in jail, five years formal probation, during which he is prohibited from engaging in loan modification or loan consulting practices, and ordered to pay restitution in an amount to be determined at a later hearing.

Circumstances of the Fraud

Between January 2009 and March 2012, Cunningham, Koelle, Phalen, Nolan, and Silva created numerous fraudulent loan modification businesses including CSFA Home Solutions, Mortgage Solution Specialists, Inc., CS & Associates, National Mortgage Relief Center, NMRC, NMRC Inc., N.M.R.C. Inc., Allied Home Servicing, Allied Loan Servicing, U.S. Consulting Corp., and Accredited Processing Solutions for home loan modification assistance. Cunningham, Koelle, Phalen, Nolan, and Silva sent a promotional letter to people throughout the United States with an offer to restructure their home loans, in which the defendants referred to the homeowner’s specific lender and principal balance, and charged the homeowner upfront fees for loan modification services. The letter was fraudulently designed to appear as if it came from the victims’ lenders.

California Senate Bill 94, enacted into law on Oct. 11, 2009, makes it illegal in California for any person or business to demand, charge, or collect any advance or upfront fee for loan modification work or services.

When victims called the number on the letter, the defendants falsely told the victims that they could get a complete refund of the fee their company charged if their loan was not modified and that the company had over a 95 percent success rate. After the victims gave Cunningham, Koelle, Phalen, Nolan, or Silva their money, the defendants kept that money without securing loan modifications for the distressed victims. They did not return or refund the victims the fees they paid for a loan modification.

In order to avoid having their theft discovered, Cunningham, Koelle, Phalen, Nolan, and Silva regularly changed the names, phone numbers, and addresses of the companies they operated.

In late December 2011, after over a hundred victims from California and other states submitted complaints to various law enforcement agencies and the Better Business Bureau regarding the defendants’ loan modification activities, Cunningham, Nolan, and Silva started a new fraudulent scheme, in which they would send out forged “Conditional Approval” letters to victims with a CitiFinancial or CitiMortgage logo in the letterhead. They stated in the forged “Conditional Approval” letters that they could offer the homeowner a low interest rate of 2.8 percent or less to refinance their home loan. Cunningham, Nolan, and Silva also attached “Escrow Instructions” with the letter, directing the homeowner to deposit between $3,500 and $4,600 directly into the defendants’ bank accounts.

Cunningham, Nolan, and Silva had no affiliation to CitiFinancial or CitiMortgage or any authorization to offer a loan on behalf of either. They made no efforts to qualify the victims for loans with CitiFinancial or CitiMortgage.

There are presently hundreds of known victims and others that are unknown both in California and out of state.

Participating Agencies

The United States Secret Service, Huntington Beach Police Department, Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), Department of Real Estate, Orange County Probation Department, Orange County Sherriff’s Department, Costa Mesa Police Department, Irvine Police Department, and Santa Ana Police Department assisted in the investigation of this case and arrests of the defendants.

Deputy District Attorney Megan Wagner of the Major Fraud Unit is prosecuting this case.

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