6 Charged for Inducing Lenders to Fund Unqualified Buyers

Allison Tussey —  May 20, 2011 — Leave a comment

Norma Valdovinos, 45, Claudia Valdovinos, 27, Linda Dung Tran, 33, Elaine “Queenie” Ly, 32, and Pablo Curiel, 71, San Jose, California, and Jesus Chavez, 52, Gilroy, California, were indicted by a federal grand jury in San Jose, California, on May 11, 2011, and charged with conspiracy to commit bank fraud, bank fraud, and making a false statement to a bank. Norma Valdovinos and Linda Tran were also charged with conspiracy to commit money laundering and money laundering. The defendants allegedly ran a multi-million dollar mortgage fraud scheme, fraudulently inducing banks to extend millions of dollars in loans to unqualified buyers, while the defendants pocketed over one million dollars in real-estate and mortgage commissions for themselves.

According to the 32-count indictment, from 2004 through August 2007, Norma Valdovinos, and Chavez, were real estate agents with Century 21 Golden Hills Real Estate and solicited primarily low-income home buyers to purchase homes, typically single-family residences, usually priced in excess of $500,000. They knew that the borrowers they solicited had insufficient incomes and assets to qualify for the mortgages they needed in order to buy the properties.

The indictment further alleges that Norma Valdovinos and Chavez referred their clients to Palacio Mortgage, owned by Linda Tran, knowing that Palacio Mortgage would falsely inflate and misrepresent the borrowers’ income, assets, and employment information so as to enable the borrowers to qualify for the loan or loans needed to buy a property. Linda Tran and “Queenie” Ly, with the assistance of Claudia Valdovinos, falsified the borrowers’ income, assets, employment, and the source of the borrowers’ down payments in the Uniform Residential Loan Applications (“URLAs”) they submitted to the banks. Tran and Ly also submitted false documents such as fake bank statements and letters from tax preparers falsely stating that the buyer owned his or her own business. The Palacio Mortgage defendants also made many of the same misrepresentations on behalf of borrowers seeking to refinance existing mortgages.

According to the indictment, Linda Tran also arranged for Pablo Curiel to secretly provide funds for the down payment required on the borrowers’ loans, without the banks’ knowledge. This scheme resulted in upwards of $40 million in loans being provided to buyers that, but for the defendants’ fraud, would not have been loaned.

This indictment is the fifth indictment brought in this investigation, resulting in a total of 10 defendants that have been charged to date. In late 2010, the United States separately charged Lita Delara, 10-00465 JF, Guadalupe Perez Nieto, 10-00842 JF, John Nguyen, 10-00467 JF, and Zosimo Reyes, 10-00468 JF, for conspiracy to commit bank fraud, in violation of 18 U.S.C. § 849.

Norma Valdovinos, Claudia Valdovinos, and “Queenie” Ly were arrested on May 18, 2011, in San Jose, California, and made their initial appearances in federal court in San Jose that same day. Each was released on bond. Norma Valdovinos‘ bond was set at $125,000, Claudia Valdovinos‘ bond at $50,000, and Ly‘s bond at $75,000. Chavez, Tran, and Curiel are expected to make their initial appearances before The Honorable Howard Lloyd, United States Magistrate Judge, on May 26, 2011, at 1:30 a.m.

The maximum statutory penalty for Count One, Conspiracy to Commit Bank Fraud, in violation of 18 U.S.C. § 1349, and Counts Two through Eleven, Bank Fraud, in violation of 18 U.S.C. § 1344, is 30 years imprisonment, a $1 million fine, and restitution; for Counts Twelve through Twenty-One, Making a False Statement to a Bank, in violation of 18 U.S.C. § 1014, is 30 years imprisonment, a $1 million fine, and restitution; Count Twenty-Two, Conspiracy to Commit Money Laundering, in violation of 18 U.S.C. § 1956(h), is 20 years imprisonment, a fine of $500,000 fine (or twice the gross gain or gross loss), and restitution; Counts Twenty-Three through Twenty-Eight, Engaging in Monetary Transactions Using Criminally Derived Property, in violation of 18 U.S.C. § 1957, is 10 years imprisonment, a $250,000 fine (or twice the amount of the criminally-derived property involved in the transaction), and restitution; and Counts Twenty-Nine through Thirty-Two, Money Laundering, in violation of 18 U.S.C. §§ 1956(a)(1)(A)(i) and (B)(i), is 20 years imprisonment, $500,000 fine (or twice the gross gain or gross loss), and restitution. The United States is also seeking the forfeiture of defendants’ real property and other assets derived from their fraudulent scheme. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

United States Attorney Melinda Haag announced the indictments.

Grant Fondo and David Callaway are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Kamille Singh and Jeanne Carstensen. The prosecution is the result of a three year investigation by the Federal Bureau of Investigation, and the Internal Revenue Service-Criminal Investigation.

Please note, an indictment contains only allegations against an individual and, as with all defendants must be presumed innocent unless and until proven guilty.

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Allison Tussey

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