All 4 Defendants Plead Guilty to Mortgage Fraud

Four Tucson, Arizona area individuals have pled guilty to their roles in a mortgage fraud case: William Michael Naponelli, Bryan Atwood, Walter Scott Fruit and Sandra Jackson.

Naponelli pleaded guilty to conspiracy to commit bank fraud and conspiracy to commit money laundering on 12/20/12, sentencing set for 5/28/2013.

Atwood pleaded guilty to conspiracy to commit wire fraud on 2/25/13, sentencing set for 5/6/2013.

Fruit pleaded guilty to conspiracy to commit bank fraud and conspiracy to commit transactional money laundering on 2/28/13, sentencing set for 5/9/2013.

Jackson pleaded guilty to conspiracy to commit wire fraud on 2/27/13, sentencing set for 5/9/2013.

The defendants were indicted on September 1, 2011.

FACTUAL BASIS

From approximately June, 2006 through at least May, 2007, William Naponelli, agreed with others to commit loan fraud. The defendant worked as a loan officer for Southern Arizona Mortgage Services, Tucson, Arizona. The following events occurred at least in part, in Arizona. The defendant, along with at least one or more co-conspirators, purchased parcels of land in Arizona. Naponelli, along with at least one co-conspirator, thereafter split and sold these properties to straw buyers, who were acting on the the defendants behalf.

In order to obtain financing for the purchase of these properties, the defendant knowingly submitted or knowingly caused to be submitted loan applications and other documents with knowledge that these documents contained material false representations. The material false statements were provided to various federally insured financial institutions and at least one other commercial lender in order to qualify the straw buyers for financing. Some of the material false representations made to the various financial institutions included: (1) failing to disclose that the loan applicant had applied for and/or obtained financing with a different lender(s); (2) false representation that the loan applicant had provided the cash down payment or cash to close the real estate transaction; (3) false representation that no part of the down payment had been borrowed; (4) false representation that the seller of the property would carry part of the loan to the borrower (a fictitious carry back loan); (5) false representation that the source of the down payment was from checking/savings or cash from the borrower; and/or (6) falsely inflated the assets of the borrower. Various federally insured financial institutions and at least one other commercial lender thereafter approved and issued loans after receiving and relying on the material false representations.

After the funds were received from the fraudulently obtained loans in this scheme to defraud, some of the money and funds were deposited or wired into the bank accounts of myself or accounts controlled by myself or at least one or more of my co-conspirators. The defendant knew that these funds received from the fraudulent loans represented the proceeds of our fraud scheme. The defendant and at least one or more of his co-conspirators conducted or caused to be conducted monetary transactions with these funds in the United States knowing the funds received from these fraudulently obtained loans represented the criminally derived proceeds from unlawful activities. The funds from these specified unlawful activities were knowingly used by Naponelli and at least one or more co-conspirators to engage in monetary transactions affecting interstate commerce in criminally derived property of a value of greater than $10,000. The properties that we purchased in this scheme to defraud went into foreclosure due to lack of payment. As a result, the lenders suffered significant financial losses totaling approximately $3.9 million.

Facts Set Forth in Atwoods‘ Plea Agreement:

The following events occurred at least in part, in Arizona. I, Bryan Atwood, agreed with at least one or more individuals to commit loan fraud. I agree that the government could prove that the other individuals with whom I engaged in loan fraud were the individuals referred to in the underlying indictment of my case. During the time, I worked as a real estate agent. I was recruited to purchase three properties. I purchased these properties between July and December, 2006.

In purchasing these properties, I obtained financing from three separate lenders totaling approximately $1.25 million. At the time of funding, the lenders were federally insured financial institutions. In order to obtain financing and as part of the loan approval process, I knew that the lenders would rely on loan applications and other documents that I signed including HUD settlement real estate closing statements. I provided or caused to be provided loan applications or other documents (HUD settlement statements) to these lenders with actual knowledge that these documents contained one or more of the following material false statements or material false omissions: (1) false representation that the source of the down payment was checking and/or savings; (2) false representation that no part of the down payment was borrowed; (3) false representation that the loan applicant(s) or borrower would provide funds or cash to close the transaction and/or (4) failed to disclose that I obtained separate mortgages with different lenders at approximately the same time frame. In each of my purchases, the HUD settlement statements falsely represented that the borrower(s) would provide cash to close the transaction. However, I did not provide any money or cash to close towards the purchases.

I agree that the government could prove that the cash to close these properties was provided by one of my co-conspirators. In connection with the fraud scheme and relying on the false documents that were provided to the lenders, the lenders wired the loan funds in interstate commerce to an Arizona title company’s bank account for each loan. The above three properties that I purchased subsequently went into foreclosure due to lack of payments on the mortgages. As a result, the lenders suffered significant financial losses totaling approximately $1,024,272 for the purposes of the U.S. Sentencing Guidelines.

Facts Set Forth in Fruit‘s Plea Agreement:

From approximately June, 2006 through at least May, 2007, I, Walter Fruit, agreed with others to commit loan fraud. The following events occurred at least in part, in Arizona. I along with at least one or more of my co-conspirators purchased parcels of land in Arizona and inflated their value by selling the land to an entity owned by myself or a co- conspirator simultaneously through a dual escrow. As a result, the private loan, obtained by the second buyer, which was less than 80 percent of the inflated price, was used by the original buyer to purchase the property in full. For example, I incorporated Marana Development Company LLC in the State of Nevada on or about June 1, 2006. I subsequently transferred management of this company using a forged document in the name of Jennifer Durand, my step-daughter. This was done to conceal the true ownership of the entity.

On or about June 26, 2006, Marana Development Company, LLC purchased raw land from Fidelity National Title for $1,650,000 and sold it to 4 Points Development Group, LLC (co-conspirator William Naponelli‘s LLC) in a simultaneous escrow for $2,320,000. For this transaction, the seller’s signature, Jennifer Durand, was forged on various documents including the HUD-l Settlement Statement. 4 Points Development LLC obtained a $1,500,000 hard money loan (private lender) for this purchase of which Marana Development Company LLC used $1,497,978.17 towards the initial purchase from Fidelity National Title. I along with at least one of my co-conspirators thereafter split and sold these properties and other properties approximately one year or more later as specified in my indictment to straw buyers.

In order for the straw buyers to obtain financing for the purchase of these properties and as part of the loan approval process, I along with one or more of my co-conspirators knowingly submitted or knowingly caused to be submitted documents with knowledge that these documents contained material false representations. The HUD Settlement Statements (real estate closing documents) that I signed, subject to criminal penalties, falsely represented that the borrower would provide the down payment or cash to close for a particular real estate transaction. However, in these transactions, the borrowers did not provide any funds towards the down payment or cash to close. The seller, either myself or a co-conspirator, purchased various cashiers checks that were used as the down payments or cash to close. These cashiers’ checks were submitted to the title company on behalf of the borrowers. Myself and at least one other co-conspirator falsely represented on the cashiers’ checks that the purchaser of the check was the borrower. These false representations were made in order to conceal the true identity of the individuals who purchased the checks who were the sellers of the properties (either myself or another co-conspirator). Additionally, I was the seller on several transactions where the HUD settlement statements falsely represented that there would be a “seller carry back” loan listing the seller as the beneficiary of the loan. In reality, these seller carry back loans were fraudulent. These fraudulent loans were used to assist the buyer/borrower to qualify for financing.

In reality, the seller never had any intent to enforce the terms of any seller carry back loan against any of the borrowers in the scheme. Myself and/or one or more of my co-conspirators further fraudulently inflated the true sales price of the properties. The HUD settlement statements, including those that I signed, fraudulently inflated the true sales price of the properties. The fraudulently inflated sales prices allowed the borrowers to qualify for approximately 80% financing of the inflated sales price when in reality the borrowers obtained 100% financing of the true sales price. The remaining 20% of the inflated sales price was provided by the seller, either myself or a co-conspirator, as the down payment towards the transactions. These down payments were returned to the sellers, myself or co-conspirator Naponelli, either before or after the closing. Various federally insured financial institutions thereafter approved and issued loans based in part on at least some of the above material false representations.

After the funds were received in escrow from the fraudulently obtained loans, some of the funds were deposited or wired into the bank accounts of myself or accounts controlled by myself or at least one or more of my co-conspirators. Myself and at least one or more of my co-conspirators knowingly conducted or caused to be conducted monetary transactions with these funds in the United States knowing that these funds represented the criminally derived proceeds from unlawful activities. I agree the government could prove that these proceeds used in the monetary transactions were derived from a specified unlawful activity, specifically, Bank Fraud or False Statement to Influence a Financial Institution. The funds from these specified unlawful activities were knowingly used by myself and at least one or more of my co-conspirators to engage in monetary transactions affecting interstate commerce in criminally derived property of a value of greater than $10,000. The properties that we purchased in this scheme to defraud went into foreclosure due to lack of payment. As a result, the lenders suffered significant financial losses totaling greater than $3 million.

Facts Set Forth in Jackson‘s Plea Agreement:

The following events occurred at least in part, in Arizona. I, Sandra Jackson, agreed with at least one or more individuals to commit loan fraud. I agree that the government could prove that the other individuals with whom I engaged in loan fraud were the individuals referred to in the underlying indictment of my case. During the time, I worked as an escrow officer. I was recruited to purchase three properties. I purchased these properties between April and May, 2007. I was told that I would not have to make any of the mortgage payments. In purchasing these properties, I obtained financing from two separate lenders totaling $762,500. At the time of funding, the lenders were federally insured financial institutions. In order to obtain financing and as part of the loan approval process, I knew that the lenders would rely on loan applications and other documents that I signed including HUD settlement real estate closing statements. I provided or caused to be provided loan applications or other documents (HUD settlement statements) to these lenders with actual knowledge that these documents contained one or more of the following material false statements or material false omissions: (1) false representation that the source of the down payment was checking and/or savings or cash in the bank; (2) false representation that no part of the down payment was borrowed; (3) false representation that the loan applicant(s) or borrower would provide funds or cash to close the transaction and/or (4) failed to disclose that I obtained separate mortgages with different lenders at approximately the same time frame. In each of my purchases, the HUD settlement statements also falsely represented that the borrower(s) would provide cash to close the transaction.

However, I did not provide any money or cash to close towards the purchases. I agree that the government could prove that the cash to close these properties was provided by one of my co-conspirators. In connection with the fraud scheme and relying on the false documents that were provided to the lenders, the lenders wired the loan funds in interstate commerce to an Arizona title company’s bank account for each loan. The above three properties that I purchased subsequently went into foreclosure due to lack of payments on the mortgages. As a result, the lenders suffered significant financial losses totaling approximately $553,836.