Charges and Updates in Three Mortgage Cases

admin —  May 24, 2010 — Leave a comment

Anthony G. Symmes, 59, Paradise, California, has agreed to plead guilty to an information, charging him with one count of conspiracy to commit mail fraud in connection with a builder bailout scheme involving fraudulent sales of 62 houses, and with one count of money laundering. Symmes, who is an attorney, a CPA, a developer, and the largest home builder in the Chico, California area, has agreed to cooperate in the ongoing investigation of Garret G. Gililland and his associates. Gililland was previously indicted for mortgage fraud in this district, extradited from Spain, and is currently awaiting trial in federal custody. According to the plea agreement filed, Symmes has already deposited $4 million into a U.S. Treasury account, which will be paid to the court for restitution.

Symmes Builder-Bailout Scheme.

The prosecution of Anthony G. Symmes arises from the same investigation that resulted in the prosecution of Garret Griffith Gililland III. According to the plea agreement, beginning in the Fall of 2006, as the real estate market cooled, Symmes found himself with a significant inventory of newly built homes not selling at their list price. Gililland, an unlicensed mortgage broker, approached Symmes and offered to take the homes off of Symmes’s hands, using a network of straw buyers. The two agreed that the prices on Symmes’s homes would be artificially inflated by approximately $40,000 to $60,000 above the list price.

According to court documents, Gililland, using fraudulent documents, would then qualify his straw buyers for 100 percent financing on the inflated value of the homes. Typically the day after the homes sold at the inflated values, Symmes would write a check to shell corporations controlled by Gililland and his associates for the inflated portion of the sales price ($40,000 to $60,000, depending on the house). Gililland then pocketed a portion of the money and used some of the money to pay off his straw buyers.

Altogether, from 2006 through 2008, Symmes sold Gililland and Gililland’s associates 62 houses at artificially inflated prices. These fraudulent purchases were financed by mortgage lenders in the total amount of approximately $21 million. Symmes wrote checks back to Gililland and his associates totaling approximately $2.5 million. These price rebates from Symmes were concealed from the lenders. To date, dozens of Symmes’s homes have been foreclosed or short-sold. Losses realized to date total almost $5 million and are expected to climb. Due to the volume of the artificially inflated prices on homes in Chico, California, Symmes and Gililland were able to create artificially high comparable sales that appraisers relied upon, affecting the overall new-home market in the Chico, California area.

Symmes is expected to appear in U.S. District Court in Sacramento, California in the near future to enter his plea pursuant to the plea agreement. As part of that agreement, Symmes has already paid $4 million, which will be used to make restitution to victims, and has agreed to cooperate in the ongoing investigation.

Symmes faces a maximum penalty of 20 years in prison, for the mail fraud charge, 10 years in prison for the money laundering charge, a $250,000 fine, and three years of supervised release The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory sentencing factors and the Federal Sentencing Guidelines, which take into account a number of variables.

The Symmes case was a joint investigation involving the FBI, IRS-Criminal Investigation, and the Butte County District Attorney’s Office. The case is being prosecuted by Assistant U.S. Attorney Russell Carlberg.

Lawrence Davis, 26, and Joel Clark, 27, both formerly of Sacramento, California and currently living in Las Vegas, Nevada and Eric Mortenson, 28, Sacramento, California were indicted by a federal grand jury in Sacramento, California. That indictment was unsealed after defendants Clark and Mortenson were arrested by FBI and IRS agents in Sacramento, California and Las Vegas, Nevada. The indictment charges them with conspiracy to commit wire fraud and wire fraud in connection with an alleged property-flipping scheme operated in the Sacramento County, California area. This case is the product of an initial investigation by the California Department of Real Estate and is currently being investigated by the FBI. Assistant U.S. Attorney Laurel Loomis Rimon is prosecuting the case.

Sacramento Area Property-Flipping Scheme:

The indictment in the Davis case alleges that Davis, a real estate agent, and Mortenson, a loan officer with All State Home Loans, worked as a team assisting clients in buying houses and obtaining mortgage loans through a real estate sales office in Sacramento, California. Joel Clark was Davis’s associate who assisted in running paperwork and showing homes to prospective buyers. Davis and Mortenson marketed a “rebate” program and encouraged buyers to buy multiple properties in a very short period of time, even within a single month, promising them “cash-back” on their purchases for repairs, upgrades, and to cover the mortgage payments they could not otherwise afford. Buyers were told that they had the opportunity to become real estate “investors” and to generate rental income and “flip” properties for substantial profits. Davis and Mortenson themselves gained large commissions from each transaction, and Joel Clark received some of the cash-back payments.

The indictment charges that the transactions involved false and fraudulent loan applications submitted by Davis and Mortenson on behalf of the buyers. First, Davis would offer the seller a purchase price on behalf of his client that was substantially more than the list price of the property, thereby misleading the lender as to the market value of the property. Then, Davis would include a term in the sales contract that required the seller to pay thousands of dollars back to the buyer, or to a third party, generally after the close of escrow and without notice to the lender. The “cash-back” to the buyers exceeded the limits set by lenders for buyer credits.

Additionally, the indictment alleges that Mortenson would submit loan applications that were full of false information and forged and fraudulent supporting documents. Loan applications were submitted that had entirely false occupations and monthly incomes, as well as falsely inflated bank account balances, leading the banks to believe that the borrowers were more qualified for the loans than they truly were. Mortenson also submitted fraudulent and forged forms verifying material matters, such as employment, rental history, and bank balances. By causing the buyers to buy so many properties in such a short period of time, earlier property purchases did not show up on property reports, leaving the lenders unaware of the buyers’ other loan commitments. In all, the charges in the indictment include more than $6 million worth of fraudulently obtained loans. All of the properties were foreclosed, resulting in a loss to the financial institutions of more than $2.6 million.

Mortenson is expected to make an initial appearance before a U.S. Magistrate Judge in Sacramento, California. Defendants Davis and Clark will make their initial appearances before a U.S. Magistrate Judge in Las Vegas, Nevada.

If convicted of the charges, the defendants face a maximum sentence of 20 years in prison, a $250,000 fine, and three years of supervised release. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory sentencing factors and the Federal Sentencing Guidelines, which take into account a number of variables.

Jeremiah Andrew Martin, 32, San Antonio, Texas, Darrin Arthur Johnston, 45, Redding, Texas, Todd Allen Smith, 47, Redding, California and Cheryl Ann Hitomi Peterson, 47, Redding, California were indicted by a federal grand jury in Sacramento, California. The indictment was unsealed when the defendants were arrested by FBI and IRS agents in Shasta County, California. The indictment charges all four defendants with conspiracy to commit mail fraud, mail fraud, and money laundering in connection with an alleged fraudulent foreclosure rescue scheme. The case is being investigated by the FBI and IRS-Criminal Investigation, and is being prosecuted by Assistant U.S. Attorney Matthew Stegman.

Shasta County Foreclosure Rescue Scheme.

The indictment in the Martin case charges that Martin, Johnston, Smith, and Peterson, operating through several entities in the Redding, California area that purported to offer foreclosure relief and credit repair services, targeted homeowners in financial distress and facing foreclosure. Martin, Johnston, and Smith allegedly marketed a “foreclosure recovery” program in which homeowners were persuaded to sign over the deeds to their homes, based on the defendants’ false representations that the homeowners could lease them back for a low rent, that the defendants would help them repair their credit, and that the homeowners could buy the homes back after two years. After obtaining title to the homes, Martin, Johnston and Smith are alleged to have extracted equity from them by inflating their values and obtaining additional loans, keeping the rent payments rather than making payments to lenders, and then allowing the homes to be lost in foreclosure. Peterson, an escrow officer and notary, is alleged to have used her office and her notary status to lend the appearance of legitimacy to the scheme. Many homeowners lost their homes in the course of the fraud, and lenders suffered losses in excess of $1 million.

Defendants Johnson, Smith, and Peterson were arrested in Shasta County, California and are expected to make an initial appearance before a U.S. Magistrate Judge in Sacramento.

The maximum penalty for conspiracy to commit mail fraud affecting a financial institution and for mail fraud affecting a financial institution is 30 years in prison and a $250,000 fine. The maximum penalty for conspiracy to launder funds is 10 years in prison and a $250,000 fine or twice the amount of the criminally derived property. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory sentencing factors and the Federal Sentencing Guidelines, which take into account a number of variables.

Regarding the Symmes case, Butte County District Attorney Mike Ramsey said, “Greedy, crooked developers, appraisers, mortgage brokers, and others contributed significantly to the great mortgage meltdown of the past two years. Greed led this formerly well-respected Chico developer down a path to his downfall and the destruction of a number of neighborhoods populated by good folks who have found their homes devalued by the empty foreclosures on their block. Once we discovered the complex, fraudulent scheme hatched here we began an extensive investigation. When we found the tentacles of this corrupt organization stretched beyond Butte County, we reached out to our federal partners for help. We are most gratified with the assistance and cooperation that has lead to the justice we see this day.”

United States Attorney Benjamin B. Wagner said “The various schemes reflected in the cases announced today illustrate the many varieties of mortgage fraud. These types of crimes have a broad impact on our communities, not only weakening financial institutions and devastating individual victims of the fraud schemes, but also driving down the value of many families’ primary asset, their home. Rooting out and prosecuting fraudsters in the mortgage and real estate industries is an extremely high priority for the U.S. Department of Justice. We are working on other mortgage fraud investigations here in the Eastern District of California, and there will be more to come.”

IRS-Criminal Investigation takes mortgage fraud seriously. The impact of these types of crimes cannot be overstated. Fraud in the mortgage industry has played a major role in almost crippling this nation’s economy, and directly affecting our tax administration system,” said José M. Martínez, Assistant Special Agent in Charge, IRS-Criminal Investigation. “We will continue to utilize our financial investigative expertise to aggressively investigate criminal activities that adversely affect our financial system.”

United States Attorney Benjamin B. Wagner made the announcements.

The charges in the indictment are only allegations, and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt.

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