Donna Demello, 44, San Jose, California, pleaded guilty in federal court to conspiracy to commit wire and mail fraud for her role in a mortgage fraud scheme. At the time of the offense, Demello worked as an escrow officer at Stewart Title, Milpitas, Calif.
Demello was indicted by a federal Grand Jury on May 13, 2010. She and five others, including James Delbert McConville, were charged with conspiracy to commit mail and wire fraud in violation of Title 18, United States Code, Section 1349. The Indictment alleges that McConville purchased hundreds of condominiums throughout California in the names of straw buyers, individuals who were promised $5,000 to $10,000 for the use of their names and credit. The loan applications are alleged to have contained false information about the employment, income, and assets of the straw buyers. Demello admitted to participating in the fraudulent approval of approximately 80 loans for condominiums in Escondido, Calif., and San Marcos, Calif. The government has alleged in its filings that loans totaling more than $20 million were approved for the purchase of these condominiums in Southern California, and that more than $11 million of that was paid directly out of escrow to individuals and companies controlled by McConville.
In pleading guilty to count one of the Indictment, Demello admitted that she conspired with McConville and others to conceal from the lending institutions the “marketing fees” paid to McConville for the sale to straw buyers of approximately 80 condominiums in Escondido and San Marcos, California. Demello acknowledged that marketing fees paid to McConville averaged about $150,000 per loan transaction.
Demello also admitted that in furtherance of the conspiracy, she would create two “final” versions of the settlement statements on a form approved by the United States Department of Housing and Urban Development (called the HUD-1). The correct version of the HUD-1 that was provided to the seller would show a large marketing fee paid to an individual or entity associated with McConville. The fraudulent version of the HUD-1 that was sent to the lending institution would not show the payment of any marketing fee. At McConville‘s direction, his “marketing fee” would be paid directly from escrow to individuals associated with him and/or one of many corporate entities he controlled, including but not limited to: Diamond House Development, La Mirage HA, Emerald Park Housing, Hi Investments, Kearny Mesa Townhomes, LLC, Stonemark Asset Portfolio, Sunset Drive Media, 3 Mac Asset Portfolio, 3 Mac Development Corp., and Sapphire Park House.
Araks Davoudi, a former employee of Citibank, previously pled guilty to the same conspiracy on Aug. 2, 2010, for her role in creating false verifications of deposit for straw buyers. Two others who worked for McConville have pled guilty to conspiracy to commit mail and wire fraud in a related case. United States v. Raymond Davoudi and Bahareh Shamlou, CR 10-364 SBA. McConville is currently in custody.
The sentencing of Demello is scheduled for Dec. 8, 2010, before U.S. District Court Judge Phyllis J. Hamilton in Oakland. The maximum statutory penalty for each count of conspiracy in violation of Title 18, United States Code, Section 1349 is 30 years imprisonment and a fine of $1,000,000 or twice the gross gain or loss involved in the conspiracy, whichever is greater. 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.
Keslie Stewart is the Assistant U.S. Attorney who is prosecuting the case with the assistance of Kathleen Turner and Patty Lau. The prosecution is the result of a one year investigation by the Federal Bureau of Investigation, Internal Revenue Service – Criminal Investigation, U.S. Department of Housing and Urban Development – Office of Inspector General, U.S. Postal Inspection Service, and the Alameda County District Attorney’s Office.