Alonzo Jackson Brown III, 44, Fairfield, California has been indicted on nine counts in connection with an investment fraud scheme and a mortgage fraud scheme.
According to court documents, Brown is a licensed real estate broker who used that position to perpetrate a mortgage fraud scheme. Brown is accused of submitting fraudulent loan applications in the names of unwitting individuals for the purchase of residential properties at greatly inflated prices. Several of the properties were owned by Brown himself. Among other things, the loan applications falsely stated the applicant’s true income, employment, assets, liabilities, and intent to occupy the property as a primary residence. When these loans funded, Brown obtained large payouts in the form of cash back to the seller. Because the nominal buyer of the properties was unaware of these transactions, to avoid causing any red flags, Brown would make the mortgage payment on these properties for several months before walking away and permitting the home to go into foreclosure. His actions resulted in alleged actual loss of at least $1.5 million.
In a separate case, Leonard Bernot, 46, Laguna Hills, California, pleaded guilty before U.S. District Judge Kimberly J. Mueller to conspiracy to commit mail fraud for his part in a wide-ranging “foreclosure rescue” scheme involving Head Financial Services Inc. Originally indicted on February 28, 2008, Bernot and 10 other defendants were charged with conspiring to defraud financially distressed homeowners by promising them that their homes could be saved from foreclosure and their credit repaired if the names of straw buyers were added to, or replaced on, the homes’ property titles. Bernot and others allegedly would obtain mortgage loans on each of the homes, thereby extracting substantial equity, a scheme sometimes referred to as “equity stripping.” Often, the homeowners were left paying “rent” to the conspirators. The rent would often be nearly as much as the prior mortgage payment the homeowner had been unable to pay. When the homeowners were unable to keep up with the payments, they were often evicted from their homes. The cases of several co-defendants, including Charles Head, the founder of Head Financial Services Inc., are still pending.
This case is the product of an investigation by the FBI and the U.S. Postal Inspection Service. Assistant U.S. Attorney R. Steven Lapham is prosecuting the case. Brown is scheduled to be arraigned before U.S. Magistrate Judge Kendall J. Newman.
This case is the product of an investigation by the FBI and IRS-Criminal Investigation. Assistant U.S. Attorneys Matthew Stegman and Michael Anderson are prosecuting the case. Bernot will be sentenced before Judge Mueller on September 1, 2011.
U.S. Attorney Benjamin B. Wagner announced the grand jury indictment.
The announcement comes almost exactly a year after the conclusion of a nationwide sweep, Operation Stolen Dreams, that targeted mortgage fraudsters throughout the country and was the largest collective enforcement effort ever brought to bear in confronting mortgage fraud. The operation was organized by the Mortgage Fraud Working Group of President Obama’s interagency Financial Fraud Enforcement Task Force, which was established to lead an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. U.S. Attorney Wagner is a co-chair of the Mortgage Fraud Working Group. Between March 1, 2010 and June 18, 2010, Operation Stolen Dreams involved 1,517 criminal defendants nationwide, including 525 arrests, representing an estimated loss of more than $3 billion. The operation also resulted in 191 civil enforcement actions and the recovery of more than $196 million. During the three-and a-half-month sweep in 2010, the Eastern District of California charged 46 defendants with felony mortgage fraud offenses and secured 11 guilty pleas.