Richard Elroy Giddens, 67, Riverside, John Richard Varner, 54, Hesperia, Stephen Ray Harper, 50, Ontario, and Katherine Ann Kilmer, 52, Hesperia, all of California, and all former officers with the now-defunct Inland Empire mortgage lender, were arrested by Federal Agents on charges of defrauding the United States Department of Housing and Urban Development and private lenders by fraudulently obtaining federally insured loans and selling those notes to private lenders.
Two more defendants charged in the case – Ricardo Bonilla, 46, Fontana, California, and Abraham Julian Rezex, 59, Downey, California – are expected to self-surrender later this month.
All six defendants are charged with conspiracy and bank fraud. Giddens and Varner are charged with subscribing to a false tax return. Harper is charged with willful failure to file a tax return.
The scheme, which ran from 1997 until 2002, was run out of the Mortgage One Corporation, which was based in Hesperia, California and M-1 Capital Corporation, which was based in Riverside and Rancho Cucamonga, California. The two companies were in the business of approving, funding and then selling home mortgage loans, typically obtaining mortgage insurance of the loans from the Federal Housing Administration, which is an agency within HUD.
The indictment alleges that the defendants engaged in a conspiracy to defraud HUD by submitting fraudulent loan application documents in order to qualify the loans for FHA insurance. The indictment further alleges that Mortgage One and M-1 Capital sold the funded loans to banks using the same fraudulent documents. HUD has identified more than 850 FHA-insured loans approved by Mortgage One and M-1 Capital that went into foreclosure and made insurance claims to HUD. Investigators estimate that the losses suffered by the government and the private lenders are at least $10 million.
Three of the defendants arrested are expected to make their initial appearances before a United States Magistrate Judge in Riverside, California. Giddens is expected to make his initial appearance before a United States Magistrate Judge in Los Angeles, California.
The maximum penalty for the conspiracy charge is five years in federal prison. The maximum penalty for the bank fraud charge is 30 years in prison. The maximum penalties for the tax charges range from one to three years in prison.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty in court.
This case is the result of an investigation by the Federal Bureau of Investigation, HUD's Office of Inspector General, and IRS-Criminal Investigation. The investigation received assistance from the Social Security Administration’s Office of Inspector General.
Rachel Dollar, the editor of Mortgage Fraud Blog is an attorney and Certified Mortgage Banker who handles litigation for lending institutions and secondary market investors.