United States Attorney Laura E. Duffy
and Federal Housing Finance Agency Inspector General Steve A. Linick announced
that fugitive loan broker Mary Armstrong was arrested today in Las Vegas,
Nevada. The indictment, which was returned on May 10, 2012, and unsealed today,
charges Armstrong, an unlicenced mortgage loan broker, Ramona real estate agent
Teresa Rose, and Armstrong’s assistant William Fountain with devising and
executing a mortgage loan origination fraud and kickback scheme.
As detailed in the indictment, the
defendants carried out their scheme by recruiting “investors” through
advertisements in the Los Angeles Times and online and encouraging them to
purchase homes in Ramona, California, and elsewhere. The advertisements offered
investors who had good credit the chance to buy property with no money down,
and the defendants falsely claimed they would make the mortgage payments on the
investors’ behalf using rental income they generated by renting and managing
the properties. In reality, these so-called investors were nothing more than
straw buyers who were promised $10,000 for each property purchased as part of
the scheme. The defendants were able to secure mortgages for the properties by
falsifying loan applications for the straw buyers. Among other things, the loan
applications falsely claimed exorbitant income from fake employers and used
sham companies to verify the borrowers’ fabricated employment and rental
histories. The defendants went so far as to include fake W-2s and pay stubs to
support the income claims. The defendants used these loan applications to
obtain mortgages with 100 percent financing and thus avoided having to make any
down payment on the properties.
The bulk of the profits the defendants
made from the scheme resulted from their convincing sellers to inflate the
purchase price of the properties by approximately $100,000, which was allegedly
to be used for construction to improve the properties. In fact, no construction
work was ever performed and the funds were instead diverted (or “kicked back”)
to bank accounts controlled by the defendants. The defendants pocketed this
money, made few if any mortgage payments, and allowed nearly all of the
properties to swiftly fall into foreclosure.
The indictment alleges that Armstrong,
Rose and Fountain purchased at least 16 properties in Ramona and in El Cajon,
California, and Washington state as part of this scheme. In total, the
defendants secured over $11 million in mortgage loans, skimmed over $1.5
million in sham construction kickbacks, and earned hundreds of thousands of
dollars in additional proceeds through commissions and fees listed as part of
the closing costs for each transaction. As a result of the foreclosures and
defaults caused by the defendants’ failure to make the mortgage payments they
promised, the defrauded mortgage lenders suffered losses of approximately $5
million. The Federal National Mortgage Association, better known as Fannie Mae,
purchased five of these fraudulently obtained mortgages on the secondary market
and suffered losses as a result of the defaults.
United States Attorney Duffy commented
that these charges are the result of an active, ongoing criminal investigation.
On April 18, 2012, a fourth defendant, Justin Mensen, pled guilty to
participating in the conspiracy. As part of his plea, Mensen admitted that he
aided his coconspirators by registering sham “construction” and “development”
companies and opening several bank accounts—which were used to receive
kickbacks (disguised as sham construction payments) in order to conceal from
the mortgage lenders and sellers that the money was being funneled to the
defendants. On May 30, 2012, Teresa Rose pled guilty to participating in the
conspiracy, admitting that she represented both the buyers and the sellers in each
Ramona sale and arranged for inflated sales prices of the Ramona properties.
William Fountain was arrested in Los Angeles on May 25, 2012, and has pled not
guilty. His trial has not yet been scheduled.
United States Attorney Duffy emphasized
that if anyone in the community has information relating to these charges, they
are asked to contact the San Diego branch of the Federal Bureau of
Investigation at (858) 565-1255 or the Federal Housing Finance Agency-Office of
Inspector General hotline at (800) 793-7724.
An indictment is not evidence that the
defendants committed the crimes charged. The defendants are presumed innocent
until the government meets its burden in court of proving guilt beyond a
reasonable doubt.
Defendants,
Criminal Case No. 12CR1848-JAH:
Mary Armstrong, 51, Las Vegas, Nevada
Teresa Rose, 57, Ramona, California
William Fountain, 56, Los Angeles,
California
Defendant,
Criminal Case No. 12CR1458-JAH:
Justin Mensen, 31, Seattle, Washington
Summary
of Charges:
Count one (Mary Armstrong, Teresa Rose,
and William Fountain): Title 18, United States Code, Section 371-conspiracy to
commit wire fraud and to launder money: statutory maximum sentence of five
years custody; a maximum fine of $250,000 or twice the gain derived from or
loss caused by the offense; and $100 special assessment.
Count two (Mary Armstrong): Title 18,
United States Code, Section 1343-wire fraud: statutory maximum sentence of 20
years custody; a maximum fine of $250,000 or twice the gain derived from or
loss caused by the offense; and $100 special assessment.
Counts three through five (Mary
Armstrong): Title 18, United States Code, Section 1956(a)(1)(B)(I)-money
laundering: statutory maximum sentence of 15 years’ custody; a maximum fine of
$500,000 or twice the value of the property involved in the transaction; and $100
special assessment.
Information (Justin Mensen): Title 18,
United States Code, Section 371-conspiracy to commit wire fraud and to launder
money: statutory maximum sentence of five years custody; a maximum fine of
$250,000 or twice the gain derived from or loss caused by the offense; and $100
special assessment.
Agencies
Federal Bureau of Investigation
Federal Housing Finance Agency-Office of
Inspector General
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