LOS ANGELES—The top two managers at a
Westwood-based mortgage brokerage company have been arrested on federal charges
relating to a foreclosure avoidance and equity-skimming scheme that targeted
distressed homeowners. According to an indictment in this case, the scheme led
several mortgage lenders to disburse more than $15 million in loan
proceeds—with nearly half of that being lost to the fraud conspiracy.
Federal authorities on Tuesday arrested
David Singui, 49, of Inglewood, and Aziz Meghji, 35, of Los Angeles, who were,
respectively, the principal owner and the second-in-charge at Direct Money
Source (DMS), a mortgage brokerage which allegedly operated as an
equity-skimming operation that took possession of distressed homeowner’s equity
under fraudulent pretenses and also defrauded mortgage lenders.
A third defendant in the case—Kiet
Truong, 27, of Hawthorne, who worked at DMS, surrendered to authorities
yesterday morning.
The fourth defendant named in the
42-count indictment—Starr Smith, 31, whose last known address was in Long
Beach, is a fugitive currently being sought by authorities.
The federal grand jury indictment, which
was returned on September 6, charges all four defendants with conspiracy, wire
fraud, loan fraud and aggravated identity theft. Singui and Meghji are
additionally charged with money laundering.
DMS held itself out as a company with a
“Fresh Start Program” that was devoted to assisting distressed homeowners avoid
foreclosure by arranging to have their homes purchased by so-called “credit
investors,” who would hold the properties for 12 months and then sell them back
to the original homeowners after they restored their credit ratings. In fact,
as alleged in the indictment, DMS was an equity-skimming operation that took
possession of distressed homeowner’s equity under fraudulent pretenses. the
scheme allegedly defrauded mortgage lenders in connection with loans on
approximately 50 different properties.
As part of the scheme, DMS told
distressed homeowners that it would provide affiliated “credit investors” with
good FICO scores, which the “credit investors” would use to provisionally
purchase the properties for one year, thereby avoiding foreclosure on the
properties. During this period, the distressed homeowners could remain in their
homes and repair their credit and, at the end of the 12-month period, they
could repurchase their homes at a lower interest rate, according to promises
allegedly made by DMS. The distressed homeowners were told that, because they
had equity in their homes, DMS would be able to draw down on the equity and
make monthly mortgage payments on behalf of the homeowners during the one-year
period in which they were to repair their credit.
In fact, according to the indictment,
DMS took title to more than four dozen properties belonging to the distressed
homeowners it targeted and simultaneously misappropriated the existing equity
in their homes. Using “straw borrowers” as the “credit investors,” DMS
orchestrated loan transactions that allowed DMS to obtain access to the
distressed homeowners’ equity. As alleged in the indictment, DMS and its
principals falsified the employment, bank account and income information of the
straw borrowers on the loan applications. DMS also allegedly fabricated
fictitious bank statements to support this false information on the loan
applications in order to facilitate the approval of these fraudulent loans.
At the conclusion of these transactions,
DMS usually ended up with approximately $100,000 equity per transaction, plus
around $35,000 in fees and commissions associated with each loan. In the
meantime, each of the straw borrowers ended up owing approximately $300,000 or
more on loans that went into default because DMS did not make the 12 months of
mortgage payments as promised.
As a consequence of this scheme, the
mortgage lenders lost more than $7 million on approximately 50 different
fraudulent loans.
Singui and Meghji were arraigned on the
indictment on Tuesday afternoon. They both entered not guilty pleas, and a
federal magistrate judge ordered them held without bond. Meghji asked for a
bond hearing that is scheduled for Tuesday afternoon.
Truong was arraigned yesterday
afternoon. He pleaded not guilty and was released on a $100,000 bond.
This case has been assigned to United
States District Judge Christina A. Snyder. A trial has been scheduled for
November 6.
An indictment contains allegations that
a defendant has committed a crime. Every defendant is presumed to be innocent
until and unless proven guilty in court.
If convicted on all charges in the
indictment, Singui would face a statutory maximum sentence of 855 years in
federal prison, while Meghji would face a maximum sentence of 815 years in
prison.
Truong and Smith similarly would face
potential sentences of hundreds of years in prison if they are convicted.
This case is the result of a joint
investigation by the Federal Bureau of Investigation, the United States Postal
Service and IRS-Criminal Investigation.
This prosecution is part of efforts
underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF),
which was created in November 2009 to wage an aggressive, coordinated, and
proactive effort to investigate and prosecute financial crimes. With more than
20 federal agencies, 94 United States Attorneys’ offices, and state and local
partners, it is the broadest coalition of law enforcement, investigatory, and
regulatory agencies ever assembled to combat fraud. Since its formation, the
task force has made great strides in facilitating increased investigation and
prosecution of financial crimes; enhancing coordination and cooperation among
federal, state, and local authorities; addressing discrimination in the lending
and financial markets; and conducting outreach to the public, victims,
financial institutions, and other organizations. Over the past three fiscal
years, the Justice Department has filed more than 10,000 financial fraud cases
against nearly 15,000 defendants including more than 2,700 mortgage fraud
defendants. For more information on the task force, visit www.stopfraud.gov.
[b]Contact: [/b]
Assistant United States Attorney Paul
Stern
Major Frauds Section
(213) 894-0715
Assistant United States Attorney Monica
Tait
Major Frauds Section
(213) 894-2931
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