Principals of Mortgage Brokerage Arrested in Equity-Skimming and Foreclosure Avoidance Scheme Targeting Distressed Homeowners

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

Nevada Woman Sentenced to 54 Months for Her Role in College Financial Aid Fraud

RICHMOND, VA—Linda Palmer Taylor, 62, of Henderson, Nevada was sentenced today to 54 months in prison, followed by three years of supervised release, for her role in recruiting investors and misusing their funds in a college financial aid fraud.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia; and John S. Adams, Acting Special Agent in Charge of the FBI’s Richmond Field Office, made the announcement after sentencing by United States District Judge Henry E. Hudson.

Taylor pled guilty to conspiracy to commit wire fraud on May 14, 2012. According to court documents, Taylor was the owner of several companies that purported to assist families with finding and securing financial aid for college expenses. As part of her financial planning advice, Taylor recommended that of her clients purchase annuities through her companies, the College Dream Foundation and College Funding Associates. Taylor and her co-conspirator, Edward Menster, sold approximately $1.6 million in annuities to investors in California, Colorado, and Virginia. Taylor falsely represented to her clients that the funds would be secured or guaranteed, when, in fact, they were deposited in a checking account controlled by Taylor and were neither secured nor guaranteed.

The funds were used by Taylor and Menster for personal expenses to fund other, unrelated businesses and to make interest payments and withdrawals to previous investors in a Ponzi-like scheme. As part of her sentence, Taylor was ordered to pay nearly a million dollars in restitution to the victims of her fraud.

Taylor’s co-conspirator, Ed Menster, also pled guilty to conspiracy to commit wire fraud and was sentenced to 58 months’ incarceration on March 9, 2012.

This case was investigated by the Federal Bureau of Investigation. Assistant United States Attorney Jamie L. Mickelson prosecuted the case on behalf of the United States.

AEP Power Surge Scammers Sentenced to Federal Prison

American Electric Power Issued More Than Half-a-Million Dollars in Fraudulent Claims Checks as a Result of the Conspiracy

CHARLESTON, WV—U.S. Attorney Booth Goodwin announced that three individuals were sentenced to federal prison yesterday in connection with a scheme to obtain money by submitting fraudulent claims for power surge damage to American Electric Power Service Corporation Inc. (“AEP”). Lead defendant and former AEP property damage claims adjuster Deborah Farmer, 47, was sentenced to three years in prison. Farmer previously pleaded guilty in April to conspiracy to commit mail and wire fraud. Farmer admitted she arranged the scheme and conspired with other individuals to unlawfully obtain money from the power company by submitting the fraudulent claims. Co-defendant Julia Washington, 45, of Charleston, was sentenced to two years in prison. Washington previously pleaded guilty in April to conspiracy to commit mail and wire fraud. A third defendant, Freda Bradshaw, 47, of Pliny, Putnam County, West Virginia, was sentenced to one year in prison (six months of which will be served on home confinement) and three years of supervised release. Bradshaw previously pleaded guilty in April to conspiracy to commit mail and wire fraud.

Four other co-defendants involved in the conspiracy were also sentenced for their roles in the conspiracy: Jonathan Shaffer, 32, of Charleston, was sentenced to eight months of home confinement with electronic monitoring. Tiffany Shaffer, 24, of Poca, West Virginia, was sentenced to four months of home confinement with electronic monitoring. Bryan P. Javins, 33, of Nitro, West Virginia, was sentenced to four months of home confinement with electronic monitoring. Jeanette Boggs, 58, also of Nitro, was sentenced to four months of home confinement with electronic monitoring. These four defendants also received five years of probation once their sentences have been discharged.

A two-year investigation revealed that false claims were filed with AEP related to phony power surge damage to homes. These claims were submitted by Deb Farmer. Claims checks, ranging from $2,000 to as much as $25,000 per fraudulent claim, were mailed to the defendants at various times between March 2009 and March 2010. Farmer and Washington recruited other people into the scheme in exchange for a “cut” of the claims checks. A total of 57 fraudulent claims were filed resulting in a loss of approximately $598,485. The final restitution figure was slightly lowered due to account for some offsets that were uncovered in the course of the investigation and one scam participant settling with AEP in the civil suit filed in Putnam County.

At sentencing, the court also ordered Farmer and Washington to pay $558,412.36 in restitution, jointly and severally with each other. Defendant Freda Bradshaw was ordered to pay $115,639.07 in restitution. Defendant Jonathan Shaffer was ordered to pay $44,929 in restitution. Defendant Bryan Javins was ordered to pay $20,945 in restitution and defendant Janette Boggs was ordered to pay $25,724.57 in restitution, with a $5,000 down payment due in 20 days. All defendants were placed on payment plans.

Judge Copenhaver stated during the sentencing of defendant Deborah Farmer that he was shocked at the “ease in which more than 30 people were recruited into this fraudulent scheme.” The court continued that Farmer spent a considerable amount of time “assailing the treasury of AEP” and “acting with abandon until the scheme ended in March 2010.”

The Federal Bureau of Investigation (FBI), the United States Postal Inspection Service, and the West Virginia State Police conducted the investigation. Assistant United States Attorney Erik S. Goes handled the prosecution.

FBI Top Stories: New Internet Scam

‘Ransomware’ Locks Computers, Demands Payment

There is a new “drive-by” virus on the Internet, and it often carries a fake message—and fine—purportedly from the FBI.

“We’re getting inundated with complaints,” said Donna Gregory of the Internet Crime Complaint Center (IC3), referring to the virus known as Reveton ransomware, which is designed to extort money from its victims.

Reveton is described as drive-by malware because unlike many viruses—which activate when users open a file or attachment—this one can install itself when users simply click on a compromised website. Once infected, the victim’s computer immediately locks, and the monitor displays a screen stating there has been a violation of federal law.

The bogus message goes on to say that the user’s Internet address was identified by the FBI or the Department of Justice’s Computer Crime and Intellectual Property Section as having been associated with child pornography sites or other illegal online activity. To unlock their machines, users are required to pay a fine using a prepaid money card service.

“Some people have actually paid the so-called fine,” said the IC3’s Gregory, who oversees a team of cyber crime subject matter experts. (The IC3 was established in 2000 as a partnership between the FBI and the National White Collar Crime Center. It gives victims an easy way to report cyber crimes and provides law enforcement and regulatory agencies with a central referral system for complaints.)

“While browsing the Internet a window popped up with no way to close it,” one Reveton victim recently wrote to the IC3. “The window was labeled FBI and said I was in violation of one of the following: illegal use of downloaded media, under-age porn viewing, or computer-use negligence. It listed fines and penalties for each and directed me to pay $200 via a MoneyPak order. Instructions were given on how to load the card and make the payment. The page said if the demands were not met, criminal charges would be filed and my computer would remain locked on that screen.”

The Reveton virus, used by hackers in conjunction with Citadel malware—a software delivery platform that can disseminate various kinds of computer viruses—first came to the attention of the FBI in 2011. The IC3 issued a warning on its website in May 2012. Since that time, the virus has become more widespread in the United States and internationally. Some variants of Reveton can even turn on computer webcams and display the victim’s picture on the frozen screen.

“We are getting dozens of complaints every day,” Gregory said, noting that there is no easy fix if your computer becomes infected. “Unlike other viruses,” she explained, “Reveton freezes your computer and stops it in its tracks. And the average user will not be able to easily remove the malware.”

The IC3 suggests the following if you become a victim of the Reveton virus:

■Do not pay any money or provide any personal information.

■Contact a computer professional to remove Reveton and Citadel from your computer.

■Be aware that even if you are able to unfreeze your computer on your own, the malware may still operate in the background. Certain types of malware have been known to capture personal information such as user names, passwords, and credit card numbers through embedded keystroke logging programs.

■File a complaint and look for updates about the Reveton virus on the IC3 website.

Pelham Man Pleads Guilty to Laundering Money in Scam with Daughter

BIRMINGHAM—A Pelham man pleaded guilty today in federal court to money laundering in a scheme with his daughter that collected more than $400,000 for expenses of a lawsuit that never existed, announced U.S. Attorney Joyce White Vance, Alabama Securities Commission Director Joseph P. Borg, IRS-Criminal Investigation Special Agent in Charge Donald B. Yaden, and FBI Special Agent in Charge Patrick J. Maley.

Paul Haskell Lane, Jr., 69, entered his plea before U.S. District Judge C. Lynwood Smith, Jr. Lane is scheduled for sentencing November 14.

“Today’s guilty plea represents the culmination of years of hard work by my office and our federal and state partners,” Vance said. “Tenacious work by the IRS, FBI, and Alabama Securities Commission made it possible for us to secure this guilty plea,” she said.

“The Alabama Securities Commission was proud to be an integral part of the investigation and legal aspects of this case and to work as a close partner with the U.S. Attorney’s Office, the IRS, and the FBI,” Borg said. “The combined resources and hard work by all agencies has promoted justice and led to this guilty plea.”

“Mr. Lane exploited his family, friends, and neighbors by perpetrating a scheme that was based entirely on lies,” Yaden said. “The plea today is Mr. Lane’s opportunity to admit to the deception and face the consequences of his actions.”

Lane’s guilty plea caps a six-year investigation and prosecution effort by federal and state authorities. In late 2009, Lane and his daughter, Katherine Hope Lane, 28, were separately indicted for wire fraud, mail fraud, and money laundering for their roles in a plan to get people in other states to wire money to Lane’s bank account. Those who sent money were led to believe it would go toward costs for a personal-injury lawsuit filed by the Lane family after Katherine Lane suffered a brutal assault at work.

The Lanes represented that proceeds from the lawsuit would be used to repay people who donated. Most who provided money also believed that they would get back from the Lanes more money than they sent. Katherine Lane, however, was never assaulted, and the Lanes had never filed a lawsuit.

Over the course of several years, Lane took the money that was wired into his account and gave it to his daughter. He acknowledged those actions in his money laundering plea and agreed to pay $343,900 in restitution, which is expected to go toward repaying those who sent money.

Katherine Lane pleaded guilty in 2010 to wire fraud, aggravated identity theft, and money laundering. She was sentenced in 2011 to seven years and three months in federal prison. Katherine Lane also pled guilty to felony state securities fraud charges related to her actions. Her sentence of seven years and three months on the state charges was ordered to run concurrently with the federal sentence.

The Internal Revenue Service, the FBI, and the Alabama Securities Commission investigated the case. Assistant U.S. Attorney Melissa K. Atwood prosecuted the case.

FBI Consumer Alert: Don’t Fall for Phony Fines

The FBI Salt Lake City Division has received numerous complaints from concerned Montana residents who have been threatened with fines of up to $200. In the past two weeks, several complainants have called FBI offices in Montana to report someone claiming to be an FBI employee has contacted them by phone or e-mail. Several complainants say they were told their computers had been locked due to illegal online activity and a one-time payment of $200.00 was required to unlock their computers. One complainant reported he was threatened with a higher fine if he did not comply. Some individuals report sending money. “Unfortunately, once a person wires or sends money, they have potentially just become a victim of a scam,” said FBI Special Agent in Charge David J. Johnson. “I want Montana residents to realize this is a ruse that con artists are using to steal money from unsuspecting people.”

Montana residents who have been victimized by Internet-based scams are encouraged to file complaints at IC3.gov (http://www.ic3.gov/default.aspx). The Internet Crime Complaint Center (IC3) is a partnership between the FBI and the National White-Collar Crime Center. It is funded in part by the Bureau of Justice Assistance.

Major overseas supplier of phony pharmaceuticals pleads guilty to federal charges

LOS ANGELES — A foreign physician suspected of being a large-scale supplier of phony erectile dysfunction drugs to distributors in California, Texas and Europe faces up to 30 years in prison after pleading guilty to federal charges stemming from a long-term probe by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI).

Robin Han, 43, a New Zealand citizen who resided in China prior to his arrest earlier this year, pleaded guilty Thursday morning to three criminal counts that could also result in a fine of up to $6 million. Han's sentencing is set for Oct. 4 before U.S. District Judge George Wu. The case is being prosecuted by the U.S. Attorney's Office for the Central District of California.

"Trafficking in counterfeit prescription drugs of any kind represents a serious threat to public safety," said United States Attorney André Birotte Jr. "The Department of Justice will continue to work with all of its law enforcement partners — at both the federal and local levels — to help secure federal convictions that should send a strong message to international counterfeiters like Mr. Han."

Han was originally indicted in December 2007, but remained at large until March 29. He was taken into custody at San Francisco International Airport following his arrival on a flight from Hong Kong. Officers with U.S. Customs and Border Protection (CBP) detained Han after determining he was the subject of an international law enforcement lookout. Subsequently, Han was transferred to Los Angeles where he has remained in federal custody ever since.

"The challenge in intellectual property investigations is that large-scale suppliers like Han are typically based overseas," said Claude Arnold, special agent in charge for HSI Los Angeles. "But as this case clearly demonstrates, these defendants are not beyond the reach of U.S. law enforcement. We owe it to consumers to pursue these cases vigorously given the significant public safety risks posed by these counterfeit medications."

The HSI probe targeting Han began in 2006 after CBP officers at a mail facility in northern California intercepted a parcel shipped from China that contained counterfeit Cialis tablets and phony Cialis packaging. The ensuing investigation identified Han as the sender.

According to the case indictment, Han advertised the sale of counterfeit pharmaceuticals on a number of websites, including alibaba.com. During the course of the probe, HSI special agents made undercover buys of some 20,000 counterfeit Viagra, Cialis and Levitra tablets with an estimated retail value of approximately $200,000. On the parcels Han shipped to the undercover special agents, the packing slips falsely claimed the contents were plastic stationery holders and pen boxes.

HSI, CBP and the Department of Justice are working together to combat intellectual property crimes. In fiscal year 2011, HSI and CBP made nearly 25,000 seizures involving counterfeited and pirated products, a 24 percent increase compared to fiscal year 2010.

 

As the largest investigative arm of the Department of Homeland Security, HSI plays a leading role in targeting criminal organizations responsible for producing, smuggling and distributing counterfeit products. HSI focuses not only on keeping counterfeit products off our streets, but also on dismantling the criminal organizations behind such illicit activity.

The HSI-led National Intellectual Property Rights Coordination Center (IPR Center) is one of the U.S. government's key weapons in the fight against criminal counterfeiting and piracy. The IPR Center uses the expertise of its 21 member agencies to share information, develop initiatives, coordinate enforcement actions, and conduct investigations related to IP theft. Through this strategic interagency partnership, the IPR Center protects the public's health and safety, the U.S. economy and the war fighters.