Former Buffalo Lawmaker Sentenced to One Year, One Day in Prison for Theft of Government Funds

BUFFALO, NY—U.S. Attorney William J. Hochul, Jr. announced today that former city of Buffalo Common Council Member Brian C. Davis, 43, of Buffalo, New York, who pleaded guilty to theft concerning programs receiving federal funds, was sentenced to one year and one day in prison by Chief U.S. District Judge William M. Skretny. The defendant was also ordered to pay $48,237 in restitution.

Assistant U.S. Attorney Russell T. Ippolito, Jr., who handled the prosecution, stated that Davis stole $48,237 in city of Buffalo discretionary funds to his own use and the use of others. As a city of Buffalo Common Council Member between 2006 and 2010, Davis was responsible for distributing discretionary funds for public benefit purposes. Instead, the defendant funneled city funds through not-for-profit pass through agencies and personal friends and ultimately to himself. Neither Davis nor his associates were entitled to any of the discretionary funds.

The government’s evidence showed that in 2006, the defendant sent discretionary funds to the Community Action Organization (CAO), of which Davis was president of at the time. The defendant then directed the CAO to send those funds to the Pratt Willert Community Center which wrote to checks to such fictitious organizations as the Ellicott Fun Day and Ellicott Senior Prom.

In 2007 and 2008, Davis sent funds to the Back to Basics Organization. The defendant then directed the organization to send checks to friends or other individuals to whom Davis owed money. In one instance, Davis urged one individual to cash a $5,000 check and keep half the money.

“This is an extreme case where an individual elected to represent the community, abused that position, and stole money which could have benefitted those residents,” said U.S. Attorney Hochul. “This behavior, besides showing a blatant disregard for his office, had the effect of depriving the community of funds which could have led to real, long term benefits to the city. Working with our law enforcement partners, this office will continue to root out public corruption wherever it is found.”

“The FBI uncovered evidence of Brian Davis’ crimes during an investigation into a separate matter,” said Federal Bureau of Investigation Special Agent in Charge Christopher M. Piehota. “Davis’ intentional diversion of government funds to his private, personal use violated not only his oath of office, but also the obligation he had to his constituents to represent them honestly and responsibly. Buffalo has long been known as the ‘City of Good Neighbors’—Brian Davis’s crimes do not reflect that moniker, and his community deserved better.”

The sentencing is the result of an investigation by special agents of the Federal Bureau of Investigation, under the direction of Special Agent in Charge Christopher M. Piehota; and the Department of Housing and Urban Development, Office of Inspector General, under the direction of Cary Rubenstein.

Federal Prosecutors Charge Atlanta Woman with Mortgage Fraud

BIRMINGHAM—Federal prosecutors on Friday charged an Atlanta woman with mortgage fraud for providing false financial information for several home buyers that resulted in fraudulently obtained mortgages totaling more than $623,000, U.S. Attorney Joyce White Vance; FBI Acting Special Agent in Charge Robert E. Haley, III; and Housing and Urban Development Inspector General David Montoya announced.

The U.S. Attorney’s Office filed an information in U.S. District Court charging Melneka Parker, 27, with three counts of aiding and abetting others in the making of false statements on mortgage loan applications.

Parker assisted in the commission of a larger mortgage fraud ring among several buyers, including Gloria Allen and Crystal Douglas, both of Huntsville, who were charged by information in July. Beginning in 2008, Parker owned and operated Elite Business Services in Huntsville, with the stated purpose of helping its clients improve their credit scores, according to the information.

The charges filed against Parker outline the fraud as follows:

After forming Elite Business Services, Parker began assisting her clients in obtaining mortgages to buy real estate in the Huntsville area. Because many of her clients were not financially eligible to obtain loans, Parker would submit false payroll and income information to the financial institution. The false payroll information inflated the monthly income that each borrower claimed to earn, making them eligible for a mortgage that they would otherwise have been unable to obtain. Parker also sent the false income information to another tax preparation business, which resulted in the creation of false tax documents. All of those documents were submitted to support the false income claims made by the borrower and Parker. As a result of her fraudulent activities, financial institutions approved $623,357 in mortgages that they would not otherwise have approved.

If convicted, Parker could face a maximum sentence of 30 years in prison and a $1 million fine for each count.

The FBI and HUD-Office of the Inspector General investigated the case. Assistant U.S. Attorney Patrick Carney is prosecuting the case.

Loan Officer Arrested on Bank Fraud Charges

PHILADELPHIA—Satish Suri, 57, of Philadelphia, Pennsylvania, was arrested yesterday on an indictment charging him with bank fraud, false statements on loans, and false statements to the Department of Housing and Urban Development (HUD) on a HUD-insured loan, announced United States Attorney Zane David Memeger.

The indictment charges that from 2005 to 2008, Suri, a loan officer at Sovereign Bank in Horsham, Pennsylvania, knowingly submitted false and fraudulent documents to Sovereign Bank on behalf of borrowers in support of mortgage applications on eight properties. The indictment charges that Sovereign Bank relied on the false documents in approving over $2.375 million in loans and mortgages. Further, according to the indictment, the mortgage on one of the properties was federally insured by HUD.

If convicted of all charges, Suri faces a maximum of 30 years in prison for each bank fraud count, a fine of up to $20.5 million, five years’ supervised release, and a $2,200 special assessment.

The case was investigated by the United States Secret Service, the Federal Bureau of Investigation, and the Department of Housing and Urban Development-Office of Inspector General. It is being prosecuted by Assistant United States Attorney Sarah L. Grieb.

Husband and Wife Indicted in Mortgage Fraud Scheme

BUFFALO, NY—U.S. Attorney William J. Hochul, Jr. announced today that Timothy McCabe, 47, and Theresa Morales, 48, both of Hypoluxo, Florida, were indicted by a federal grand for bank fraud. The charge carries a maximum penalty of 30 years in prison, a $1,000,000 fine, or both.

Assistant U.S. Attorneys Maura K. O’Donnell and Kathleen A. Lynch, who are handling the case, stated that according to the indictment, the defendants submitted a fraudulent loan application to a financial institution, JPMorgan Chase Bank, to obtain a $560,000 mortgage on a property in Lewiston, New York. The defendants, who are husband and wife, provided false information in the loan application as to employment, salary, and residency. The defendants conduct resulted in foreclosure on the property.

This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and with state and local partners to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

The indictment is the result of an investigation by the Mortgage Fraud Task Force of WNY which includes agents and personnel from the United States Secret Service, under the direction of Special Agent in Charge Tracy Gast; the Federal Bureau of Investigation, under the direction of Special Agent in Charge Christopher M. Piehota; the U.S. Postal Inspection Service, under the direction of Inspector in Charge Robert Bethel; the Housing and Urban Development Office of Inspector General, under the direction of Cary Rubenstein, Special Agent in Charge, New York Region; and the Internal Revenue Service, under the direction of Acting Special Agent in Charge Toni Weirauch. The Mortgage Fraud Task Force of WNY is led by the U.S. Attorney’s Office and also includes Veterans Affairs Office of Inspector General and the U.S. Bankruptcy Trustee.

New London Man Involved in Mortgage Fraud Scheme Sentenced to 18 Months in Prison

David B. Fein, United States Attorney for the District of Connecticut, announced that Michael Hodges, 53, of New London, was sentenced today by Senior United States District Judge Alfred V. Covello in Hartford to 18 months of imprisonment, followed by two years of supervised release, for his participation in an eastern Connecticut mortgage fraud scheme. Hodges also was ordered to forfeit $25,000 and to pay restitution in the amount of $328,516.31.

According to court documents and statements made in court, from approximately 2004 to 2007, Jose Guzman and others used mortgage brokerage, property management, and home improvement companies to arrange for individuals (“buyers”) to purchase real estate, primarily residential housing properties located in New London County, by obtaining funding from various mortgage companies and mortgage originators after submitting false information on the buyers’ mortgage loan applications. The fraudulent information included information regarding income, assets, employment, rent history, as well as the buyers’ intention to make the properties their primary residences. The buyers were compensated for participating in the scheme.

Hodges, who was unemployed at the time, acted as a buyer in connection with Guzman’s purchase of one property in New London in 2006 and one property in Norwich in 2007. Hodges also referred individuals to Guzman to act as buyers and identified properties to be bought and sold as part of the conspiracy. Hodges received $5,000 both times he acted as a buyer and additional compensation when he identified a buyer or a property to be bought and sold.

According to previously filed court documents, the government believes that more than 200 fraudulent mortgages were funded through this mortgage fraud scheme, causing more than $9 million in losses to lenders.

On October 12, 2011, Hodges pleaded guilty to one count of conspiracy to commit mail fraud and wire fraud. Fifteen other individuals, including Jose Guzman, have been convicted of various charges stemming from this scheme. Guzman awaits sentencing.

This case has been investigated by the Federal Bureau of Investigation and the U.S. Department of Housing and Urban Development, Office of Inspector General. The case is being prosecuted by Assistant United States Attorneys Michael S. McGarry and David T. Huang.

In July 2009, the U.S. Attorney’s Office and the Federal Bureau of Investigation announced the formation of the Connecticut Mortgage Fraud Task Force to investigate and prosecute mortgage fraud cases and related financial crimes occurring in Connecticut. Citizens are encouraged to report any suspected mortgage fraud activity by calling 203-333-3512 and requesting the Connecticut Mortgage Fraud Task Force, or by sending an e-mail to ctmortgagefraud@ic.fbi.gov.

The Connecticut Mortgage Fraud Task Force includes representatives from the U.S. Attorney’s Office; Federal Bureau of Investigation; Internal Revenue Service-Criminal Investigation; U.S. Postal Inspection Service; U.S. Department of Housing and Urban Development, Office of Inspector General; Federal Deposit Insurance Corporation, Office of Inspector General; and State of Connecticut Department of Banking.

To report financial fraud crimes, and to learn more about the President’s Financial Fraud Enforcement Task Force, please visit www.stopfraud.gov.

Former PHA Employee Sentenced to Prison for Extortion and Obstruction

PHILADELPHIA—Kerri Bizzell, 43, of Philadelphia, a former PHA employee, was sentenced today to 50 months in prison for extortion and the obstruction of a grand jury proceeding, announced Zane Dave Memeger. Bizzell was a manager of the PHA’s small repair and renovation contracts when she abused her position to extort kickbacks in return for the award of work. The indictment claims that over the period of about six months, Bizzell extorted and agreed to accept from two different contractors approximately $25,000. When she learned of the grand jury’s investigation into the extortion, she attempted to prevent one of the contractors from disclosing payments to her. Bizzell pleaded guilty May 4, 2011, to two counts of extortion and one count of obstruction.

In addition to the prison term, U.S. District Court Judge Mitchell S. Goldberg ordered Bizzell to pay restitution in the amount of $25,000.

The case was investigated by the FBI and by the HUD-Office of the Inspector General and was prosecuted by Assistant United States Attorney Pamela Foa.

Federal Prosecutors Charge Five People for Fraudulent Home Loan Applications

BIRMINGHAM—Federal prosecutors have filed fraud charges against five people this month in connection with false statements made in mortgage loan applications, U.S. Attorney Joyce White Vance announced.

The U.S. Attorney’s Office filed separate charges against each of the five individuals, but there are connections among some of the defendants.

“These prosecutions are part of our ongoing commitment to root out mortgage fraud, which contributed greatly to our nation’s financial meltdown,” Vance said. “We need to bring an end to this kind of criminal conduct.”

Prosecutors filed a one-count information in U.S. District Court on Monday against Gloria A. Allen, 49, of Madison, charging her with making a materially false statement on a 2008 loan application that was submitted to the Federal Housing Administration. An information prosecutors filed Friday charges Crystal S. Douglas, 30, of Huntsville, with one count of making a materially false statement on a 2008 residential loan application to a financial institution insured by the Federal Deposit Insurance Corporation.

Both Allen and Douglas, who were aided and abetted by others in the same loan scheme, signed loan applications that contained falsely inflated income information, according to court documents.

In two other informations filed Friday in connection with a 2007 mortgage loan of more than $500,000, the U.S. Attorney’s Office charged Julie Melissa McBrayer, 32, of Birmingham, with one count of mail fraud and charged Michael Joseph Bennett, 38, also of Birmingham, with one count of making false statements on loan documents.

At the time of the loan, McBrayer worked at Marathon Mortgage in Birmingham as a loan originator and was responsible for compiling the loan documents for the sale of Bennett’s property in Bessemer, according to McBrayer’s plea agreement with the government. In that agreement, McBrayer admits that she was directed to submit a false verification of employment form and a loan application that included false income information for the intended buyer of Bennett’s property in order to ensure the buyer would be approved for first and second mortgage loans on the house.

Bennett was a home builder. He is charged with signing loan documents that he knew contained false information. Those documents included a Department of Housing and Urban Development form that is intended to disclose the party making the down payment on the property being purchased. According to Bennett’s plea agreement in the case, he signed the HUD form stating that the borrower provided a down payment for his property when Bennett knew that someone else had provided the money.

The person who bought Bennett’s property made only a few payments on the first and second mortgages, which totaled $546,659, and the house was placed in foreclosure soon after the loans were approved, according to McBrayer’s plea agreement.

In another information filed Friday, prosecutors charged Danielle Lacey Chavers, 36, of Birmingham, with two counts of wire fraud associated with applications for mortgage loans on two houses in 2008. Chavers submitted loan documents containing false income and employment information when she applied for mortgages on houses in the Birmingham area, according to her plea agreement. The fraudulent mortgage applications prompted approval of the loans, causing funds to be wired from the lender’s accounts to the trust account of the attorney handling the closings on the real estate transactions, according to the plea agreement.

The maximum sentence for wire fraud and mail fraud is 20 years in prison and a $1 million fine. The maximum sentence for false statements on loan documents is five years in prison and a $100,000 fine.

The FBI investigated all five cases. The HUD Office of Inspector General assisted in the investigation of the Allen and Douglas cases. Assistant U.S. Attorney Patrick Carney is prosecuting the cases.

Twenty Individuals Charged in Puerto Rico with Making False Statements in Loan Applications

SAN JUAN—Yesterday, July 18, 2012, a grand jury returned a 45-count indictment charging 20 individuals with making false statements in loan applications, aggravated identity theft, and money laundering, announced U.S. Attorney for the District of Puerto Rico Rosa Emilia Rodríguez-Vélez. The lead agency during this investigation was the Housing and Urban Development-Office of Inspector General (HUD-OIG), with the collaboration of the Internal Revenue Service-Criminal Investigations (IRS-CI), U.S. Secret Service (USSS), FBI, Immigration and Customs Enforcement-Homeland Security Investigations (ICE-HIS), and the Puerto Rico Commissioner of Financial Institutions (OCIF).

According to the indictment, beginning on a date unknown but no later than in or about December 2008, up to and including in or about April 2010, defendants Carlos D. Cuevas-Díaz, Miguel Ángel Echegaray-González, and Lee A. Arcia-Centeno conspired and agreed with each other, and with diverse other persons known and unknown to the grand jury, to knowingly make false statements or cause false statements to be made to mortgage lending institutions Equity Mortgage, Latin American, and Express Solution for the purpose of influencing the Federal Housing Administration (FHA) to insure the mortgage loans.

The object of the conspiracy was to obtain monetary gain through commissions and/or revenues related to real property and/or loan transactions, including undisclosed payments from third parties and false or fraudulent liens, debts, or claims allegedly owed. As part of the manner and means by which the defendants and co-conspirators accomplished and furthered the object of the conspiracy, defendants would recruit straw buyers who at times received monetary compensation for their participation in the offense. The defendants and their co-conspirators knowingly submitted and caused to be submitted false and fraudulent information to the mortgage lenders to fraudulently procure mortgage financing for the real property transactions. This false and fraudulent information included, among other things, the purchaser’s occupation and place of employment, income, time at employment, assets, and intent to occupy the property.

The indictment further alleges that it was a part of the manner and means of the unlawful conspiracy that the defendants and their co-conspirators would distribute the illegally obtained proceeds of the real property transactions amongst themselves.

The defendants are: Carlos Daniel Cuevas-Díaz; Miguel Ángel Echegaray-González; Lee A. Arcia-Centeno; Carlos Luis Cuevas-Díaz; Germania Gil-Gil; Inmerta J. Pérez Echevarría, aka “María Pérez”; Jorge Paul González-González; Sonia E. Díaz-Rodríguez; Pedro Archilla-Colón; Olga M. Díaz-Medina; Gabriel Oliver-Vázquez; Oscar Piña-Fuentes; Patricia Perdomo-Regalado; Norman G. Ojeda-Marrero; Marleni De La Cruz-Ulloa; Federico Rivas-Rosario; Carlos Xavier Ortiz-Olivera; Jonathan E. Rivera-Santana; Nolin E. Cumba-Rodríguez; and Wanda Rodríguez-Colón.

Eleven defendants are facing money laundering charges and a forfeiture allegation of $535,048.89 in U.S. currency. Cuevas-Díaz and Arcia-Centeno are facing one charge of aggravated identity theft.

“We want the public to understand that making false statements in any form to banks in order to receive benefits from the federal government, in this case FHA loans, is a crime, which will be investigated and prosecuted to the full extent of the law,” said U.S. Attorney Rodríguez-Vélez. “Today’s arrests demonstrate that our law enforcement partners will continue working together in order to prevent financial fraud and to detect schemes which result in the depletion of federal funds destined for those who legitimately qualify for FHA loans.”

“We know that mortgage fraud can devastate whole communities,” said David A. Montoya, Inspector General for HUD-OIG. “Attacking the problem from every possible angle in cooperation with our federal, state, and local partners is critical. These schemes are dangerous to our communities and our economy. And they will not be tolerated.”

If convicted, the defendants charged for making false statements face a possible penalty of 30 years in prison. The defendants charged for money laundering are facing up to 20 years and the defendants charged with aggravated identity theft face a minimum of two years’ imprisonment.

The investigation was conducted by HUD-OIG, with the assistance of IRS-CI, USSS, FBI, ICE, and OCIF. The case is being prosecuted by Assistant U.S. Attorney Mariana Bauzá.