Mortgage Fraud Indictments

SACRAMENTO-U.S. Attorney McGregor W. Scott; FBI Special Agent in Charge Drew Parenti; and Internal Revenue Service Criminal Investigation Special Agent in Charge Scott O’Briant announced  the indictment of 19 individuals for mortgage fraud-related offenses under Operation Homewrecker. The leader of this nationwide scam is Charles Head, 33, of Los Angeles, California, who targeted homeowners in dire financial straits, fraudulently obtaining title to over 100 homes and stole millions of dollars through fraudulently obtained loans and mortgages.

Operation Homewrecker is the product of an extensive investigation by the FBI and IRS Criminal Investigation.

According to Assistant U.S. Attorneys Laura Ferris, Rob Tice-Raskin, and Ellen Endrizzi, who are prosecuting the case, the charges are broken out into two separate indictments, “Head One” and “Head Two.” On February 28, 2008 , a federal grand jury returned the first set of charges in a 13-count indictment against 16 defendants with violations of mail fraud, conspiracy to commit mail fraud, conspiracy to commit money laundering and other related offenses. “Head One” involved a “foreclosure rescue” scam, netting approximately $6.7 million in fraudulently obtained funds taken from 47 homeowners, nearly all of whom were located in California.

From approximately January 1, 2004 to March 14, 2006 , the defendants contacted desperate homeowners, offering two “options” allowing them to avoid foreclosure and obtain thousands of dollars up-front to help pay mounting bills. If the homeowner could not qualify for the ” first option,” which virtually none could, they would be offered the “second option.” Under the latter option, an “investor” would be added to the title of the home, to whom the homeowner would make a “rental” payment of an amount allegedly less than their mortgage payment, thereby allowing the homeowner to repair their credit by having the mortgage payments made in a timely fashion. Unfortunately all of this was a scam. The defendants would recruit straw buyers as the “investors” and oftentimes these individuals would in fact replace the homeowners on the titles of the properties without the homeowners’ knowledge. These straw buyers were often friends and family members of the defendants. Once the straw buyer had title to the home, the defendants immediately applied for a mortgage to extract the maximum available equity from the home. The defendants would then share the proceeds of the ill-gotten equity and “rent” being paid by the victim homeowner. When the defendants ultimately would sell the home, stop making the mortgage payment, and/or pursue an eviction proceeding, the victim homeowner was left without their home, equity, or repaired credit.

The following defendants were charged in the February 28, 2008 “Head One” indictment: Charles Head, 33, of La Habra, California; Jeremy Michael Head, 30, of Huntington Beach, California; Elham Assadi, aka Elham Assadi Jouzani, aka Ely Assadi, 30, of Irvine, California; Leonard Bernot, 51, of Laguna Hills, California; Akemi Bottari, 28, of Los Angeles; Joshua Coffman, 29, of North Hollywood; John Corcoran, aka Jack Corcoran, 52, of Anaheim; Sarah Mattson, 27, of Phoenix, Arizona; Domonic McCarns, 33, of Brea, California; Anh Nguyen, 36, of Los Angeles; Omar Sandoval, 32, of Rancho Cucamonga, California; Xochitl Sandoval, 29, of Rancho Cucamonga; Eduardo Vanegas, 28, of Phoenix; Andrwe Vu, 39, of Santa Ana; Justin Wiley, 28, of Irvine; and Kou Yang, 32, of Corona, California.

On March 13, 2008, the federal grand jury returned a five-count indictment in “Head Two” against seven defendants, including Charles Head, John Corcoran, Kou Yang, each also charged in “Head One,” as well as Keith Brotemarkle, 42, of Johnstown, Pennsylvania; Benjamin Budoff, 41, of Colorado Springs, Colorado; Domonic McCarns, 33, of Brea; and Lisa Vang, 24, of Westminster. “Head Two” involved an “equity stripping” scheme, netting approximately $5.9 million in stolen equity from 68 homeowners in states across the nation. While still targeting distressed homeowners and defrauding mortgage lenders through the use of straw buyers, this time Charles Head altered the scheme so that he would receive approximately 97 percent of the stolen equity, while his “sales agents” and employees, and the other defendants, would receive either the remaining 3 percent of equity or a salary from the fraudulently-obtained funding.

Instead of recruiting friends and family members as straw buyers, as in “Head One,” in “Head Two” the defendants recruited strangers via the Internet. They also used referrals from mortgage brokers to identify and solicit new victim homeowners. Beyond advertising on the Internet, the defendants also would send “blast faxes” to mortgage brokers throughout the country and generate mass emails to potential victims. Through material misrepresentations and omissions, victim homeowners would be offered what appeared to be their last best chance to save their homes. Unfortunately, as in “Head One,” these victims also were left without their homes, equity, or repaired credit.

The maximum statutory penalty for conspiracy to commit mail fraud is five years incarceration and a fine. The maximum statutory penalty for conspiracy to commit money laundering is 10 years incarceration and a fine. The maximum statutory violation for mail fraud is 20 years incarceration and a fine. The maximum statutory penalty for bank fraud is 30 years incarceration and a fine. The maximum statutory penalty for identity theft is 15 years incarceration and a fine. The actual sentence, however, will be determined at the discretion of the court after consideration of the Federal Sentencing Guidelines, which take into account a number of variables and any applicable statutory sentencing factors.

The charges are only allegations and the defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.
Mortgage Fraud Task Force

In recent months, an Eastern District of California Mortgage Fraud Task Force has been established. This action was taken as a result of the significant increase in reported mortgage fraud as economic conditions and the housing market have worsened. Members of the task force include representatives from the U.S. Attorney’s Office, FBI, IRS-CI, the Department of Housing and Urban Development, the United States Bankruptcy Trustee’s Office, and the California Department of Real Estate.

“Mortgage fraud is a very real problem, both legally and economically. Federal law enforcement here in the Eastern District is fully committed to holding responsible those who in their greed have stolen from their fellow citizens. It is our duty to do all we can to restore faith and confidence in the marketplace by placing these thieves where they belong: in prison.” stated U.S. Attorney Scott.

Drew Parenti, Special Agent in Charge of the Sacramento FBI, said, “Mortgage Fraud has recently been elevated to the FBI’s highest financial crime priority, and we are attempting to address the numerous reports of fraud within the real estate industry that have occurred across the country. We are focusing on the industry professionals, the “insiders” who have manipulated the mortgage loan process for their own financial gain. These investigations are lengthy and complicated but we will work with our law enforcement partners and utilize every resource available to us to ensure these cases are investigated and prosecuted to the extent the law allows.”

Scott O’Briant, Special Agent in Charge of IRS Criminal Investigation said, “Mortgage fraud adds secret dollars to the underground economy that erodes the integrity of our tax system and threatens the financial health of our communities. IRS-CI will continue to utilize its financial investigative expertise to aggressively investigate criminal activities that adversely affect our financial system.”

“These types of crimes create a significant loss of tax revenue, drive buyers into foreclosure, leave lenders burdened with bad loans and neighborhoods with abandoned and deteriorating properties. IRS-CI is committed to pursuing individuals who commit these types of crimes.”

The task force allows for a more targeted, coordinated approach in prioritizing the massive volume of referrals being made to federal and state agencies.