McHenry County Blog

A press release from the U.S. Attorney’s Office:

TWO ATTORNEYS AMONG FOUR DEFENDANTS INDICTED IN TWO SEPARATE MORTGAGE FRAUD SCHEMES INVOLVING SOUTH SIDE PROPERTIES

CHICAGO — Two attorneys are among four defendants who have been indicted in two separate mortgage fraud cases, federal law enforcement officials announced today.

• In one case, an attorney, a real estate investor, and a loan originator were charged with allegedly participating in a scheme to fraudulently obtain at least five residential mortgage loans totaling approximately $1.5 million from various lenders.
• In the second case, an attorney was charged with allegedly participating in a scheme to fraudulently obtain at least 12 residential mortgage loans totaling nearly $3.75 million from various lenders.

Both indictments allege that the mortgages were obtained to finance the purchase of properties on Chicago’s south side, stretching from the Back of the Yards to Englewood and West Englewood neighborhoods, at inflated prices by buyers who were fraudulently qualified for loans, or were being paid, while the defendants allegedly profited.

As a result, various lenders and their successors incurred losses because the mortgages were not fully recovered through subsequent sale or foreclosure.

Three defendants were charged together in a five-count indictment that was unsealed on Friday following the arrest of STEVEN BARTLETT, 42, of Chicago, a part owner of SSB Re, Inc., also known as SSB Real Estate Solutions, Inc., through which Bartlett bought and sold residential properties in Chicago.

Bartlett, ROBERT LATTAS, 36, of Oak Brook, an attorney who represented SSB Re in real estate closings, and NICHOLAS BURGE, 34, of Bloomington, Ill., a loan originator for two different lenders, were each charged with one count of mail fraud and four counts of wire fraud.

The indictment seeks forfeiture of $1,494,248.

Bartlett remains in custody pending a detention hearing at 10 a.m. tomorrow before U.S. Magistrate Judge Sheila Finnegan.

Lattas and Burge were ordered to appear voluntarily for arraignment at 11:30 a.m. Thursday before Magistrate Judge Finnegan in U.S. District Court.

Between January 2008 and January 2009, Bartlett allegedly used SSB Re to sell properties at inflated sales prices to buyers that he knew were fraudulently qualified for mortgage loans.

Bartlett and Burge prepared and submitted loan applications to lenders that they knew contained false information about buyers’ qualifications, including information about buyers’ income, assets, liabilities, employment, source of down payment, and intention to occupy properties as a primary residence, the indictment alleges.

Bartlett and Lattas allegedly prepared and submitted to lenders HUD-1 settlement statements that they knew contained false information, including the true source of the buyers’ down payments.

Lattas allegedly represented, or had his associates represent, SSB Re at closings in which properties were sold to buyers, knowing that Bartlett had recruited individuals to provide funds that were falsely represented to lenders as the buyers’ down payments.

Lattas knew individuals other than the buyers were providing cashier’s checks representing the buyers’ down payments and falsely listed them as the remitters, the charges allege.

The charges were announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Barry McLaughlin, Special Agent-in-Charge of the U.S. Department of Housing and Urban Development Office of Inspector General in Chicago; and Pete Zegarac, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago. The Federal Housing Finance Agency Office of Inspector General assisted in the investigation.

The government is being represented by Assistant U.S. Attorney Jason Yonan.

In a separate, unrelated case, ANTHONY CAMPANALE, 58, of Oak Park, an attorney who represented SNAP Holdings, LLC and affiliated entities at real estate closings, was charged with three counts of mail fraud and five counts of wire fraud in an eight-count indictment returned on May 16.

Campanale pleaded not guilty on May 24 at his arraignment in Federal Court. The indictment seeks forfeiture of $3,733,250.

According to the indictment, between October 2007 and November 2008, Campanale knew that he was representing SNAP Holdings and its affiliates at closings for properties that were being sold at inflated sales prices to buyers whom he knew were being paid by his clients to purchase the properties.

Campanale allegedly caused sales contracts to be submitted to lenders that he knew contained false information, including inflated sales prices, and he submitted to lenders HUD-1 settlement statements that he knew contained false information about the true source of the buyers’ down payments and about payments provided to the buyers for purchasing the properties.

The charges result from the same investigation that led to the July 2012 indictment of seven defendants for allegedly participating in a scheme to fraudulently obtain more than 20 residential mortgages totaling approximately $8.5 million from various lenders.

Three of those defendants, including Thomas Hyland, 40, of Glen Ellyn, who co-owned SNAP Holdings, have pleaded guilty while charges remain pending against the other four defendants.

Mr. Shapiro announced the Campanale charges with Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; James Vanderberg, Special Agent-in-Charge of the U.S. Department of Labor’s Office of Inspector General; and Pete Zegarac, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago. The government is being represented by Assistant U.S. Attorneys Jason Yonan and Ryan Hedges.

Each count of wire fraud and mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. If convicted, the Court may impose an alternate fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater. The Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

The public is reminded that indictments contain only charges and are not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Since 2008, several hundred defendants have been charged in Federal Court in Chicago and Rockford with engaging in various mortgage fraud schemes involving more than 1,000 properties and more than $300 million in potential losses, signifying the high priority that federal law enforcement officials give mortgage fraud in an effort to deter others from engaging in crimes relating to residential and commercial real estate.

Today’s announcement is part of efforts underway by the 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 U.S. Attorneys’ Offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has facilitated increased investigation and prosecution of financial crimes; enhanced coordination and cooperation among federal, state and local authorities; addressed discrimination in the lending and financial markets, and conducted 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.

A press release from the U.S. Attorney’s Office:

EX-LOAN OFFICER SENTENCED TO 12½ YEARS IN PRISON FOR MORTAGE FRAUD SCHEME INVOLVING DOZENS OF SOUTH SIDE PROPERTIES

CHICAGO — A former loan officer was sentenced today to more than 12½ years in federal prison for engaging in a mortgage fraud scheme involving 65 real estate transactions with properties located mostly in economically-depressed neighborhoods on the city’s south side which netted him personally more than $700,000.

The defendant, FRED HAYWOOD, worked as a loan officer or processor for several different mortgage brokerages during the scheme, which occurred between 2001 and 2007.

Haywood, 42, of Chicago, was sentenced to 151 months in prison and ordered to pay more than $1.4 million in restitution to various lenders by U.S. District Judge Ronald Guzman.

Haywood pleaded guilty in April 2012 to wire fraud.

Haywood was the last to be sentenced among six defendants who were charged in 2008 and 2009 and subsequently pleaded guilty, and his was the longest term of incarceration.

Haywood’s fraudulent acts included qualifying borrowers for loans based on false information submitted to lenders, including false information about their

• income
• assets
• employment
• intention to occupy the property
• source of down payment

Court records also established that he continued his fraudulent conduct after he was indicted and while on pretrial release.

During the scheme, Haywood and his co-schemers recruited buyers with good credit to purchase properties, knowing at the time that these buyers

• did not have sufficient income to qualify for mortgages
• had no intention of actually living in the properties they were purchasing
• had no intention of fulfilling any long-term payment obligations on the loans they obtained

Instead, he and others recruited the buyers by promising to pay them for acting as nominees and for putting the properties in their names. Haywood knew that the false statements and documents submitted to lenders were material to their decisions to make loans.

The sentence was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Pete Zegarac, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago.

The government was represented by Assistant U.S. Attorney Jason Yonan.

A press release from the U.S. Attorney’s Office:

SUBURBAN CHICAGO LAWYER WHO HOSTS NATIONAL RADIO TALK SHOW INDICTED IN $9.7 MILLION MORTGAGE FRAUD SCHEM

CHICAGO — A suburban Chicago lawyer who hosts a national radio talk show was indicted on federal charges for allegedly engaging in two mortgage fraud schemes that defrauded lenders of a total of approximately $9.7 million.

The defendant, WARREN BALLENTINE, allegedly schemed with others to obtain more than two dozen fraudulent mortgage loans and represented buyers at multiple closings, knowing that they were fraudulently qualified for loans to purchase homes in Chicago and various southern suburbs.

Ballentine, 41, of Durham, N. Car., and formerly of Country Club Hills, owns the Law Office of Warren Ballentine, LLC, in Country Club Hills.

He was charged with two counts of bank fraud, two counts of making false statements to lenders, and one count each of mail fraud and wire fraud in a six-count indictment returned last Thursday by a federal grand jury. The indictment also seeks forfeiture of approximately $9,775,000 in alleged fraud proceeds.

Ballentine is scheduled to be arraigned at 9:30 a.m. on Feb. 5 before U.S. District Judge Matthew Kennelly in Federal Court in Chicago.

The indictment was announced today by Gary S. Shapiro, United States Attorney for the Northern District of Illinois; Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation; and Thomas P. Brady, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago.

According to the indictment, between December 2004 and February 2005, Ballentine schemed with others to fraudulently cause various lenders to make at least eight loans totaling approximately $3.6 million by making false statements in loan documents, including

• applications,
• HUD-1 settlement statements, and
• occupancy statements concerning the buyers’ intention to occupy the homes they purchased as a primary residence.

Ballentine then represented buyers recruited by others at real estate closings, knowing that they had signed and submitted false documents and had been fraudulently qualified to purchase the properties in Chicago, Monee, Woodridge, and Mokena.

Between February 2005 and May 2006, Ballentine allegedly engaged in a similar, separate scheme with others to fraudulently cause various lenders to make at least 20 loans totaling approximately $6.1 million by making false statements in mortgage documents, including the buyers’ intention to occupy the homes as a primary residence.

Ballentine also represented these buyers at closings, knowing that they had been fraudulently qualified for the loans based on false documents, including some that Ballentine advised them to sign at closings.

These homes were scattered throughout Chicago and other suburbs, including Country Club Hills, Richton Park, and Markham.

Each count of the indictment carries a maximum penalty of 30 years in prison and a $1 million fine or, as an alternative, the Court may impose a fine of twice the gross gain or twice the loss, whichever is greater, and restitution is mandatory. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The government is being represented by Assistant U.S. Attorney Jason Yonan.

The Financial Fraud Enforcement 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. For more information on the task force, visit: www.StopFraud.gov.

The U.S. Attorney’s Office continues to roll out press releases about enforcement actions. The latest is below:

TWO CHICAGO LAWYERS AMONG FOUR DEFENDANTS SENTENCED TO PRISON FOR ROLES IN MULTI-MILLION DOLLAR MORTGAGE FRAUD SCHEME

CHICAGO — Four defendants, including two Chicago lawyers, were sentenced to federal prison terms following their convictions for participating in a multi-million dollar mortgage fraud scheme involving at least 40 residential properties, mostly in Englewood and surrounding areas on the city’s south side.

All four defendants were convicted last December after a nine-week trial of multiple counts of mail and wire fraud for their roles in a scheme that allegedly netted them approximately $5.45 million in fraudulently obtained mortgage loan proceeds, and involved paying kickbacks to a non-profit organization to fraudulently obtain some of the properties at a discount from the U.S. Department of Housing and Urban Development.

The sentences were imposed yesterday and Tuesday by U.S. District Court Judge Ronald Guzman, federal law enforcement officials announced today.

Sentenced yesterday were attorneys

• Charles Murphy, 65, of Chicago, to six years in prison, and
• John Farano, 50, of Palos Park, to nine years in prison,

for their roles in providing funds to finance the purchase of properties.

Murphy, who surrendered his law license this week, was ordered to forfeit more than $2.4 million and pay restitution of $651,290.

Farano, whose law license was suspended, was ordered to forfeit more than $2.3 million and pay more than $1.3 million in restitution.

Murphy and Farano provided funds to purchase residences knowing that their profit from the resale of the those residences would come from fraudulently obtained financing, and paid or facilitated the payment of kickbacks to the non-profit organization.

Many of the residences were bought and sold through Genesis Investment Group Inc., which purported to renovate and sell residential properties.

Co-defendants

• Robert Brunt, 45, of Chicago, the president of Genesis, was sentenced Tuesday to 12½ years in prison, and
• Tracey Scullark, 44, of Chicago, a sales agent for Genesis, was sentenced yesterday to 6½ years in prison.

Farano also handled real estate closings for Brunt and Genesis, knowing that the transactions were fraudulent.

Brunt and Scullark were each ordered to forfeit $4.2 million and pay more than $1.6 million in restitution.

Brunt was ordered to begin serving his sentence on Aug. 9; Farano on Sept. 10; Scullark on Oct. 1; and Murphy on Oct. 9.

“These sentences reflect the seriousness of mortgage fraud, which has a crippling effect on the housing market in communities such as Englewood, and show that courts are willing to impose sentences that we hope will deter others from engaging in similar fraud schemes.

“The role of licensed professionals is particularly deplorable because these crimes could not occur without the involvement of attorneys and real estate and mortgage professionals.

“They need to understand that they will be a focus of our efforts going forward,” said by Gary S. Shapiro, Acting United States Attorney for the Northern District of Illinois.

Two additional defendants who pleaded guilty and testified as government witnesses, Armani D’Aifallah, 40, of Chicago, a mortgage broker, and Walter Jackson, 38, of Chicago, a real estate appraiser, are awaiting sentencing.

According to the evidence at trial, between 2002 and November 2006, Brunt, Scullark, Farano and Murphy acquired and caused to be acquired at least some 40 residential properties in Chicago, often in economically-depressed areas that were in need of extensive rehabilitation work, with the intent of quickly reselling the properties at fraudulently and grossly inflated prices for a profit.

The defendants fraudulently acquired many of the properties by paying kickbacks to a former non-profit organization, Westwood Community Development, that was eligible to purchase the properties from HUD at a discount on the condition that the properties be sold to low-to-moderate income buyers.

Rather than sell the properties low-to-moderate income buyers, the defendants sold the properties to buyers who did not intend to reside in the homes, and who were fraudulently qualified for financing based on false statements about their qualifications and false statements about the condition of the properties.

Brunt, Scullark and others recruited the buyers by enticing them with promises of “no money down” and “cash back at closing,” together with false promises of making prompt renovations and repairs.

The buyers were fraudulently induced to purchase residences far in excess of their fair market value based upon fraudulent appraisals.

To induce the purchases, Brunt allegedly performed cosmetic improvements to disguise the true nature of the property.

The lenders who financed the purchases did so based on false representations that the properties were already rehabilitated and that the buyers were making substantial down-payments.

Brunt was convicted of

• 11 counts of mail and wire fraud and
• one count of money laundering;
• Scullark was convicted of
• 10 counts of mail and wire fraud and
• three counts of money laundering;

Farano was convicted of

• four counts of mail and wire fraud and
• five counts of theft of government funds; and
• Murphy was convicted of five counts of mail and wire fraud.

Mr. Shapiro announced the sentences with Thomas Jankowski, Acting Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago; Barry McLaughlin, Special Agent-in-Charge of the U.S. Department of Housing and Urban Development, Office of Inspector General in Chicago; and Jack Riley, Special Agent-in-Charge of the Chicago Division of the Drug Enforcement Administration.

The government is being represented by Assistant U.S. Attorneys James Kuhn, Jason Yonan and Brian Netols.

The case is part of a continuing effort to investigate and prosecute mortgage fraud in northern Illinois and nationwide under the umbrella of the interagency Financial Fraud Enforcement Task Force, which was established to lead an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. For more information on the task force, visit: www.StopFraud.gov.

A press release from the U.S. Attorney’s Office:

FORMER SUBURBAN MAN ADDED AS A NEW DEFENDANT IN INDICTMENT ALLEGING $105 MILLION “PONZI” SCHEME INVOLVING 400 VICTIMS

CHICAGO — A former suburban Chicago man has been charged as a new defendant in a pending federal case alleging that he and a co-defendant engaged in a “Ponzi” scheme that caused losses totaling approximately $34 million.

The indictment alleges that the defendants fraudulently obtained more than $105 million from approximately 400 victims who invested in funds that the defendants purportedly operated from the U.S. Virgin Islands.

The new defendant, Alfred Gerebizza, pleaded not guilty on Oct. 26 at his arraignment on fraud and federal income tax charges
that were brought in a superseding indictment against him and his co-defendant Daniel Spitzer, who was previously arrested and indicted. Both defendants allegedly misused money they raised from investors for their own benefit, and to make Ponzi-type payments totaling approximately $71 million to certain investors.

The indictment charging Gerebizza, 56, formerly of Crystal Lake, was unsealed in mid-October after he surrendered voluntarily to authorities in Atlanta. He remains in custody after being transferred here to face prosecution in U.S. District Court.  Gerebizza and Spitzer, 51, of Barrington, who previously pleaded not guilty was released on bond, have a status date on Dec. 6, 2011 before U.S. District Judge James Zagel.

Gerebizza was charged with 10 counts of mail fraud and six counts of filing false individual and corporate income tax returns, while Spitzer is facing 10 counts of mail fraud. The indictment seeks forfeiture against both defendants of approximately $34 million.

According to the superseding indictment, Gerebizza was a sales agent and held himself out as a trader for a dozen investment funds, known collectively as the “Kenzie Funds,” purportedly operated by Kenzie Financial Management in the U.S. Virgin Islands.

Spitzer was the principal officer and sole shareholder of the company, as well as the principal of other corporate entities.

The defendants offered and sold to the public investments in the various Kenzie Funds in the form of membership and limited partnership interests. Through sales agents and various marketing materials, they informed investors and potential investors that their investments would be used primarily in foreign currency trading, that the Kenzie Funds had never lost money, and had achieved profitable historical returns.

The defendants had to continually raise funds through the solicitation of new investors in the Kenzie Funds to make payments on investments made by earlier investors, all of which they concealed and intentionally failed to disclose to both new and earlier investors.

Ultimately, between 2004 and July 2010, the defendants allegedly raised approximately $105 million from investors, misappropriated a significant portion of those funds, and caused losses totaling approximately $34 million.

The indictment alleges that the defendants represented to investors that the Kenzie Funds had rates of returns ranging from 4.52 to 13.54 percent over the prior five years, although the bank accounts for the Kenzie Funds reflected that the total net return over the five year period on the approximately $105 million investors contributed to all of the Kenzie Funds was less than 1 percent.

As of June 30, 2009, the defendants represented that the Kenzie Funds were worth approximately $250 million, at a time when the Funds collectively had only approximately $4 million in their bankaccounts.

Gerebizza was also charged with six counts of filing false federal income tax returns between 2005 and 2007, including both his individual tax returns and returns for ARG Management, Inc., a Subchapter S corporation that he maintained.

The new charges against Gerebizza were announced today by Patrick J. Fitzgerald, United
States Attorney for the Northern District of Illinois; Alvin Patton, Special Agent-in-Charge of the
Internal Revenue Service Criminal Investigation Division in Chicago; Tom Brady, Inspector-in-
Charge of the U.S. Postal Inspection Service in Chicago; and Robert D. Grant, Special Agent-in-
Charge of the Chicago Office of the Federal Bureau of Investigation. They acknowledged the
assistance of the Securities and Exchange Commission, Chicago Regional office.

The government is being represented by Assistant U.S. Attorneys Madeleine Murphy and Jason Yonan.

Each count of mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, or the Court may impose a fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater, and restitution is mandatory. The tax counts against Gerebizza alone carry a maximum penalty of three years in prison and a $250,000 fine. In addition, defendants convicted of tax offenses face mandatory costs of prosecution and remain civilly liable to the Government for any and all back taxes, as well as a civil fraud penalty of 75 percent of the underpayment plus interest. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The Financial Fraud Enforcement 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. For more information on the task force, visit: www.StopFraud.gov.

An indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

U.S. Attorney Patrick Fitzgerald issued a press release today implicating two Round Lake Beach Residents. This continues the Chicago-area effort to attack the supply side of the mortgage fraud scandal. The details follow:

CHICAGO – Six Chicago area defendants were indicted on federal charges for allegedly fraudulently obtaining more than $10 million in mortgage loan proceeds from various lenders by submitting false loan applications and supporting documents, federal law enforcement officials announced today.

The defendants, who include

• loan officers, processors,
• a contractor and
• an unlicensed appraiser,

were each charged with one or more counts of mail, wire or bank fraud in an eight-count indictment that was returned by a federal grand jury yesterday.

As part of the alleged scheme, the indictment specifies eight residential properties – seven of them on the south side of Chicago – upon which mortgage loans were fraudulently obtained between 2002 and 2007.

Two of the defendants, Deangelo McMahan, 36, of Hazel Crest, and Fred Haywood, 37, of Chicago, both of whom were loan officers for various mortgage lenders, were initially indicted in December. Four new defendants are

• Rita McKenzie, 39, of Round Lake Beach, a loan processor;
• Steve Young, 51, of Flossmoor, a loan officer;
• Carl McMahan, 42, of Round Lake Beach, Deangelo McMahan’s brother who operated a purported home re-construction business; and
• Sumira Persaud, 32, of Blue Island, an unlicensed appraiser.

Arrest warrants have been issued for McKenzie and Carl McMahan, while the others will be ordered to appear for arraignment at a later date in U.S. District Court, including Deangelo McMahan and Haywood, who were previously released on bond.

According to the indictment, the defendants schemed to arrange for buyers with good credit, but insufficient income, to purchase homes by promising them money for acting as nominees, knowing that in most cases the buyers did not intend to occupy the homes as their primary residences or fulfill any long term payment obligations.

The defendants and others caused false information to be included in mortgage loan applications regarding the applicant’s income, assets, employment, intention to occupy the home and the source of the down payment so the applicant would falsely appear to qualify for a loan.

They also allegedly schemed to create false appraisals that did not reflect the fair market value of the properties and were designed to create excess value.

In some instances the defendants funneled excess cash they generated from inflated appraisals on the properties to sham businesses they had created, while other times they flipped the properties from one sale to another to make a profit, the charges allege.

The indictment also seeks forfeiture of $2,383,020, which reflects the loss suffered by various mortgage companies that were victims of the alleged fraud scheme.

The charges were announced by Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois; Robert D. Grant, Special Agent-in-Charge of the Chicago Field Office of the Federal Bureau of Investigation; and Thomas P. Brady, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago.

The government is being represented by Assistant U.S. Attorney Jason Yonan.

Each count of mail and wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, while bank fraud carries a maximum penalty of 30 years in prison and a $1 million fine. The Court, however, would determine the appropriate sentence to be imposed under the advisory United States Sentencing Guidelines.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

U.S. Attorney Patrick Fitzgerald issued a press release today implicating two Round Lake Beach Residents. This continues the Chicago-area effort to attack the supply side of the mortgage fraud scandal. The details follow:

CHICAGO – Six Chicago area defendants were indicted on federal charges for allegedly fraudulently obtaining more than $10 million in mortgage loan proceeds from various lenders by submitting false loan applications and supporting documents, federal law enforcement officials announced today.

The defendants, who include

• loan officers, processors,
• a contractor and
• an unlicensed appraiser,

were each charged with one or more counts of mail, wire or bank fraud in an eight-count indictment that was returned by a federal grand jury yesterday.

As part of the alleged scheme, the indictment specifies eight residential properties – seven of them on the south side of Chicago – upon which mortgage loans were fraudulently obtained between 2002 and 2007.

Two of the defendants, Deangelo McMahan, 36, of Hazel Crest, and Fred Haywood, 37, of Chicago, both of whom were loan officers for various mortgage lenders, were initially indicted in December. Four new defendants are

• Rita McKenzie, 39, of Round Lake Beach, a loan processor;
• Steve Young, 51, of Flossmoor, a loan officer;
• Carl McMahan, 42, of Round Lake Beach, Deangelo McMahan’s brother who operated a purported home re-construction business; and
• Sumira Persaud, 32, of Blue Island, an unlicensed appraiser.

Arrest warrants have been issued for McKenzie and Carl McMahan, while the others will be ordered to appear for arraignment at a later date in U.S. District Court, including Deangelo McMahan and Haywood, who were previously released on bond.

According to the indictment, the defendants schemed to arrange for buyers with good credit, but insufficient income, to purchase homes by promising them money for acting as nominees, knowing that in most cases the buyers did not intend to occupy the homes as their primary residences or fulfill any long term payment obligations.

The defendants and others caused false information to be included in mortgage loan applications regarding the applicant’s income, assets, employment, intention to occupy the home and the source of the down payment so the applicant would falsely appear to qualify for a loan.

They also allegedly schemed to create false appraisals that did not reflect the fair market value of the properties and were designed to create excess value.

In some instances the defendants funneled excess cash they generated from inflated appraisals on the properties to sham businesses they had created, while other times they flipped the properties from one sale to another to make a profit, the charges allege.

The indictment also seeks forfeiture of $2,383,020, which reflects the loss suffered by various mortgage companies that were victims of the alleged fraud scheme.

The charges were announced by Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois; Robert D. Grant, Special Agent-in-Charge of the Chicago Field Office of the Federal Bureau of Investigation; and Thomas P. Brady, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago.

The government is being represented by Assistant U.S. Attorney Jason Yonan.

Each count of mail and wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, while bank fraud carries a maximum penalty of 30 years in prison and a $1 million fine. The Court, however, would determine the appropriate sentence to be imposed under the advisory United States Sentencing Guidelines.

The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.