McHenry County Blog

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.

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:

ATTORNEY AMONG FOUR DEFENDANTS INDICTED IN ALLEGED $16.2 MILLION MORTGAGE FRAUD SCHEME INVOLVING AT LEAST 35 RESIDENTIAL LOANS

CHICAGO — Four defendants —

• an attorney
• a loan originator
• a mortgage broker
• a loan processor

— were indicted for allegedly participating in a scheme to fraudulently obtain at least 35 mortgage loans totaling more than $16.2 million from various lenders, federal law enforcement officials announced today.

The indictment alleges that the mortgages were obtained to finance the purchase of properties throughout Chicago and in suburban Country Club Hills by buyers who were fraudulently qualified for loans while the defendants allegedly profited from fees they were paid and undisclosed payments they obtained.

All four defendants were charged with various counts of mail fraud and bank fraud in a nine-count indictment that was returned by a federal grand jury last Thursday.

The indictment also seeks forfeiture of $16,218,050.

The charges were announced today by Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois; Robert D. Grant, 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.

Hakeem Rashid, 39, of Miami and formerly of the Chicago area, a licensed loan originator who was employed by two mortgage brokerage companies, including 1st Regent Mortgage Funding, Inc., was charged with four counts of mail fraud and five counts of bank fraud.

Kareem Broughton, 39, of Chicago, a mortgage broker and the owner of 1st Regent, was charged with two counts of mail fraud and three counts of bank fraud.

Marguerite Elise Dixon-Roper, also known as “Elise Dixon,” 46, of Darien, an attorney, was charged with one count of mail fraud and two counts of bank fraud, and Jada Elaine Lucas, aka “Sophia Youssef,” 52, of Chicago, a loan processor at 1st Regent and another brokerage, was charged with three counts of mail fraud and one count of bank fraud.

An arrest warrant was issued for Rashid. The other three defendants are scheduled to be arraigned at 9:30 a.m. Thursday before Magistrate Judge Geraldine Soat Brown in U.S. District Court.

Between 2005 and May 2008, all four defendants and others allegedly schemed to obtain the fraudulent mortgages by making false representations in loan applications, supporting documents, and HUD-1 settlement statements concerning the buyers’ income, employment, financial condition, source of down payments, and intention to occupy the property.

As part of the scheme, Rashid, Broughton and Dixon-Roper allegedly recruited buyers to purchase properties and facilitated the buyers’ purchase of properties, knowing that they would be fraudulently qualified for mortgage loans.

Rashid and Broughton allegedly paid buyers for purchasing properties, while concealing the payments from lenders.

In addition, the defendants also allegedly either purchased properties, which were mostly scattered throughout the city, and/or refinanced existing mortgages in their own names, knowing that they were fraudulently qualified for the loans.

According to the indictment,

• Broughton received payment through 1st Regent in the form of brokerage fees on loans for buyers whom he knew were qualified based on false information submitted to lenders;
• Rashid received payment through 1st Regent and another company for originating mortgage loans for buyers whom he knew were not qualified;
• Dixon-Roper received payment for representing buyers and sellers at real estate closings, knowing that the buyers were not legitimately qualified borrowers; and
• Youssef received payment for processing loans through 1st Regent, knowing that she submitted false information to qualify buyers for the loans.

In addition, Rashid, Broughton and Dixon-Roper allegedly obtained undisclosed payments through entities they controlled, including

• The Broughton Group
• R&B Management
• Hamaya Banco
• Dixon-Roper’s law firm

Rashid and Dixon also allegedly submitted false statements to lenders indicating that escrow money was being held by Dixon-Roper or her law firm.

Instead, knowing that no escrow money was being held, Dixon directed the payment of money purportedly held in escrow to herself and Rashid, while concealing the true nature of the payments from lenders, the charges allege.

The government is being represented by Assistant U.S. Attorneys Stephanie Zimdahl and Erika Csicsila.

Each count of bank fraud carries a maximum penalty of 30 years in prison and a $1 million fine, and each count of mail fraud carries a maximum 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 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.

The charges are 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.

Since 2008, close to 200 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 $280 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.

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.

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

THREE DEFENDANTS INDICTED IN ALLEGED $750,000 MORTGAGE FRAUD SCHEME INVOLVING THREE RESIDENCES IN CHICAGO

CHICAGO — A Chicago area real estate investor, the president of a Colorado real estate financing company, and a licensed appraiser were indicted for allegedly participating in a scheme to fraudulently attempt to obtain mortgage loans totaling more than $750,000 by selling three residential properties in Chicago to nominee buyers, federal law enforcement officials announced today.

The charges result from Operation Madhouse, an undercover investigation in which a cooperating individual posed as someone who could assist in structuring fraudulent loan transactions through a bank contact who would approve bogus loan applications on behalf of nominee buyers.

Defendant Paul Demos, 66, of Chicago, the licensed appraiser, was arrested this morning, and was released on his own recognizance after pleading not guilty at his arraignment before U.S. District Judge Amy St. Eve in Federal Court.

Co-defendants Michael Fort, 42, of Hazel Crest, an investor who owned multiple properties in Chicago, and Jeffrey Olson, 43, of Lakewood, Col., who was president of 1st Funding Source, LLC, which engaged in real estate financing, were not arrested and will be arraigned at a later date.

Fort was charged with three counts of bank fraud, and Demos and Olson were each charged with two counts of bank fraud, in an indictment returned by a federal grand jury on Tuesday and unsealed today following Demos’ arrest. The arrest and 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 Office of the Federal Bureau of investigation; Barry McLaughlin, Special Agent-in-Charge of the U.S. Department of Housing and Urban Development Office of Inspector General in Chicago; and Alvin Patton, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago.

According to the indictment, the fraud scheme involved a “double-closing” on a residence located at 5517 South Paulina St., and the sale of residences located at 6845 South Morgan St., and 1241 North Monitor Ave., all in Chicago, between June and September 2010.

The defendants and others allegedly fraudulently attempted to obtain loans by preparing and submitting to an unnamed bank applications in the names of nominee buyers that contained false information about the borrower’s employment, income, assets, down payment, intention to occupy the residence, and the value of the property.

Regarding the Paulina “double-closing,” the defendants and the undercover cooperating individual allegedly agreed that Fort would “short sell” the residence to a nominee intermediate party, who would immediately resell the property to a nominee buyer, with the second sale financed by a fraudulently-obtained $295,850 loan.

Fort allegedly hid information from the short sale lender, including that Fort had arranged for an immediate resale to a nominee buyer at a price significantly higher than the short sale price and based on an inflated appraisal, and that he would profit from the resale.

The Morgan Street property was to be sold to a nominee buyer financed by a fraudulently-obtained $300,600 loan, and the Monitor Avenue sale by Fort to a nominee buyer financed by a fraudulently-obtained $203,700 loan, the indictment alleges.

As part of the scheme, Fort would pay a fee to the nominee buyers of the Paulina and Monitor properties, it adds. In exchange, the nominee buyers would obtain the loans and sign the documents at closings, but would not occupy the residences or make payments on the loans. Fort allegedly intended to keep the proceeds of the fraudulently-obtained mortgages.

Demos allegedly provided the bank with false appraisals that inflated the value of the Paulina and Morgan properties. Olson allegedly provided the down payment funds for the nominee buyer of the Morgan property, and agreed to provide the down payment and short sale funds for the Paulina property.

In September 2010, Fort and others appeared at the closings for the sale of Paulina and Morgan properties, allegedly intending to receive approximately $596,450 in fraudulently-obtained loan proceeds.

Together with the Monitor property, the defendants allegedly intended to fraudulently obtain mortgages totaling more than $750,000.

he government is being represented by Assistant U.S. Attorneys Tyler Murray and Christopher Stetler.

Each count of bank fraud carries a maximum penalty of 30 years in prison and a $1 million 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 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.

The charges are 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.

Since 2008, approximately 200 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 $280 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.

he 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.

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

SEVEN DEFENDANTS INDICTED IN ALLEGED $8.8 MILLION MORTGAGE FRAUD SCHEME INVOLVING 35 CONDOMINIUM LOANS IN CHICAGO

CHICAGO — Seven defendants, including a Streamwood man who co-owned a Chicago condominium building and two loan officers, were indicted for allegedly participating in a scheme to fraudulently obtain approximately 35 mortgage loans totaling more than $8.8 million from various lenders, federal law enforcement officials announced today.

The indictment alleges that most of the mortgages were obtained to finance the purchase of condominium units in a building located at 4725 South Michigan Ave., Chicago, by straw buyers, including a Chicago police officer, John Welch, and others.

Defendant Yaseen Ahmed, who co-owned the Michigan Avenue condominium building, and co-defendant Eliot Higueros, who allegedly recruited straw buyers, caused proceeds of the fraud to be disbursed to themselves and multiple companies they owned or controlled, the charges allege.

All seven defendants, who will be arraigned at a later date in U.S. District Court, were charged with various counts of wire fraud in an 11-count indictment that was returned by a federal grand jury yesterday.

The indictment also seeks forfeiture of $8,820,630.

The charges were announced by Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, and Barry McLaughlin, Special Agent-in-Charge of the U.S. Department of Housing and Urban Development Office of Inspector General in Chicago.

Ahmed, 37, of Streamwood, who was charged with 10 counts of wire fraud, was co-owner of a company that owned the 4725 South Michigan Ave. condominium building. Other properties involved in the alleged fraud scheme were located at

• 3318 West Monroe St.
• 7919-21 South Phillips Ave.
• 1349 North Sedgwick St.
• 2012 West Thomas St.,

all in Chicago.

Between 2006 and 2008, Ahmed, his co-defendants and others allegedly schemed to obtain the fraudulent mortgages by making false representations in

• loan applications,
• supporting documents, and
• HUD-1 settlement statements

concerning the

• buyers’ employment,
• financial condition,
• assets,
• true source of down payments, and
• intention to occupy the residence.

As part of the scheme, Higueros, 41, of Chicago, who was charged in all 11 counts, allegedly recruited Welch, 34, of Chicago; Amanda Fanaro, 28, of Oswego; and Kristen Daugherty, also 28, of Erie, Col., and formerly of Oswego, as well as seven other unnamed individuals to serve as nominee buyers.

Ahmed and Higueros allegedly referred the straw buyers to licensed loan officers, including co-defendants Razzak Khader, 33, of Morton Grove, and Theodore Cardenas, 42, of Westmont, to arrange for the buyers to obtain fraudulent mortgage loans.

The indictment alleges that Higueros paid the straw buyers to purchase the units knowing that the payments would be concealed from the mortgage lenders, and that Ahmed paid Khader for fraudulently qualifying certain straw buyers knowing that these payments would also be concealed.

Upon closing the transactions, Ahmed and Higueros caused title companies to disburse the loan proceeds to themselves and their multiple business entities, the charges allege.

As an example of the pattern alleged throughout the indictment, Higueros recruited Welch to purchase four condominium units in the 4725 South Michigan Ave., building, knowing that he would obtain financing by making false statements to mortgage lenders, the indictment alleges.

Higueros paid Welch for each unit that Welch bought, knowing that the payments would not be disclosed to the lenders, it adds.

The government is being represented by Assistant U.S. Attorneys Heather McShain and Brian Netols.

Each count of wire 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 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.

The charges are 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.

Since 2008, close to 200 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 $280 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.

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.

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

McHENRY COUNTY BUSINESSMAN PLEADS GUILTY TO $7 MILLION FRAUD

ROCKFORD — A Woodstock, Ill., man pleaded guilty today in federal court in Rockford to conducting a $7 million mail fraud scheme. Francis X. Sanchez (“Sanchez”), 51, co-owned and operated a business in McHenry County, known as InvestForClosures, with his business partner James D. Bourassa. In his guilty plea today, Sanchez admitted that he fraudulently obtained more than $7 million from InvestForClosures’ investors.

Sanchez’s and Bourassa’s business was initially known as InvestForClosures.Com, but later changed its name to InvestForClosures Financial, LLC. According to Sanchez’s plea agreement, he represented to potential investors that this business bought distressed houses, rehabilitated those houses, and sold the houses for a profit.

Sanchez admitted in his plea agreement that he, Bourassa, and their employees solicited people to invest in InvestForClosures.Com and InvestForClosures Financial. Sanchez acknowledged that he and his employees made various representations to their potential investors, including:

1. their investments would be safe because they would be backed by real estate;
2. InvestForClosures used the majority of their investors’ funds to purchase real estate; and
3. because of the business’ efficient cash flow from buying and selling houses, InvestForClosures Financial had never failed to make an interest payment on time or return an investor’s principal when requested.

As Sanchez admitted today, each of these representations was false.

First, the business did not own sufficient real estate to secure all of the investments.

Secondly, the business did not use the majority of investor funds to purchase real estate, but instead used most of the investors’ funds to pay other expenses, including the salaries of the defendants, and to pay Ponzi type interest to prior investors.

In addition, InvestForClosures was not making enough money from property sales to pay the interest owed to the investors, but was instead using cash received from new investors to pay the prior investors with Ponzi type payments.

Sanchez further admitted that, in order to conceal from the investors his false promises and misrepresentations, and to prevent the investors from demanding the return of their principal, he told the investors that he was developing an exclusive, luxury, residential community in Mexico known as the “Sands of Gold.”

Sanchez and Bourassa formed a new business, known as InvestForClosures Ventures, LLC, doing business as Realty Opportunities International, to operate the Sands of Gold project. Sanchez acknowledged that he and Bourassa solicited their investors to purchase lots at Sands of Gold and to invest additional monies with InvestForclosures Ventures.

Sanchez admitted that he made several misrepresentations to his investors regarding Sands of Gold, including:

1. the government of Mexico had promised to invest millions of dollars in infrastructure necessary for the development of the Sands of Gold;
2. efforts to obtain financing for the project were going well and a financing deal was imminent; and
3. they were finishing negotiations with a major hotel chain for the construction of a hotel at Sands of Gold.

Sanchez further admitted that, during the course of the scheme, he and co-defendant Bourassa fraudulently obtained approximately $7,238,506.40 from the investors.

Of this amount, approximately $1,711,711.18 was paid back to the investors through Ponzi type payments.

The indictment, which was filed on November 16, 2010, charged both Sanchez and Bourassa with mail fraud and wire fraud. Bourassa pled guilty to mail fraud on February 27, 2012.

The sentencing hearing for Sanchez will be conducted on August 13, 2012, at 9:00 a.m.

Bourassa will be sentenced on June 11, 2012, at 9:30 a.m.

Mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, or a fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater, as well as restitution to the victims. The actual sentences will be determined by the United States District Court, guided by the advisory United States Sentencing Guidelines.
The case was investigated by the Rockford Office of the Federal Bureau of Investigation, the Chicago Office of the United States Postal Inspection Service, and the Illinois Secretary of State’s Securities Department. The investigation was conducted under the auspices of the Financial Fraud Enforcement Task Force, which 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 guilty plea was announced by Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois; Robert D. Grant, Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation; Thomas P. Brady, Postal Inspector-In-Charge of the Chicago Division of the U.S. Postal Inspection Service, and Illinois Secretary of State Jesse White.

The government is being represented by Assistant U.S. Attorney Scott A. Verseman.

Still another press release about legal action by Chicago’s U.S. Attorney’s Office against those who commit financial fraud:

FIVE DEFENDANTS INDICTED IN ALLEGED $15.7 MILLION MORTGAGE FRAUD SCHEME TO HELP FINANCE FAILED NORTH SHORE DEVELOPMENT

CHICAGO — Three partners in a failed North Shore development project, a title company executive and a loan officer were charged in a federal indictment unsealed yesterday with engaging in a $15.7 million residential mortgage and construction loan fraud scheme to help finance the failed mixed-use commercial development known as the Center of the Northshore, federal law enforcement officials announced.

The five defendants allegedly caused various lenders and a title company to lose at least $8.45 million.

The loan proceeds allegedly were used to make lulling interest payments on multiple fraudulent residential mortgages, as well as to make interest payments on a $26.2 million loan to finance the purchase of 14 acres at the intersection of Dundee Road and Skokie Boulevard in Northbrook for the proposed mixed-use development, which ultimately fell into foreclosure.

The 11-count indictment, which was returned by a federal grand jury on May 26, was unsealed after four of the five defendants were arrested yesterday by federal agents. The arrests and charges were announced today by Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois; Thomas A. Kelly, Special Agent-in-Charge of the U.S. Secret Service in Chicago; and Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.

The defendants and charges against each are as follows:

• Edward Renko, 49, of Glenview, who was chief executive officer of the now-defunct EAG Capital Holdings, Inc.; two counts of wire fraud and one count each of bank fraud and making a false statement to influence the action of a bank;
• Alexander Field, 42, of Northbrook, formerly president of EAG Capital; three counts of wire fraud and one count of bank fraud;
• Gary Fishkin, 54, of Glencoe, formerly chief operating officer of EAG Capital; two counts of wire fraud and one count each of bank fraud and making a false statement to influence the action of a bank;
• Kalliope Shaykin, 51, of Chicago, formerly president of Absolute Title Services, Inc., in Schaumburg; seven counts of wire fraud and one count of making a false statement to influence the action of a bank; and
• Tatyana Furman, 41, of Northbrook, formerly a loan officer and mortgage broker at American United Mortgage Co., in Northbrook, which was 50 percent-owned by EAG Capital; seven counts of wire fraud.

Renko, Field, Fishkin and Furman were arraigned yesterday before Magistrate Judge Maria Valdez in U.S. District Court, and were ordered to remain in federal custody pending a detention hearing at 11 a.m. Tuesday. Shaykin was not arrested and was scheduled to be arraigned today before U.S. District Judge Harry Leinenweber in Federal Court.

According to the indictment, between June 2006 and November 2007, the defendants fraudulently obtained at least $8.45 million in residential loan proceeds by repeatedly obtaining mortgages secured by residences owned by Renko, Field and Fishkin, located respectively at 711, 700 and 688 Greenwood Rd., Northbrook.

The mortgages were obtained purportedly to refinance existing loans secured by those residences, but instead of using the loans to pay off the existing mortgages, the defendants allegedly converted the fraudulently obtained loans to their own use, including to pay personal expenses, business expenses, and interest payments on the $26.21 million loan financing the purchase of property for the proposed Center of the Northshore.

On multiple occasions, the indictment alleges that Furman prepared, and Renko, Field and Fishkin signed, fraudulent mortgage loan applications that contained false statements that failed to disclose the respective defendant’s existing mortgage liabilities and the purpose of the loans.

Shaykin allegedly created and submitted to lenders fraudulent title insurance policies under the name of Title Company A that intentionally omitted prior existing mortgages and liens on the respective defendant’s residences.

The indictment alleges that Renko, Field and Fishkin distributed at least $720,000 in fraudulently obtained loan proceeds to Shaykin through various means, and that those four defendants distributed at least $240,000 to Furman through various transactions.

Overall, Renko, Field and Fishkin obtained home mortgages and a construction loan totaling at least $15,790,000 and caused actual losses to lenders and Title Company A totaling at least $8.45 million.

The indictment seeks forfeiture totaling nearly $10.5 million from all five defendants.

The government is being represented by Assistant U.S. Attorney Ryan S. Hedges.

Wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine. However, four of the wire fraud counts allegedly affecting financial institutions, together with bank fraud and making a false statement to influence the action of a bank, each carry a maximum penalty of 30 years in prison and a $1 million fine. As an alternative, the Court may impose a maximum fine totaling twice the loss to any victim or twice the gain to any defendant, whichever is greater, and restitution is mandatory. If convicted, the Court must determine a reasonable sentence to impose 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 are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

If you want to understand how the mortgage mess kept on going.

Here’s a paragraph written by a liberal that appeared in a Slate article.

“These documents, from Clayton Holdings, a due diligence company retained by the banks, reveal that Clayton, after analyzing more than 900,000 mortgages, told the banks that about 30 percent of the loans being packaged into securitized products did not satisfy the banks’ own underwriting standards. This meant that the securitized products were almost bound to blow up.”

Democrats controlled the U.S. House in 2008 and did nothing to stop this from happening.

And McHenry County’s own Congresswoman Melissa Bean serves on the Financial Services Committee chaired by endangered Barney Franks.

Nor have they called for criminal prosecutions of big banks from whom they got fat political contributions.

Democrat oversight was a failure of the banks as it was of BP’s oil rig operations.

More Democrat bureaucrats simply deliver more paid Democrat voters and little productive output as a practical matter.

This is why Democrats are obsessive about taking over health care and one sixth of the economy.

Democrat Melissa Bean sat on the House Financial Services Committee and did nothing to stop the big banks from almost blowing up our entire economy.

I guess this is what “merited” her an endorsement from both the Northwest Herald and Daily Herald. How can their editors have such blinders?

It not hard to surmise someone thinking

“Throw the facts out the window, Bean’s a real liberal, so let’s figure out some way to endorse her.”

On a slow Memorial Day Weekend, I thought you might be interested in the early May press release from the U.S. Attorney’s office in Milwaukee:

Five People Charged in $14 Million Mortgage Fraud

Acting United States Attorney Michelle L. Jacobs announced today that a federal grand jury in the Eastern District of Wisconsin returned a twenty four count indictment charging five people with wire fraud and money laundering in connection with a mortgage fraud scheme.

Charged were

• Paul J. Zaleski, 60, formerly of Richmond, Illinois;
• Michael Pembroke, 45, of Twin Lakes, Wisconsin;
• John F. Hochrek, Jr., 48, of Spring Grove, Illinois;
• Patricia Lynn Kay, 47, of Kenosha, Wisconsin; and
• Robert Farrell, 29, formerly of Richmond, Illinois.

According to the indictment Zaleski, is alleged to be the leader and organizer of the scheme. He is charged with 17 counts of wire fraud in violation of Title 18, United States Code, Section 1343 and five counts of money laundering in violation of Title 18, United States Code, Sections 1956 and 1957.

Pembroke and Kay are each charged with five counts of wire fraud and one count of money laundering. Hochrek is charged with seven counts of wire fraud, and Farrell, with six counts of wire fraud.

If convicted, each defendant faces up to 20 years in prison for each wire fraud offense and up to 30 years in prison for each money laundering offense.

The indictment alleges that Zaleski orchestrated the purchase of at least 40 real estate properties by straw buyers who were led to believe that they were acting as members of an investment group.

In order to secure mortgage loans, Zaleski and Farrell, working as loan originators at First Security Financial Services in Kenosha, Wisconsin, prepared fraudulent loan applications in the names of the buyers.

The applications contained, among other false representations, inflated appraisals, some of which were prepared by Hochrek.

The purpose of the scheme was to funnel mortgage funds to Silver Creek Investments, Northpointe Development and Lakeside Property Management, all shell companies that were controlled by Zaleski, Pembroke and Kay.

The indictment also alleges that fraudulently obtained funds were subsequently laundered in transactions that involved the inducement of straw buyers and the purchase of additional properties.

Over the course of a two year period, numerous mortgage lenders advanced more than $14 million in fraudulently procured funds, at least $2 million of which was deposited into accounts for the shell companies. The loans subsequently went into default and foreclosure.

An initial appearance for Pembroke, Hochrek and Kay has been scheduled for May 14, 2009 before Judge William E. Callahan, Jr. Zaleski and Farrell have been arrested in California and are awaiting return to Wisconsin.

The case was investigated by Internal Revenue Service, Criminal Investigation Division and the Federal Bureau of Investigation. The case is being prosecuted by Assistant U.S. Attorney Carol L. Kraft.
According to Acting United States Attorney Michelle Jacobs “this case, and others like it, have serious ramifications not only for the defrauded lenders but also for the residents of the neighborhood where the properties are located. This demonstrates the commitment we all share to protect consumers from fraud and help to ensure the integrity of the mortgage market and other credit markets”. She also commended the work of the law enforcement agencies involved in this lengthy investigation.

It should be noted that an indictment is merely the formal method of charging an individual and does not constitute inference of his or her guilt. An individual is presumed innocent until such time, if ever, that the government establishes his or her 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.