American Fraud Report

Daily Open Source Business Crime and Fraud Report

  1. Mortgage Sector

    1. November 27, 2012 - FBI - (Michigan) - (Fraud Losses $2.5M - ? Yr Fraud) - (CR Sent. Pend) - (Executive/Management Fraud - Conspiracy - Mortgage Fraud) - FINAL DEFENDANT IN LANSING MORTGAGE FRAUD INDICTMENT PLEADS GUILTY

      GRAND RAPIDS, MI—Mario Giannandrea, 43, pled guilty today to misprision of a felony before U.S. District Judge Robert J. Jonker. Giannandrea admitted that he participated in a fraudulent scheme to obtain a mortgage for $1,500,000, tried to conceal the scheme from being discovered, and did not bring it to the attention of law enforcement. Judge Jonker accepted the plea and found Giannandrea guilty. A sentencing hearing for the offense is scheduled for March 27, 2013. On July 26, 2012 Giannandrea was indicted with six other defendants for engaging in a scheme to commit mortgage fraud in violation of federal law. The scheme, operating under the name of a Lansing, Michigan business known as CDC Investments, involved inflating the value of a piece of real estate and then staging the sale of that property so that an unsuspecting bank would supply mortgage funds to members of the scheme. After obtaining the money, the members of the scheme would split the money among themselves. The mortgage would not be paid, leaving the bank with property not worth enough to make the bank whole. The scheme resulted in approximately 35 mortgage loans and resulted in losses of approximately 2.5 million dollars. U.S. Attorney Patrick Miles acknowledged the efforts of the Western District of Michigan Mortgage Fraud Task Force, composed of agents from the Federal Bureau of Investigation, United States Secret Service, the U.S. Postal Inspection Service, HUD Office of Inspector General, and others. “Rooting out mortgage fraud is a top priority for law enforcement in this district, because it does so much damage to property values and our financial system. This task force has a lot of work to do, and I am proud to say that these investigators are up to the task,” said U.S. Attorney Miles. The six others named in the indictment have entered guilty pleas to federal charges of conspiring to commit bank fraud or bank fraud. These are Aaron Teachout, Isaac Modert, Eric Williams, Dennis Sare, Rick Artibee, and Nichole Buda. All have agreed to cooperate with the investigators in locating others engaged in mortgage fraud. All of the defendants face sentencing hearings before Judge Jonker in March 2013.

    2. November 27, 2012 - FBI - (Kentucky) - (Fraud Losses $5M - 2 Yr Fraud) - (CR Sent. 1.3 Yrs - Fines/Rest. $487K) - (Executive/Management Fraud - Conspiracy - Mortgage Fraud) - KENTUCKY MAN SENTENCED TO 15 MONTHS IN PRISON FOR HIS ROLE IN A MORTGAGE FRAUD SCHEME - ORDERED TO PAY $487,111 IN RESTITUTION; SCHEME INCLUDED 19 PROPERTIES TOTALING NEARLY $5 MILLION

      LOUISVILLE, KY—A Jeffersonville, Indiana man was sentenced in United States District Court this week by District Judge Charles R. Simpson, III to 15 months in prison and ordered to pay $487,111 in restitution after pleading guilty to engaging in a conspiracy, with five indicted co-defendants, to commit bank and wire fraud. In court, Dane Little admitted to intentionally devising a scheme to defraud various banks and mortgage lenders by submitting fraudulent mortgage loan information in the purchase of 19 properties in Louisville, Kentucky and Jeffersonville, Indiana, totaling nearly $5 million dollars announced David J. Hale, United States Attorney for the Western District of Kentucky. “Combating mortgage fraud is a priority of the Department of Justice and my office. We will continue to work with the FBI and our other important partners, such as the Kentucky Department of Financial Institutions, to stop these crimes and bring the people responsible to justice,” stated David J. Hale, United States Attorney. “Fraudsters such as Little—whose scam allowed him to make off with excess loan proceeds—have fueled foreclosures and added to neighborhood blight. Their crimes cause serious harm to our communities, as well as to lenders, and the real estate and housing industries.” According to the indictment returned by a federal grand jury on February 24, 2011, between November 1, 2006 and August 30, 2008, Shawn Bramlett, Billy D. McDaniels, Dane Little, Kyle Kark, and Mark Hack all of Jeffersonville, Indiana; and Stephen C. Netherton of Louisville, Kentucky, perpetrated a fraudulent scheme against various banks and commercial lending companies, including Wells Fargo Bank, Bank of America (formerly Countrywide Home Loans), Accredited Home Lenders, Primary Residential Mortgage Company, and First Franklin Financial Company. The indictment claims that they submitted applications and other documents for loans which contained false and fraudulent information, including false employment information, false and fraudulent bank account balances, and false representations that down payments were being made toward purchases of properties. According to court records, after loan applications were approved for funding, the loan proceeds were wire transferred in interstate commerce to designated accounts with various banks in Louisville, Kentucky, whereby the defendants and other unnamed co-conspirators appropriated, for their personal benefit and gain, portions of the fraudulently obtained loan proceeds. The Louisville grand jury returned a second charge in the superseding indictment against Little and Netherton charging them with conspiracy to commit bank fraud in a separate but similar fraudulent scheme against various banks and commercial lending companies. They submitted applications and other documents for automobile loans which contained false and fraudulent information, including borrower’s employment, income and assets, and identity of the seller of the vehicle. According to court records, between October 22, 2010 and December 31, 2010, the defendants caused fraudulent loans to be funded in the amount of $118,000, purportedly to purchase four vehicles and in at least one instance, no car was purchased. After obtaining the loans, the defendants and other unnamed co-conspirators appropriated for their personal benefit and gain portions of fraudulently obtained loan proceeds. To date, all six defendants have entered guilty pleas with the court, and two defendants, including Little, have been sentenced. Stephen Netherton was sentenced on April 6, 2012, to serve 24 months in federal prison, concurrent to his state sentence, and ordered to pay restitution in the amount of $874,100. McDaniels and Kark are scheduled for sentencing next month, while Hack and Bramlet are scheduled to be sentenced in the early months of next year. The case is being prosecuted by Assistant United States Attorney Jim Lesousky, and it was investigated by the Federal Bureau of Investigation and the Kentucky Department of Financial Institutions. Mortgage fraud is a priority area for the President’s Financial Fraud Enforcement Task Force. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit

    3. November 27, 2012 - State AG - (Michigan) - (Fraud Losses $7M - 3 Yr Fraud) - (CR Sent. Pend) - (Executive/Management Fraud - Conspiracy - Mortgage Fraud) - SCHUETTE FILES CRIMINAL CHARGES AGAINST FORMER MORTGAGE PROCESSOR PRESIDENT FOR ROLE IN FRAUDULENT ROBO-SIGNING

      LANSING - Michigan Attorney General Bill Schuette today announced he charged Lorraine Brown, former president of mortgage document processor DocX, with racketeering for her alleged role in authorizing the fraudulent signing of mortgage documents filed in Michigan. The felony charge comes as the result of an ongoing Attorney General investigation into questionable mortgage documentation filed with Michigan's Register of Deeds offices during the foreclosure crisis. "Shortcuts like robo-signing are just one piece of the mortgage foreclosure crisis," said Schuette. "Our investigation remains ongoing, and we will bring to justice every lawbreaker we find." In April 2011, Schuette launched an investigation after county officials across the state reported that they suspected Assignment of Mortgage documents filed in their offices may have been forged. A "60 Minutes" news broadcast had shown that the name "Linda Green" was signed to thousands of mortgage-related documents nationwide, but with many different variations in handwriting. County officials in Michigan reviewed their files and found similar documents, thus raising questions about the authenticity of the documents filed. As part of his investigation, Schuette reviewed documents filed in Michigan and prepared by DocX, a document processing company located in Georgia. DocX processed mortgage assignments and lien releases for residential lenders and servicers nationwide. Schuette's investigation revealed that former DocX president Lorraine Brown, 51, of Alpharetta, Georgia, allegedly established and orchestrated a widespread scheme of "robo-signing," a practice in which employees were directed to fraudulently sign another authorized person's name on mortgage documents in order to execute these documents as quickly as possible. Internally, DocX identified this practice as "facsimile signing" or "surrogate signing." Schuette alleges that from 2006 through 2009, these improperly executed documents were created and recorded at Brown's direction. Schuette's investigation revealed that more than 1,000 unauthorized and improperly executed documents were filed with county registers of deeds throughout Michigan. Lorraine Brown has been charged with one count of Conducting Criminal Enterprises (Racketeering), a 20-year felony, in Kent County's 61st District Court. Arrangements are being made for Brown to surrender to Michigan authorities, and arraignment will be scheduled at a later date. In 2010, DocX suspended operations, halting its work as a mortgage document processor. Schuette noted that while the criminal charges against Brown address her role in the scheme, his office's overall investigation into robo-signing remains ongoing and is not yet complete. A criminal charge is merely an accusation, and the defendants are presumed innocent unless proven guilty. Mortgage Settlement Brings Relief to Michigan Families Earlier this year, Schuette joined 48 other state attorneys general in entering into a settlement with the five leading bank mortgage servicers. The settlement addresses allegations of faulty foreclosure processes and poor servicing of mortgages that harmed Michigan homeowners. The settlement also requires comprehensive reforms of mortgage loan servicing to improve customer service for Michigan borrowers. On August 1, 2012, Governor Rick Snyder signed legislation to create the Homeowner Protection Fund. The fund will be used to help avoid preventable foreclosures, alleviate the effects of the foreclosure crisis, support law enforcement activities to prevent or prosecute financial fraud or deceptive practices, and to compensate the state for costs resulting from unlawful conduct of the defendants in the lawsuit. Current borrowers serviced by the banks may be eligible for loan modifications and other refinancing options. Residents who went through foreclosure with the participating banks from 2008-2011 may be eligible for cash payments. Within the last two months, more than 116,000 postcards and claim forms were mailed to Michigan borrowers who are eligible to file claims for cash payments, which are scheduled to be mailed in the first quarter of 2013. "Although we can never completely undo the damage caused by the foreclosure crisis, through this settlement, many Michigan families will finally begin to see some relief," said Schuette. The Homeowner Protection Fund will be used for the following eight initiatives: Foreclosure Rescue Scam Victim Restitution - $7.5 million. Many Michigan residents have fallen prey to foreclosure rescue scam artists who offered to help citizens save their homes. This fund will provide restitution payments for victims of foreclosure scams. Eligibility criteria to determine qualifying cases are currently being developed by Schuette's office. Assistance for Veterans - $5 million. The men and women who served our country also have been affected by poor mortgage servicing and foreclosure practices. These funds will provide targeted relief for military service members unable to qualify for existing programs. The Michigan Department of Military and Veteran's Affairs will be responsible for this program. Michigan Attorney General Home Protection Unit - $6 million. These funds will allow the attorney general to ramp up investigation and prosecution of foreclosure-related crimes. This unit has convicted 27 individuals and companies since 2011. These funds will allow for additional investigators and prosecutors to combat foreclosure related crimes. Blight Elimination - $25 million. These funds will be dedicated to blight elimination efforts throughout Michigan. Detroit will receive $10 million for blight elimination in the city of Detroit and $15 million will be allocated for use throughout the rest of the state. Foreclosure Counseling for Homeowners - $20 million. The Michigan State Housing and Development Authority (MSHDA) and Michigan State University Extension Offices will use these funds to expand their much-needed, free homeowner counseling services for citizens seeking to avoid foreclosure. Housing and Community Development Programs - $3.7 million. These funds will be allocated to the Michigan Housing and Community Development Fund which develops and coordinates public and private resources to meet the affordable housing needs of low- income households and to revitalize downtown areas and neighborhoods in Michigan. Grants to Help Homeowners Refinance - $5 million. These funds will allow MSHDA to provide grants to help pay the closing costs of citizens who use the Home Affordable Refinance Program. Eligible citizens will receive assistance paying closing costs associated with refinancing their home. Homeowners will be able to begin applying for these funds by the end the year. Assistance to Homebuyers - $15 million. These funds will assist both service members and non-service members by providing grants to offset the purchase price of a home. Service members may be eligible for grants up to $5,000 and non-service members up to $3,000. Eligibility criteria to determine qualifying cases will be established at a later date. Homebuyers will be able to begin applying for these funds by the end the year.


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