“Operation Stolen Dreams” Nets Local Mortgage Fraud Convictions and Charges

BOSTON, MA—Following an announcement today by Attorney General Eric Holder in Washington, DC, representatives of the Financial Fraud Enforcement Task Force in Boston, including U.S. Attorney Carmen M. Ortiz, announced the regional results of the nationwide initiative, "Operation Stolen Dreams," which targeted mortgage fraud throughout the country and is the largest collective enforcement effort ever brought to bear in confronting mortgage fraud.

The sweep was organized by President Obama’s interagency Financial Fraud Enforcement Task Force, which was established to lead an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. Starting on March 1, Operation Stolen Dreams has involved to date, 1,215 criminal defendants nationwide, including 485 arrests, who are allegedly responsible for more than $2.3 billion in losses. Additionally, to date the operation has resulted in 191 civil enforcement actions which have resulted in the recovery of more than $147 million.

“Today’s announcement highlights the type of greed and self-interest that has directly contributed to the credit crisis and the deterioration of many neighborhoods here in Massachusetts and across the nation. We are working to hold professionals criminally accountable in the mortgage industry, including attorneys and mortgage brokers, who participate in large-scale fraudulent schemes,” said U.S. Attorney Ortiz. “The bottom line is that mortgage fraud schemes make it more difficult for honest home owners to purchase and finance their homes, and to maintain stable communities. The U.S. Attorney’s Office and our law enforcement partners, are committed to ensuring that those in the real estate profession who exploit consumers for their own profit are brought to justice,” concluded Ortiz.

“Mortgage fraud ruins lives, destroys families and devastates whole communities, so attacking the problem from every possible direction is vital,” said Attorney General Holder. “We will use every tool available to investigate, prosecute, and prevent mortgage fraud, and we will not rest until anyone preying on vulnerable American homeowners is brought to justice.”

Unlike previous mortgage fraud sweeps, Operation Stolen Dreams focused not only on federal criminal cases, but also on civil enforcement, restitution for victims and increasing cooperation with state and local partners.

The President’s 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 StopFraud.gov.

In the District of Massachusetts, mortgage fraud prosecutions are coordinated through the District’s Mortgage Fraud Working Group, which includes the Federal Bureau of Investigation, the United States Postal Inspection Service, United States Secret Service, Internal Revenue Service – Criminal Investigation, Department of Housing and Urban Development – Office of Inspector General as well as state and local law enforcement agencies, including the Office of Martha Coakley, Attorney General of the Commonwealth of Massachusetts, and the Massachusetts Banking Commission.

Mortgage Fraud cases in the District of Massachusetts included:

United States v. Eric L. Levine, et al.

To date, 11 defendants in this case have been convicted of conspiring to commit fraud in the sale of 21 properties, primarily in the Dorchester area of Boston. Former attorney Eric Levine and closing attorney J. Daniel Lindley, together with real estate broker Ernst Appolon and mortgage brokers Daniel Appolon and LaToya Haltiwanger, were convicted in June 2010 following a seven-week trial. Six other defendants pled guilty to charges related to this criminal scheme. The scheme involved the use of straw borrowers—who never intended to reside the in properties—to “purchase” condominiums at inflated purchase prices, based upon fraudulent documentation. Among other things, the documents falsely inflated purchase price and borrower income, and in many instances included fictitious employment and bank account information. By means of these false statements the defendants managed to obtain mortgage loans far in excess of the actual purchase prices. Excess loan proceeds, which the defendants divided among themselves or used to pay their straw purchasers, ranged from a little as $15,000 to as much as $255,000 on individual properties in South Boston, Dorchester, Jamaica Plain, Quincy, Hyde Park, and Cohasset. Of the 21 properties at issue in the trial, the total mortgage loans totaled over $10 million. The mortgages on all of the properties were defaulted upon and nearly all went into foreclosure. During the sentencing phase of this case, the United States Attorney anticipates presenting evidence regarding dozens of additional properties for which this ring fraudulently obtained mortgage loans.

United States v. Cassell

On June 16, 2010, James Luke Cassell was charged with wire fraud in an Indictment which alleges that Cassell defrauded mortgage lenders in connection with the sale and financing of residential condominium units that he owned at 285 North End Boulevard in Salisbury, MA. The indictment charges that Cassell falsely reported the sale prices of the condo units and arranged for sham down payments. Cassell also paid the purchasers a share of the mortgage proceeds. Cassell used the remainder of the fraudulently obtained mortgage proceeds for his own purposes. The investigation is continuing.

United States v. Jenkins and Archambault

Dwight Jenkins and Eric J. Archambault were charged in an Indictment which alleges that from about August 2006 through February 2007, Jenkins and associates recruited “straw buyers” for the purchase of nine properties for which Archambault brokered the mortgages. The nine properties identified in the Indictment are all located in Dorchester. Although the straw buyers took title to the properties and obtained mortgages to finance the purchases, none of the straw buyers actually intended to live in the condominiums they bought or intended to repay the loans. Instead, Jenkins and his associates promised the straw buyers that Jenkins or his company would pay the mortgages, maintain the properties, find tenants and then re-sell the properties, sharing a portion of the proceeds with the straw buyers. Jenkins and his associates promised most buyers they would be paid a fee for the use of their names, identifying information, and credit histories in securing the loans. Archambault is alleged to have prepared fraudulent mortgage applications in the names of the straw buyers. The case is currently pending.

United States v. Michael Hicks

Michael Hicks was sentenced by U.S. District Judge Douglas P. Woodlock to 42 months' imprisonment after pleading guilty to one count of wire fraud and one count of money laundering. Hicks, through a Pennsylvania associate, recruited a straw buyer to purchase the units sold by Michael Lee, at 162 Quincy Street, Dorchester. Hicks used the straw buyer’s personal information, name, address, date of birth, and Social Security number to apply for mortgages for the purchase of the three units at 162 Quincy Street. In the loan applications, Hicks falsely represented that the straw buyer intended to make each unit his primary residence, that he was self-employed as a contractor, with annual income ranging, in the various applications, from $156,241 to more than $379,152. Hicks also created a fictitious business for the straw buyer, falsely verified the straw buyer’s employment status for the mortgage applications and arranged for false income tax returns to be submitted with the applications.

Hicks also arranged for a straw buyer for a multi-family dwelling at 3-5 Sexton Court in Dorchester, Mass., which was owned by Lee’s in-laws. For recruiting both buyers, Lee paid Hicks a total of $180,500, a sum which Hicks turned over to the United States prior to sentencing and which the Court ordered Hicks to forfeit.

United States v. Augustus Okoye

Augustus C. Okoye, pled guilty before U.S. District Judge Richard G. Stearns to three counts of wire fraud and one count of identity fraud. Okoye used his brother’s name, social security number, and date of birth to obtain mortgage loans for the purchase of three properties in and around the Boston area. Okoye bolstered these loan applications with false statements about the borrower's monthly income, employment, and/or intent to occupy the properties. Sentencing is scheduled for July 21, 2010.

United States v. Christiano Lima

Mortgage broker Christiano Lima pled guilty to seven counts of wire fraud. Lima schemed with others to defraud mortgage lenders in connection with the purchases of properties located at 168 Smith Street, New Bedford, Mass.; 57 Pine Swamp Rd., Cumberland, RI; 375 Shove Street, Fall River, Mass.; and 126 Liberty Street, Marlborough, Mass. For each property, Lima and his confederates submitted false mortgage loan applications which fraudulently inflated the borrower’s income and falsely represented that the property would be the borrower’s primary residence. For three of the properties, all of which had the same straw buyer, Lima concealed from lenders that the same person had arranged for mortgage loans in connection with multiple properties.

Two of the property sales were mortgage “rescue” schemes, whereby homeowners who were on the brink of foreclosure purported to sell their homes to straw buyers. The straw buyers never intended to occupy the properties and, instead, arranged to collect “rent” from the original homeowners. All of the properties ultimately were foreclosed upon. The case is pending for sentencing.

United States v. Robert Rego

Mortgage broker Robert Rego, of North Dartmouth, Mass., pled guilty to six counts of wire fraud. Rego defrauded mortgage lenders in connection with the purchases of properties located at 168 Smith Street, New Bedford, Mass.; 64 Pine Street, Swansea, Mass.; and 49 Longwood Avenue, N. Dartmouth, Mass. Each of the mortgage loans was based upon false mortgage loan applications which fraudulently inflated the borrower’s income and/or falsely represented that the property would be the borrower’s primary residence.

Two of the property sales were foreclosure “rescue” schemes, whereby homeowners who were on the brink of foreclosure purported to sell their homes to straw buyers, one of whom was Rego. The straw buyers never intended to occupy the properties but obtained more favorable financing terms by so stating. Rego profited over $140,000 as a result of the transactions. All of the properties were ultimately foreclosed upon. Sentencing is scheduled for October 7, 2010.

United States v. Michael Lee

Michael Lee was charged with five counts of wire fraud in connection with his purchase, refinance, and purported resale of a three-family residence located at 162 Quincy Street, in Dorchester. Lee purchased the multi-family property, secured by a $381,500 mortgage and immediately converted it to condominiums, each of which he “sold,” for $380,000 apiece, to a straw buyer. The straw buyer, whose mortgage paperwork was prepared for him by another Lee associate, represented in each of the three sham purchases that the buyer intended to make that unit his primary residence. False representations on the straw buyer’s mortgage applications also included representations regarding his employment, income, and assets. The case is currently pending.

United States v. Clarista Bramble

Former Bank of America employee Clarista Bramble pled guilty to nine counts of wire fraud for creating false bank documents which reporting fictitious account balances for accounts in the names of people who were applying for loans from various mortgage lending companies. Bramble understood that the false documents would be used to fraudulently secure mortgage loans. Bramble received cash payments and other financial benefits for her role in the scheme. The investigation is continuing. Bramble is scheduled for sentencing on July 30, 2010.