Two Co-Conspirators Sentenced for Mortgage Fraud Scheme
|U.S. Attorney’s Office March 19, 2013|
DENVER—Michael Jacoby, age 44, of Castle Rock, Colorado, and Derek Zar, age 30, of Commerce City, Colorado, were sentenced last Friday by visiting U.S. District Court Judge Kathryn H. Vratil to serve 108 months in prison and 63 months in prison, respectively, for a mortgage fraud scheme, the U.S. Attorney’s Office, the Federal Bureau of Investigation, and IRS-Criminal Investigation announced. Following his 108-month prison sentence, Jacoby was ordered to spend five years on supervised release and pay $2,979,712 in restitution. Following his 63-month sentence, Zar was ordered to spend three years on supervised release and pay $1,417,902 in restitution.
Michael Jacoby, Derek Zar, and co-conspirator Susanne Zar were found guilty by a jury on August 30, 2012. The guilty verdicts were the result of a four-week trial. Susanne Zar is scheduled to be sentenced on July 2, 2013. All were indicted by a federal grand jury in Denver on September 27, 2010. A superseding indictment was filed on September 15, 2011.
According to the indictments and testimony at trial, between January 2005 and continuing through September 2006, in the State and District of Colorado, the defendants knowingly devised and intended to devise a scheme to defraud various financial institutions and other commercial lenders that funded residential mortgages and to obtain moneys, funds, and other property owned by and under the custody and control of those financial institutions and commercial lenders by means of materially false and fraudulent pretenses and representations. In furtherance of the scheme, one or more of the defendants participated in real estate transactions involving 18 properties located in Colorado.
It was part of the scheme that Derek Zar and a co-defendant bought homes at purported discounted rates because they paid cash. Jacoby often lent them the cash for these initial purchases and was then was paid back with interest. Furthermore, Jacoby acted as the realtor for the sales. Derek Zar and a co-defendant usually bought the homes through limited liability companies they owned and operated and then resold these homes within a very short time period to themselves as individuals at inflated prices financed by mortgage loans. Additionally, Susanne Zar often refinanced the homes with mortgage loans based on an inflated value. Sometimes, the inflated value was supported by false documentation showing a higher initial purchase price than the actual initial purchase price. The defendants also prepared and submitted and caused to be prepared and submitted applications for loans which contained various materially false and fraudulent representations.
It was further part of the scheme for the co-defendants to cause to be submitted false appraisals for some of the properties. Jacoby usually recommended an appraiser to the mortgage broker for the loan approval. He supplied the appraiser with inflated values of comparable homes or omitted information concerning the home sales so the appraiser would overvalue the current home. At closing, through a grant program, the defendants funneled money back to the home buyer who was one of the defendants. They concealed from the lenders and other parties associated with the transactions that the home buyer was receiving a kickback for buying the home.
“As the financial crisis of 2008 showed, mortgage fraud harms all Americans, not just banks and homeowners,” said U.S. Attorney John Walsh. “In this case, two people who scammed the system of millions ended up spending years in federal prison.”
“Mortgage fraud undermines public confidence in achieving the American dream and jeopardizes the well-being and stability of our financial institutions,” said FBI Denver Acting Special Agent in Charge Steve Olson. “The sentences announced today redress some of the damage caused by these defendants. The FBI will continue to work diligently to identify and investigate those who perpetrate these types of schemes.”
“Mortgage fraud directly threatens the financial health of the communities in which we live; IRS-CI will work diligently with our law enforcement partners to insure mortgage fraud is vigorously investigated and individuals are brought to justice,” said Stephen Boyd, Special Agent in Charge, IRS-Criminal Investigation, Denver Field Office.
The case was investigated by special agents with the Federal Bureau of Investigation and IRS-Criminal Investigation.
The case was prosecuted by Assistant U.S. Attorneys Suneeta Hazra and Jamie Mendelson.