Eight Charged in $30 Million Mortgage Fraud Scheme
|U.S. Attorney’s Office September 13, 2012|
NEWARK, NJ—Eight people involved in a long-running, large-scale mortgage fraud scheme that caused losses of over $30 million were charged in two complaints with conspiracy to commit bank fraud and money laundering, U.S. Attorney Paul J. Fishman announced.
Lester Soto, 56, of Freehold, N.J.; Klary Arcentales, 44, of Lyndhurst, N.J.; Antonio Pimenta, 44 of Irvington, N.J.; and Adilson Silva, 46, of Union, N.J., were arrested this morning by FBI special agents and special agents of IRS-Criminal Investigation. Linda Cohen, 54 of Orange, N.J., surrendered to FBI special agents. Michael Rumore, 54, is already incarcerated on other charges. Issac DePaula, 33, and Rodrigo Costa, 32, both of Brazil, are still at large.
Soto, Arcentales, Pimenta, Silva, and Cohen are scheduled for initial appearances and bail hearings this afternoon before U.S. Magistrate Judge Patty Shwartz in Newark.
According to the complaints filed in Newark federal court:
From September 2006 to May 2008, the defendants engaged in a mortgage fraud conspiracy through a company called Premier Mortgage Services (“PMS”). The conspirators targeted properties in low-income areas of New Jersey. After recruiting “straw buyers,” the defendants used a variety of fraudulent documents to make it appear as though the straw buyers possessed far more assets and earned far more income than they actually did.
The defendants then submitted these fraudulent documents as part of mortgage loan applications to financial institutions. Relying on these fraudulent documents, financial institutions provided mortgage loans for the subject properties. The defendants then split the proceeds from the mortgages among themselves and others by using fraudulent settlement statements (“HUD-1s”), which hid the true sources and destinations of the mortgage funds provided by financial institutions. Once the money was deposited in accounts they controlled, the defendants shuttled funds among various other accounts, in amounts greater than $10,000 per transaction. The straw buyers had no means of paying the mortgages on the subject properties, and many of the properties entered into foreclosure proceedings. The co-conspirators and others defrauded financial institutions out of more than $30 million.
The defendants played different roles in the scheme, and those charged include a part owner of PMS (Soto), an attorney who aided the fraud by performing closings on many of the Subject Properties (Rumore), and a paralegal for another attorney who also closed transactions, sometimes from her home (Cohen).
Besides being a part-owner of PMS, Soto also acted as a loan officer on certain PMS mortgage loan applications. Soto took a percentage of PMS’s profits. Soto employed document makers to create false and fraudulent documents in furtherance of the scheme and put mortgage brokers at PMS in contact with these document makers to create other false and fraudulent documents. Soto instructed PMS employees to provide him with loan files that PMS employees believed contained suspicious information, and then personally shepherded these loan files through to funding.
DePaula, Silva, and Arcentales were loan officers at PMS. DePaula, Silva, and Arcentales recruited straw buyers, provided false and fraudulent documents to the straw buyers, and incorporated false and fraudulent documents into loan applications to induce financial institutions to fund mortgage loans. The loan officers profited illegally by receiving a commission from PMS for each mortgage loan that they closed and also profited illegally by diverting portions of the fraudulently obtained mortgage proceeds for themselves, often via shell corporations or nominee bank accounts.
Rodrigo Costa created false and fraudulent documents, including Verifications of Deposit (“VODs”) and Verifications of Rent (“VORs”). Other defendants, including DePaula and Silva, then submitted Costa’s fraudulent documents to support the fraudulent mortgage loan applications of various straw buyers. For his participation, Costa received a portion of the illicit proceeds from the mortgages obtained on certain Subject Properties.
Michael Rumore was an attorney licensed in the state of New Jersey. Rumore served as the settlement agent on mortgage loans brokered by DePaula, Silva, and Soto for various subject properties. Rumore used his status as an attorney to further the fraudulent scheme, including by convening closings, receiving funds from lenders, and preparing HUD-1s that purported to reflect the sources and destinations of funds for mortgages on subject properties—when in fact, the HUD-1s were neither true nor accurate. At or following the closings, Rumore disbursed mortgage loan proceeds directly to PMS, Soto, DePaula, and Silva, including amounts not reflected on the HUD-1s. Rumore received a fee for each fraudulent loan in which he participated.
Antonio Pimenta owned and managed Kelmar Construction Co. (“Kelmar”). Kelmar built properties that were then sold to straw buyers utilizing fraudulent mortgage loans brokered by Arcentales.
The criminal complaints charge each of the defendants with one count of bank fraud conspiracy, punishable by a maximum potential penalty of 30 years in prison and a fine of $1,000,000. Cohen, Pimenta, Soto, DePaula, Silva, and Rumore are also each charged with one count of money laundering, punishable by a maximum penalty of 10 years in prison and a fine of either $250,000 or twice the loss caused by the offense or twice the gain derived from the offense.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward, and special agents of the IRS-Criminal Investigation, under the direction of Special Agent in Charge Victor W. Lessoff, for the investigation leading to today’s charges. Fishman also thanked the Social Security Administration-Office of Inspector General, under the direction of Special Agent in Charge Edward Ryan, for their participation in the investigation.
The government is represented by Assistant U.S. Attorneys Rahul Agarwal of the U.S. Attorney’s Office General Crimes Unit and Zach Intrater of the Economic Crimes Unit in Newark.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. 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.
The charge and allegations contained in the complaints against each defendant are merely accusations, and the defendants are considered innocent unless and until proven guilty.
Soto: Jeff Smith Esq., of Teaneck, N.J.
Cohen: Brian Daly Esq., of Middletown, N.J.
Arcentales: Ronald Ricci Esq., Woodland Park, N.J.
Pimenta: Linda Foster Esq., Assistant Federal Public Defender, Newark