Four Plead Guilty in Million-Dollar Bank Bribery Case
SAN DIEGO—Israel Hechter, the owner of San Diego-based mortgage investment firms Ocean 18, LLC, and Note Tracker Corporation, admitted in federal court today that he paid $1 million in bribes to bank insiders at J.P. Morgan Chase Bank, GMAC Mortgage, LLC, and National City Bank.
According to his plea agreement, in exchange for the bribes, the bankers arranged for Hechter to win bids to purchase mortgage loans issued by the banks and sold on the secondary market. In order to make sure that Hechter’s bids won, the bankers corrupted the process by altering bids, rejecting other bids, and erasing or ignoring bids from qualified competitors. The bankers also rigged the bidding by supplying Hechter with confidential information about prices and competing bids.
Assistant U.S. Attorney Phillip L.B. Halpern noted in court today that it was essential that the Department of Justice police the $10 trillion secondary mortgage market to ensure that there was a level playing field for all investors. “Individuals and corrupt bank employees who attempt to tilt this playing field for their own advantage cannot be tolerated,” he told the court.
Hechter’s brother, Amir Hechter, and his business associate, Jack Prober, pleaded guilty on Wednesday to participating in the conspiracy. Both Prober and Amir Hechter admitted writing personal checks to the bankers in order to assist the bankers in evading taxes on the illegal income. Israel and Amir’s father, Zeev Hechter, also admitted participating in the conspiracy. In entering his guilty plea on Tuesday, Zeev Hechter admitted hand-delivering approximately $330,000 in cash to GMAC banker Robert Moreno. In addition to meeting Zeev Hechter on New York City street corners, Moreno met him at Hechter’s car wash where the conspirators “laundered” the bribes. Each time they met, Zeev Hechter handed Moreno a bag containing tens of thousands of dollars in cash.
Moreno was arrested on July 15, 2014, for his alleged role in the conspiracy. As alleged in his charging documents, Moreno accepted hundreds of thousands of dollars in bribes in return for steering GMAC mortgages to Hechter’s company. After this relationship developed, Moreno allegedly used his position at the bank to help Hechter win bids to purchase mortgages – which Hechter previously had trouble winning. Moreno’s case is pending before U.S. District Judge Roger T. Benitez. A trial date has not been set.
According to his plea agreement, Israel Hechter and his coconspirators attempted to cover up the bribes by pretending that they were legitimate “commissions” unrelated to the bankers’ positions with the banks, using a phony “Consulting Agreement,” a sham business and a corresponding bank account to disguise the bribes.
Many of the mortgages at issue were non-performing or distressed second mortgages. Israel Hechter pooled the loans and sold share of the pools to investors, usually friends and family members including Zeev Hechter, Amir Hechter, and Jack Prober, each of whom invested in the pools. After purchase, Ocean 18, LLC would service the loans and collect monthly payments from the borrowers, or would initiate foreclosure proceedings when the borrowers defaulted. The investors made money when borrowers made payments, sold the properties, or after foreclosure and re-sale.
The mortgages at issue were purchased on the secondary market, after the banks had issued funds to homeowner borrowers. Secondary purchasers of mortgages provide primary lenders with additional capital and reduced credit risk, and in turn provide borrowers with greater access to mortgage loans. The secondary mortgage market in the United States exceeds $10 trillion.
Each of the four guilty pleas were taken before U.S Magistrate Judge Mitchell D. Dembin. The defendants are scheduled to be sentenced by Judge Benitez on January 5, 2015, at 9 a.m.
“People who think they can manipulate and bribe their way into the winner’s circle should take note: The integrity of our financial system is not for sale,” said U.S. Attorney Laura Duffy. “This behavior is criminal, and there are consequences.”
“The defendants in this case knowingly engaged in a pattern of corruption by paying hundreds of thousands of dollars in bribes to those responsible for ensuring the integrity of financial transactions,” said FBI Acting Special Agent in Charge, Robert Howe. “Today’s conviction sends a clear message that the FBI will not allow greed and corruption to undermine our financial markets. The FBI will continue to pursue these cases to ensure confidence and trust in our financial markets.”
“Professionals, including bankers who line their pockets with the payment of illicit bribes, should know they will not go undetected and will be held accountable,” said IRS Criminal Investigation’s Special Agent in Charge Erick Martinez. “IRS Criminal Investigation is working hard to ensure that all forms of income are taxed, including income from illegal sources.”
The swift resolution of these bribery and tax charges was the result of coordinated investigations by the Federal Bureau of Investigation, the Federal Housing Finance Agency – Office of Inspector General, and Internal Revenue Service, Criminal Investigation.
DEFENDANTS PLEADING GUILTY
|Israel Hechter||Age: 47||San Diego, CA|
|Amir Hechter||Age: 42||San Diego, CA|
|Jack Prober||Age: 56||La Jolla, CA|
|Zeev Hechter||Age: 68||Aventura, FL|
Conspiracy to commit bank bribery and tax evasion, in violation of 18 U.S.C. § 371.
Maximum Penalties: Five years in prison, $250,000 fine or twice the pecuniary gain or loss resulting from the offense, $100 special assessment, restitution.
DEFENDANT FACING CHARGES
|Robert Moreno||Age: 42||Tempe, AZ|
- Bank bribery, in violation of 18 U.S.C. § 215
- Maximum Penalties: 30 years in prison, $1,000,0000 fine or three times the value of the bribe, $100 special assessment, restitution
- Federal Bureau of Investigation
- Federal Housing Finance Agency – Office of Inspector General
- Internal Revenue Service, Criminal Investigation
*As to defendant Robert Moreno, the public is reminded that the charges are not evidence that the defendant committed the crime charged. The defendant is presumed innocent until the United States meets its burden in court of proving guilt beyond a reasonable doubt.