Former CPA for Crisp & Cole Real Estate, Wife Plead Guilty in Mortgage Fraud Schemes

FRESNO, CA—United States Benjamin B. Wagner announced today that KEVIN PATRICK SLUGA, 60, and his wife, LESLIE SLUGA, 57, of Bakersfield, pleaded guilty today before U.S. District Judge Oliver W. Wanger, in Fresno, to four counts of wire fraud and two counts of wire fraud, respectively. As part of their respective plea agreements, KEVIN SLUGA and LESLIE SLUGA have agreed to cooperate in the government’s ongoing investigation.

This case is the product of an extensive investigation by the Federal Bureau of Investigation.

According to Assistant United States Attorneys Sheila K. Oberto, Kirk E. Sherriff, and Stanley A. Boone, who are prosecuting the case, KEVIN SLUGA is a Certified Public Accountant (CPA) who provided corporate tax and accounting services to Crisp & Cole Real Estate and Tower Lending, a mortgage company affiliated with Crisp & Cole and owned by Crisp & Cole’s owners. KEVIN SLUGA prepared tax returns for a Crisp & Cole owner as well as for various Crisp & Cole employees. KEVIN SLUGA and LESLIE SLUGA admitted in their plea agreements, that they, along with certain individuals at Crisp & Cole and Tower Lending, and other individuals, executed schemes to defraud mortgage lending institutions by causing materially false and fraudulent statements to be submitted in mortgage loan applications and related documents to obtain loans from lenders for property purchases.

In pleading guilty, KEVIN SLUGA admitted that during the period from January 2005, to January 2007, he prepared verification of employment letters (CPA letters) that contained false information to assist the owners of Crisp & Cole, and others, in a scheme to obtain mortgage loans from lenders to purchase property, using straw buyers and other illegal means. The false CPA letters were submitted to lenders in support of applications for mortgage loans to be used to finance purchases of properties. The CPA letters included material misstatements regarding the borrowers’ employment status, occupation, and experience as a landlord, among other material misstatements or omissions. For example, KEVIN SLUGA would at times state that the borrower was employed at California Business Solutions, also known as Comprehensive Business Solutions (CBS), in a specific capacity for a certain period of time, when in truth and in fact, the borrower had either never worked at CBS or had not been employed in such a capacity at CBS. Based on his experience as a CPA, KEVIN SLUGA knew and expected that the false and fraudulent CPA letters would be submitted to the lenders in response to the lenders’ request for such verification, and that the lenders would reasonably rely on such misstatements and omissions in approving the loans. The lenders then distributed the mortgage loan funds to escrow companies or other companies, often across state lines.

LESLIE SLUGA admitted that from April 2005, through May 2006, at the direction of one of the owners of Crisp & Cole, she purchased three properties with a total purchase value at the time of approximately $2.5 million, and obtained loans to finance such purchases. In almost all of the loan applications, she knowingly made material misstatements and omitted relevant and material information. LESLIE SLUGA admitted that she knew and expected that the lenders would reasonably rely on such misstatements and omissions in approving the loans. LESLIE SLUGA’s misstatements and omissions included misstatements concerning her employer, the number of years employed, and her position and title with the employer; misstatements regarding her income and her outstanding liabilities (including her liabilities with respect to other properties), and misstatements that she would use certain properties as owner-occupied residences when in fact she had no intent to reside in the properties.

KEVIN SLUGA, LESLIE SLUGA, and others involved in these schemes committed these acts to deceive lending institutions into funding mortgage loans on the basis of the false information. A number of the properties purchased with the loan proceeds were subsequently foreclosed upon after loan payments were not made when due.

U.S. Attorney Wagner stated, “The United States Attorney’s Office will vigorously pursue those responsible for mortgage fraud schemes in this district. Schemes such as the ones committed in this case have contributed to the devastation in real estate and financial markets.”

To further the prosecution of mortgage fraud cases arising out of the southern half of the Central Valley, in 2009 the U.S. Attorney’s Office and the FBI created a Mortgage Fraud Task Force based in Fresno, comprising both federal and local law enforcement agents and prosecutors.

KEVIN SLUGA and LESLIE SLUGA are scheduled to be sentenced by Judge Wanger on July 12, 2010, at 1:30 p.m. The maximum statutory penalty on the wire fraud charge is 20 years in prison, and a criminal fine of $250,000. The actual sentence, however, will be determined at the discretion of the court after consideration of the Federal Sentencing Guidelines, which take into account a number of variables and any applicable statutory sentencing factors.