President and Vice President of Corporate Funding Financial of America Sentenced to Prison

United States Attorney Karen Hewitt announced that Richard Habib and Luis Madrid were sentenced today in U.S. District Court in San Diego for their roles in connection with a scheme to defraud investors through their real estate finance and development company, Corporate Funding Financial of America, Inc. (“CFFA”). U.S. District Court Judge Marilyn L. Huff sentenced Habib to serve 46 months in federal custody and three years of supervised release, and Madrid to serve 96 months in federal custody and three years of supervised release.

Pursuant to their plea agreements with the United States, Habib and Madrid plead guilty to conspiring to commit mail and wire fraud and one count of filing a false tax return.

According to the plea agreement and other court records, beginning in July 2001, Habib and Madrid represented CFFA to the public and potential investors as a successful real estate investment company that had the capacity to develop profitable commercial and residential projects, including the “Finestra Lofts” development in the Little Italy section of downtown San Diego. Habib and Madrid offered investors secured and unsecured promissory notes with returns ranging from 14 percent to 96 percent per annum. Habib admitted that: (a) he and Madrid misled investors about the success of CFFA as a real estate development company; (b) a large percentage of investors’ funds were not invested in CFFA’s real estate projects as represented to investors; (c) CFFA was paying the high rates of returns to investors with new money and not profits from the projects; (d) subordination agreements relating to Deeds of Trust that had been executed in favor of investors were forged; and (e) investor money was diverted for personal use. Habib admitted to defrauding investors of up to $20 million; Madrid admitted to defrauding investors of up to $50 million.

Both Habib and Madrid admitted that they made false statements on their tax returns by not reporting all of the money they received from CFFA on their personal tax returns. Habib failed to report income he received from CFFA on his 2003, 2004, and 2005 tax returns and admitted that the tax loss to the United States from his false statements was $293,108.00. Madrid failed to report income he received from CFFA on his 2005 tax return, and admitted that the tax loss to the United States from his false statements was $89,963.93.

The restitution hearing for both Habib and Madrid is scheduled for May 17, 2010, before United States District Court Judge Marilyn L. Huff.

DEFENDANTS
Richard Habib Case Number: 09cr2729H
Luis Madrid Case Number: 09cr3139H

SUMMARY OF CHARGES
Count 1: Title 18, United States Code, Section 371- Conspiracy
Counts 2 Title 26, United States Code, Section 7206(1) - Filing False Tax Return

AGENCIES
Federal Bureau of Investigation Internal Revenue Service - Criminal Investigation