Kansas man pleads guilty in $12 million mortgage fraud
Friday, October 10, 2008 at 8:55AM In the following press release Marietta Parker, Acting U.S. Attorney for the District of Kansas announced that David Kostelec, 53 Leawood, Kan., has pleaded guilty to charges he and other conspirators fraudulently obtained more than $12 million in home loans, Acting U.S. Attorney Marietta Parker announced today. In his plea, Kostelec admitted that from July 20, 2002, through Oct. 14,2005, he and others conspired to defraud lenders by submitting fraudulent loan applications and false real estate appraisals and attempted to conceal the crimes by laundering the money through accounts at various banks.
Kostelec submitted false and fraudulent appraisal reports to lenders containing inflated property values and forged signatures of licensed appraisers. Conspirators stole the identities of licensed appraisers by searching the Internetfor information including the appraisers’ state license numbers.
After closing, the conspirators used straw entities including Alexandra Enterprises and Hyde Park development to receive the money from escrow companies. Then they moved the money to personal accounts.
Kostelec admitted:
- In July 2002, he submitted a fraudulent appraisal inflating the value of a house in the 1800 block of Timber Valley Drive in Linn Valley, Kan.
- In April 2003, he submitted a false loan application in his son’s name claiming his son was the owner of a house in the 1600 block of N. 24th Street in Kansas City, Kan. In fact, Andrew Kostelec lived with David Kostelec at another address.
- In July 2004, he fraudulently caused a lender to deposit $57,101 into an escrow account in Kansas for the purchase of a house in the 2000 block of Cypress in Kansas City, Kan.
- In October 2005, he submitted a loan application falsely stating that the borrower had an income $15,221 a month. In fact, the borrower made significantly less and lived mainly on Social Security retirement benefits.
- In January 2008 he falsely stated he had power of attorney to obtain a loan in his son’s name for $575,000 for the purchase of real estate properties in Kansas City, Mo., and Miami, Fla.
Sentencing is set for Feb. 2, 2009. The crimes to which he pleaded guilty carry the following penalties:
- Conspiracy: A maximum penalty of 5 years in federal prison and a fine up to $250,000.
- Wire fraud: A maximum penalty of 20 years and a fine up to $250,000.
- False statements on a loan application: A maximum penalty of 30 years and a fine up to $1 million.
- Identity theft: A mandatory 2 years in federal prison consecutive to other terms of imprisonment.
The Internal Revenue Service - Criminal Investigation and Housing and Urban Development - Office of Inspector General worked on the case. Acting U.S. Attorney Marietta Parker is prosecuting.
The Editor - Ian Shuter - ACFE, DMS
In the following press release Marietta Parker, Acting US Attorney for the District of Kansas announced today that David Kostelec, 54, Leawood, Kan., has been sentenced to 154 months in federal prison for leading a scheme to fraudulently obtain more than $12 million in home loans. He was also ordered to pay more than $1.3 million in restitution.
Kostelec pleaded guilty in October to one count of conspiracy to commit wire fraud and money laundering, one count of wire fraud, one count of providing false information to lenders and one count of aggravated identity theft.
In his plea, Kostelec admitted that from July 20, 2002, through Oct. 14,2005, he and others conspired to defraud lenders by submitting fraudulent loan applications and false real estate appraisals and attempted to conceal the crimes by laundering the money through accounts at various banks.
Kostelec submitted false and fraudulent appraisal reports to lenders containing inflated property values and forged signatures of licensed appraisers. Conspirators stole the identities of licensed appraisers by searching the Internet for information including the appraisers’ state licensenumbers.
After closing, the conspirators used straw entities including Alexandra Enterprises and Hyde Park Development to receive the money from escrow companies. Then they moved the money to personal accounts.
Parker, who prosecuted the case, commended the Internal Revenue Service - Criminal Investigation and Housing and Urban Development - Office of Inspector General for their work on the case.
The Editor - Ian Shuter - ACFE, DMS
In the following press release Marietta Parker, Acting U.S. Attorney for the District of Kansas announced that Joseph Balano, 51, Kansas City, Mo., has been sentenced to 15 months in federal prison for mortgage fraud. He also was ordered to pay$454,945 in restitution.
In December 2008, Balano pleaded guilty to one count of conspiracy tocommit wire fraud and money laundering. In his plea, Balano admitted he conspired with co-defendant David Kostelec and others to submit fraudulent loan applications and property appraisals to lenders. As a result of the conspiracy, lenders made more than $12.5 million worth of mortgage loans based on false information. Balano and other conspirators laundered the proceeds of the fraudulent loans by moving the money into accounts controlled by Balano and others.
On Jan. 29, 2003, for instance, Balano submitted to lenders a property appraisal fraudulently inflating the value of a house in the 4000 block of Harrison in Kansas City, Mo. On April 8, 2003, he submitted documents fraudulently representing that the house was subject to a first mortgage of $98,771. As a result, the conspirators obtained $105,523 from National City Mortgage.
Co-defendant David Kostelec was sentenced in February 2009 to 154 months in federal prison. Co-defendants Alexandra Davidson, Craig Long and Gregory Stevenson have pleaded guilty and are awaiting sentencing.
Prosecutors cited Balano’s cooperation in the investigation when they recommended a sentence of 15 to 21 months.
Parker, who prosecuted the case, commended the Internal Revenue Service - Criminal Investigation and Housing and Urban Development - Office of Inspector General for their work on the case.
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