In the following press release Maricopa County Attorney Andrew Thomas announced that Jeffrey Allen Herald (DOB 6/26/58) of Phoenix has been indicted on three counts related to providing unlicensed legal and mortgage loan services to victim clients. Herald was indicted on two counts of Fraudulent Schemes and Artifices, a class 2 felony, and one count of Theft, a class 2 felony. The indictment contains nine different aliases for the defendant.

It is alleged that between February 1, 2005 and October 1, 2007, Herald presented himself as either an attorney or a mortgage loan originator to as many as 21 different clients and perhaps more. The total dollar loss incurred to these clients during this period is $313,957. The victims, residents of Arizona, Florida, California, Texas, New Mexico, Washington, Hawaii and Utah, paid the defendant legal and mortgage loan fees for services that he was unable or unwilling to fulfill.

The defendant billed and received “refundable” origination fees for residential and commercial real estate loans, construction loans, small business loans, and other types of loans, including re-financing, which never materialized.

In 2006, the State Bar of Arizona had admonished Herald for practicing law without a license. Presumably, that is when he changed the focus of Herald & Herald Associates, which operates out of Phoenix office location, from a legal services provider to a loan origination business. He was arrested and booked Friday morning.

“White-collar crime cannot be ignored,” said Thomas. “Defendants in these cases use deception instead of force, but they are serious crimes deserving proper penalties.”

In the following press release from Phoenix, AZ United States Attorney Daniel G. Knauss and HUD Inspector General Kenneth M. Donohue announced that six individuals have been indicted for conspiracy and separate counts of mail and wire fraud violations in connection with the U.S. Department of Housing and Urban Development (HUD) “Pre-Foreclosure” sale program.

The charged defendants are:
• Trudy M. Peters, 43, of Peoria, Az, formerly an Escrow Officer for Ticor Title Agency, Phoenix, Az.
• John M. Soto, 35, of Moreno Valley, Ca., formerly a Service Representative for Wells Fargo Home Mortgage
• Larry M. Smith, 28, of Rancho Cucamonga, Ca, formerly a Service Representative, Wells Fargo Home Mortgage
• Maria A. Felix, 47, of Glendale, Az, formerly a Housing Counselor for Acorn Housing, Phoenix.
• Tony S. Vasquez, 54, of Tolleson, Az, formerly a Housing Counselor for Chicanos Por La Causa, Phoenix, Az.

Also listed in the indictment as an un-indicted co-conspirator is Edward Carrillo, Jr., currently serving a five year prison sentence arising from a state conviction for Fraudulent Schemes and Artifices. He ran a company called Sahara Investments.

According to the charging documents filed in the District of Arizona, the defendants conspired with Carrillo, doing business as Sahara Investments, Scottsdale, Az, to purchase and sell 65 properties in the Phoenix area using the HUD “Pre-Foreclosure” sale program. The program was designed to reduce foreclosures cost to the government by allowing homeowners to sell their homes for less than what they owed on the mortgage, often referred to as a “short sale.” The “Pre-Foreclosure” sale program had strict guidelines among which required that property owners receive homeowner counseling, and that an independent appraisal had to establish the market value of the home.

The indictment alleges that homeowner counseling certifications were falsely created by Felix and Vasquez to show that other housing options were discussed with the owners in accordance with the program regulations. Another allegation is that appraisals were fraudulently created or altered to allow Carrillo to purchase the homes for less than the actual market value of the homes. The properties were normally sold the same day they were purchased for thousands more than Carrillo paid for the homes. Felix and Vasquez were paid thousands of dollars for their services by Carrillo according to the indictment.

The charging document further alleges that Soto and Smith as employees of Wells Fargo Home Mortgage, accepted thousands of dollars from Carrillo for the referral to him of homeowners whose mortgages were in default. In addition, the two men replaced independent appraisals that had been ordered by Wells Fargo with appraisals that had been fraudulently altered and sent to them by Carrillo.

The charging document also states that Peters, as an Escrow Officer for Ticor Title, failed to disclose on the real estate settlement statements that second and third mortgages were encumbering the properties. Peters also received thousands of dollars from Carrillo for her part in the conspiracy.

The following Arizona properties mentioned in the indictment are:
12202 W. Corrine Drive, El Mirage,
1277 W. Linda Lane, Chandler
1542 W. Carol Avenue, Mesa
10938 E. Catalina Avenue, Mesa
17807 N. 9^th Avenue, Phoenix
4031 N. 8oth Avenue, Phoenix
17807 N. 9^th Avenue, Phoenix
10868 W. Devonshire Avenue, Phoenix

“HUD paid $1,878,163 in claims from the FHA insurance fund as a direct result of this fraudulent scheme and conspiracy,” said HUD Inspector General Kenneth M. Donohue. Inspector General Donohue added, “This type of mortgage fraud undermines all of the professionals that work hard to keep the real estate industry honest and fair. We will continue to aggressively pursue real estate fraud cases in Arizona.”

An indictment is simply the method by which a person is charged with criminal activity and raises no inference of guilt. An individual is presumed innocent until competent evidence is presented to a jury that establishes guilt beyond a reasonable doubt.

The investigation preceding the indictment was conducted by Special Agent James Carrieres of the HUD Office of Inspector General, Office of Investigations. The prosecution is being handled by Richard I. Mesh, Assistant United States Attorney, District of Arizona, Phoenix, Arizona.

Federal Court records show that on February 2, 2007 First Magnus Financial Corporation filed a civil complaint in the Nevada District Court against a number of defendants, the key ones have been named below.

Tyson Rondeau a former loan officer with First Magnus
Paul Hill Sr. and Paul Hill II and Accurate Accounting and Innovative Tax Service, 28235 Southfield Road, Lathrup Village, Michigan 48076
Brian Haneline who owned ACE APPRAISALS CORPORATION, 1450 W. Horizon Ridge Parkway, Suite B-304, Henderson, Nevada 89012
Cordebella Los Gatos Trust
Rafik, Inc
Cara Maria Gudelis owner of Options Are Us.
7540 Key Royale Trust
Michael Mullins
Panther Investments
Dwayne R. Smith
Rudolph Straat
Emmett Garfield Traylor
Lawyers Title of Nevada, Inc (accused of negligence in the closing of one property)

In the complaint FMFC alleges that defendants conducted a massive scheme of fraudulent real estate transactions involving residential properties located in Las Vegas, Nevada and Greater Metropolitan Phoenix, Arizona. The fraudulent investment scheme used straw buyers to purchase residential property in Nevada and Arizona, often from other members of the fraudulent investment scheme, with the intent to lease the properties for a period of time before selling the properties and splitting the profits among the members of the fraudulent investment scheme.

The members of the fraudulent investment scheme not only set up the residential mortgage transactions but assisted the straw buyer in submitting the necessary paperwork and information, often fraudulent, to convince FMFC to loan the straw buyer money to purchase the property. One straw buyer would often purchase multiple properties.

After the straw buyer signed the loan agreement and deed of trust necessary to complete the residential mortgage transaction, the property would be transferred, without notifying FMFC, to a trust whose Trustee was involved in the fraudulent investment scheme.

The fraudulent investment scheme then called for the Trustee to lease the properties to tenants who were given an option to buy the property. To entice the tenants, or even the buyers, the members of the fraudulent investment scheme promised them money and even cars. Pursuant to the fraudulent investment scheme, the Trustee was to sell the property, often to another straw buyer/member of the fraudulent investment scheme, and split the profits with other members of the fraudulent investment scheme.

The members of the fraudulent investment scheme, however, could not always deliver tenants or purchasers and several of the straw buyers were stuck with properties for which they could not pay the loan obligations.

As a result, several of the straw buyers defaulted on their loan obligations, forcing FMFC to foreclose on the property in an attempt to mitigate its losses through the foreclosure sale. Because the loans were issued fraudulently, and at times at inflated purchase prices, FMFC incurred significant losses due to the costs of remedying the fraud. FMFC has been damaged in an amount in excess of $925,000

Fraudulent information included fraudulent verifications of deposit, fraudulent letters concerning the source of the straw buyer’s income, fraudulent verifications of employment and fraudulent applications, which included the straw buyer’s intent to occupy the residence, the straw buyer’s current residence and the straw buyer’s liabilities.

Properties mentioned in the indictment are:

7540 Key Royale Court, Las Vegas, NV
5720 Mount Athos, North Las Vegas, NV
22226 Los Gatos, Sun City West, AZ

No date for trial has yet been set. Please click here to read the Civil Complaint.

On February 7, 2007 the Arizona Department of Financial Institutions announced that Annette Marie Damico and Margie Lynn Means were subject of removal orders.

In July 2005 Ms. Damico pleaded guilty in the Maricopa County Supreme Court to felony charges relating to the theft of mortgage payments which were under her control as an employee of the Security Title Agency. As a result of the convictions the Arizona Department of Financial Institutions issued the removal order which prohibits Damico from taking a position in an Financial Institution.

In November 2004 Means was convicted of felony offences in the Maricopa County Supreme Court after an internal investigation found that she had diverted over $500,000 dollars from escrow accounts to her daughter and herself. In addition she influenced the approval of a loan for her unemployed daughter. As a result of the convictions the Arizona Department of Financial Institutions issued the removal order which prohibits Means from taking a position in an Financial Institution

Please click here to read the Damico removal order.                        Please click here to read the Means removal order.

According to court records found by this blog, on December 12, 2006 Oak Street Mortgage filed a civil complaint in the Hamilton Superior Court which alleges fraud against American Mortgage Specialists, a mortgage broker in Mesa, Arizona.

The complaint alleges that American Mortgage Specialists brokered a loan to Oak Street for the purchase of a property at 1930 South Montezuma Avenue, Tucson, AZ 85711 and that the loan application contained false information about occupancy and failed to disclose other mortgage loans. The borrower is alleged to have never taken occupancy of the property and considers it to be an investment property.

In addition it alleges that they were supplied with a fraudulent appraisal which valued the property at $265,000 in May 2005. A subsequent appraisal in January 2006 valued the property at no more than $172,000.

The case is still progressing through the court and American Mortgage Specialists are due to file an answer to the complaint by February 6, 2007. Click here to read the complaint.

Arizona State Legislature Senator Jay Tibshraeny has introduced a bill that will, if approved, make Arizona the third state, after Georgia and Colorado, to recently make mortgage fraud a felony.

Senate Bill 1221 was first read on 1/22/2007 and is now in committee. The bill will make it a Class 4 Felony to receive money or cause false documents (misstatement, misrepresentation or ommission) to be recorded by a county recorder.

Click here to read the bill which is only two pages long. We will keep you informed of its progress.

In a separate annoucement the Arizona Department of Financial Institutions and the Arizona Department of Real Estate said that they are creating a task force to deal with mortgage fraud and in particular cash back fraud in Arizona, which saw rapid growth followed by a rapid slow down in property sales and prices.

In the following press release Arizona Attorney General Terry Goddard  announced on October 26, 2006 that his office has filed a consumer and racketeering lawsuit against Gregory Allen Best of Phoenix for attempting to defraud several Phoenix residents out of their homes.

In 2003, Best began contacting residents of the South Country neighborhood, located south of the Salt River between 7th and 16th Streets, to discuss an area plan adopted by the Phoenix City Council that included the neighborhood. The plan, called the Rio Salado Beyond the Banks Area Plan, provides guidance on redevelopment for South Phoenix.

According to the complaint filed in Maricopa County Superior Court, Best told residents in the South Country neighborhood that Phoenix would most likely condemn their properties using eminent domain. He convinced more than three dozen neighbors to sign an “Exclusive Purchase Option Contract” with him to protect their property values. That contract provided Best with an option to purchase the properties for a stated price. Best assured the neighbors he would not exercise this option.

Contrary to Best’s assertions, the City of Phoenix did not have any plans to condemn the South Country properties. Nonetheless, Best began exercising his options to purchase properties, and in some cases filed lawsuits to enforce the contracts.

The complaint alleges that Best:
Misrepresented the City of Phoenix’s intentions regarding redevelopment plans.
Misrepresented his intentions about exercising his option to purchase when the neighbors signed contracts with him.
Engaged in acts constituting theft, and intentional or reckless false statements or publications concerning land for sale.

The Attorney General’s Office is asking the Maricopa County Superior Court to:
Require Best to return to all victims any money or property acquired through deceptive practices.
Require Best to pay damages to anyone harmed in this scheme.
Forfeit any property Best acquired from proceeds of this scheme.
Impose a $10,000 penalty for each violation of the Arizona Consumer Fraud Act.

Click here to read the press release

In the following press release the US DOJ reported that a federal grand jury in Phoenix, Arizona returned a 60 count indictment against James J. Rose, 45, of Phoenix, Arizona for violations which included Fraudulent Use of Identification Documents, Use of Counterfeit Access Devices, Mail Fraud, Wire Fraud, Conspiracy to Commit Money Laundering, Promotional Money Laundering, Concealment and Disguise of Source of Funds, Monetary Transactions in Excess of $ 10,000 and False Statements on Loan and Credit Applications.

Malcolm D. Newton , 47, of Maricopa, Arizona was also indicted on 17 counts of Conspiracy to Commit Money Laundering, Promotional Money Laundering, Concealment and Disguise of Source of Funds and False Statements on Loan and Credit applications.

U.S. Attorney Paul K. Charlton said, “Identity theft is one of the most challenging and perplexing issues of the Information Age, because any one of us could find ourselves a victim of this offense. The cost in time and money to rectify the damage caused by identity thieves can be extraordinary. This indictment reflects an aggressive attempt to obtain hundreds of false identities, with enormous consequences for unknowing citizens.”

The indictment alleges that Rose was the organizer and leader of the scheme to defraud. During the early 1990’s Rose owned a credit reporting company in California called American Mortgage Services, Inc. (AMS). Mortgage brokers used the services of AMS to obtain credit reports for their customers. Rose retained credit reports, or copies of credit reports over the years. Rose subsequently used social security numbers contained in these credit reports to establish fictitious identities. The indictment alleges Newton assisted Rose in executing the scheme to defraud after Newton moved to Arizona in 2001 to work with Rose.

The indictment further alleges that Rose with the help of others established credit histories for the fictitious persons by creating false businesses to establish credit accounts for the fictitious persons and to establish an employment history. It is alleged that Rose then reported the fictitious person’s credit histories to credit reporting bureaus Experian, TransUnion and Equifax. According to the indictment Rose applied for and obtained credit cards in the names of these fictitious persons utilizing this fabricated credit history.

In all, the indictment indicates Rose used over 200 addresses in 14 states to aid in establishing credit histories, applying for credit cards in the mail, establishing merchant accounts and bank accounts. Allegedly Rose opened merchant and business bank accounts in the names of fictitious businesses and persons. Rose rented business suites and apartments in several states to give legitimacy to the fictitious businesses and persons. Rose then utilized these business accounts to pay the expenses of his operation, to conceal funds moving money between accounts, and ultimately to obtain money for his own use. By having a merchant bank account, Rose was able to obtain a credit card machine, which he would allegedly use to swipe fictitious individuals credit cards for fictitious purchases. The credit card issuer would then credit Rose’s merchant account.

The investigation preceding the indictment was conducted by special agents of the Criminal Investigation Division at the Internal Revenue Service. The prosecution is being handled by Michelle Hamilton-Burns, Assistant U.S. Attorney, District of Arizona, Phoenix, and Julie Halferty, Special Assistant U.S. Attorney, District of Arizona, Phoenix.