Articles Posted in White Collar Criminal Defense

Continuing the series on Mr. Behr’s mortgage fraud prosecutions in Florida:

18 U.S.C. §1014 Loan and credit applications generally; renewals and discounts; crop insurance
Under this federal statute, the government must prove beyond a reasonable doubt (1) a person knowingly made any material misrepresentations (2) directly to any specific federally insured institutions in the business of extending credit (3) for the purpose of influencing the institution’s actions.29 In United States v. Dominguez, 226 F.3d 1235 (11th Cir. 2000) the defendant faced multiple counts involving participation in a cocaine distribution organization and a mortgage fraud scheme.30 The basis of Dominguez’ assumed fraudulent mortgage scheme was an overestimation of his legitimate income by about $40,000.00 on federal tax returns and mortgage loan applications submitted to federally insured banks.31
Dominguez’ argued on appeal “…the district court erred by denying his motion to sever the drug-related charges and mortgage fraud-related charges…”32 The court found his argument to be without merit because it believed the concealment of his income from the “…the drug activity was the motive for the mortgage fraud.”33 Moreover, the court included the government’s closing argument in a footnote to find the two sets of charges were properly joined.34 The government claimed the defendant was falsifying his income just enough to be believable but not enough to raise any suspicion for a person “…four years out of law school.”35

Continuing in Attorney Behr’s mortgage fraud prosecutions series:

18 U.S.C. § 1010 Department of Housing and Urban Development and Federal Housing Administration transactions
&
18 U.S.C. § 1006 Federal credit institution entries, reports and transactions
In United States v. Mclean, 131 Fed.Appx. 34 (4th Cir. 2005), Mclean was convicted under 18 U.S.C. §1010 for making material misrepresentations to “…any person, partnership, association, or corporation…” in order to obtain “…any loan or advance of credit…” with the intention of such loan or advance of credit to be “…offered to or accepted by the Department of Housing and Urban Development…” for mortgage loans insured by the department.17 The defendant was also convicted under 18 U.S.C. §1006 for material misrepresentations made to HUD and the Federal Housing Administration (FHA) because he was “…an officer, agent or employee of or connected in any capacity with…” a federal credit institution.18
McLean’s mortgage company was a qualified FHA lender and “…had the authority to approve mortgage loans for federal FHA insurance. 19 “An FHA-insured mortgage loan, in turn, is ‘readily saleable’ on the secondary mortgage market.”20 McLean’s company also obtained the proper authorization to be a Fannie Mae lender giving the company the power to “…originate a mortgage loan with the borrower and then Fannie Mae would immediately buy the mortgage on the secondary market without doing its own underwriting evaluation.”21
McLean’s company formed a subsidiary company for the purpose of building modular homes which was financed by the parent mortgage company. Efforts were made to collect the proper funding for the construction of the modular homes through construction mortgage loan notes allegedly signed by investors and officers of the parent mortgage company.22 “None of the individuals signing these documents ever acquired or possessed any ownership interest in the properties listed on the notes.”23
“Eventually, Fannie Mae detected irregularities in FBMC’s underwriting practices and conducted an audit of the loans it had purchased.”24 Upon visual inspection of the properties by Fannie Mae “…revealed that the many of the lots were either vacant or contained a partially completed house.”25 Furthermore, a portion of the lots secured with mortgage loans previously purchased by Fannie Mae were up for sale.26 McLean believed “…Fannie Mae would purchase construction loans, which disburse funds in piecemeal fashion as each new phase of construction begins.”27 “Fannie Mae, however, does not purchase construction loans, which FBMC was not authorized to sell.”28

Continuing the series on Mr. Behr’s mortgage fraud prosecutions in Florida:

IV. STATUES
i. Federal
Defendants who find themselves within the prosecutorial jurisdiction of the federal government are not indicted under a particular mortgage fraud statute, but are prosecuted under a number of different statutes. Assistant United States Attorneys (ASA) apply one or more of the statutes to activity considered fraudulent. Usually, the wire fraud and mail fraud statutes are effectuated the most. An ASA may also use a conspiracy theory to prosecute mortgage fraud under either statute. However, specific statutes such as the wire and mail statutes themselves appear to take a backseat to the overall scheme and persons or entities defrauded by defendants.

ASA’s are specifically guided by a policy statement of when to initiate legal action which is conspicuously placed at the beginning of the Mail Fraud and Wire Fraud section of the United States Attorney Manuel. In particular the manual states:

Prosecutions of fraud ordinarily should not be undertaken if the scheme employed consists of some isolated transactions between individuals, involving minor loss to the victims, in which case the parties should be left to settle their differences by civil or criminal litigation in the state courts. Serious consideration, however, should be given to the prosecution of any scheme which in its nature is directed to defrauding a class of persons, or the general public, with a substantial pattern of conduct.

Although there is this claimed safety net of policy consideration in place and no specific mortgage fraud statutes in affect, it does not stop the federal government from vigorously prosecuting defendants under the mail, wire or other fraud statutes as exemplified below in various federal cases of what a particular ASA considers to be substantial patterns of behavior.

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Making the first entry today, this series of continual excerpts from a legal paper written by Ralph Behr himself will delve into the court system and its prosecution of mortgage fraud in Florida. Mr. Behr took copious amounts of time and effort to research the topic and provided the following to share online to readers who have the time to read it. Enjoy.

I. INTRODUCTION

a. Why is Florida the ‘epicenter’ of Prosecutions and Investigations?

Statistically, Florida is number one for reported incidences of mortgage fraud and moreover also accounts for twenty-one percent of the overall nation wide occurrences.1 “Florida also has noticeably higher percentages than the other states in: asset and debt misrepresentation on the loan application; Verification of Employment (VOE) fraud; appraisal misrepresentation; and escrow and closing document misrepresentation.”2 The south Florida areas of Miami-Dade and Broward Counties, also known as The Miami Metropolitan Statistical Area (MSA), rank first in reports of mortgage fraud.3 Consequently, because Florida, in particular the more populated areas of south Florida are responsible for the bulk of reported incidences, Florida has become the epicenter of mortgage fraud investigations and prosecutions.

b. Statistics on Mortgage Failures
II. MORTGAGE FRAUD DEFINED
Although there is no agreed definition mortgage fraud, it can be defined as a material misrepresentation or omission which is intended to induce a person or entity to extend credit to another person or entity. However, the Federal Bureau of Investigation (FBI) defines mortgage fraud “…as an intentional misstatement, misrepresentation, or omission by an applicant or other interested parties, relied on by a lender or underwriter to provide funding for, to purchase, or to insure a mortgage loan.”4 According to the FBI there are two different types of mortgage fraud: (1) Fraud for Profit, and (2) Fraud for Housing.5 “Fraud for Profit is sometimes referred to as Industry Insider Fraud and the motive is to revolve equity, falsely inflate the value of the property, or issue loans based on fictitious properties.”6 On the other hand, Fraud for Housing is personified by unlawful activity conducted exclusively by a borrower.7 In regards to Fraud for Profit, the FBI has even constructed a laundry list of indicators of mortgage fraud as well as various categorical patterns that may qualify as Fraud for Profit.8
Even though the FBI may only identify two (2) types of mortgage fraud, it and other regulatory agencies are charged with monitoring and focusing on the multiple indicators and categorical patterns of fraudulent mortgage transactions of Fraud for Profit.9 The Department of Housing and Urban Development (HUD)10 puts forth the majority of their regulatory power on industry insiders who conduct Fraud for Profit operations.11 Specifically, a Financial Crimes Enforcement Network report indicates accountants, mortgage brokers, and lenders are the most likely suspects of mortgage fraud.12 These persons are considered to be “…familiar with the mortgage loan process and therefore know how to exploit vulnerabilities in the system.”13 Common designs of these targeted occupations are considered to have the potential to dramatically increase in numbers as a direct result of the downward trend in the housing market.14

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Ruth Madoff is under heat in regards to whether she can continue to stay at her living quarters or if she has to let the government seize them. Lawyers of Bernie Madoff are claiming that millions in assets of Bernie are in the escrow of Mrs. Madoff and thus untouchable or not relevant in a court of law.

The article, from the New York Times, goes on to say that to argue that the assets in Ms. Madoff’s name are in fact separate, it will be necessary for her to show they were acquired by untainted money. That may be difficult to prove because the records from Mr. Madoff’s investment advisory business do not appear to be very clear. If the government is able to show the brokerage operation was supported by the Ponzi scheme, then money taken from that business may not be immune to forfeiture.

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Louis Beverly, an ACORN activist, faces charges of fourth-degree burglary, a first in the realm of the foreclosure market. The activist, a part of ACORN (the Association of Community Organization for Reform Now) is facing these criminal charges in response to the breaking and entering of a home in southeast Baltimore a few weeks ago. “This is our house now,” ACORN member Louis Beverly reportedly said after cutting a lock with bolt cutters at the home. A spokesperson at the Pittsburgh Police said charges would be filed in response to any person found living in a foreclosed home even if that person has lived at the residence previously or not.

ACORN launched its “Home Savers” campaign in New York earlier this month and plans to expand the program to at least 22 other cities and three counties nationwide in the coming weeks. Participants like Beverly say they will refuse to move out of foreclosed homes or reclaim properties altogether until a comprehensive federal housing plan takes affect. At least 500 volunteers have reportedly agreed to work as “home defenders” to employ non-violent tactics to block authorities from evicting homeowners. Orlando, Florida, is one of the other cities being targeted by “Home Savers” participants.

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With the economy tanking, those who took advantage of the situation are now feeling the heat. Anthony Dehaney, 57, was sentenced to 8 years in prison for concocting a $12 million mortgage fraud scheme that helped slide the Florida market and economy further downward than it already was. He pled guilty to conspiracy, mail fraud and bankruptcy fraud.

The criminal proceedings for the Jamaican national were in order and final in verdict. The defendant stated during trial that he started in 2002 by investing in real estate. Egged on by other mortgage professionals, he let the details slide on loan applications. Dehaney admitted to fudging mortgage loan applications on no less than 20 properties in Broward county from Jan 03 to Aug 06. Some lofty properties noted in the report were that of 3 different properties on 26th Street located in Wilton Manors and a Coral Springs home valued at $1.4 million.

US District Judge William Dimitrouleas viewed the sentencing as a “signal to others tempted to skirt the law ‘to make a quick easy buck’ .” Dehaney’s actions were only a drop in the pool of what has caused banks to lose millions.

This particular case has also been noted as one of the most severe in sentencing of any mortgage fraud case, even going over the prosecutor’s recommendation of a 5 year prison term.

The sentence–among the toughest to date in a mortgage fraud case–exceeds a prosecutor’s recommendation for a roughly five-year prison term. “As real estate prices escalated, things were moving so fast no one realized what they were doing,” he said. “Everyone was trying to make money.”

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Florida Federal Criminal Cases: Mortgage Fraud

The US Attorney for the Middle District of Florida convicted and sentenced Brian Albritton to tens years for mortgage fraud.

The allegations are that staring in 2004 he participated in a mortgage rescue operation for homeowners at risk of foreclosure. The allegations are a scheme to defraud through straw man transfers.

In South Florida the US Attorney and Fort Lauderdale (Broward) and Miami prosecutors are building mortgage fraud cases. South Florida criminal attorneys are learning how to defend these cases.

If you have been arrested or are under investigation seek an experienced South Florida criminal defense attorney for a consultation. Information is the best way to protect yourself. An experienced South Florida criminal attorney can advise you on mortgage fraud prosecutions and how they are handled by prosecutors in Miami, Fort Lauderdale and Palm Beach.

The US Attorney for the Southern District of Florida (Miami, Fort Lauderdale, West Palm Beach) arrested Magile Cruz. Cruz is alleged to have participated in $24,000,000 of allegedly fraudulent mortgages.
There has been a lot of political pressure on prosecutors in Miami, Fort Lauderdale and Palm Beach to arrest and prosecute mortgage brokers.
The Law Offices of Ralph Behr has defended mortgage brokers and realtors as far back as the 1980’s when there was a rush to prosecute. Many innocents went to prison, and it is happening again.
If you need a criminal defense attorney in Broward, Fort Lauderdale, or West Palm Beach, contact attorney Behr.

The press release from the US Attorney is available for viewing. Attorney Behr’s credentials appear on his website. Call now the phones are answered 24/7.

Miami has a Mortgage Fraud taskforce working overtime to grab headlines but many criminal defense lawyers in Broward and Fort Lauderdale view the arrests as a public relations ploy.

Alleging fraud, racketeering, grand theft and money laundering in Miami and Fort Lauderdale, the Miami police arrested 14 mortgage brokers and real estate professionals.

Criminal defense lawyers in Miami, Fort Lauderdale and South Florida are lining up to find new clients and at the same time scrambling to learn how to defend these white collar crimes.

Attorney Ralph Behr of Fort Lauderdale represented mortgage brokers charged with fraud and grand theft during the real estate collapse of the early 90’s. His office has added additional court qualified experts to his defense team of real estate fraud professionals.

If you have been charged or have concerns you may be a target of the criminal investigation in Florida call for a consultation or have your attorney contact our office for a defense review.