United States Attorney
Southern District of New York
Thursday, April 4, 2013
Golden First Mortgage Corp. and David Movtady Named in Mortgage Fraud Lawsuit for Fraudulently Certified Loans
Suit Alleges Practice of Fraudulent Loan Certification Resulting in at Least $12 Million in Losses on FHA-insured Loans
Golden First Mortgage Corp. and its owner, operator and president, David Movtady were charged today in a mortgage fraud lawsuit for fraudulently certified loans, announced Preet Bharara, the U.S. Attorney for the Southern District of New York, Helen R. Kanovsky, General Counsel of the U.S. Department of Housing and Urban Development (HUD) and David A. Montoya, Inspector General of HUD. The suit seeks damages and civil penalties under the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) for years of misconduct in connection with Golden First’s participation in the Federal Housing Administration’s (FHA) Direct Endorsement Lender Program. The complaint alleges that Golden First and Movtady intentionally, knowingly and recklessly approved loans since 2002 that should never have been federally insured.
U.S. Attorney Bharara said: “As alleged, Golden First and David Movtady churned out bad loans and lied about their compliance with HUD requirements, leaving taxpayers on the hook for millions of dollars when the loans inevitably defaulted. This Office continues its work to hold the perpetrators of mortgage fraud accountable, as this latest complaint demonstrates.”
HUD General Counsel Kanovsky said: “Our program depends on lenders properly originating FHA loans and certifying their compliance with our rules. Today’s complaint should send an unmistakable message that we will use the False Claims Act to protect working families and FHA’s insurance fund from allegedly unscrupulous lenders.”
HUD Inspector General Montoya said: “The alleged utter disregard and willful failure to abide by the standards set by the FHA make this one of the worst examples of mortgage fraud that I have seen since becoming Inspector General. My office will continue its dedicated efforts to protect the integrity of FHA’s mortgage insurance program. Safeguarding HUD’s programs from exploitation and ensuring that they are managed with honesty, competency and stewardship is our commitment to the public we serve.”
The following allegations are based on the complaint filed today in New York federal court:
The complaint seeks treble damages and penalties under the False Claims Act, as well as FIRREA penalties for millions of dollars in insurance claims already paid by HUD for mortgages wrongfully certified by Golden First and Movtady. In addition, the United States seeks compensatory damages under the common law theories of gross negligence, negligence and breach of fiduciary duty for the millions of dollars in insurance claims that HUD has paid and expects to pay in the future, for mortgages wrongfully certified by Golden First and Movtady.
The case is being handled by the office’s Civil Frauds Unit. U.S. Attorney Bharara established the Civil Frauds Unit in March 2010 to bring renewed focus and additional resources to combating financial fraud, including mortgage fraud.
The Civil Frauds Unit works in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which U.S. Attorney Bharara serves as a co-chair of the Securities and Commodities Fraud Working Group. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.
U.S. Attorney Bharara thanked HUD and HUD-OIG for its assistance in this case. He also expressed his appreciation for the support of the Commercial Litigation Branch of the U.S. Department of Justice’s Civil Division in Washington, D.C.
Assistant U.S. Attorneys Lara K. Eshkenazi and Lawrence H. Fogelman are in charge of the case.