DEBRA W. YANG
United States Attorney
Central District of California
Thom Mrozek, Public Affairs Officer
March 11, 2005
PICO RIVERA MAN CONVICTED OF DEFRAUDING GOVERNMENT HOUSING PROGRAM
A Pico Rivera man has been found guilty on various charges related to a loan fraud scheme in which he and others submitted fraudulent loan applications for mortgages that were insured by the Federal Housing Administration. As a result, mortgages were issued to unqualified and "straw" purchasers, which led to numerous foreclosures and the issuance of more than $5 million in fraudulent loans.
Following a four-week trial, Frank Acosta, 38, was convicted Thursday afternoon of a total of 25 counts. After deliberating for less than one day, the jury found Acosta guilty of conspiracy, 13 counts of making false statements to Department of Housing and Urban Development (FHA's parent agency), seven counts of wire fraud and four counts of money laundering. Yesterday's convictions follow a trial last fall that resulted in a mistrial when a jury was unable to reach unanimous verdicts.
Acosta's wife, Elizabeth Madrigal, 31, also of Pico Rivera, pleaded guilty in 2003 to conspiracy, wire fraud and money laundering charges.
The evidence at trial showed that Acosta purchased residential properties that qualified for resale using home mortgages insured by the FHA. Acosta recruited and had others recruit non-qualified buyers and straw buyers to act as the purchasers of the properties. Acosta and his co-conspirators prepared mortgage loan applications that contained false employment, income, down payment and credit information for the buyers.
To qualify for an FHA-insured home mortgage loan, the FHA requires that the borrower have sufficient income to cover the mortgage payment, current employment, an acceptable credit history and sufficient assets to cover the down payment for the property. Acosta's co-conspirators prepared fraudulent loan applications for people who could not qualify for FHA-backed loans, knowing that the banks and HUD would rely on the false information to determine whether to fund and insure the loans.
Acosta enlisted mortgage brokers to fraudulently package each loan. The mortgage brokers sometimes placed additional false statements in the applications, including false verifications of cash-on-hand and false certifications of face-to-face interviews with the straw buyers.
Acosta is scheduled to be sentenced by United States District Judge Dickran Tevrizian on June 13. As a result of the guilty verdicts, Acosta faces a maximum statutory sentence of five years in prison for the conspiracy and false statement counts, and up to 20 years in prison for the wire fraud and money laundering counts.
Madrigal was sentenced by Judge Tevrizian last year to 40 months in prison.
This case is a product of a joint investigation by the Office of Inspector General of the United States Department of Housing and Urban Development, IRS-Criminal Investigation Division and the Federal Bureau of Investigation.
Release No. 05-044
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