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Release No. 10-139
September 30, 2010
DOWNEY MAN CHARGED WITH RUNNING $11 MILLION PONZI SCHEME, AS WELL AS RELATED $10 MILLION MORTGAGE FRAUD SCHEME THAT TOOK ADVANTAGE OF DISTRESSED HOMEOWNERS
Juan Rangel’s Financial Plus Investments Targeted Spanish-Speaking Victims and Conned Them Out of Their Savings and Titles to their Homes
LOS ANGELES - A federal grand jury has indicted a Downey man on a series of fraud charges for allegedly running two related fraud schemes – a Ponzi scheme that took more than $11 million from more than 300 victims, and a mortgage fraud scheme that preyed on homeowners by stealing the equity from their homes and secretly taking title to their properties.
Juan Rangel, 46, who is already in federal custody after his conviction last year for bribing a bank manager at Bank of America, was charged in a 16-count indictment that was returned by a federal grand jury on September 22.
In relation to the Ponzi scheme, the indictment alleges that Rangel and his company, the Commerce-based Financial Plus Investments, recruited new investors through Spanish-language newspapers and magazines, as well as in radio advertisements and infomercials broadcast on television. Rangel and Financial Plus promised to pay investors guaranteed returns of 60 percent each year out of the profits from Financial Plus’ real estate investments and lending business.
The indictment alleges that Financial Plus did not make any actual profits from real estate or lending, and that Rangel instead used the victims’ money to make Ponzi payments to other investors, as well as for his own personal use, including the monthly mortgage payments on his $3 million home, to make monthly lease payments for his Lamborghini sports car and a limousine, and to buy cocaine.
In the related mortgage fraud scheme, the indictment alleges that Rangel and others targeted Latino homeowners who were at risk of losing their homes and offered to help them avoid foreclosure. Rather than assist them, however, the indictment alleges that Rangel took titles to their homes and drained the remaining equity out of the properties. As part of this scheme, Rangel arranged to sell the homeowners’ properties, usually without their knowledge, to third-party straw buyers. He then applied for loans in the straw buyers’ names related to these supposed purchases, and used a variety of falsified documents to ensure that the fraudulent loans were approved. The proceeds from these loans went to Rangel and his companies. The indictment alleges that this scheme was successful in duping mortgage lenders into approving more than $10 million in fraudulent loans.
United States Attorney André Birotte Jr. announced the indictment today after Rangel's two co-defendants were taken into custody this week and the indictment was unsealed.
Co-defendant Javier Juanchi, 42, of Sherman Oaks, a vice president at Financial Plus, was arrested by special agents with the Federal Bureau of Investigation on Monday. Juanchi, who is charged only in relation to mortgage fraud part of the scheme, was ordered held without bond.
The third defendant in the case, Pablo Araque, 40, of Downey, who owns the Downey-based tax preparation and bookkeeping company A One Tax Pros, was arrested yesterday. Araque, who is also charged only in relation to the mortgage fraud component of the scheme, is being held in jail pending a detention hearing scheduled for tomorrow afternoon.
Rangel, who is scheduled to make his first court appearance in this case tomorrow afternoon, is charged with a total of 11 counts of mail fraud, four counts of aggravated identity theft, and one count of money laundering, in relation to the two schemes he ran out of Financial Plus. If he is convicted of all 16 counts, Rangel would face a statutory maximum sentence of 232 years in federal prison.
Rangel owned and operated Financial Plus Investments, which was based in Commerce. Financial Plus purported to provide guaranteed returns to investors by using their money to invest in real estate and make high-interest loans to homeowners facing foreclosure. Financial Plus originally offered returns as high as 60 percent each year to investors, but during the later part of the scheme began to offer investors guaranteed annual returns of 100 percent on their investments.
The indictment alleges, however, that only a small fraction of the money that Financial Plus received from investors was ever used to invest in real estate or to make loans. Instead, investor money was used to make monthly Ponzi payments to other investors that were falsely characterized as investment profits. At the same time, Rangel allegedly diverted a substantial portion of the investors’ money for his own use.
In addition to the company’s purported investment business, Financial Plus also purported to offer foreclosure relief services. Rangel and Juanchi identified Latino homeowners who were at risk of losing their homes but who appeared to still have substantial equity in their properties. Financial Plus then offered to help these homeowners avoid foreclosure. Many of the homeowners were told that Financial Plus would save their home by refinancing their mortgages using a co-signer who would be provided by the company. These homeowners were told that the co-signer would be removed from the loan after one year, once the homeowners had fixed their credit.
The indictment alleges, however, that Rangel and Juanchi did not refinance these homeowners’ properties. Instead, they arranged to sell the homeowners’ properties to straw buyers and apply for loans related to these supposed purchases in the straw buyers’ names. Rangel and Juanchi allegedly paid Araque to create false documents, including pay stubs and tax forms, to support the false information listed for the straw buyers on the fraudulent loan applications. Once the loans were funded by the victim banks, Rangel and his companies received the proceeds from the loans, funded by the equity from the homeowners’ properties, as well as title to their homes.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until proven guilty.
Rangel is currently pending sentencing for his conviction last year on federal charges of bribing a bank manager to falsify bank records and release holds on millions of dollars in checks that he deposited at the bank. Rangel’s son, Harold Rangel, was also charged in that case, but fled while on pretrial release.
The cases against Rangel are the result of an investigation by the Federal Bureau of Investigation, the United States Postal Inspection Service and IRS-Criminal Investigation.
Release No. 10-139
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