Residential Care Home Owners, Real Estate Agents Sentenced In $20 Million Mortgage Loan Fraud Scheme
SAN JOSE, Calif. – Edith Nelson, Ronald Nelson, Nelda Asuncion and Cristeta Lagarejos were sentenced in federal court in San Jose yesterday in a far-reaching mortgage loan fraud scheme involving at least 20 properties in the Northern District of California and more than $20 million in loan proceeds, United States Attorney Melinda Haag; Special Agent in Charge, IRS Criminal Investigation, Marcus Williams; and Special Agent in Charge, U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), Clark Settles announced. Edith Nelson and Ronald Nelson were also sentenced for income tax evasion and harboring an illegal alien.
“Mortgage loan fraud has had a devastating effect on the United States’ economy,” U.S. Attorney Haag said. “My office will continue to work with our law enforcement partners to bring those who commit these crimes to justice.”
In pleading guilty on Feb. 3, 2012, Edith Nelson, 53, and Ronald Nelson, 76, a married couple, admitted that they owned and operated Placement Services, a referral service located in Pleasant Hill, Calif., that placed elderly people into residential care home facilities. On or about Aug. 21, 1998, the Department of Social Services for the State of California ordered the immediate exclusion of Ronald Nelson and Edith Nelson (under her former name Edith Grutas) from all facilities licensed by the Department based upon various violations of licensing requirements. Despite the exclusion order, the Nelsons continued to operate numerous Residential Care Home Facilities for the Elderly and other properties in the identities of others used to purchase the properties (straw buyers). As part of this scheme, at least 63 loans, totaling approximately $20,754,700 in loan proceeds, were obtained from financial institutions based on false and fraudulent representations. Ronald and Edith Nelson maintained full control over the properties by directing the straw buyers to sign grant deeds that either transferred title of the property to Edith Nelson or added her name to the title on the property. A number of straw buyers were instructed to open bank accounts that were then controlled by Ronald and Edith Nelson.
Nelda Asuncion, 68, a real estate agent and co-owner of Realty World Pacific West in Concord, Calif., and Cristeta Lagarejos, 49, a real estate agent and broker, and the owner of Legacy Financing in Pleasant Hill who also entered guilty pleas on Feb. 3, 2012, admitted to participating in the scheme to commit mortgage loan fraud with the Nelsons. In furtherance of this scheme, mortgage loan applications were prepared in the names of straw buyers that contained materially false and fraudulent statements such as employment information and grossly inflated income and assets intended to enhance the likelihood that the mortgage lenders would approve the loan applications. Nelda Asuncion and Cristeta Lagarejos determined the qualifying income that the lenders required for approval of mortgage loans and falsely placed that amount on the loan applications instead of the straw buyers’ actual income. Nelda Asuncion sent faxes to Placement Services with a summary of the employment information fraudulently placed on the loan applications prepared by Realty World Pacific West. Edith Nelson then falsely corroborated the employment information placed on the loan applications when the lenders called to verify employment.
As also set forth in their plea agreements, Ronald and Edith Nelson hired care givers, whom they knew were illegally present in the United States, to work at the Residential Care Home Facilities for the Elderly that they obtained through fraud. The care givers worked long hours at less than minimum wage and often resided in the same facilities where they worked. Many of the Nelsons’ illegal alien workforce were paid under the table in cash and did not pay taxes. The Nelsons never reported any of their illegal alien employees to immigration authorities because their intent was to conceal them from detection.
The sentences were handed down by U.S. District Court Judge D. Lowell Jensen:
- Edith Nelson was sentenced to 37 months in prison; five years of supervised release, including a special condition that she serve 12 months in home detention; 500 hours of community service; a $400 special assessment; $25,000 fine; and restitution of $5,223,476.90 (plus interest and penalties on the restitution owed for income tax evasion).
- Ronald Nelson was sentenced to 32 months in prison; five years of supervised release, including a special condition that he serve nine months in home detention; 100 hours of community service; a $300 special assessment; $15,000 fine; and restitution of $5,223,476.90 (plus interest and penalties on the restitution owed for income tax evasion).
- Nelda Asuncion was sentenced to 30 months in prison; five years of supervised release, including a special condition that she serve seven months in home detention; 400 hours of community service; a $200 special assessment; $12,000 fine; and restitution of $2,838,868.54.
- Cristeta Lagarejos was sentenced to 18 months in prison; five years of supervised release; 300 hours of community service; $200 special assessment; $7,500 fine; and total restitution of $318,500.
The $5,223,476.90 in restitution that Edith and Ronald Nelson were ordered to pay includes restitution to lending institutions and other victims of the mortgage loan fraud, taxes owed based upon their income tax evasion and back wages in the amount of $1,546,246.40 owed to forty-nine of the Nelsons’ employees and former employees as determined by the U.S. Department of Labor.
“IRS-CI takes mortgage fraud seriously. The impact of these types of crimes cannot be overstated. Fraud in the mortgage industry has played a major role in almost crippling this nation’s economy,” Special Agent in Charge, IRS-Criminal Investigation Williams said . “IRS-CI is committed to pursuing individuals who commit this type of offense.” “Those who line their pockets with profits from these schemes should know they will not go undetected and will be held accountable.”
“As the defendants learned yesterday, those who defraud our financial system face serious consequences,” said Clark Settles, Special Agent in Charge for HSI San Francisco. “These individuals callously exploited foreign workers; our nation’s legal immigration system; and the mortgage-lending process, all for their own enrichment. Justly, they are now going to pay a significant price for their crimes.”
Deborah Douglas is the Assistant United States Attorney who prosecuted this case with the assistance of Paralegal Noble Hughes and Legal Assistant Daniel Charlier-Smith. The prosecution is the result of an extensive investigation by IRS-CI and ICE HSI.