Eleven Defendants Indicted in $14 Million Mortgage Fraud Scheme
Charges Include Conspiracy, Wire Fraud, and Bank Fraud
An indictment was unsealed this morning in federal court in Brooklyn, New York, charging eleven defendants for their participation in a scheme to defraud mortgage companies and banks of more than $14 million. The scheme's organizers, VIJAY ANAND KHEMRAJ and ROBERT RODRIGUEZ, recruiters of "straw buyers," DAVID BURKS, ERIC WHITESIDE, SIMON CLARK, and HARLEM GUZMAN, realtor, VENECIA DESILVA, mortgage brokers, DAVID CHO and MARK MATTHEWS, and attorneys FRANTZ METELLUS and ROBERT B. DAVIS, are charged with conspiracy. The attorneys, mortgage brokers, and organizer KHEMRAJ are also charged with wire fraud and bank fraud.1
The charges were announced by Benton J. Campbell, United States Attorney for the Eastern District of New York, Mark J. Mershon, Assistant Director-in-Charge of the Federal Bureau of Investigation, New York Field Division, and Jon T. Rymer, Inspector General of the Federal Deposit Insurance Corporation (FDIC). The defendants' initial appearances and arraignments are scheduled later today before United States Magistrate Judge Roanne L. Mann at the U. S. Courthouse, 225 Cadman Plaza East, Brooklyn, New York. The case has been assigned to United States District Judge Jack B. Weinstein.
The indictment alleges that KHEMRAJ, BURKS, WHITESIDE, CLARK, and GUZMAN recruited “straw buyers” with good credit ratings to purchase residential properties located in Brooklyn, Queens, and the Bronx by promising that, among other things, rental incomes from the properties would insure that the purchasers would never have to make payments on the mortgages or take possession of the houses. Once the buyers were signed up, loan officers CHO and MATTHEWS generated false documents for the buyers to support inflated income and asset statements in the mortgage applications.
While the so-called buyers were being recruited, KHEMRAJ, BURKS, DESILVA, and CLARK identified run-down properties on sale within the range of $250,000 to $500,000. RODRIGUEZ signed sales contracts to buy all of these properties, but by the time of the closings he assigned his rights to purchase the properties to the straw buyers for fees totaling up to $600,000. The straw buyers' mortgages - which had been secured through fraudulently inflated financial statements - covered both the sales prices and the assignment fees. The banks and mortgage companies, however, were never made aware of the assignments or the true market value of the purchased properties. The mortgage proceeds were wired into the attorney trust accounts of METELLUS and DAVIS, and subsequently distributed to the other defendants.
Between July 2005 and February 2008, at least 24 mortgages were secured through this scheme. The total dollar amount of the mortgages exceeded $14 million.
“Earlier this month we announced the formation of an EDNY task force comprised of federal, state, and local law-enforcement agents and investigators to address the burgeoning problem of mortgage fraud," stated United States Attorney Campbell. "Investigating and prosecuting mortgage-related fraud is a priority program, and we and our partners in the task force are determined to bring to justice those who line their pockets at the expense of mortgage lenders.”
FBI Assistant Director-in-Charge Mershon stated, “This mortgage fraud conspiracy included straw buyers, corrupt loan officers, a realtor, and law-breaking lawyers. The defendants worked in concert to deceive victim lenders out of millions of dollars. The FBI, the U.S. Attorney, and our law enforcement partners will be working in concert to put a halt to such conduct.”
FDIC Inspector General Rymer stated, "I am pleased that the FDIC Office of Inspector General can play a key role in ensuring the integrity of the financial services industry. By partnering with our law enforcement colleagues, we leverage the resources needed to successfully combat mortgage fraud and rid the industry of those seeking to undermine the safety and soundness of our financial institutions and other legitimate businesses involved in mortgage lending.”
The maximum term of imprisonment for any defendant convicted of wire fraud or conspiracy to commit wire fraud is 20 years. The maximum term of imprisonment for any defendant convicted of bank fraud or conspiracy to commit bank fraud is 30 years.
The government's case is being prosecuted by Assistant United States Attorney Patrick Sean Sinclair.
VIJAY ANAND KHEMRAJ
ROBERT B. DAVIS
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