Mortgage Fraud Task Force Announces Regional Results Of "Operation Stolen Dreams" Targeting Mortgage Fraudsters
PITTSBURGH, Pa. - Following an announcement today by Attorney General Eric Holder in Washington, DC, representatives of the Western Pennsylvania Mortgage Fraud Task Force in Pittsburgh, including Acting U.S. Attorney Robert S. Cessar, announced the regional results of the nationwide takedown, Operation Stolen Dreams, which targeted mortgage fraudsters in the Western District of Pennsylvania and throughout the country and is the largest collective enforcement effort ever brought to bear in confronting mortgage fraud.
The sweep was organized by President Obama's interagency Financial Fraud Enforcement Task Force, which was established to lead an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. Starting on March 1, to date Operation Stolen Dreams has involved 1,215 criminal defendants nationwide, including 485 arrests, who are allegedly responsible for more than $2.3 billion in losses. Additionally, to date the operation has resulted in 191 civil enforcement actions which have resulted in the recovery of more than $147 million.
"Mortgage fraud ruins lives, destroys families and devastates whole communities, so attacking the problem from every possible direction is vital," said Attorney General Holder. "We will use every tool available to investigate, prosecute, and prevent mortgage fraud, and we will not rest until anyone preying on vulnerable American homeowners is brought to justice."
"Here in Pittsburgh, and in cities across the country, mortgage fraud crimes have reached crisis proportions. But we are fighting back," said Mr. Cessar. "Through the Mortgage Fraud Task Force that we created in February 2008, we're tackling the challenges and consequences of mortgage fraud in innovative, coordinated and highly effective ways."
Unlike previous mortgage fraud sweeps, Operation Stolen Dreams focused not only on federal criminal cases, but also on civil enforcement, recovering money for victims and increasing cooperation with state and local partners.
Locally, the Western Pennsylvania Mortgage Fraud Task Force is comprised of investigators from federal, state and local law enforcement agencies and others involved in the mortgage industry. Federal law enforcement agencies participating in the Mortgage Task Force include the United States Secret Service; Federal Bureau of Investigation; the Internal Revenue Service, Criminal Investigations; the United States Department of Housing and Urban Development, Office of Inspector General; and the United States Postal Inspection Service. Other Mortgage Fraud Task Force members include the Allegheny County Sheriff's Office; the Pennsylvania Attorney General's Office, Bureau of Consumer Protection; the Pennsylvania Department of Banking; the Pennsylvania Department of State, Bureau of Enforcement and Investigation; and the United States Trustee's Office.
The President's Financial Fraud Enforcement Task Force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit StopFraud.gov.
According to Mr. Cessar, 13 individuals were charged through indictment/information; seven pleaded guilty; and six were sentenced as part of Operation Stolen Dreams in Western Pennsylvania. The total amount of fraudulent loans associated with these individuals exceeds $233 million. Case summaries follow:
I. RECENT INDICTMENTS AND INFORMATIONS
Kenneth McGavitt, 57, of Washington, Pennsylvania
A grand jury returned a two-count indictment charging McGavitt with two counts of Mail Fraud. According to the indictment, McGavitt operated an assisted living facility that owned a building in Donegal, Pa. In May 2006, McGavitt applied for a $3 million loan secured by the building. He falsely represented that a tenant had a long-term lease at the facility and exaggerated the tenant's monthly payment. He caused a tax lien payoff check to be sent to the Westmoreland Tax Claim Bureau, and caused a closing package containing forged and fraudulent documents to be sent to an attorney's office in Washington, Pa. The law provides for a total sentence of 40 years in prison, a fine of $500,000, or both.
David Landman, 41, of Cheswick, Pennsylvania
A grand jury returned a seven-count indictment charging Landman with one count of Bank Fraud; two counts of Wire Fraud; one count of Aggravated Identity Theft; and three counts of Money Laundering. Beginning in April 2005, Landman applied for a series of loans and lines of credit in another individual's name without that person's authorization. He falsely represented to the lending institutions the person's income and financial condition. Landman also failed to pay off the liabilities associated with the collateral for the loans. In addition, Landman caused three financial transactions that involved the proceeds of wire fraud in an attempt to conceal the illegal source of the money. The law provides a total sentence of 152 years in prison, a fine of $2,550,000, or both.
Jason Lewis and Dean Ackinclose
Jason Lewis, 37, of Buena Vista, Pennsylvania
Dean Ackinclose, 41, of Clairton, Pennsylvania
The United States Attorney filed separate but related one-count informations charging Lewis and Ackinclose with Wire Fraud Conspiracy. The informations allege that Lewis and Ackinclose were loan officers who, along with others, submitted loan applications to lenders on behalf of a mortgage broker business and borrowers that contained false information related to the borrowers' financial condition, including their income, assets and employment. The members of the conspiracy allegedly caused wire transfers from the accounts of lending institutions outside of Pennsylvania to the accounts of closing agents in the Commonwealth. The law provides a total sentence of 20 years in prison, a fine of $250,000, or both, for each defendant.
Ralph Esposito, James Ross and William Buchko
Ralph Esposito, 46, of Beaver, Pennsylvania
James Ross, 40, of Oakdale, Pennsylvania
William Buchko, 49, of New Brighton, Pennsylvania
The United States Attorney filed separate but related one-count informations charging Esposito and Ross with Bank, Mail, and Wire Fraud Conspiracy. According to the informations, Esposito and Ross participated in a mortgage fraud scheme in which they signed loan applications that misrepresented their income and participated in loan closings that they knew were fraudulent because they knew that false representations related to the borrowers' financial condition had been made to the lenders. The law provides a total sentenced of 30 years in prison, a fine of $1 million, or both.
A grand jury returned a separate but related indictment charging Buchko with one count of Bank Fraud. According to the indictment, from April 2002 until August 2009, Buchko conspired to participate in real estate closings that he knew were fraudulent. Buchko was a closing attorney who created false documents, including a settlement statement and mortgage deed, falsely evidencing the $3.2 million purchase of a property located in Coraopolis. The law provides a total sentenced of 30 years in prison, a fine of $1 million, or both.
Pittsburgh Home Loans
Eric Hall, 29, of Monaca, Pennsylvania
Jason Moreno, 27, of Pittsburgh, Pennsylvania
Crystal Spreng, 39, of Cabot, Pennsylvania
Robert Arakelian, 48, of Pittsburgh, Pennsylvania
Karen Atkison, 51, of West Sunbury, Pennsylvania
Daniel Sporrer, 46, of Pittsburgh, Pennsylvania
In separate but related cases, the United States Attorney filed a one-count information charging Hall with Mail and Wire Fraud Conspiracy, and a grand jury returned a one-count indictment charging Moreno with Wire Fraud Conspiracy.
Robert Arakelian operated Pittsburgh Home Loans, which was a mortgage broker company that assisted borrowers in obtaining financial collateralized by real estate, and he has pleaded guilty to a Wire Fraud Conspiracy in connection with more than a hundred fraudulent deals. The typical fraud deal involved an overstated appraisal, a fake down payment, and a fake verification from Citizens Bank that the borrower had sufficient income in his or her account to qualify for the loan and make the down payment required by the lender.
The Pennsylvania Department of Banking received several complaints related to Arakelian, and they deposed him. During the course of the deposition, he admitted that he had used fraudulent Verifications of Deposit from Citizens Bank that falsely indicated that the borrowers had sufficient money in their accounts to make the down payments and qualify for the loans.
Spreng was the representative of Citizens Bank that provided the fraudulent Verifications of Deposit. On June 15, 2010, she pleaded guilty to a charge of Wire Fraud in connection with this conspiracy. Her sentencing is scheduled for November 5, 2010.
Daniel Sporrer and Karen Atkison have also pleaded guilty in connection with this conspiracy. On May 27, 2010, Sporrer, pleaded guilty to a charge of Wire Fraud Conspiracy on connection with this mortgage fraud scheme. Sporrer participated in a mortgage fraud scheme with Arakelian and Karen Atkison, who was a closing agent who worked with Sporrer, and others. The closing documents in connection with these fraudulent loans, which were prepared and executed by Sporrer and Atkison, falsely reported to the lenders that the borrowers made down payments from their own funds at the closings, when, in fact, they did not make any payments at the closings. In addition, Sporrer advanced money to Arakelian before the closings so that Arakelian could purchase certified checks, copies of which were made to present to the lenders to falsely verify that the borrowers had made the down payments. Sporrer's sentencing is scheduled for October 29, 2010. Atkison's sentencing date has been continued. The law provides for a total sentence of 20 years in prison, a fine of $250,000, or both for Sporrer and Atkison.
Hall was a loan officer that worked with Arakelian. The information filed against him alleges Hall assisted Arakelian in the execution of the scheme as a loan officer on dozens of fraudulent deals, by attending fraudulent closings, and by selling his own properties through the scheme. The law provides for a total sentence of 20 years in prison, a fine of $250,000, or both.
The indictment filed against Moreno alleges that his role in the conspiracy was to prepare appraisals for the properties that were to serve as collateral for loans that materially overstated the actual true market value of the properties. Moreno also faces up to 20 years in prison, a fine of $250,000, or both.
Jason Sheppard, 29, of Oakdale, Pennsylvania
A grand jury returned a five-count indictment charging Sheppard with five counts of Wire Fraud. From October 2009 to January 2010, Sheppard operated TruClose Financial Services, an entity that specialized in closing real estate transactions. According to the indictment, Sheppard withdrew money from the accounts for his personal benefit which causes the company to fail to meet the financial obligations that TruClose Financial Services was representing to the lending institutions that they were paying. He also caused the wire transfer of more than $830,000 from the accounts of financial institutions outside Pennsylvania to the First Niagra Bank account of his Pittsburgh-based company. The law provides for a total sentence of 100 years in prison, a fine of $1.25 million, or both.
Richard Lawrence Veazey, a/k/a Larry Veazey, 52, of Pittsburgh, Pennsylvania
A grand jury returned a 14-count indictment charging Veazey with two counts of Wire Fraud Conspiracy and 12 counts of Wire Fraud. According to the indictment, Veazey, who is a licensed appraiser, participated in two different mortgage fraud conspiracies. Both conspiracies involved Veazey preparing fraudulent appraisals that were submitted to lenders and that overstated the true market values of properties serving as collateral for loans. The law provides for a total sentence of 280 years in prison, a fine of $3.5 million, or both.
Anthony Pearson, 30, of Ben Avon, Pennsylvania
A grand jury returned a one-count indictment charging Pearson with Wire Fraud Conspiracy. From May 2006 to February 2007 Pearson prepared appraisals that overstated that overstated the actual true market values of the properties. He then provided these fraudulent appraisals an individual who has been previously convicted of mortgage fraud. He further caused wire transfers from the accounts of lending institutions outside Pennsylvania to accounts of closing agents inside the Commonwealth. The law provides a total sentence of 20 years in prison, a fine of $250,000, or both.
Lisa Gerideau-Williams, 43, of New Kensington, Pennsylvania
A grand jury returned a 14-count indictment charging Gerideau-Williams with 13 counts of Wire Fraud and one count of Aggravated Identity Theft. According to the indictment, Gerideau-Williams is a closing attorney who also operated as a mortgage broker. From April 2005 to July 2008, she submitted fraudulent loan applications to finance purchases of real estate that included misrepresentations related to the borrower's income, employment, assets and liabilities. The indictment alleges she forged signatures, fraudulently closed loans, did not record mortgages and deeds despite being paid for those services, and purported to issue title insurance policies without authorization. The law provides for a total sentence of 262 years in prison, a fine of $3.5 million, or both.
First Capital Home Equity
John Polosky, 40, of McMurray, Pennsylvania
Kenneth C. Cowden, 59, of Coraopolis, Pennsylvania
On March 4, 2010, Polosky pleaded guilty to charges of Wire Fraud Conspiracy and Filing False Tax Returns. Polosky participated in two different mortgage fraud conspiracies, one in the Western District of Pennsylvania and one in the Eastern District of Pennsylvania. In both conspiracies, Polosky acted as a loan officer for First Capital Home Equity, which was a mortgage broker company that assisted buyers and home owners secure financial collateralized by real estate. Loan officers at First Capital Home Equity regularly submitted fraudulent appraisals that had been prepared by Kenneth Cowden, who was not a licensed appraiser and regularly submitted appraisals that vastly overstated the true fair market value of the properties that were serving as collateral for the loans. Cowden submitted more than $66 million of fraudulent appraisals through First Capital Home Equity, and a total of more than $320 million of fraudulent appraisals through more than a dozen different mortgage brokers. Fraudulent appraisals were just one aspect of the fraud. Individuals associated with First Capital, including Polosky, regularly submitted loan applications to lenders that falsely represented the financial condition of the borrowers, including their income and assets. Those individuals also submitted fraudulent documents that supported those false representations, including pay stubs, W-2s, and similar types of documents. In addition, Polosky submitted false tax returns that vastly understated his income. Sentencing is scheduled for July 2, 2010. The law provides for a total sentence of 43 years in prison, a fine of $750,000, or both.
Constantino Papastergou, 39, of Allison Park, Pennsylvania
On March 15, 2010, Papastergou pleaded guilty to a charge of Wire Fraud Conspiracy in connection with a mortgage fraud scheme. Papastergou was a loan officer for Steel City Mortgage, which was a mortgage broker company. Papastergou and other individuals associated with Steel City Mortgage used Kenneth Cowden, an unlicensed appraiser who submitted fraudulent appraisals using the names of licensed appraisers, to prepare more than $50 million of fraudulent appraisals for Steel City Mortgage. The appraisals were fraudulent in that they falsely represented that they were prepared by a licensed appraiser and because they overstated the value of the property serving as collateral for the loans. Papastergou and other individuals associated with Steel City also submitted loan applications and supporting documents that misrepresented the financial status of the borrowers, including their income and assets. Sentencing is scheduled for July 9, 2010. The law provides for a total sentence of 20 years in prison, a fine of $250,000, or both.
Daniel Gillen, 42, of Mt. Lebanon, Pennsylvania
On April 6, 2010, Gillen pleaded guilty to charges of Wire Fraud Conspiracy, Money Laundering Conspiracy, and Tax Evasion in connection with a mortgage fraud scheme. Gillen was a loan officer for several different mortgage broker companies who submitted fraudulent loan applications and supporting documents that misrepresented borrowers' income and assets. He also conspired with Kenneth Cowden, who, as part of the conspiracy, prepared fraudulent appraisals for Gillen and others that overstated the true values of the properties serving as collateral for the loans. Gillen, even though he was not a licensed appraiser, also prepared fraudulent appraisals as part of the conspiracy that overstated the true values of the properties serving as collateral for the loans. Gillen also laundered money in connection with the mortgage fraud scheme by reinvesting profits from the scheme back into the scheme. In addition, Gillen filed false tax returns that understated his income and engaged in other activities designed to evade his tax obligations. Sentencing is scheduled for August 20, 2010. The law provides for a total sentence of 45 years in prison, a fine of $750,000, or both.
Jeanette Gray, 54, of Yeadon, Pennsylvania
On April 1, 2010, Gray pleaded guilty to a charge of Wire Fraud Conspiracy in connection with a mortgage fraud scheme. Gray was a licensed appraiser. She participated in a conspiracy with an individual associated with the mortgage broker company First Capital Home Equity in which First Capital Home Equity submitted appraisals to lending institutions representing that Gray had actually done the appraisals, when, in fact, she neither prepared nor reviewed the appraisals. In exchange, First Capital Home Equity paid Gray $4,000 per month. Sentencing is scheduled for July 23, 2010. The law provides for a total sentence of 20 years in prison, a fine of $250,000, or both.
Michael Dokmanovich, 36, of Bethel Park, Pennsylvania
On May 3, 2010, Dokmanovich pleaded guilty to a charge of Wire Fraud conspiracy in connection with a mortgage fraud scheme. Dokmanovich operated Brandy Financial Services Company, which was a mortgage broker company. Dokmanovich participated in a conspiracy in which he submitted loan documents to lenders that overstated the borrowers' financial condition, including their assets and income. The conspiracy also involved appraisals that overstated the true fair market values of the properties serving as collateral for the loans. In addition, the conspiracy involved fraudulent closings, in which the closing agent executed closing documents that falsely represented that the borrowers had made down payments associated with the purchases of the properties when the borrowers did not make down payments. Sentencing is scheduled for August 24, 2010. The law provides for a total sentence of 20 years in prison, a fine of $250,000, or both.
David McCloskey, 45, of Finleyville, Pennsylvania
On June 7, 2010, McCloskey pleaded guilty to a charge of Wire Fraud Conspiracy. He operated First Atlantic Financial, a mortgage broker company that assisted buyers and home owners secure loans collateralized by real estate. Loan officers at First Atlantic Financial, including McCloskey, regularly submitted fraudulent appraisals that had been prepared by Kenneth Cowden, who was not a licensed appraiser, that vastly overstated the true fair market value of the properties that were serving as collateral for the loans. Cowden submitted more than $33 million of fraudulent appraisals through First Atlantic Financial. Sentencing is scheduled for September 27, 2010. The law provides for a total sentence of 20 years in prison, a fine of $250,000, or both.
Robert Danenberg, 55, of Pittsburgh, Pennsylvania
On May 25, 2010, Danenberg was sentenced to two years in prison and three years of supervised release on his conviction of Wire Fraud Conspiracy in connection with a mortgage fraud scheme. He also paid $250,000 in restitution prior to his sentencing. Danenberg is an attorney who specialized in closing real estate transactions. He participated in a mortgage fraud conspiracy in which a co-conspirator recruited buyers to purchase properties at fraudulently elevated prices and financed through fraudulently obtained loans. Danenberg's role in the conspiracy was to close the fraudulent loans, and the closings themselves were fraudulent in two ways. First, the closings required the borrowers to bring certified funds to the closings from their own funds to make the down payments associated with the purchase. The borrowers, however, did not have sufficient funds to make the down payments and were often getting cash back at the closings. The down payments were paid by the sellers, the mortgage broker, and on several occasions, by Danenberg himself. The closings were also fraudulent in that the settlement statements reflected payments to contractors for work purportedly already done on the properties serving as collateral for the loans. In fact, however, as Danenberg well knew, those payments were kickbacks to participants in the conspiracy.
In total, Danenberg closed approximately 70 fraudulent loans totaling in excess of $5,000,000 of loan proceeds. Danenberg pleaded guilty after four days of trial.
Kenneth Fox, 43, of Irwin, Pennsylvania
On March 5, 2010, Fox was sentenced to 41 months in prison and three years of supervised release on his conviction of Wire Fraud Conspiracy, Money Laundering Conspiracy, and Failure to File Income Tax Returns. Acting as a closing agent for real estate transactions, Fox participated in a conspiracy in which he failed to pay obligations associated with the real estate as directed by the lender, and used those funds for his own benefit and the benefit of his co-conspirator. In addition, Fox's conspiracy included using the proceeds from his offense to attempt to cover it up and prolong it by using funds from more recent transactions to pay liabilities associated with older transactions. The conspiracy also involved the submission of fraudulent loan applications and other documents to lenders that overstated the borrowers' income and assets and the value of the properties serving as collateral for the loans. And finally, Fox also willfully failed to file an income tax return for 2005 despite earning well in excess of the amount triggering the legal requirement to file income tax returns.
Matthew Yurchison, 37, of Champion, Pennsylvania
On March 10, 2010, Yurchison was sentenced to 12 months and one day of incarceration on his conviction of Wire Fraud Conspiracy and Willful Failure to File Income Tax Returns. Yurchison participated in a mortgage fraud scheme that had two aspects. The first aspect of the scheme involved closing loans in which Yurchison and his co-conspirator were supposed to pay off other mortgages, but instead used that money for their own purposes. As a result, there ended up being two mortgages on properties when there was only supposed to be one. Thus, when it came time to foreclose on the properties, the second lending institutions were not in the first lien position and they suffered losses expected to top $670,000. The second aspect of the fraud involved applying for and obtaining loans based on false information and by forging signatures of borrowers and other participants in the fraud. The lending institutions that loaned the money have suffered hundreds of thousands of dollars of losses as a result of those fraudulent loans. Yurchison also failed to file his tax returns for two years.
Robert Jones, 54, of Irwin, Pennsylvania
On March 24, 2010, Jones was sentenced to three years of probation and four months home detention on his conviction of Wire Fraud Conspiracy in connection with a mortgage fraud scam. Jones participated in a mortgage fraud scheme in which the sales prices of properties as represented to the lenders were higher than the true sales prices; fraudulent loans applications and documents were submitted to lenders related to the borrowers' financial conditions; fraudulent appraisals were submitted to lenders that vastly overstated the value of the property serving as collateral for the loans; and fraudulent real estate closings occurred in which the loan proceeds were distributed contrary to the representations to the lenders.
Patrick Totten, 33, of Weirton, West Virginia
On March 25, 2010, Totten was sentenced to two years of probation on his conviction of Accessory After the Fact to Wire Fraud. Totten arranged to purchase a building, and in connection with that purchase other individuals submitted false documents related to his income and assets, and related to the rent that the building was generating. After the closing on the property, Totten became aware that false documents had been submitted to the lender about the amount of rent that the building was generating. Rather than rescind the transaction, however, he sought and received $25,000 from the other individuals who had submitted the false documentation, for which he agreed not to report or rescind the transaction.
Ann Marie Tonkovich, 34, of Fombell Pennsylvania
On June 8, 2010, Tonkovich was sentenced to one day of incarceration, followed by three years of supervised release. While on supervised release, she will be required to serve an additional 21 days in jail, and then every weekend in jail for the next 76 weeks. She will then serve every other weekend in jail for the next 38 weeks. Tonkovich had been charged in a one-count information with Tax Evasion. Tonkovich attempted to evade a portion of her tax obligation by filing false tax returns that under reported her income, by concealing business income by depositing business receipts into her personal bank account and the bank account of another individual known, and by providing inaccurate and incomplete information to her tax return preparer. Tonkovich was also indicted in connection with a Mortgage Fraud Conspiracy. Tonkovich operated T&T Financial, a Pittsburgh mortgage broker business that assisted borrowers in obtaining financing to purchase homes. Tonkovich submitted loan applications that contained material misrepresentations about the borrowers' financial condition, and false documents in connection with those loan applications, including appraisals that inflated the true value of the properties, appraisals that represented that they were prepared by licensed appraisers when they were really prepared by unlicensed appraisers, false real estate contracts, and employment and income verification documents that misrepresented the borrowers' employment status and overstated the borrowers' income.
Assistant United States Attorney Brendan T. Conway is prosecuting these cases.
The Mortgage Fraud Task Force conducted the investigation that led to the prosecution of these cases. Mortgage industry members with knowledge of fraudulent activity are encouraged to call the Mortgage Fraud Task Force at (412) 894-7550. Consumers are encouraged to report suspected mortgage fraud by calling the Pennsylvania Attorney General's Consumer Protection Hotline at (800) 441-2555.
An indictment/information is only a charge and is not evidence of guilt. A defendant is presumed innocent and is entitled to a fair trial at which the government must prove guilt beyond a reasonable doubt.
Protect yourself from fraud, and report suspected cases of financial fraud to local law enforcement.