Jury Finds Pittsburgh Man Played Crucial Role in Mortgage Fraud Schemes
PITTSBURGH - After deliberating six hours, a federal jury of five men and seven women found Jason Moreno guilty of two counts wire fraud conspiracy and five counts of wire fraud, United States Attorney David J. Hickton announced today.
Moreno, 30, was tried before United States District Judge Nora Barry Fischer.
According to Assistant United States Attorney Brendan T. Conway, who prosecuted the case, the evidence presented at trial established that Moreno operated Platinum Appraisal Services, which provided hundreds of fraudulent appraisals in connection with two different complex mortgage fraud schemes. The appraisals were fraudulent in at least the following respects:
- The appraisals represented that they had been prepared by a licensed appraiser named Joel Reck when, in fact, they were prepared by Jason Moreno and others who were not licensed appraisers;
- The appraisals overstated the conditions of the properties and represented that they were in better condition than they actually were;
- The appraisals falsely represented that substantial improvements had been made to the properties;
- The appraisals failed to identify significant problems with the properties that effected the market values of the properties; and
- The appraisals represented that the properties being appraised, which are referred to as the "subject properties", were comparable to certain other properties, which are referred to as the "comparable properties", when, in fact, the comparable properties were in superior conditions and in superior locations than the subject properties.
All of these misrepresentations were designed to overstate the values of the properties serving as collateral for the loans.
One of Moreno's primary customers for the fraudulent appraisers was Robert Arakelian, who was a mortgage broker who operated Pittsburgh Home Loans along with his partner, Michael Ferrazza. Arakelian operated a mortgage fraud scheme in which he falsely represented to the lenders that the borrowers intended to and had made substantial down payments associated with the purchase of the properties. In fact, the borrowers were not making any down payments and were actually getting money back from many of the transactions. Thus, for the scheme to work, the loan amounts had to be sufficient to pay the seller, pay the buyer money back, as well as pay the closing costs and any kickbacks to Arakelian and others associated with the scheme.
Lenders, however, will typically only lend between 80% and 90% of the lower of the sales prices and the value of the home. The "value" is supposed to be determined by a licensed independent professional appraiser. In order to get a sufficient loan amount to make the disbursements associated with the scheme, the sales prices of the properties had to be drastically overstated, and these overstated sales prices had to be supported by similar fraudulently overstated appraisal values. Preparing and causing the preparation of the fraudulent appraisals was Moreno's role in the conspiracy. In the end, while the lenders believed that they were lending between 80-90% of the values of the properties, they were typically lending 150-200% of the values of the properties.
Another major customer for Moreno's fraudulent appraisals was James Platts, who operated East Realty Solutions. Platts' scheme was slightly different from Arakelian's scheme. Platts identified properties for sale in some sort of distressed circumstances, and he would enter into a contract to purchase the properties for a relatively modest amount. Prior to actually closing on the transactions, however, Platts located purchasers for the properties, who were typically in poor financial condition, had insufficient money to make a down payment, and were unsophisticated first-time home buyers.
As presented to the lenders, the buyers were purchasing the properties directly from the sellers, and the buyers were making substantial down payments associated with the purchase of the properties. Neither of those representations, however, was accurate.
Platts was paid through the payoff of Lis Pendens he had placed on the properties, which were often more than half of the true values of the properties. These Lis Pendens were essentially the difference between the true sales prices and the sales prices represented to the lenders.
Like Arakelian's scheme, Platts' scheme required drastically overstated sales prices because the loan amounts needed to pay the seller, Platts, and other kickbacks associated with the scheme. Moreno provided the fraudulent appraisals that mirrored the drastically overstated sales prices, leading the lenders to believe that their loans were collateralized by real estate worth much more than it was actually worth.
In terms of the Wire Fraud Scheme, there are a number of properties where Moreno was more than just an appraiser for the property. For example, there was a property located in Pittsburgh, Pa. Moreno negotiated to purchase the property, but prior to the closing, he arranged to sell the property to another buyer. The transaction was structured, however, to make it appear to the lender that Jason Moreno was not involved at all in the transaction, including failing to disclose a substantial payment to him at the closing. The transaction also involved a fake down payment, an undisclosed disbursement to the buyer of the property, and an egregiously fraudulent appraisal.
There were a number of other fraudulent deals involving Moreno himself, Moreno's fiance, his aunt, and his mother. All of these deals involved overstated sales prices, fake down payments, undisclosed disbursements to the buyers, and egregiously overstated appraisals. Another fraudulent transaction involved the purchase of a property by Daniel Hoey, Arakelian's brother-in-law. The settlement statement and other loan documents reflected the purchase of an $800,000 home in Sewickley, Pa., by Arakelian's wife, Samantha, which was financed by a $650,000 loan in which Samantha Arakelian made a substantial down payment associated with the closing. The reality, however, was that Hoey purchased the property for $441,000 and received $140,000 cash back, and neither he nor Samantha Arakelian made a down payment. In fact, Samantha Arakelian got $40,000 for the transaction. Moreno provided a fraudulently elevated appraisal that supported the fraudulently elevated $800,000 sales price, and another appraisal some months later related to a cash-out refinance associated with that same property.
Judge Fischer scheduled sentencing for Jan. 15, 2014. The law provides for a total sentence of 140 years in prison, a fine of $1,750,000, or both. Under the Federal Sentencing Guidelines, the actual sentence imposed is based on the seriousness of the offenses and the criminal history, if any, of the defendant.
The Western Pennsylvania Mortgage Fraud Task Force conducted the investigation that led to the prosecution of Moreno. The lead investigator on the case was United States Secret Service Special Agent Keith Heckman.