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Press Release

Two Los Angeles-Area Men Sentenced to Federal Prison for Running Mortgage Scam that Purchased Homes with ‘Straw Buyers’

For Immediate Release
U.S. Attorney's Office, Central District of California

          LOS ANGELES – Two defendants linked to a mortgage fraud scheme that cost at least $2.4 million when fraudulently purchased homes went into foreclosure have been sentenced to federal prison.

          The case involves a scheme to fraudulently obtain mortgages for residential properties through the use of “straw buyers” – individuals who pretend to purchase the properties and have no intention of living in the homes. In this case, the straw buyers’ personal information was used to obtain mortgages without their knowledge. The scheme was run out of JTR Real Estate, Inc., a Norwalk-based real estate brokerage company which bought, renovated and sold residential properties.

          The two defendants sentenced on Monday by United States District Judge Dale S. Fischer were:

  • John Martynec, 41, of Long Beach, a licensed real estate broker and co-owner of JTR, who previously pleaded guilty to one count of conspiracy and was sentenced to two years in prison; and
  • Elek Andrade 32, of Downey, who also previously pleaded guilty to one count of conspiracy and was sentenced to one year and one day in federal prison.

          In addition to the prison terms, Judge Fisher ordered both men to pay $2,573,092 in restitution.

          Martynec was responsible at JTR for identifying distressed residential properties which could be purchased, renovated, and then sold for a profit. Andrade worked for Martynec as a real estate agent and assisted in selling the properties. When the market for renovated properties slowed in 2007, Martynec and Andrade engaged in a scheme to use straw buyers to purchase the renovated homes.

          The loan applications were submitted without the knowledge of the straw buyers and included fraudulent supporting documents, such as verifications of employment.

          As a result of the scheme, lending institutions approved and funded more than $5.2 million in loans for at least 11 properties.

          A third defendant who fabricated documents that were submitted with the fraudulent loan applications – Mireya Espinoza, 36, of Carson – was sentenced on February 6 to one year and one day in prison and was ordered to pay $1,476,966 in restitution.

          “Schemes like this can destabilize the financial industry and the real estate market,” said United States Attorney Eileen M. Decker. “The last economic crisis demonstrates the dangers of such destabilization and the importance of prosecuting crimes like those committed by these defendants.”

          Leslie DeMarco, the Special Agent in Charge of the Federal Housing Finance Agency, Office of Inspector General (FHFA OIG), Western Region, stated: “The housing crisis severely impacted many individuals throughout the country. Instead of working through the challenges the crisis presented, the defendants, Martynec and Andrade, engaged in a fraudulent scheme that caused additional harm to many individuals. As a result of our work, they are now being held accountable for their actions. The FHFA OIG will continue to work with our law enforcement partners to ensure that these types of frauds are investigated and exposed to ensure the American Taxpayer is protected.”

          James Todak, Special Agent in Charge of the Department of Housing and Urban Development’s Office of the Inspector General, said: “HUD-OIG continues to vigilantly protect FHA-insured borrowers from those who conduct mortgage fraud schemes. These prosecutions demonstrate our commitment to protecting HUD’s important work in providing affordable home ownership.”

          This matter was investigated by the Federal Housing Finance Agency, the United States Department of Housing and Urban Development’s Office of the Inspector General Office of Inspector General; and IRS Criminal Investigation.

          This case was prosecuted by Assistant United States Attorney Byron J. McLain of the Major Frauds Section.

Updated March 6, 2017

Press Release Number: 17-043