Tuesday, March 25, 2008

19 indicted in foreclosure fraud that reaped millions, Posted by Robert Paisola


19 indicted in foreclosure fraud that reaped millions


Federal prosecutors in Sacramento announced yesterday that 19 people have been indicted in a large mortgage fraud case that preyed on people close to foreclosure and stripped homeowners in two dozen states of millions of dollars in equity.

McGregor Scott, U.S. attorney for the Eastern District of California, unsealed the contents of two indictments that detail a conspiracy to strip 115 people of $12.6 million in equity and their homes in cases that stretch from California to New York.

Two indictments - both citing Charles Head, 33, of La Habra, Calif., as the ringleader - allege a total of 18 counts of money laundering, mail fraud and conspiracy.

Scott called the cases an example of "unmitigated greed" and noted that his office has charged nearly a dozen others in continuing mortgage fraud cases.

"It is our duty to do all we can to restore faith and confidence in the marketplace by placing these thieves where they belong, which is in prison," Scott said.

Sheila Jones of Sacramento said she lost her home and its equity after dealing with one of Head's companies more than a year ago. After she was forced to move out, looters stripped the south Sacramento home to the studs.

She greeted news of the indictment with relief.

"Oh, my goodness," she said. "Oh, my goodness. Well, God is good."

Scott said that Head, the alleged ringleader, faces at least 20 years in prison if convicted. The 18 other defendants face 12 to 15 years, he said.

The case came to an FBI agent's attention when a victim reached an FBI economic crimes agent.

"[The agent] called Head, and based on call the agent believed there was something to this," Assistant U.S. Attorney Ellen Endrizzi said.

Scott detailed how the alleged scheme worked, starting in January 2004 and ending in November 2006, when investigators completed search warrants and froze the companies' activities.

The defendants reached out to people on the brink of foreclosure, offering them the chance to keep their homes and pay rent to the defendants while having their credit repaired.

Those who agreed were presented with a hefty pile of paperwork that included blank spaces that were filled in later, giving a "straw buyer" title to their homes.

The homeowners paid rent to one of Head's property management firms. The straw buyers paid the mortgage.

Then, Head and the co-conspirators refinanced the homes - often with inflated appraisals - and pocketed tens of thousands of dollars in equity at a time, prosecutors said.

After about a year passed, the victims "were left without homes, equity or repaired credit," the indictment says.

Endrizzi said FBI and Internal Revenue Service agents were in the sad position of breaking the news to victimized homeowners that their homes were no longer theirs.

Drew Parenti, special agent in charge of the FBI's Sacramento field office, said the defendants "duped innocent homeowners."

"It's unbelievable," Parenti said. "This is bad - you're almost destroying someone's life."

Prosecutors would not name the victims represented by the indictments.

Kevin Carlin, a New Jersey attorney who has spoken with about 70 victims of Head's alleged fraud, said the scam targeted elderly and disabled people facing financial strain after job loss and illness.

"I trust that some people will be leaping for joy today," Carlin said. "Even if they lost title to their house, Mr. Head may be required to pay for it with his liberty."

Carlin said one of Head's former employees testified in a deposition that Head took an entire office full of workers to Hawaii.

Endrizzi said agents seized Head's Mercedes convertible, $385,000 in cash, 50,000 shares of stock and exotic motorcycles. She said Head faces about 30 civil lawsuits filed from Hawaii to New Jersey.

Head was arrested in Orange County, Calif., on Friday and is being held in Santa Ana. He is to be brought to Sacramento's jail this week, Scott said.

Head, reached by e-mail in February, denied wrongdoing.

"The FBI/IRS has made no progress on this case at all. It's been over 2 years without a single charge...," he wrote.

Search warrant documents obtained by The Sacramento Bee listed 256 victims - more than twice those noted in the indictments - from Hawaii to Maine.

Endrizzi said prosecutors will be preparing cases based on many of those victims' cases in other federal districts.

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