U.S. Attorney Announces District of Arizona Results in National Distressed Homeowner Initiative
First Law Enforcement Effort Focused on Crimes Against Struggling Homeowners
|U.S. Attorney’s Office October 10, 2012|
PHOENIX—U.S. Attorney John S. Leonardo announced the District of Arizona’s participation in the National Distressed Homeowner Initiative described by Attorney General Eric Holder and other federal officials yesterday at a press conference in Washington, D.C. Nationwide, during the 12 months ending September 30, 2012, hundreds of defendants were charged in cases involving tens of thousands of distressed homeowner victims.
In Arizona, a state hit particularly hard by the decline in the housing market, defendants in several such cases have been successfully prosecuted, and more prosecutions are underway.
“These comprehensive efforts represent an historic, government-wide commitment to eradicating mortgage fraud and related offenses,” said Attorney General Holder. “The success of the Distressed Homeowner Initiative, and the developments we announce today, underscore our determination to pursue these and other financial fraud criminals around the country.”
“We appreciate the efforts of our partner agencies in this endeavor,” declared U.S. Attorney Leonardo. “Arizona homeowners trying to do the right thing with respect to mortgage obligations have been victimized anew by loan modification schemes.”
“The FBI formed our statewide Mortgage Fraud Task Force to protect the public as an answer to the collapse of the housing market in Arizona”, stated FBI Special Agent in Charge James L. Turgal Jr., Phoenix Division. “Whenever an individual targets a distressed homeowner utilizing fraudulent schemes it undermines the American dream of home ownership. The FBI and our law enforcement partners are committed to identifying and investigating individuals who prey on homeowners through fraudulent means.”
From October 1, 2011, to September 30, 2012 (fiscal year 2012), the Distressed Homeowner Initiative focused on fraud targeting homeowners, such as foreclosure rescue schemes that take advantage of homeowners who have fallen behind on their mortgage payments.
Typically, the con-artist in such a scheme promises the homeowner that he can prevent foreclosure for a substantial fee by, for example, having so-called investors purchase the mortgage, or transferring title in the home to persons in league with the scammer.
In the end, the homeowner can lose everything.
Other targets of the Distressed Homeowner Initiative include perpetrators of loan modification schemes who obtained advance fees from homeowners after falsely promising that they would negotiate more favorable mortgage terms on behalf of the homeowners.
In federal civil actions involving distressed homeowner victims, the Justice Department’s U.S. Trustee Program, the Federal Trade Commission, and the Consumer Financial Protection Bureau (CFPB), protectors of the nation’s bankruptcy laws and federal consumer laws, filed 110 cases against 153 defendants in federal cases across the country, with more than 15,000 victims identified and losses estimated at more than $37 million.
False or abusive filings in U.S. Bankruptcy Court are commonly used to execute foreclosure rescue scams.
State Attorneys General also filed criminal cases against 51defendants, with losses at more than $2 million, and also filed at least 104 civil enforcement actions against 125 defendants with losses to homeowners at approximately $5 million.
Last, the Treasury Department’s Office of Financial Stability’s Antifraud Unit and the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP), in order to protect homeowners from fraudulent or confusing websites that misuse the Treasury seal and key TARP housing program names, such as the Home Affordable Modification Program, shut down or forced into compliance more than 900 mortgage rescue websites or web advertisers.
In order to protect struggling homeowners and increase the number of criminal enforcement actions made as part of this initiative, the members of the Mortgage Fraud Working Group were proactive and fully operational. The FBI generated new investigations by gathering victim complaint data from FTC databases and other sources, analyzed the data and distributed information of lead value to field offices from coast-to-coast. The FBI, together with HUD-OIG, also utilized sophisticated undercover operations to facilitate the development of federal distressed homeowner criminal cases. Many of the investigations initiated as part of the Distressed Homeowner Initiative are ongoing and will result in additional enforcement actions in the near future.
Cases prosecuted in the District of Arizona as part of the Distressed Homeowner Initiative since October 1, 2011, include cases against the following “foreclosure rescue” companies:
- The Guardian Group: Luis Belevan and Brian Prehoda, principals of The Guardian Group, pleaded guilty earlier this year to defrauding nearly 2,000 struggling homeowners into paying up-front fees of $1,595 per home in exchange for false promises of mortgage assistance. In operation for just 10 months in 2009 and 2010, The Guardian Group defrauded those hit hardest by the housing market decline out of millions of dollars in up-front fees by promising homeowners that, with the backing of a multi-billion-dollar hedge fund, the company would purchase mortgage loans from lenders at a deep discount and then refinance the properties based on the decreased market value of the property. In reality, the company had no financial backing at all, not a single homeowner received the promised services, and the vast majority of the homes ended up in foreclosure proceedings. Belevan was sentenced to five years in federal prison and Prehoda was sentenced to three years in federal prison, with both prison terms to be followed by three-year terms of supervised release. Both men were ordered to pay almost $3 million in restitution to the victims.
- Foreclosure Home Savers & Gold Capital Investment Corporation: Earlier this month, Frank Campos, owner of California-based Gold Capital Investment Corporation, pleaded guilty to conspiring with principals of Foreclosure Home Savers (FHS), an Arizona company, to target primarily Hispanic distressed homeowners in California and Arizona with false promises of mortgage assistance. In exchange for a fee of $2,500 to $4,500, nearly 300 homeowners were guaranteed a substantial reduction in the principal balance of their mortgage loans, a fixed interest rate over a 30-year loan term, and a corresponding reduction in monthly mortgage payments. In reality, neither Campos nor FHS had any means to fulfill these promises, and instead filed bankruptcy petitions on behalf of the homeowners to delay foreclosures. No homeowner was provided the guaranteed service, and virtually all homes ended up in foreclosure proceedings. Any Arizona homeowners who believe they may have been defrauded by Foreclosure Home Savers are urged to call the Phoenix Field Division of the FBI at (623) 466-1999, or to e-mail firstname.lastname@example.org.
The initiative included federal criminal prosecutions brought by various U.S. Attorneys’ offices and the Department of Justice’s Criminal and Civil Divisions; civil enforcement cases filed by the Department of Justice’s U.S. Trustee Program, FTC, and CFPB; and criminal and civil cases brought by Attorneys General in over 11 states. Participating federal agencies included the FBI, the Office of Inspector General of the Department of Housing and Urban Development (HUD-OIG), the Federal Housing Finance Agency’s Office of Inspector General (FHFA-OIG), SIGTARP, Internal Revenue Service-Criminal Investigation, U.S. Postal Inspection Service, and the U.S. Secret Service. In addition, the Financial Crimes Enforcement Network, a task force partner, announced yesterday that during the Distressed Homeowner Initiative it collected 4,395 foreclosure rescue Suspicious Activity Reports, a critical tool for law enforcement agencies when conducting investigations. For more on this announcement, please visit: www.FinCEN.Gov.
To learn more about scams targeting homeowners, how to protect yourself from scams, or how to report fraud if you believe you have been a victim, please visit: www.stopfraud.gov.
For information about the Distressed Homeowner Initiative, including stories about common scams, fraudsters’ sample marketing materials, plus radio and television public service announcements, please visit: www.stopfraud.gov.
The Mortgage Fraud Working Group of President Obama’s interagency Financial Fraud Enforcement Task Force was established to lead an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force, chaired by Attorney General Eric Holder, 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 about the Financial Fraud Enforcement Task Force, please visit: www.stopfraud.gov.