Tuesday, April 7, 2009 | Federal prosecutors on Tuesday announced unprecedented charges against individuals involved in an alleged mortgage fraud ring involving 220 properties in San Diego County, with total purchase prices topping $100 million.
The 24 defendants were all charged with participating in a “corrupt enterprise” under a federal law created by the Racketeer Influenced and Corrupt Organizations (RICO) Act, which allows for charging multiple defendants with extended penalties for their participation in an ongoing crime ring.
This was the first known time in the country that defendants in an alleged mortgage fraud scheme have been charged in a RICO conspiracy, U.S. Attorney Karen Hewitt said today. This was the largest mortgage fraud uncovered to date in San Diego, Hewitt said.
The RICO Act was passed in 1970 in efforts to eradicate organized crime. It was originally intended to focus on La Cosa Nostra, but its application here is fitting, said local FBI Special Agent in Charge, Keith Slotter.
“To me it ups the ante,” Slotter said. “It shows how seriously we take the crime. … It’s the most serious charge you could go with.”
The indictment describes a network of individuals allegedly masterminded by defendant Darnell Bell, or D-Bell. Bell is a documented member of the Lincoln Park street gang and had already been serving time for about a year for narcotics charges when he was arraigned on the racketeering charges in federal court this morning, Hewitt said.
Between January 2005 and April 2008, Bell and his team worked in concert to find properties that had been sitting on the market for long enough that the sellers had reduced their prices, prosecutors allege. The defendants used straw buyers, individuals who allowed their names and identities to be used, to submit offers on those properties for much more than the asking price, according to the indictment.
Prosecutors say Bell and his associated hired appraisers — including one of the defendants — to tell mortgage lenders that the properties were actually worth the higher amount. The straw buyers, who have also been charged, then obtained loans for 100 percent of those purchase prices. When lenders asked for more verification, Bell and his associates allegedly had tax preparers and a CPA — three more of the defendants — respond to the lenders with faked CPA letters and verification of employment forms.
The organization told lenders that the extra money would be used to fix up the houses to make them handicapped-accessible. That money, in some cases more than $100,000 in a single transaction, was directed to Bell Construction, a company that prosecutors say was a shell company.
Bell received at least $9 million in proceeds from the conspiracy, the indictment alleges. None of the properties were ever made handicapped-accessible, Hewitt said. All of the properties have fallen into foreclosure.
By recruiting members of their organization to cover every piece of the real estate transaction — from appraiser to escrow to real estate agent to buyer — the organization allegedly obtained millions of dollars in cash back and fraudulently obtained commissions and fees, according to the indictment.
Besides Bell, the lead defendants in the case are:
- Michael Ivy, 43, of San Diego, who prosecutors say negotiated the property transactions.
- Stanley Gentry, a 49-year-old licensed local real estate broker, allegedly allowed the organization to use his broker’s license to facilitate the purchases, in exchange for $10,000 a month and a cut of the commissions and fees on each deal.
- Billie Bishop, 49, of La Mesa was another lead defendant, an escrow officer who allegedly enabled the organization to purchase more than 100 properties.
The other defendants include several real estate professionals: Diana Jaime, 33, a public notary; Jorge Cortez, 39, a licensed real estate agent; Esteban Valenzuela, 28, a licensed real estate appraiser; Anton Ewing, 38, a CPA; and Randolph Hirsch, 43, and Dennis Tapia, 49, both registered tax preparers.
Prosecutors said defendants Latashia McKinney, 35, and Marcus Dozzell, 34, rounded up some of the straw buyers. Lorena Callu, 52, worked for the organization and allegedly helped to prepare and submit loan applications.
Prosecutors also name several straw buyers as participants in the corrupt enterprise: Desiree Holiday, Dexter Holiday, Keith Holiday, Gerard Holiday, Ray Logan aka Jack Nasty, David Lewis, David Lewis, Joseph Lewis, Stevie Frazier, Jorge Magana, Nicoele Watson and Daniel Williams. All of them fraudulently obtained mortgages and purchases properties on behalf of the organization, according to the indictment.
Because prosecutors decided to fuse the alleged actions of all 24 defendants into the overarching racketeering charge, the individuals could each face up to 20 years in prison and fines of $250,000. The alleged racketeering activity includes charges of bank fraud, money laundering and wire fraud.
The charges came out of a joint investigation between the FBI and IRS that spanned November to March. Charles Rees, attorney for Darnell Bell, did not immediately return a call for comment Tuesday afternoon.
This article relates to: Housing