Foreclosure Rescue Bailout Schemers Are "Opportunistic Thieves" Says NJ FBI Agent As Charges Are Filed Against Equity Stripping, Straw Buyer Operation

From the Office of the Federal Bureau of Investigation: (Newark, New Jersey):

• FBI Special Agent In Charge Weysan Dun announced [Monday] the arrest of Daniel Verdia, Don Apolito, Jaye Miller, and Chrystal Paling (all on Tuesday, July 21), as well as the surrender of Robert Gorman and Philip Blanch (on Friday, July 24)—all in connection with a mortgage fraud scam(1) operated out of an office in Hasbrouck Heights, New Jersey. All of the arrests occurred without incident. The six defendants are each charged with one count of wire fraud, in a joint investigation between the FBI and IRS titled “Operation Follow The Money.”(2)

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• The following outline is based on allegations made in the criminal complaint. In the simplest terms, a victim home owner [...] was convinced by one of the defendants named above to either sell or refinance his or her home through Monarch Mortgage Services, LLC as part of a foreclosure bailout scheme. The defendants then recruited a straw buyer who was promised a sum of $5,000 for his or her participation. The defendants explained to the straw buyer that the original owner would repurchase the home after a short period of time when the owner had recovered from financial difficulties. The defendants also told the straw buyers that the mortgage payments for the newly purchased properties would be paid by Monarch. The defendants then falsified the financial information in the paperwork associated with the transaction.

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• Once the loans were approved, the mortgage lenders wired funds to Blanch’s attorney trust account. At Blanch’s direction, Palings, would then wire all or most of the proceeds to CIS as a fee or payment. In the end, three of the victim homeowners received no compensation whatsoever for the sale of their homes. Furthermore, one of those three victims suffering financial hardship was lead to believe he was refinancing his home when in reality, he sold it for a 100% loss. The other two victims received a fraction of the money they were legitimately owed. The defendants, however, all received financial compensation for each of the five transactions. None of the resulting mortgages from these five transactions were ever paid and all of them went into default. The total fraud in these five transactions is estimated at $1 million.

For the entire FBI press release, see Six Mortgage Industry Insiders Charged by FBI and IRS.

(1) According to the press release, the alleged scam was perpetrated in two phases. The first phase involved misrepresenting to the buyers and sellers the terms of the mortgage financing the purchase, the disbursements of the mortgage proceeds, and the source of the proceeds to pay off the mortgages, among other details. The second phase of the fraud involved falsifying information on the mortgage loan applications—namely the income and assets of the purchasers on the loans, the source of the down payments on new purchases, and the disbursements of cash related to the mortgage proceeds. The defendants allegedly accomplished their misdeeds through numerous interstate wire transfers.

(2) “Those who are engaged in foreclosure bailout schemes are opportunistic thieves,” said FBI Special Agent In Charge Weysan Dun. “The defendants in this matter are charged with preying on the financially weak and desperate, our lending industry, and ultimately the taxpayers. To swindle people out of the roofs over their heads is just deplorable. But we will continue working with our partners in uncovering these schemes, bringing the fraudsters to justice, and educating the public.”