In a matter of months, several well-known individuals in real estate have been convicted of and/or charged with fraud or similar crimes relating to the theft of client funds. The summary below highlights a few of those cases with some extraordinary damages, but questions remain: Is this a harbinger of what’s to come? Or are the sentences harsh enough to act as a deterrent?
- In October, a Massachusetts real estate developer was sentenced to four years in prison in connection with a decade-long mortgage fraud scheme, totaling $6.5 million and more than $3.8 million in losses to lenders. The former real estate developer was convicted of one count of conspiracy, two counts of wire fraud, six counts of bank fraud, one count of aiding in preparing false income taxes, and one count of obstruction of justice.[1] Two of his co-conspirators, including a real estate attorney and his office assistant and spouse, pleaded guilty to five counts of bank fraud, with the former attorney also pleading to aggravated identity theft and tax evasion.[2] The attorney was also disbarred prior to his conviction for serving as a settlement agent on multiple residential real estate transactions and converting loan proceeds to his personal use.[3] He was sentenced to six and a half years in prison and five years of supervised release, and ordered to pay restitution of $3,236,466 and forfeiture of $3,221,403. His former legal assistant and spouse was also sentenced to prison and ordered to pay a similar amount of restitution jointly and severally.
- In another recent case, operators of California-based real estate and escrow companies pleaded guilty to participating in a $6 million real estate scheme.[4] The operators along with others within their offices listed homes for sale without owners’ permission, collecting millions from clients in search of purchasing homes. The real estate and escrow companies operated under a variety of aliases, working together to locate and list for sale properties, including those not for sale, with no intention of selling them. In some instances, they tricked homeowners into allowing their homes to be used for marketing through open houses. Multiple offers were accepted for homes not actually for sale, and all the while, the operators failed to disclose this to the potential buyers, instead making them wait and advising that closing delays were due to pending lender approvals. One of the former real estate moguls was sentenced to nine years in federal prison, while others await sentencing.
- A federal grand jury in the U.S. District Court for the Eastern District of California also recently returned an indictment against two real estate agents and a loan officer, alleging that they had falsified documents and created fictitious names of companies and individuals to obtain loans for borrowers who would not otherwise have been eligible.[5] If convicted, among other penalties, the defendants are facing a maximum of 30 years in prison, a fine of up to $1 million, or both fine and imprisonment, along with supervised release of up to five years.[6] After its investigation, the Federal Housing Finance Agency-Office of Inspector General (FHFA-OIG) aptly declared that it is “committed to holding accountable those who waste, steal, or abuse the resources of the Government-Sponsored Enterprises…” regulated by FHFA.[7] Historically, while methods or enforcement of statutory or regulatory rules may have been lacking in some respects, it is critical, moving forward, for borrowers, lenders, agents, and anyone involved in real estate to follow all applicable laws, rules, and guidelines.[8]
Hopefully, these cases are not indicative of a continuing trend in the real estate market. Whether it’s mortgage fraud, title fraud, wire fraud, collection scams, foreclosure relief scams, credit fixing ploys, or investment schemes, protect yourself by adhering to all applicable laws, regulations, and guidelines and by utilizing competent, experienced, and ethical counsel.
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[1]. Salem Man Found Guilty on All Counts in Decade-long Mortgage Fraud Scheme, 2022 WL 1778337 (News Release, Department of Justice, United States Attorney’s Office, District of Massachusetts, June 1, 2022).
[2]. USA v. Plunkett, Jr. et al, 1:20-cr-10140 (D. Mass).
[3]. In Re: Barry Wayne Plunkett, Jr., 2017 WL 7048877 (Ma.St.Bar.Disp.Bd. 2017); United States v. Cassiere, 4 F.3d 1006, 1011 (D. Mass. 1993) (illustrating the settlement attorney as the “eyes and ears” of the lenders, was obligated to look out for their best interests.).
[4]. USA v. Schoneke, 2:21-cr-00151 (C.D. Cal.).
[5]. USA v. Lopez-Velasquez, et al., 1:22-cr-00208 (E.D. Cal.).
[6]. Id.; see also, 18 U.S.C. §§ 1344, 1349.
[7]. https://www.justice.gov/usao-edca/pr/mortgage-loan-officer-and-real-estate-agents-charged-mortgage-fraud-scheme-central
[8]. https://www.fha.com/fha_loan_requirements
