SAN DIEGO - The leader of a corrupt enterprise that defrauded mortgage lenders out of more than 100 properties, resulting in a loss of at least $20 million, pleaded guilty Friday.
Darnell Bell, 39, pleaded guilty to a conspiracy to violate a racketeering statute by engaging in a pattern of wire fraud, bank fraud and money laundering.
He admitted that, among other things, the corrupt enterprise used inflated appraisals, "straw buyers" and false loan applications to induce lenders to make loans to people and at terms that the lenders otherwise would not have funded.
The Chula Vista resident also admitted that members of the enterprise structured the escrow documents in such a way that they would receive a cash kickback on each real estate transaction.
Bell admitted that the straw buyers failed to make the required mortgage payments for the fraudulently purchased properties, which ultimately resulted in the properties being foreclosed on.
He is scheduled to be sentenced June 7.
Bell is the fourth defendant to plead guilty in the case. Michael Ivy, Diana Jaime, and Marcus Dozzell have previously admitted guilt, prosecutors said.
Brokerage Settlement
SAN DIEGO - A San Diego-based broker-dealer agreed to pay $1.95 million to settle a case involving unauthorized fraudulent trading by one of its registered representatives in the accounts of two Florida municipalities, the Securities and Exchange Commission announced Friday.
The SEC maintained that First Allied Securities Inc. failed to reasonably supervise its former broker, Harold J. Jaschke, who was charged with fraud last year.
"Supervising registered representatives is a job that must be taken seriously by broker-dealers," said Rosalind Tyson, director of the SEC's Los Angeles office. "By failing to establish reasonable systems to prevent Jaschke's misconduct, First Allied did not fulfill its obligation to reasonably supervise its registered representatives."
The SEC administrative order that instituted the settlement against First Allied found that between May 2006 and March 2008, Jaschke executed numerous unauthorized transactions, made unsuitable recommendations and churned the accounts of the city of Kissimmee, Fla., and the Tohopekaliga Water Authority.
The SEC found that First Allied failed to reasonably supervise Jaschke because it did not establish reasonable systems to direct follow-up action in response to red flags regarding churning and suitability.
Churning is excessive trading in a customer's account by a broker taken in the context of a customer's financial situation and investment objectives.
According to the SEC's order, First Allied waited nine months before contacting the municipalities through self-described "annual review" letters that, in actuality, did not relate to annual reviews.
The letters failed to alert the customers about the suspicious trading activity in their accounts, the SEC said.
Additionally, the SEC order found that First Allied had no system in place to monitor compliance with its rule prohibiting its brokers from using personal e-mail accounts to conduct business.
That enabled Jaschke to use his personal e-mail account to send and receive business-related e-mails that were neither reviewed nor retained by the firm, according to the SEC.
