An indictment released Tuesday charges 24 people with racketeering offenses stemming from an extensive mortgage fraud scheme based in San Diego. "All 24 individuals in this case were charged with RICO violations, that's never been done before," says Keith Slotter, FBI Special Agent in charge.
The indictment represents the largest mortgage fraud case ever prosecuted in the Southern District of California, involving 220 properties with a combined sales price of more than $100 million, said U.S. Attorney Karen Hewitt.
Darnell Bell, a 38-year-old member of the Lincoln Park street gang, was the leader of the corrupt enterprise and personally received at least $9 million in proceeds from the racketeering conspiracy, Hewitt alleged. Hewitt also disclosed that Bell has been in custody for the last year on drug charges. "The main goal for Mr. Bell and his associates was to exploite the drive of a home ownership," says Thomas Holloman, IRS Special Agent.
The indictment alleges that between January 2005 and April 2008, the defendants used multiple real estate businesses, including the Ivy House Inc., the Real Estate Center of Southern California and the Real Estate Center of La Mesa, to facilitate the fraudulent purchase of real estate.
The indictment identifies several real estate professionals as alleged members of the conspiracy, including Diana Jaime, a public notary, Jorge Cortez, a licensed real estate agent, Esteban Valenzuela, a licensed real estate appraiser, Anton Ewing, a Certified Public Accountant, and registered tax preparers Randolph Hirsch and Dennis Tapia. "The individuals charged in this indictment have one thing in common: greed," said FBI Special Agent in Charge Keith Slotter.
"They represent precisely those who have undermined our country's financial system by perpetuating such egregious schemes," he said. "The extent to which this group of people went to defraud lenders should also serve as a warning to the public. We urge people to come forward with information of suspicious activities they may encounter when engaged in real estate and mortgage transactions."
The defendants identified properties throughout Southern California that had been on the market for an extended period of time and for which the original asking price had been reduced.
They then recruited "straw buyers," who allowed their names and credit histories to be used to obtain mortgage loans and purchase properties in name only on behalf of the racketeering enterprise, according to the indictment.
The defendants prepared and submitted offers to purchase the identified properties that substantially exceeded the asking price for those properties, the government alleges.
According to the indictment, the defendants hired real estate appraisers to prepare inflated appraisals for the identified properties, which were used to induce lenders into believing that the loans being given to the "straw buyers" would be fully secured by the value of the properties being purchased.
False loan applications prepared and submitted for the "straw buyers" induced 70 lenders to make loans to individuals that the lenders otherwise would not have funded, according to prosecutors.
The defendants arranged to have the amount of money that exceeded that asked price paid at the close of escrow to a shell construction company maintained by the racketeering enterprise, the government alleges.
The defendants falsely informed the lenders that the "kickback amount" would be used to pay for handicap access and property upgrades to the properties by a shell firm, Bell Construction, according to the indictment.
"Then the strawbuyers would eventually stop making the mortgage payments and basically walk away from the home and eventually all of the homes fell into foreclosure," explained Hewitt.
The defendants each face up to 20 years in federal prison and a $250,000 fine if convicted of conspiracy to conduct enterprise affairs through a pattern of racketeering activity, namely wire and bank fraud and money laundering.
