With a spate of recent lawsuits, charges and investigations being volleyed, financial institutions, government agencies and private parties have ample opportunities to recover assets in the wake of epic mortgage frauds -- whether they have taken advantage of these opportunities is another matter.
"This Administration has made protecting America's working families from financial fraud a top priority," said Assistant Attorney* General for the Civil Division Tony West, speaking at a mortgage fraud summit in Los Angeles on Sept. 30. The event was attended by task force members and legal services providers, real estate industry representatives and law enforcement officials to discuss the problem of mortgage fraud from a national, state and local perspective. In the morning, attendees participated in panels on mortgage fraud trends and the community impact of mortgage fraud in the Los Angeles area. In the afternoon, task force representatives met privately with law enforcement officials involved in the investigation of mortgage fraud.
"The President's Financial Fraud Enforcement Task Force has brought together the government's civil and criminal capabilities to uncover mortgage fraud schemes and hold those who commit fraud accountable to the fullest extent of the law."
Recovering any of the billions bilked from banks and homeowners was but a side item on the agenda -- strategies for tracing and recovering assets through the wires were discussed -- but experts did address the nature of crooks emerging from the first wave of bank-led mortgage fraud -- a second generation of fraudsters exploiting government programs to defraud taxpayers.
"As we've increased our efforts in addressing mortgage fraud, new challenges arise as the nature of the fraud evolves with the economic situation of homeowners," said Steven Martinez, Assistant Director of the FBI's Los Angeles Field Office.
For an example of these next-generation fraudsters Martinez would have to look no further than his own city on the same day of the summit. Juan Rangel, 46, was indicted in Los Angeles for running a hybrid fraud empire that stole more than $20 million -- about half coming from a mortgage fraud ring, the other half from a Ponzi/affinity scheme.
In relation to the Ponzi scheme*, the indictment alleges that Rangel and his company, the Commerce-based Financial Plus Investments, recruited new investors through Spanish-language newspapers and magazines, as well as in radio advertisements and infomercials broadcast on television. Rangel and Financial Plus promised to pay investors guaranteed returns of 60 percent each year out of the profits from Financial Plus' real estate investments and lending business. The indictment alleges that Financial Plus did not make any actual profits from real estate or lending, and that Rangel instead used the victims' money to make Ponzi payments to other investors, as well as for his own personal use, including the monthly mortgage payments on his $3 million home, to make monthly lease payments for his Lamborghini sports car and a limousine, and to buy cocaine.
In the related mortgage fraud scheme, the indictment alleges that Rangel and others targeted Latino homeowners who were at risk of losing their homes and offered to help them avoid foreclosure. Rather than assist them, however, the indictment alleges that Rangel took titles to their homes and drained the remaining equity out of the properties.
As part of this scheme, Rangel arranged to sell the homeowners' properties, usually without their knowledge, to third-party straw buyers. He then applied for loans in the straw buyers' names related to these supposed purchases, and used a variety of falsified documents to ensure that the fraudulent loans were approved. The proceeds from these loans went to Rangel and his companies. The indictment alleges that this scheme was successful in duping mortgage lenders into approving more than $10 million in fraudulent loans.
Rangel's elaborate home and trappings have been seized, and the hunt is on for more of his wealth purported to be held overseas and in Mexico. Prosecutors and investigators have their work cut out for them when chasing down and putting away the likes of Rangel, and although it seems mortgage fraudsters would represent low-hanging fruit for asset recovery*, it has so far proven difficult.
On June 18, Operation Broken Dreams -- an FBI-led, multi-agency effort to put mortgage fraudsters behind bars -- netted 395 arrests stemming from an estimated $2.3 billion in nationwide mortgage fraud. About $11 million in assets, or about half of one percent, was recovered then, and little more has been identified since then.
"It highlights the difficulties inherent in holding these perpetrators responsible," said Attorney* General Eric Holder.
United States Attorney* André Birotte Jr. announced the indictment after Rangel's two co-defendants were taken into custody that week and the indictment was unsealed.
