Former Los Angeles Resident Expected in Federal Court Tomorrow
LAWFUEL – Legal News Network – A former Los Angeles-based real estate developer charged with running a $50 million mortgage fraud scheme arrived in the United States this afternoon to face federal criminal charges. Charles Elliott Fitzgerald was arrested and deported by authorities in the Independent State of Samoa, a Pacific island nation where he fled to in June 2003 after he was sued by a mortgage lender he allegedly defrauded.
Samoan law enforcement officials, responding to a request from the United States, arrested the 46-year-old Fitzgerald in the Samoan capital of Apia on December 11. Fitzgerald was deported by Samoa because his United States passport had been revoked after the criminal charges were filed, which in turn subjected him to immediate deportation under Samoan law. Federal authorities in the United States expressed great appreciation for the cooperation of the Government of Samoa and its law enforcement authorities.
Fitzgerald arrived at Los Angeles International Airport at approximately noon today. He is being transported to the Metropolitan Detention Center in downtown Los Angeles, and he is expected to make his initial court appearance in United States District Court tomorrow afternoon.
Fitzgerald is charged with one count of conspiracy to commit bank fraud and loan fraud, four counts of bank fraud, one count of loan fraud, five counts of money laundering and one count of obstruction of justice.
The arrest warrant for Fitzgerald was unsealed today, as well as criminal informations against four co-conspirators. The other four defendants previously charged are:
Mark Alan Abrams, 45, of Long Beach;
Nicole LaViolette, 37, of Palm Springs;
Jamieson Matykowski, 33, of Laguna Niguel; and
Timothy Holland, 35, of Santa Ana.
Abrams previously pleaded guilty to charges of conspiracy to commit bank fraud and loan fraud, bank fraud, making a false statement on a tax return and obstruction of justice. LaViolette, Matykowski and Holland previously pleaded guilty to charges of conspiracy to commit bank fraud and loan fraud, as well as wire fraud. All four are scheduled to be sentenced next year by United States District Judge Dean D. Pregerson.
Fitzgerald and the others were allegedly involved in a wide-ranging and sophisticated conspiracy to defraud federally insured mortgage lenders out of tens of millions of dollars. As part of the scam, the co-conspirators obtained inflated mortgage loans on expensive homes in some of California’s most exclusive neighborhoods, including Beverly Hills, Bel Air, Holmby Hills, Malibu, Carmel, Mill Valley, Pebble Beach and La Jolla. According to the recently unsealed charges, the conspiracy was spearheaded by Fitzgerald and Abrams.
In the charges filed against the others, Fitzgerald is identified as the “DPF/BHEF Conspirator.” According to these documents, in late 1999 or early 2000, Fitzgerald went into business with Abrams in a mortgage brokering company called Desert Pacific Financial, Inc. (DPF). The company sent mortgage loan applications to lenders for review and funding, and received commissions from those lenders when the loans closed. In late 2001, Fitzgerald and Abrams renamed the company Beverly Hills Estates Funding, Inc. (BHEF).
LaViolette was a loan processor at DPF/BHEF, and Matykowski was a property scout who helped locate homes for potential purchase. Fitzgerald and Abrams also had several in-house escrow companies, in which Holland was the escrow officer.
Fitzgerald and Abrams, working with Matykowski and real estate agents, located homes for sale. According to court documents, they primarily looked for homes with purchase prices they could inflate, which generally meant they used homes with good views in expensive neighborhoods throughout California.
As part of the scheme, Fitzgerald and Abrams purchased homes at their real market values. For example, the case against Abrams details the purchase of a home on Roscomare Road in Bel Air, which Fitzgerald and Abrams bought for $735,000 in the name of “Matykowski or his assignee,” even though they were at all times in actual control of the home.
Fitzgerald, Abrams and associates then recruited “straw borrowers” to obtain inflated loans on the properties. The straw borrowers, some of whom received payments, allowed Fitzgerald and Abrams to use their names and credit to obtain mortgages as part of a “property-flipping” process. After obtaining inflated appraisals and other false documentation that were submitted with loan applications, Fitzgerald and Abrams obtained mortgages in the names of the straw borrowers for double or triple the actual values of the homes. For example, when they flipped the Roscomare Road property, they “sold” the residence to the straw borrower for $2,370,000. The Abrams charges allege that a bogus loan application package went to Lehman Brothers Bank seeking a loan of $1,422,000, nearly double the true $735,000 purchase price, and that Lehman Brothers Bank unwittingly funded a loan of more than $1.4 million on the property, almost all of which ended up in one of the in-house escrow companies controlled by Fitzgerald and Abrams.
The victim lenders, having been deceived by the false documentation supplied by Fitzgerald, Abrams, and others, unwittingly funded the inflated loans. According to the Abrams charges, Lehman Brothers Bank alone was deceived into funding about 80 such inflated loans from March 2000 through March 2003. These 80 loans were more than $50 million over the true prices of the homes. Fitzgerald and Abrams allegedly received millions of dollars of these excess loan proceeds, and their associates received kickbacks, inflated appraisal fees, and large commissions.
Lehman Brothers Bank sued Fitzgerald, Abrams and others in federal court in Los Angeles in 2003 and obtained a receivership, temporary restraining orders, and preliminary injunctions against them. Judge Pregerson appointed David J. Pasternak as receiver to recover assets acquired with proceeds of the fraud. The receiver, as well as attorneys and forensic accountants employed by him, have cooperated extensively with the government’s ongoing criminal investigation.
If he is convicted of the 12 counts in the criminal complaint, Fitzgerald faces a maximum possible sentence of 265 years in federal prison.
A criminal complaint contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.
The charges against Fitzgerald and the others are part of an ongoing investigation being conducted by the Federal Bureau of Investigation and IRS-Criminal Investigation Division.
Fitzgerald was returned to Los Angeles under escort by a Special Agent assigned to the FBI’s Legal Attache in Canberra, Australia, which provided substantial assistance in facilitating Fitzgerald’s to the United States.
CONTACT: Assistant United States Attorney Jeremy D. Matz
Release No. 06-169