LAWFUEL – Law News, Law Jobs – A Yorba Linda man was charged friday with mail fraud for running a scam he called “private money note investments” that he claimed would earn money by making short-term loans for real estate projects.
Salvatore “Sam” Favata, 46, has agreed to plead guilty to a mail fraud charge related to the scheme that cost several hundred victims more than $20 million.
Favata managed and operated the investment division of National Consumer Mortgage, LLC (NCM), a real estate mortgage and investment company located in Orange. Beginning in early 2000, Favata falsely represented that NCM directly loaned money at high rates of return to borrowers who required short-term credit to fund real estate developments, construction projects, and other ventures. Favata falsely told investors that they could purchase the notes that secured these loans and thus acquire the right to collect interest payments from the borrowers. Favata falsely assured investors that their principal would be returned once the borrowers paid off the loans from NCM. At the time he made these representations, Favata knew that the purported private money note investments that he offered to investors simply did not exist. Rather than investing the investors’ money as promised, Favata misappropriated the money, spending considerable sums on his home in Yorba Linda, expenses associated with NCM’s legitimate mortgage business, and lavish trips to Las Vegas. Favata additionally used funds from new investors to make purported interest payments to older investors in the scheme. As a result of these lulling payments made as part of his Ponzi scheme, Favata induced many victims to reinvest their principal into the scheme rather then withdraw their funds.
Favata is scheduled to make his first court appearance in United States District Court in Santa Ana on October 16. At that time, Favata’s case will be assigned to a federal judge to take Favata’s guilty plea. Favata is expected to receive the maximum possible sentence of five years for the mail fraud count to which he has agreed to plead guilty.
The investigation of Favata’s fraud started in April when Favata’s attorney reported the criminal conduct to the United States Attorney’s Office. The investigation was conducted by the Federal Bureau of Investigation, which received substantial assistance from the Securities and Exchange Commission.
CONTACT: Assistant United States Attorney Douglas F. McCormick
Assistant United States Attorney Brent G. Tabacchi