September 14 2012 – LawFuel.com The Law Newswire –
LOS ANGELES – The top two managers at a Westwood-based mortgage brokerage company have been arrested on federal charges relating to a foreclosure avoidance and equity-skimming scheme that targeted distressed homeowners. According to an indictment in this case, the scheme led several mortgage lenders to disburse more than $15 million in loan proceeds – with nearly half of that being lost to the fraud conspiracy.
Federal authorities on Tuesday arrested David Singui, 49, of Inglewood, and Aziz Meghji, 35, of Los Angeles, who were, respectively, the principal owner and the second-in-charge at Direct Money Source (DMS), a mortgage brokerage which allegedly operated as an equity-skimming operation that took possession of distressed homeowner’s equity under fraudulent pretenses and also defrauded mortgage lenders.
A third defendant in the case – Kiet Truong, 27, of Hawthorne, who worked at DMS, surrendered to authorities yesterday morning.
The fourth defendant named in the 42-count indictment – Starr Smith, 31, whose last known address was in Long Beach, is a fugitive currently being sought by authorities.
The federal grand jury indictment, which was returned on September 6, charges all four defendants with conspiracy, wire fraud, loan fraud and aggravated identity theft. Singui and Meghji are additionally charged with money laundering.
DMS held itself out as a company with a “Fresh Start Program” that was devoted to assisting distressed homeowners avoid foreclosure by arranging to have their homes purchased by so-called “credit investors,” who would hold the properties for 12 months and then sell them back to the original homeowners after they restored their credit ratings. In fact, as alleged in the indictment, DMS was an equity-skimming operation that took possession of distressed homeowner’s equity under fraudulent pretenses. the scheme allegedly defrauded mortgage lenders in connection with loans on approximately 50 different properties.
As part of the scheme, DMS told distressed homeowners that it would provide affiliated “credit investors” with good FICO scores, which the “credit investors” would use to provisionally purchase the properties for one year, thereby avoiding foreclosure on the properties. During this period, the distressed homeowners could remain in their homes and repair their credit and, at the end of the 12-month period, they could repurchase their homes at a lower interest rate, according to promises allegedly made by DMS. The distressed homeowners were told that, because they had equity in their homes, DMS would be able to draw down on the equity and make monthly mortgage payments on behalf of the homeowners during the one-year period in which they were to repair their credit.
In fact, according to the indictment, DMS took title to more than four dozen properties belonging to the distressed homeowners it targeted and simultaneously misappropriated the existing equity in their homes. Using “straw borrowers” as the “credit investors,” DMS orchestrated loan transactions that allowed DMS to obtain access to the distressed homeowners’ equity. As alleged in the indictment, DMS and its principals falsified the employment, bank account and income information of the straw borrowers on the loan applications. DMS also allegedly fabricated fictitious bank statements to support this false information on the loan applications in order to facilitate the approval of these fraudulent loans.
At the conclusion of these transactions, DMS usually ended up with approximately $100,000 equity per transaction, plus around $35,000 in fees and commissions associated with each loan. In the meantime, each of the straw borrowers ended up owing approximately $300,000 or more on loans that went into default because DMS did not make the 12 months of mortgage payments as promised.
As a consequence of this scheme, the mortgage lenders lost more than $7 million on approximately 50 different fraudulent loans.
Singui and Meghji were arraigned on the indictment on Tuesday afternoon. They both entered not guilty pleas, and a federal magistrate judge ordered them held without bond. Meghji asked for a bond hearing that is scheduled for Tuesday afternoon.
Truong was arraigned yesterday afternoon. He pleaded not guilty and was released on a $100,000 bond.
This case has been assigned to United States District Judge Christina A. Snyder. A trial has been scheduled for November 6.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.
If convicted on all charges in the indictment, Singui would face a statutory maximum sentence of 855 years in federal prison, while Meghji would face a maximum sentence of 815 years in prison.
Truong and Smith similarly would face potential sentences of hundreds of years in prison if they are convicted.
This case is the result of a joint investigation by the Federal Bureau of Investigation, the United States Postal Service and IRS-Criminal Investigation.
This prosecution is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 United States Attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
CONTACT: Assistant United States Attorney Paul Stern
Major Frauds Section
Assistant United States Attorney Monica Tait
Major Frauds Section