SIGTARP, a sophisticated, white-collar criminal investigative agency, is committed to robust criminal and civil enforcement against those who waste, steal, or abuse TARP funds. SIGTARP partners with law enforcement agencies to investigate and prosecute, among other things, TARP-related accounting fraud, securities fraud, insider trading, bank fraud, mortgage fraud, mortgage modification fraud, wire fraud, false statements, obstruction of justice, money laundering, and tax crimes. SIGTARP currently has more than 150 ongoing criminal and civil investigations.

From SIGTARP’s inception through July 12, 2012, the agency and its law enforcement partners were responsible for:

• Criminal charges filed against 91 individuals, including 64 senior officers
• Criminal convictions of 67 individuals, of whom 28 have been sentenced to prison (others are awaiting sentencing)
• Civil charges filed against 51 individuals, including 37 corporate or senior officers, and 26 companies
• Restitution orders entered for $3.7 billion, forfeiture orders entered for $126.9 million, and civil judgments and other orders entered for $281.9 million. SIGTARP has already assisted in the recovery of $160.8 million in assets
• Saving $553 million in taxpayer money by preventing TARP funds from going to the now-failed Colonial Bank

The SIGTARP Hotline (877-SIG-2009) provides a simple, accessible way for the American public to report concerns, allegations, information, and evidence of violations of criminal and civil laws in connection with TARP. From its formation in February 2009 through September 30, 2011, the SIGTARP Hotline has received and analyzed more than 28,000 contacts. The SIGTARP Hotline can receive information anonymously and protects the confidentiality of whistleblowers to the fullest extent possible.

Although the majority of SIGTARP’s investigative activity remains confidential, below is a summary of individual cases in which there have been significant public developments.

• Taylor, Bean & Whitaker Mortgage Corporation and Colonial Bancgroup

• On June 15, 2012, Delton de Armas, the former chief financial officer of Taylor, Bean & Whitaker (“TBW”), was sentenced by the U.S. District Court for the Eastern District of Virginia to five years in prison. De Armas previously pled guilty to conspiracy to commit bank and wire fraud and making false statements for his role in a $2.9 billion fraud scheme that led to the failures of TBW and Colonial Bank (“Colonial”). As previously reported, Lee Bentley Farkas, the former chairman of TBW, was convicted at trial in 2011 of 14 counts of conspiracy, and bank, securities, and wire fraud, and sentenced to 30 years imprisonment. On June 20, 2012, the U.S. Court of Appeals for the Fourth Circuit upheld Farkas’ conviction. Colonial Bank was initially approved to receive $553 million in TARP funding that SIGTARP prevented from going to the bank.

  De Armas admitted that he and others engaged in a scheme to defraud financial institutions that had invested in TBW’s wholly-owned lending facility, Ocala Funding (“Ocala”). Shortly after Ocala was established, de Armas learned that inadequate assets were backing its loans. This collateral deficit increased to more than $700 million by June 2008. De Armas knew that a subordinate sent false collateral reports to Ocala investors that misrepresented the collateral deficit. De Armas acknowledged that he and former TBW chief executive officer Paul Allen also provided false explanations to investors and regulators about the deficit in Ocala’s collateral. De Armas further admitted that he directed a subordinate to inflate an accounts receivable balance on the books of TBW, which inflated TBW’s financial statements. De Armas admitted knowing that these false financial statements were provided to the Government National Mortgage Association (“Ginnie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) for their determination to renew TBW’s authority to sell and service securities guaranteed by Ginnie Mae and Freddie Mac. De Armas also admitted to reviewing and editing a letter sent by Allen to Ginnie Mae that contained false statements regarding the reason for TBW’s delay in providing audited financial statements to Ginnie Mae.

  Six additional defendants pled guilty and were sentenced to prison in 2011 for their roles in the fraud scheme. Allen was sentenced to 40 months in prison; Catherine Kissick, the former senior vice president of Colonial Bank, was sentenced to eight years in prison; Desiree Brown, the former treasurer of TBW, was sentenced to six years in prison; Raymond Bowman, the former president of TBW, was sentenced to 30 months in prison; Sean Ragland, a former senior financial analyst at TBW, was sentenced to three months in prison; and Teresa Kelly, the former operations supervisor in Colonial Bank’s Mortgage Warehouse Lending Division, was sentenced to three months in prison.

  This case was investigated by SIGTARP, the FBI, FDIC OIG, the Department of Housing and Urban Development Office of Inspector General (“HUD OIG”), the Federal Housing Finance Agency Office of Inspector General (“FHFA OIG”), the Securities and Exchange Commission (“SEC”), and IRS-CI, and was prosecuted by the U.S. Department of Justice Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Virginia.

  Additional Information:

  June 15, 2012

  
  SIGTARP: Former CFO of Taylor, Bean & Whitaker Sentenced to 5 Years in Prison for Fraud Scheme which Contributed to the Failures of TBW and Colonial Bank
  

  March 20, 2012

  
  SIGTARP: Former Chief Financial Officer of Taylor, Bean & Whitaker Pleads Guilty to Fraud Scheme which Contributed to the Failures of TBW and Colonial Bank
  

  June 30, 2011

  
  SIGTARP: Former Chairman of Taylor, Bean & Whitaker Sentenced to 30 Years in Prison and Ordered to Forfeit $38.5 Million
  

  June 21, 2011

  
  SIGTARP: Former TBW CEO Sentenced to 40 Months in Prison for Fraud Scheme
  

  June 17, 2011

  
  SIGTARP: Former Colonial Bank Senior Vice President Sentenced to 8 Years in Prison for Fraud Scheme
  

  June 10, 2011

  
  SIGTARP: Former Treasurer and President of Taylor, Bean & Whitaker Each Sentenced to Prison for Fraud Scheme
  

  April 20, 2011

  
  SIGTARP: Former Chairman of Taylor, Bean & Whitaker Convicted for $2.9 Billion Fraud Scheme that Contributed to the Failure of Colonial Bank and Taylor, Bean & Whitaker
  

  April 1, 2011

  
  SIGTARP: Former TBW CEO Pleads Guilty to $1.5 Billion Fraud Scheme
  

  March 31, 2011

  
  SIGTARP: Former TBW Financial Analyst Pleads Guilty to $1.5 Billion Fraud Scheme
  

  March 16, 2011

  
  FBI: Former Colonial Bank Mortgage Lending Supervisor Pleads Guilty in Fraud Scheme
  

  March 16, 2011

  
  SEC: SEC Charges Former Supervisor at Colonial Bank for Role in Securities Fraud Scheme
  

  March 14, 2011

  
  FBI: Former President of TBW Pleads Guilty in Fraud Scheme
  

  March 14, 2011

  
  Court Document: Raymond Bowman Plea Agreement
  

  March 2, 2011

  
  SEC: SEC Charges Former Officer of Colonial Bank for Role in Securities Fraud Scheme
  

  March 2, 2011

  
  Justice: Former Senior Vice President of Colonial Bank Pleads Guilty to Fraud Scheme
  

  March 2, 2011

  
  Court Document: Catherine Kissick Plea Agreement
  

  February 24, 2011

  
  SEC: SEC Charges Former Treasurer of Major Mortgage Lender for Role in Securities Fraud and TARP Scheme
  

  February 24, 2011

  
  Justice: Former Treasurer of Taylor, Bean & Whitaker Pleads Guilty to $1.9 Billion Fraud Scheme that Contributed to the Failure of Colonial Bank
  

  February 24, 2011

  
  Court Document: Desiree Brown Plea Agreement
  

  June 16, 2010

  
  Justice: Former Chairman of Taylor, Bean & Whitaker Indicted for His Role in a More Than $1.9 Billion Fraud Scheme that Contributed to the Failure of Colonial Bank
  

  June 16, 2010

  
  SEC: SEC Charges Former Chairman of Major Mortgage Lender with $1.5 Billion Securities Fraud and Related TARP Scheme
  

  June 15, 2010

  
  Court Document: Lee Bentley Farkas Indictment
  

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• United Commercial Bank / UCBH Holdings, Inc.

• In a recently unsealed court proceeding, Lauren Tran, the former Vice President and Manager of Credit Policy at United Commercial Bank (“UCB”), pled guilty on June 15, 2011, in the U.S. District Court for the Northern District of California to conspiracy to commit securities fraud, falsifying corporate books and records, and lying to auditors. As previously reported, former UCB senior executives, Ebrahib Shabudin and Thomas Yu, were indicted on similar charges in September 2011 and are currently awaiting trial.

  In her guilty plea, Tran admitted to engaging in a conspiracy and fraudulent scheme to conceal UCB’s growing inventory of impaired loans and to avoid disclosing its significant loan losses. Tran admitted to conducting the fraud scheme by knowingly and willingly falsifying UCB’s books and records, over-valuing the collateral securing certain UCB loans, and misleading UCB’s independent auditor by withholding material appraisal information. As a result of the conspiracy and fraud scheme, UCB is alleged to have issued false and misleading public statements and reports in 2009 regarding its 2008 year-end financial condition and performance. The charges carry a maximum penalty of five years imprisonment and a fine. Tran’s plea was unsealed by the court in October 2011.

  In another action related to UCB, on March 27, 2012, former UCB executive vice president, John Cinderey agreed to settle charges brought by the SEC alleging that Cinderey misled the bank’s independent auditors regarding the financial statements of UCB and UCBH Holdings, Inc. (“UCBH”). Cinderey had previously agreed to pay a $40,000 civil penalty in an administrative action brought by the FDIC in connection with the same conduct.

  UCB was a commercial bank headquartered in San Francisco, California. UCB was a subsidiary of UCBH, whose shares were publicly traded. In November 2008, UCBH received approximately $298 million in TARP funds. UCB became the first TARP recipient bank to fail when it closed on November 6, 2009. FDIC, which became the receiver for the bank, estimates that deposit insurance fund losses from UCB’s failure will be $2.5 billion. The total loss to TARP is more than $298 million.

  The investigation is ongoing. The case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Northern District of California, the SEC, the FBI, the FDIC OIG, and the Office of Inspector General of the Board of Governors of the Federal Reserve System (“FRB OIG”).

  Additional Information:

  October 11, 2011

  
  SIGTARP: Former United Commercial Bank Officials Charged with Securities Fraud
  

• Bank of America

• On February 4, 2010, the New York Attorney General charged Bank of America Corporation (“Bank of America”), its former Chief Executive Officer Kenneth D. Lewis, and its former Chief Financial Officer Joseph L. Price with civil securities fraud. According to the allegations, in order to complete a merger between Bank of America and Merrill Lynch & Co., Inc. (“Merrill Lynch”), the defendants failed to disclose to shareholders spiraling losses at Merrill Lynch. Additionally, after the merger was approved, it is alleged that Bank of America made misrepresentations to the Federal Government in order to obtain tens of billions of dollars in TARP funds. The investigation was conducted jointly by the New York Attorney General’s Office and SIGTARP, and the case remains pending in New York state court.

  SIGTARP also assisted the Securities and Exchange Commission (“SEC”) with its Bank of America investigation. On February 22, 2010, the Honorable Jed S. Rakoff, United States District Judge for the Southern District of New York, approved a $150 million civil settlement between the SEC and Bank of America to settle all outstanding SEC actions against the firm. The court found that Bank of America failed to disclose adequately to its shareholders, prior to their approval of a merger with Merrill Lynch, the extent of additional material losses that Merrill Lynch had suffered. Additionally, the court found that the proxy statement sent to shareholders in November 2008 failed to disclose adequately Bank of America’s agreement to allow the payment of bonuses to Merrill Lynch employees prior to the merger.

  In addition to the $150 million payment, Bank of America also agreed to the following settlement requirements:

  • Engaging an independent auditor to assess and report on the effectiveness of the company’s disclosure controls and procedures.
  • Furnishing management certifications signed by the chief executive officer and chief financial officer with respect to proxy statements.
  • Retaining disclosure counsel to the audit committee of the company’s board of directors.
  • Adopting independence requirements beyond those already applicable for all members of the compensation committee of the company’s board of directors.
  • Retaining an independent compensation consultant to the compensation committee.
  • Implementing and disclosing written incentive compensation principles on the company’s website and providing the company’s shareholders with an advisory vote concerning any proposed changes to such principles.
  • Providing the company’s shareholders with an annual “say on pay” advisory vote regarding the compensation of executives.

  Additional Information:

  June 15, 2010

  
  New York: The New York State Attorney General Andrew M. Cuomo Files Fraud Charges Against Bank of America, Former CEO Kenneth Lewis, and Former CFO Joseph Price
  

  February 4, 2010

  
  Court Document: Bank of America Complaint
  

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• False Claims Act Lawsuits

• On February 9, 2012, the Federal Government and 49 State Attorneys General reached a $25 billion settlement with the nation’s five largest mortgage servicers over mortgage loan servicing mishandlings, foreclosure abuses, and fraud. Under the terms of the agreement, Bank of America Corporation (“Bank of America”), JPMorgan Chase & Co. (“JPMorgan”), Wells Fargo & Company, Citigroup Inc., and Ally Financial Inc. (formerly GMAC) will commit $25 billion to resolve certain violations of state and federal law. As part of the global agreement, certain False Claim Act lawsuits being investigated by SIGTARP and its law enforcement partners will be resolved.

  Bank of America

  On February 9, 2012, the U.S. Attorney for the Eastern District of New York announced a $1 billion settlement with Bank of America to resolve allegations that Bank of America, and its Countrywide Financial subsidiaries, among other things, defrauded the Federal Government by failing to determine the eligibility of homeowners to participate in HAMP. A qui tam, or whistleblower, complaint alleged that it was more lucrative for the bank to deliberately force otherwise qualified homeowners to programs outside of HAMP so that it could either profit from foreclosure proceedings, force the homeowner into a more costly proprietary mortgage modification than HAMP would permit, or otherwise profit from continuing to service the defaulting and defaulted mortgage. Gregory Mackler, who filed the complaint under the whistleblower provision of the False Claims Act, will receive a portion of the $1 billion settlement once the agreement is finalized by the court.

  JPMorgan

  On February 10, 2012, the U.S. Attorney for the District of Massachusetts announced a $6.2 million settlement with JPMorgan to resolve allegations that JPMorgan, and institutions acquired by JPMorgan, failed to use adequate loss mitigation efforts as mandated by federal regulation in handling loans with individuals who had fallen behind on their mortgage payments. In addition, the complaint alleges that JPMorgan defrauded HAMP by failing to follow HAMP program guidelines and foreclosing on homeowners in HAMP trial modifications. Robert Harris, as whistleblower, will receive $1.2 million of the $6.2 million settlement.

  Ally Financial

  On March 12, 2012, the U.S. Attorney for the Western District of North Carolina announced a $95 million settlement with Ally Financial, Bank of America, JPMorgan, Wells Fargo & Company, and Citigroup Inc. to resolve allegations that the banks made false claims in connection with their failure to obtain required mortgage assignments, were involved in servicing misconduct and the charging of inappropriate costs, and used false documents in Federal Government mortgage guarantee claims. The defendants, according to the complaint, falsely represented that they held good title to the notes and mortgages in connection with claims they submitted on the mortgage guarantees, resulting in payments from the Government that would not have been made if the Government had been aware of the true facts. Lynn Szymoniak, as whistleblower, will receive $18 million of the $95 million settlement. Ally Financial remains in TARP and the Department of Treasury holds 74% of Ally Financial’s common stock.

  Additional Information:

  March 12, 2012

  
  WDNC: U.S. Attorney’s Offices Reach $95 Million Settlement in False Claims Case Against Nation’s Five Largest Financial Institutions
  

  March 12, 2012

  
  Justice: Federal Government and State Attorneys General Reach $25 Billion Agreement with Five Largest Mortgage Servicers to Address Mortgage Loan Servicing and Foreclosure Abuses
  

  March 12, 2012

  
  EDNY: $1 Billion to Be Paid by the Bank of America to the United States; Largest False Claims Act Settlement Relating to Mortgage Fraud
  

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• Orion Bank

• On June 12, 2012, Jerry J. Williams, former president, chief executive officer, and board chairman of Orion Bank (“Orion Bank”) and its holding company, Orion Bancorp, Inc., was sentenced by the U.S. District Court for the Middle District of Florida to 72 months in Federal prison. As previously reported, in February 2012, Williams pled guilty to conspiracy to commit bank fraud and making false statements to Federal regulators arising from his participation in a bank fraud scheme involving Orion Bank. In October 2008, Orion Bancorp unsuccessfully sought $64 million in TARP funds. As part of the sentence, the court ordered Williams to pay $5.76 million in restitution to victims and ordered an additional hearing to determine restitution to be paid by Williams to FDIC.

  Williams admitted that, after Orion Bank failed to raise capital as instructed by Federal banking regulators, he conspired with two other Orion Bank executives, Thomas Hebble (former executive vice president), Angel Guerzon (former senior vice president), and a former Orion Bank borrower, Francesco Mileto, to mislead state and Federal regulators into believing that Orion Bank was financially healthier than it truly was. The conspirators committed their scheme in part by restructuring distressed assets of Orion Bank to fraudulently create the illusion that certain of the bank’s non-performing loans were performing loans. The conspirators furthered their scheme by secretly financing the sale of Orion Bancorp stock to Mileto, which created the false impression to regulators of a legitimate capital infusion that considerably improved the bank’s capital position. Williams admitted to providing regulators with false documents and statements about Orion Bank’s capital position and amount of capital raised.

  As previously reported, Hebble, Guerzon, and Mileto pled guilty to their participation in the fraud and received prison sentences of 30 months, 24 months, and 65 months, respectively. Hebble and Guerzon were also each ordered to pay $33.5 million in restitution to FDIC and Mileto was ordered to pay $65.2 million in restitution to FDIC ($33.5 million of which is to be paid jointly and severally with Guerzon and Hebble). The court also ordered forfeiture of $2 million as to Mileto.

  Florida’s Office of Financial Regulation closed Orion Bank on November 13, 2009, and appointed FDIC as receiver. FDIC estimates that Orion Bank’s failure will cost the deposit insurance fund more than $600 million.

  The case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Middle District of Florida, the FBI, IRS-CI, the Federal Reserve Board Office of Inspector General (“FRB OIG”), and FDIC OIG.

  Additional Information:

  June 13, 2012

  
  SIGTARP: Former President of Orion Bank Sentenced to 6 Years in Federal Prison for Conspiracy to Commit Bank Fraud and for Deceiving Regulators
  

  February 3, 2012

  
  SIGTARP: Former President of Orion Bank Pleads Guilty to Bank Fraud and Related Charges
  

  October 27, 2011

  
  SIGTARP: Top Orion Bank Executives and Borrower Are Sentenced to Federal Prison
  

• First Community Bank

• On April 26, 2012, Reginald R. Harper pled guilty in the U.S. District Court for the Eastern District of Louisiana to conspiracy to commit bank fraud. Harper’s co-conspirator, Troy A. Fouquet, previously pled guilty on March 15, 2012. The charges against Harper and Fouquet arose from their orchestration of a fraudulent scheme to conceal delinquent, non-performing loans at First Community Bank of Hammond, Louisiana (“First Community Bank”) by creating new “sham” loans. Harper was the former president, chief executive officer, and loan officer of First Community Bank. Fouquet was a Louisiana real estate developer.

  Harper arranged for First Community Bank to provide more than $2 million in loans to Fouquet in 2004 to purchase land and build houses on the land. However, they were unable to identify a sufficient number of qualified buyers for the houses. In response, Harper and Fouquet devised various cover-up schemes to avoid reporting the delinquent loans made by Harper to Fouquet. For example, they used “nominee” loans and “straw” borrowers to apply for new loans from First Community Bank, which Harper authorized, and then used the proceeds to pay off the original loans made to Fouquet. Harper and Fouquet’s misconduct caused First Community Bank to suffer severe financial losses.

  As a result of Harper’s and Fouquet’s fraudulent activities, First Community Bank submitted a false “call report” (a report meant to disclose the bank’s true financial condition) to its regulator, which later affected the bank’s application for TARP funds. First Community Bank ultimately withdrew its TARP application, despite being approved to receive $3.3 million in TARP funds.

  At sentencing, Fouquet and Harper each face a maximum of five years in Federal prison and a fine. Harper and Fouquet are scheduled to be sentenced on October 25, 2012.

  The case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Eastern District of Louisiana, and the FBI.

  Additional Information:

  April 27, 2012

  
  SIGTARP: Former President of First Community Bank of Louisiana Pleads Guilty to Bank Fraud
  

  March 16, 2012

  
  SIGTARP: Louisiana Real Estate Developer Pleads Guilty to Conspiracy to Commit Bank Fraud
  

  February 16, 2012

  
  SIGTARP: Former Louisiana Bank President and Conspirator Charged with Bank Fraud
  

• Bank of the Commonwealth

• SIGTARP agents, along with its law enforcement partners, arrested four former executives of Bank of the Commonwealth (“BOC”), including CEO and chairman of the board Edward Woodard, his son Troy Brandon Woodard, executive vice presidents Simon Hounslow and Steven Fields, along with two bank customers, Thomas Arney and Dwight Etheridge. On July 11, 2012, a Federal grand jury sitting in the Eastern District of Virginia returned a 25-count indictment against the six individuals for their alleged roles in a massive fraud scheme that contributed to the failure of the bank. Each charge contained in the indictment carries a maximum penalty of 30 years in prison, if convicted.

  BOC was a community bank headquartered in Norfolk, Virginia, that failed in September 2011. It was the eighth largest bank failure in the country that year, and the largest bank failure in Virginia since 2008. Six other defendants have been charged (five of whom pled guilty) in this case for a total of 12 defendants. The FDIC estimates that BOC’s failure will cost the deposit insurance fund more than $268 million.

  SIGTARP has been investigating this case because in November 2008, BOC sought $28 million in TARP funds. BOC’s Federal banking regulator asked the bank to withdraw the TARP application.

  The four senior bank officers were charged on July 11, 2012, with fraud schemes to conceal past-due loans and remove foreclosed property from the bank’s books. The indictment details how friends of the bank received sweetheart deals in return for helping mask the bank’s true financial condition. The indictment also details how bank insiders benefitted personally from various schemes.

  According to the indictment, BOC more than doubled its assets from 2005 to 2009. This was largely through brokered deposits, a financial tool that allows investors to pool their money and receive higher rates of returns. Because of the high volatility of these deposits, an institution must remain well-capitalized to accept and renew brokered deposits.

  The indictment alleges that BOC funded and administered many loans during this period without following industry standards or the bank’s own internal controls, and by 2008, the volume of the bank’s troubled loans and foreclosed real estate soared. From 2008 to 2011, BOC executives (Edward Woodard, Hounslow and Fields) allegedly utilized various methods to fraudulently mask the bank’s true financial condition out of fear that the bank’s declining health would negatively impact investor and customer confidence and affect the bank’s ability to accept and renew brokered deposits.

  To fraudulently hide BOC’s troubled assets, bank insiders allegedly overdrew demand deposit accounts to make loan payments, extended new loans or additional principal on existing loans to cover payment shortfalls, changed the terms of loan agreements to make loans appear current, and used funds from related entities (sometimes without authorization from the borrower) to make loan payments. In addition, the BOC executives allegedly hid millions of dollars of non-performing loans from the bank’s board of directors.

  The BOC executives also allegedly provided preferential treatment to troubled borrowers, including Arney, Etheridge, and others, to purchase bank-owned property. The borrowers were already having difficulty making payments on their existing loans and the financing allowed the borrowers to convert these non-earning assets into earning assets. In some instances, according to the indictment, these new loans exceeded the purchase price of the property, which resulted in the borrowers obtaining cash at closing that they used to make payments on their other loans at the bank and for their own personal purposes. In addition, BOC executives caused the bank to fund loans to troubled borrowers to purchase or attempt to purchase properties owned by Edward Woodard and Troy Brandon Woodard.

  Additionally, the indictment alleges that Edward Woodard and Hounslow caused the bank to fund three loans totaling $11 million without approval of the board of directors and falsely represented in bank records that the board had approved the loans. BOC subsequently charged off $9 million of these loans as a loss. In addition, Edward Woodard and Troy Brandon Woodard allegedly caused BOC to pay fraudulent invoices purportedly for construction costs for a bank branch when the true costs were incurred for renovations to Troy Brandon Woodard’s personal residence.

  Six other individuals have been charged (five of whom pled guilty) in this ongoing investigation:

  • On April 12 and July 12, 2012, respectively, business partners Eric H. Menden and George P. Hranowskyj pled guilty to engaging in a fraud scheme that contributed to the failure of BOC. Menden and Hranowskyj admitted to performing favors for BOC insiders by using the proceeds of loans provided by BOC insiders to purchase BOC-owned properties and properties owned by BOC insiders. Menden and Hranowskyj further admitted to submitting construction draw requests to the bank for amounts owed to subcontractors that were inflated or for work that was not completed. Menden and Hranowskyj admitted knowing the loan proceeds obtained from these draw requests were to be used solely for renovating the property but instead they used the proceeds for their own personal purposes. At the time the bank failed, Menden and Hranowskyj owed the bank approximately $41 million and the total loss attributed to the loans outlined in court was over $13 million. Menden and Hranowskyj also pled guilty to a separate six year tax fraud scheme that cost state and Federal Government over $12 million and investors more than $8 million. At sentencing on September 26, 2012, Menden faces a maximum of 15 years in Federal prison and possible restitution of up to $49 million. Hranowskyj, scheduled to be sentenced on October 15, 2012, faces a maximum of 25 years in Federal prison.
  • On May 9, 2012, Jeremy C. Churchill, a BOC vice president and commercial loan officer, pled guilty to conspiracy to commit bank fraud. According to court documents, Churchill admitted that, under the direction of a BOC coconspirator, Churchill submitted loan requests to the bank to provide more than $1 million to Tivest Development and Construction LLC (“Tivest”) and Genesis Staffing, Inc. (“Genesis”), companies owned by Etheridge, who was having difficulty keeping current on $8 million in loans he guaranteed at the bank. BOC approved these loan requests based on false representations by Churchill and a BOC co-conspirator that the funds would be used to pay pre-development costs for an office tower project and operational costs at Genesis. To the contrary, Etheridge allegedly used the proceeds to make payments on other loans at the bank. BOC subsequently fully charged off these $1 million in loans as a loss. Churchill also admitted to requesting that BOC provide a $4.1 million loan to Tivest to be used to purchase an incomplete condominium project from the owners who were delinquent on their loan at the bank. BOC would have suffered a substantial loss had it foreclosed on this property. Churchill admitted that he and a bank co-conspirator used approximately half the loan proceeds to pay down the underlying loan on the property. Churchill faces a maximum penalty of five years in prison when he is sentenced on August 24, 2012.
  • On May 15, 2012, Recardo Lewis, a former vice president at Tivest, pled guilty to conspiracy to commit bank fraud. Lewis, allegedly at the direction of Etheridge, submitted eight draw requests to the bank on construction loans that fraudulently inflated the amounts owed to contractors and included costs for work that was not completed. Etheridge allegedly used the funds from these draws to make interest payments on other loans at the bank, to operate other businesses, and for other personal purposes. BOC subsequently charged off approximately $1.3 million of this $4.1 million loan as a loss. Lewis faces a maximum penalty of five years in prison when he is sentenced on September 19, 2012.
  • On September 15, 2011, Natallia Green, a former employee of Menden and Hranowskyj, pled guilty to making a false statement to BOC in a loan application. According to court documents, on August 12, 2010, Green submitted an application to the bank requesting a home loan in the amount of$108,000 to purchase a piece of property owned by the bank. Green admitted that she knowingly lied in her application by falsely stating that she had $29,000 in cash in banks and admitted that she provided an altered bank statement to support her false assertion. On January 25, 2012, Green was sentenced to five years’ probation, and was ordered to pay $106,519 in restitution.
  • On August 10, 2011, Maria Pukhova, a former employee of Menden and Hranowskyj, was charged with making a false statement on a loan application to BOC. The information alleges that, on April 30, 2010, Pukhova defrauded the bank by making false representations on a loan application.

  This ongoing investigation is being conducted by SIGTARP, the United States Attorney’s Office for the Eastern District of Virginia, the Federal Bureau of Investigation (“FBI”), the Internal Revenue Service Criminal Investigation (“IRSCI”), and the Federal Deposit Insurance Corporation Office of Inspector General (“FDIC OIG”).

  Additional Information:

  July 12, 2012

  
  SIGTARP: CEO of Bank of the Commonwealth, Senior Executives, and Borrowers Indicted in Massive Fraud that Led to the Collapse of the Bank
  

  May 15, 2012

  
  SIGTARP: Virginia Real Estate Project Manager Pleads Guilty to Bank Fraud Conspiracy which Contributed to Collapse of Bank of the Commonwealth
  

  May 9, 2012

  
  SIGTARP: Loan Officer at Defunct Bank of the Commonwealth Pleads Guilty to Bank Fraud Conspiracy
  

  April 20, 2012

  
  SIGTARP: Virginia Developer Pleads Guilty to Massive Bank Fraud which Contributed to Failure of Bank of the Commonwealth
  

• Oxford Collection Agency

• On May 11, 2012, Richard Pinto and his son, Peter Pinto, each pled guilty in the U.S. District Court for the District of Connecticut to using their debt collection company, Oxford Collection Agency, Inc. (“Oxford”), to defraud business clients and a TARP-recipient bank. The Pintos both pled guilty to wire fraud and conspiracy to commit wire fraud, bank fraud, and money laundering, and face a maximum of 35 years in Federal prison and a fine of up to $20 million at sentencing, which is scheduled for September 13, 2012.

  According to court documents and statements made in court, Richard Pinto was chairman of the board of directors at Oxford and Peter Pinto was Oxford’s president and chief executive officer. From January 2007 through March 2011, Oxford had agreements with business clients to collect debts from debtors, to report such collections to the clients and to remit the collected payments back to the clients. The clients would pay Oxford a portion of the monies collected by Oxford as a fee. The Pintos admitted to collecting funds from debtors on behalf of clients and failing to remit those funds to the clients. The Pintos also admitted to creating false documents and employing other deceptive means to cover up their failure to remit collected funds to clients and their improper use of the funds.

  The Pintos further admitted to causing Oxford to secure a line of credit from TARP-recipient Webster Bank without disclosing to the bank that Oxford was defrauding its clients and had significant outstanding payroll taxes. In the ensuing years, according to court documents and statements made in court, the Pintos continued to defraud Webster Bank by inducing the bank to increase the line of credit to $6 million by withholding Oxford’s true financial condition and submitting falsified financial records to the bank. The Pintos laundered funds from the line of credit by remitting those funds to clients in order to maintain the clients’ business and thereby continue the scheme against the clients. The fraudulent scheme has led victims to lose more than $10 million.

  The case is being investigated by SIGTARP, IRS-CI, the FBI, the U.S. Attorney’s Office for the District of Connecticut, and the Connecticut Securities, Commodities and Investor Fraud Task Force.

  Additional Information:

  May 15, 2012

  
  SIGTARP: Executives at Debt Collection Agency Admit Roles in $10 Million Fraud Scheme and to Defrauding TARP Bank
  

• Lynn Nunes

• On April 24, 2012, Lynn Nunes, a New York mortgage broker, pled guilty in the U.S. District Court for the Eastern District of New York to conspiracy to commit fraud against mortgage lenders, including subsidiaries of TARP recipient banks Wells Fargo & Company, SunTrust Banks, Inc., and JPMorgan Chase & Co.

  From January 2005 through October 2010, Nunes and others recruited persons interested in purchasing property but who had insufficient assets and income to secure a mortgage. Nunes prepared fraudulent mortgage applications for the potential purchasers by falsely inflating their bank account balances and income to make the applicants appear more creditworthy. Nunes submitted these falsified loan applications to the mortgage lenders, which issued mortgage loans in reliance on the false applications. The lenders suffered losses on the properties when many of the purchasers subsequently defaulted on the mortgage loans.

  The case is being investigated by SIGTARP, the United States Attorney’s Office for the Eastern District of New York, and the FBI.

  Additional Information:
• Robin Brass

• On April 25, 2012, Robin B. Brass pled guilty in the U.S. District Court for the District of Connecticut to mail fraud for defrauding investors of more than $1 million. Brass is scheduled to be sentenced on July 27, 2012, and faces a maximum sentence of 20 years in Federal prison and a fine of up to $250,000.

  Brass admitted to devising a scheme to defraud investors by taking their money and failing to invest it as promised. From March 2009 through November 2011, Brass successfully solicited funds from investors by falsely representing herself as a highly successful investment advisor, guaranteeing investors against losses, and promising them a good rate of return on their investment. Brass used some of the investor funds to pay off other investors (to keep the scheme going) and to pay personal expenses for herself and her family, including her mortgage at Bank of America, a TARP-recipient bank. To perpetuate the fraud scheme, Brass sent fraudulent account statements to investors that made it appear that their investments were performing well.

  The case was investigated by SIGTARP, the United States Attorney’s Office for the District of Connecticut, U.S. Postal Inspection Service (“USPIS”), the FBI, and with assistance from the State of Connecticut Department of Banking as part of the Connecticut Securities, Commodities and Investor Fraud Task Force.

  Additional Information:

  July 30, 2012

  
  SIGTARP: Connecticut Woman Who Ran $2 Million Ponzi Scheme Sentenced to Eight Years in Federal Prison for Investor Fraud
  

• The Park Avenue Bank

• On May 18, 2011, Carlos Peralta was sentenced by the U.S. District Court for the Southern District of New York to 12 months and one day of confinement and three years of supervised released for wire fraud. Peralta participated in a fraudulent investment scheme through which he caused the pastors of a church in Coral Springs, Florida, to wire $103,940 from a Florida bank account to one at The Park Avenue Bank (“Park Avenue Bank”) in New York.

  On October 8, 2010, Charles Antonucci, former president and CEO of Park Avenue Bank, pled guilty in the U.S. District Court for the Southern District of New York to offenses including securities fraud, making false statements to bank regulators, bank bribery, and embezzlement of bank funds. Antonucci had previously been arrested in March 2010 after attempting to steal $11 million of TARP funds by, among other things, making fraudulent claims about the bank’s capital position related to a TARP application. With his guilty plea, Antonucci became the first defendant convicted of attempting to steal from the taxpayers’ investment in TARP.

  The case is being investigated by SIGTARP, FBI, U.S. Immigration and Customs Enforcement, the New York State Banking Department Criminal Investigations Bureau, and FDIC OIG.

  Additional Information:

  October 8, 2010

  
  Justice: Former President of The Park Avenue Bank Pleads Guilty in Manhattan Federal Court to Fraud on the TARP, Securities Fraud, Self-Dealing, Bank Bribery, and Embezzlement of Bank Funds
  

  March 15, 2010

  
  Justice: Manhattan U.S. Attorney Charges Former President of The Park Avenue Bank with Self-Dealing, Bank Bribery, Embezzlement of Bank Funds, and Fraud
  

  October 18, 2010

  
  Court Document: Charles J. Antonucci, Sr. Information
  

  June 9, 2010

  
  Court Document: Carlos Peralta Indictment
  

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• FirstCity Bank

• On June 26, 2012, Clayton A. Coe, the former vice president and senior commercial loan officer at FirstCity Bank (“FirstCity”), pled guilty in U.S. District Court for the Northern District of Georgia to bank fraud and to making a false statement on his tax return. Coe faces a maximum sentence of 33 years in prison and a fine of up to $1.1 million at his sentencing on September 18, 2012. In February 2009, FirstCity unsuccessfully sought $6.1 million in Federal Government assistance through TARP. FirstCity failed and was seized by Federal and state authorities on March 20, 2009.

  According to court documents, as senior commercial loan officer, Coe was primarily responsible for recommending to FirstCity’s loan committee whether to approve commercial loans to real estate developers. Coe admitted to defrauding FirstCity by causing FirstCity’s loan committee to approve an $800,000 loan to a borrower in connection with a real estate development transaction that provided a personal financial benefit to Coe. Coe concealed from FirstCity’s loan committee that the borrower used the loan proceeds to purchase land lots from a company owned by Coe and his wife and that the Coes had purchased these lots from the true owner at a lower sales price on the same day the loan to the borrower closed. Coe also admitted to failing to report to the Internal Revenue Service $476,000 in commissions he earned for loans he originated as FirstCity’s senior commercial loan officer.

  As previously reported, on October 21, 2011, Mark A. Conner, the former president, chief executive officer, and chairman of FirstCity, pled guilty to conspiracy to commit bank fraud and perjury. Conner is scheduled to be sentenced on August 9, 2012, and faces a maximum of 12 years in Federal prison, a lifetime ban from the banking industry, a requirement to forfeit $7 million, and an order to pay significant restitution to the FDIC and victim banks. Robert E. Maloney, FirstCity’s former in-house counsel, has also been charged with conspiracy to commit bank fraud, making false entries in the records of an FDIC-insured financial institution, and conspiracy to commit money laundering. A trial date has not been set for Maloney.

  The case is being investigated by SIGTARP, the United States Attorney’s Office for the Northern District of Georgia, the FBI, IRS-CI, and FDIC OIG.

  Additional Information:

  June 27, 2012

  
  SIGTARP: Former Top Loan Officer at Failed FirstCity Bank Pleads Guilty to Bank Fraud
  

  October 21, 2011

  
  SIGTARP: Former President of FirstCity Bank Pleads Guilty to Multi-Million Dollar Fraud Conspiracy
  

  June 24, 2011

  
  SIGTARP: Former Bank Lawyer Indicted in Multi-Million Dollar Fraud and Money Laundering Conspiracies
  

• Omni National Bank

• Omni National Bank (“Omni”), a national bank headquartered in Atlanta, failed and was taken over by the FDIC on March 27, 2009. Prior to its failure, Omni applied for, but did not receive, TARP funding under CPP. SIGTARP’s participation in a mortgage fraud task force, which also includes the U.S. Attorney’s Office for the Northern District of Georgia, FDIC OIG, HUD OIG, the U.S. Postal Inspection Services (“USPIS”), and FBI, has resulted in criminal charges, convictions, and sentencings against multiple individuals concerning Omni.

  Most recently, on June 1, 2011, Karim Walthour Lawrence, a former loan officer of Omni, was sentenced by the U.S. District Court for the Northern District of Georgia to serve 21 months in Federal prison on charges of accepting bribes from contractors he selected to renovate Omni-foreclosed properties while he was an officer for Omni. Lawrence pled guilty in January 2011 to one count of receiving commissions or gifts for procurement of loans. In his role as a bank officer at Omni, from February 2008 to March 2009, Lawrence had the authority to select contractors to perform renovations on foreclosed properties the bank owned. Lawrence corruptly accepted hundreds of thousands of dollars from contractors who wanted to perform work on the Omni houses. Contractors who hoped to influence Lawrence paid him more than $600,000 in cash and services.

  On April 22, 2011, Jeffrey L. Levine, a former executive vice president of Omni and head of the bank’s Community Redevelopment Lending Department, was sentenced by the U.S. District Court for the Northern District of Georgia to serve five years in prison on charges of causing materially false entries to be made on the books, reports, and statements of the bank that overvalued the bank’s assets. Levine and others at Omni failed to disclose many exceptions made to Omni’s policies and procedures that resulted in Omni being exposed to greater risk of loss. Practices that went unreported included: diversion of loan proceeds escrowed for rehab; excessive credit concentrations to a single borrower; funding additional loans for Omni foreclosures at ever-increasing amounts; and failing to create sufficient reserves for those questionable loans or to properly record them on Omni’s books and records.

  Also on April 22, 2011, Delroy Oliver Davy was sentenced by the same court to serve 14 years in prison on charges of bank fraud and conspiring to commit bank, mail, and wire fraud. Davy’s conduct included forming corporations and companies to purchase properties from financial institutions secured by the FDIC, including Omni. Davy would “flip” the properties within a short period of time to unqualified “investors,” and arrange mortgage loans from banks based on false qualifying information, all while concealing from the lenders that his own companies had recently purchased the properties for amounts significantly less than the new loans. Davy paid kickbacks to a loan officer at Omni, as well as to employees at another lender, who approved the funding for his “investors.” Ultimately, Davy’s scheme forced many properties into foreclosure, causing lenders, insurers and others to incur millions of dollars in losses. Davy also collected money from investors by falsely promising they would receive property, which they never received.

  Previously, Brent Merriell was sentenced in August 2010 to 39 months in prison for his role in a scheme to prompt Omni to forgive $2.2 million in loans. Merriell had pled guilty to charges of making false statements to the FDIC and six counts of aggravated identity theft in connection with the scheme. In addition, Christopher Bernard Loving was sentenced in August 2010 to three years of probation for making false statements to agents of SIGTARP and the FDIC in connection with an investigation of kickbacks he paid Lawrence for construction contracts.

  Additional Information:

  June 1, 2011

  
  SIGTARP: Karim Walthour Lawrence Sentenced to 21 Months in Prison for Accepting Bribes and Other Kickbacks as Loan Officer for Failed TARP Applicant Omni National Bank
  

  April 22, 2011

  
  SIGTARP: Delroy Oliver Davy Sentenced to 14 Years in Prison for Defrauding the Failed Omni National Bank and Other Lenders
  

  April 22, 2011

  
  SIGTARP: Jeffrey L. Levine, Former Executive of Failed Omni National Bank, Sentenced to Federal Prison
  

  April 22, 2011

  
  Court Document Karim Walthour Lawrence Plea Agreement
  

  August 3, 2010

  
  Justice: Atlanta Man Sentenced to Prison for Fraud Related to Omni National Bank
  

  June 24, 2010

  
  Court Document: Christopher Bernard Loving Plea Agreement
  

  May 11, 2010

  
  Court Document: Delroy Oliver Davy Plea Agreement
  

  April 1, 2010

  
  Justice: East Point Man Sentenced in Mortgage & Bankruptcy Fraud Related to Loans Funded by Failed Bank
  

  March 23, 2010

  
  Justice: Atlanta Man Pleads Guilty to Making False Statements to the FDIC and Aggravated Identity Theft
  

  May 23, 2010

  
  Court Document: Brent Merriell Plea Agreement
  

  January 14, 2010

  
  Justice: Former Executive of Failed Bank Pleads Guilty
  

  January 14, 2010

  
  Justice: Former Executive of Failed Bank Pleads Guilty
  

  January 14, 2010

  
  Court Document: Jeffrey L. Levine Plea Agreement
  

  April 24, 2009

  
  Court Document: Jeffrey L. Levine Plea Agreement
  

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• Galleria USA, Inc.

• On January 26, 2012, Thomas Chia Fu and his wife, Cheri L. Shyu (also known as Cheri Fu), owners of Galleria USA, Inc. (“Galleria”), pled guilty in Federal court in Santa Ana, California, to bilking nearly $5 million from a group of banks, including several TARP-recipient banks. The couple is scheduled to be sentenced in July 2012. At sentencing, each faces a maximum sentence of 30 years in Federal prison.

  As previously reported, the Fus were indicted in March 2011 for bank fraud. Galleria imported home decor items manufactured in China for sale in the United States. The Fus obtained a $130 million revolving line of credit for Galleria from seven banks, some of which were TARP recipients, including Bank of America and United Commercial Bank. The Fus admitted to significantly overstating to the banks the amount of Galleria’s accounts receivables in order to be able to continue borrowing funds under the line of credit. The Fus admitted to providing false financial reports to the banks and falsifying Galleria’s computer system to support the exaggerated accounts receivables figures they provided to the banks.

  The banks suffered an estimated loss of $4.7 million under the line of credit from October 2008 to July 2009.

  This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Central District of California, the FBI, and Secret Service.

  Additional Information:

  January 26, 2012

  
  SIGTARP: California Couple Plead Guilty to Federal Fraud Charges for Bilking Banks, Including TARP Banks, Out of Nearly $5 Million
  

• Timelender et al.

• Frederic Alan Gladle

  On May 3, 2012, Frederic Alan Gladle was sentenced by the U.S. District Court for the Western District of Texas to 61 months in Federal prison, following his previous guilty plea to bankruptcy fraud and aggravated identity theft. The charges stem from Gladle’s operation of a foreclosure-rescue scam involving more than 1,100 distressed homeowners and several banks, including TARP banks. As part of the sentence, the court also ordered Gladle to pay $214,259 in restitution and to forfeit $87,901.

  Gladle admitted that, from 2007 to 2011, he promised homeowners whose properties were being foreclosed upon that, in exchange for a monthly fee, he would postpone the foreclosure for at least six months. After collecting fees from a homeowner, Gladle would have the homeowner execute a deed granting a small interest in their property to a random debtor in bankruptcy whose name Gladle found in bankruptcy records. Neither the homeowner nor the bankruptcy debtor was aware of Gladle’s misuse of the debtor’s bankruptcy petition. Gladle further defrauded the bank that had issued the loan to the homeowner by providing the bank a copy of the debtor’s bankruptcy petition showing that the debtor owned an interest in the homeowner’s property that the lender was attempting to foreclose upon. Upon receipt of these documents, the lender was legally obligated to and did terminate the foreclosure proceeding against the homeowner. As a result, multiple lenders, including TARP recipient banks Bank of America, Wells Fargo Bank and U.S. Bank, incurred costs and delays while attempting to collect money that was owed to them. Gladle admitted that he collected more than $1.6 million in fees from homeowners through this scam.

  Glen Alan Ward (aka Brandon Michaels)

  A defendant charged in the Northern and Central Districts of California for a separate, similar foreclosure-rescue scheme, Glen Alan Ward, was arrested in Canada in May 2012. Ward has been a fugitive sought by U.S. federal authorities since 2000. According to court documents, Ward (aka Brandon Michaels) is alleged to have worked with and taught Gladle how to perpetrate the foreclosure-rescue scheme. Ward is currently being detained in Canada pending his extradition to the United States.

  The case was investigated by SIGTARP, the United States Attorney’s Office for the Central District of California, the FBI, and the U.S. Trustee’s Office.

  Additional Information:

  May 24, 2012

  
  SIGTARP: SIGTARP, CFPB, and Treasury Issue a Fraud Alert to the Armed Services Community to Combat HAMP Mortgage Modification Scams
  

  May 4, 2012

  
  SIGTARP: Texas Man Sentenced to 61 Months in Federal Prison for Bankruptcy Fraud and Identity Theft in Connection with Nationwide Foreclosure-Rescue Scheme
  

  January 9, 2012

  
  SIGTARP: Austin, Texas, man Pleads Guilty to Bankruptcy Fraud and Identity Theft in Connection with Nationwide Foreclosure-Rescue Scheme
  

  December 9, 2011

  
  SIGTARP: Nationwide Foreclosure Rescue Scheme Shut Down; Operator Charged with Bankruptcy Fraud and Identity Theft, Agrees to Plead Guilty
  

• Waikele Properties Corporation
• Marleen and Winston Shillingford

  On October 12, 2011, Marleen Shillingford pled guilty in the U.S. District Court for the District of Connecticut to conspiracy to commit wire fraud and conspiracy to commit money laundering.

  From approximately April 2004 through August 2011, Shillingford, through the Waikele Properties Corporation, conspired with others to commit a mortgage fraud and money laundering scheme to obtain false mortgages that she and others used to purchase more than 40 multi-family properties and vacant land, in Bridgeport, Connecticut, upon which they built new houses. The scheme involved recruiting straw purchasers for the properties who applied for mortgages from banks, including TARP banks, such as Bank of America. Shillingford and co-conspirators filed loan applications on behalf of the purchasers that contained material misrepresentations regarding the purchasers’ employment, income, assets, and liabilities, and also provided the banks false documentation. Shillingford used the loan proceeds to enrich herself and continue the scheme. Several straw purchasers defaulted on the mortgages resulting in losses of more than $7 million to lenders.

  On October 19, 2011, Shillingford’s husband, Winston Shillingford, pled guilty to conspiracy to commit wire fraud and conspiracy to commit money laundering.

  This case is being investigated by SIGTARP, the United States Attorney’s Office for the District of Connecticut, IRS-CI, the FBI, and Department of Housing and Urban Development Office of Inspector General (“HUD OIG”).

  Robert Ilunga

  On January 18, 2012, Robert Ilunga pled guilty in the U.S. District Court for the District of Connecticut to one count of conspiracy to commit wire fraud and one count of conspiracy to commit money laundering stemming from his involvement in a mortgage fraud scheme.

  Ilunga is the third person to plead guilty in connection with a mortgage fraud scheme committed through Waikele Properties Corporation, a real estate company with offices in New York and Connecticut. From sometime in 2001 through August 2011, Ilunga conspired with Marleen Shillingford, Winston Shillingford, and others to commit a mortgage fraud and money laundering scheme to obtain false mortgages that they used to purchase more than 40 multi-family properties and vacant land. Ilunga and his co-conspirators recruited straw purchasers and filed false mortgage applications on behalf of these purchasers with banks, including TARP recipient banks such as Bank of America. Several straw purchasers subsequently defaulted on the loans. As a result of the scheme, mortgage lenders including TARP banks suffered more than $7 million in losses.

  Ilunga faces a maximum prison term of 40 years at his sentencing, which is scheduled for April 2012. As previously reported, the Shillingfords pled guilty to the same charges in October 2011 and are awaiting sentencing.

  This case was investigated by SIGTARP, the U.S. Attorney’s Office for the District of Connecticut, IRS-CI, the FBI, and HUD OIG.

  Additional Information:

  January 19, 2012

  
  SIGTARP: Connecticut Man Pleads Guilty to Decade-Long Mortgage Fraud Scheme
  

  October 13, 2011

  
  SIGTARP: Woman Admits Role in Mortgage Fraud Against TARP-Funded Banks
  

• Mount Vernon Money Center

• On June 16, 2011, Robert Egan, former president of the Mount Vernon Money Center (“MVMC”), and Bernard McGarry, former chief operating officer of MVMC, were sentenced by the U.S. District Court for the Southern District of New York to 11 and five years in prison, respectively, and three years of supervised release, for their roles in defrauding banks that had received TARP funds and other MVMC clients. An Order of Forfeiture in the amount of $70 million was also entered by the court. Restitution orders will be determined at a later date.

  Egan and McGarry each pled guilty in late 2010 to conspiracy to commit bank fraud and wire fraud. The guilty pleas arose from a scheme in which Egan and McGarry defrauded MVMC clients, including banks that had received TARP funds, universities, and hospitals, out of more than $60 million that had been entrusted to MVMC. MVMC engaged in various cash management businesses, including replenishing cash in more than 5,300 automated teller machines owned by financial institutions. From 2005 through February 2010, Egan and McGarry solicited and collected hundreds of millions of dollars from MVMC’s clients on the false representations that they would not co-mingle clients’ funds or use the funds for purposes other than those specified in the various contracts with their clients. Relying upon the continual influx of funds, Egan and McGarry misappropriated the clients’ funds for their own and MVMC’s use, to cover operating expenses of the MVMC operating entities, to repay prior obligations to clients, or for their own personal enrichment.

  This case was jointly investigated by SIGTARP, FBI and the U.S. Attorney’s Office for the Southern District of New York.

  Additional Information:

  June 16, 2011

  
  SIGTARP: President and Chief Operating Office of Money Service Company Sentenced to 11 and 5 Years in Prison, Respectively, for Roles in Defrauding Banks, Retailers, Hospitals, and Universities Out of Over $60 Million
  

  October 14, 2010

  
  Justice: Chief Operating Officer of Money Service Company Pleads Guilty in Manhattan Federal Court to Defrauding Banks, Retailers, Hospitals, and Universities Out of Over $50 Million
  

  September 15, 2010

  
  Justice: Chief Operating Officer of Money Service Company Pleads Guilty in Manhattan Federal Court to Defrauding Banks, Retailers, Hospitals, and Universities Out of Over $50 Million
  

  September 15, 2010

  
  Court Document: Robert Egan Consent Order
  

  March 10, 2010

  
  Justice: Manhattan U.S. Attorney Charges President and Chief Operating Officer of Mount Vernon Money Center with Defrauding Banks, Retailers, Hospitals, and Universities Out of $50 Million
  

  March 10, 2010

  
  Court Document: Robert Egan and Bernard McGarry Indictment
  

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• Joseph D. Wheliss, Jr.

• On November 2, 2011, a criminal information was filed in the U.S. District Court for the Middle District of Tennessee charging Joseph D. Wheliss, Jr. with bank fraud that involved a scheme to defraud Pinnacle National Bank (“Pinnacle”). Pinnacle received $95 million in TARP funds in December 2008. Wheliss, the owner and operator of National Embroidery Works, Inc., was a banking customer of Pinnacle. The information alleged that, from approximately May 18, 2005, through January 2011, Wheliss defrauded Pinnacle by submitting false and forged documents to the bank regarding his finances and assets in order to obtain multiple commercial loans.

  The case is being investigated by SIGTARP, the United States Attorney’s Office for the Middle District of Tennessee, and the FBI.

• New Point Financial Services, Inc.

• On June 4, 2012, John Farahi pled guilty in the U.S. District Court for the Central District of California to charges of mail fraud, loan fraud, selling unregistered securities, and conspiracy to obstruct justice, all relating to his ownership and operation of an investment firm known as New Point Financial Services, Inc. (“New Point”). Farahi is scheduled to be sentence d on January 14, 2013. He faces a maximum penalty of 75 years in Federal prison, a fine of up to $1.75 million, and possible restitution of approximately $7 million.

  Farahi was the former co-owner and president of New Point. Farahi admitted that, from 2005 until 2009, he operated a Ponzi scheme through New Point in which he convinced potential investors to invest their money with him by falsely assuring them their money would be invested in safe investments. Farahi also told investors that New Point would invest in the corporate bonds of companies backed by TARP and other Government programs and that the investors risked losing their money only if the U.S. government failed. Many of the investors who approached New Point about investing were members of the Iranian-Jewish community who had listened to Farahi’s daily Farsi-language investment radio show. Farahi admitted that New Point generally did not place the investors’ money in safe investments. Instead, Farahi used investor money to support his lavish lifestyle, to make payments to previous New Point investors in order to perpetuate the Ponzi scheme, and to finance and cover trading losses on speculative options trades. Farahi acknowledged that the scheme caused investor losses of more than $7 million, while prosecutors reserved the right to argue to the court that losses to victims exceeded $20 million.

  Facing massive trading losses at the end of 2008, Farahi borrowed millions of dollars through lines of credit at banks, including TARP recipient banks Bank of America and U.S. Bank. Farahi admitted to making false statements to these banks about his financial situation in connection with these borrowings. Farahi also admitted to illegally selling unregistered securities and then conspiring with David Tamman, New Point’s former attorney, to obstruct an investigation by the SEC into Farahi’s illegal sale of the unregistered securities. As previously reported, Tamman was indicted in December 2011 for his role in allegedly obstructing the SEC investigation. Tamman is scheduled to go on trial on October 23, 2012.

  This case is being investigated by SIGTARP, the United States Attorney’s Office for the Central District of California, and the FBI.

  Additional Information:

  June 7, 2012

  
  SIGTARP: Former Fund Manager Pleads Guilty to Defrauding Investors and TARP Banks; Losses May Exceed $20 Million
  

  December 8, 2011

  
  SIGTARP: Former Fund Manager Indicted on Federal Charges of Bilking Investors and TARP-Funded Banks Out of More Than $20 Million
  

• Online Mortgage Modification Scams Advertised on Google, Yahoo!, and Bing

• This quarter, SIGTARP decided to take a 360-degree approach to combating and stopping mortgage modification fraud. In addition to investigations and criminal charges, SIGTARP actively worked to shut down hundreds of these scams advertised on the Internet and formed a joint task force to raise homeowner awareness of these scams. SIGTARP will continue to investigate and hold accountable criminals who defraud homeowners in connection with HAMP, while doing everything it can to stop homeowners from becoming victims in the first place.

  The first place many homeowners turn for help in lowering their mortgage payment is the Internet through online search engines, and that is precisely where they are being targeted. From talking to the victims of these scams, SIGTARP learned that many were enticed by web banner ads and online search advertisements that promised, for a fee, to help lower mortgage payments. These ads offer a false sense of hope that can end up costing homeowners their homes.

  In November 2011, SIGTARP shut down 125 websites that were advertised on Yahoo!, Bing, and Google and evidenced hallmarks of these fraudulent scams. SIGTARP coordinated with Google and Microsoft (which founded Bing and whose technology powers Yahoo!) to shut down the websites. In addition, Google suspended advertising relationships with more than 500 Internet advertisers and agents and Microsoft suspended advertising relationships with more than 400 Internet advertisers and agents connected with the 125 websites.

  SIGTARP’s work in cutting off this primary access to homeowners immediately and dramatically decreases the scope and scale of these scams by limiting their ability to seek out and victimize struggling homeowners. This SIGTARP investigation is ongoing.

  Additional Information:

  May 24, 2012

  
  SIGTARP: SIGTARP, CFPB, and Treasury Issue a Fraud Alert to the Armed Services Community to Combat HAMP Mortgage Modification Scams
  

  December 1, 2011

  
  SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners
  

  November 21, 2011

  
  SIGTARP: SIGTARP Shuts Down Online Mortgage Modification Scams Advertised on Yahoo! and Bing
  

  November 16, 2011

  
  SIGTARP: SIGTARP Shuts Down 85 Online Mortgage Modification Scams Advertised on Google
  

• The Shmuckler Group, LLC

• On April 10, 2012, Howard R. Shmuckler pled guilty in the U.S. District Court for the Eastern District of Virginia to wire fraud relating to his ownership and operation of a fraudulent mortgage modification business known as The Shmuckler Group, LLC (“TSG”). Shmuckler admitted to falsely portraying himself to TSG clients as an attorney licensed to practice in Virginia and to misrepresenting to clients that TSG’s loan modification success rate was 97%. Shmuckler also assured clients that their loans would be successfully modified. False representations by Shmuckler and TSG employees induced homeowners to pay TSG fees ranging from $2,500 to $25,000. Court records indicate that Shmuckler instructed clients to terminate contact with their mortgage companies and to stop making payments to their lenders. TSG never facilitated a modification of the mortgages referenced in the statement of facts admitted to by Shmuckler. On June 25, 2012, Shmuckler was sentenced to 90 months in Federal prison, a sentence that will run consecutive to his current term of imprisonment that resulted from a conviction in the U.S. District Court for the District of Columbia. Restitution to FDIC will be set by the court at a later date.

  As previously reported, on November 18, 2010, the Prince George’s County State’s Attorney’s Office in Maryland obtained a 30-count indictment against Shmuckler for conspiracy, theft, and operating a business without a license, in connection with a mortgage modification scam. On February 3, 2012, Shmuckler appeared before a judge in the Circuit Court for Prince George’s County, Maryland, where he waived his right to a jury trial and consented to certain facts in connection with the mortgage modification scam. At the next hearing, which had been postponed pending Shmuckler’s sentencing by the Eastern District of Virginia, the Maryland judge will rule on the charge. Shmuckler faces a maximum sentence of 15 years on the theft charge.

  The case brought in Federal court in Virginia resulted from a joint investigation conducted by SIGTARP, the FBI, FDIC OIG, and the U.S. Attorney’s Office for the Eastern District of Virginia. The case brought in state court in Maryland resulted from a joint investigation by SIGTARP, the Office of the State’s Attorney for Prince George’s County, and the Maryland Department of Labor Licensing and Regulation’s Financial Regulation Division.

  Additional Information:

  June 26, 2012

  
  SIGTARP: Operator of Virginia-Based Mortgage Modification Scam Sentenced to 7½ Years in Federal Prison
  

  May 24, 2012

  
  SIGTARP: SIGTARP, CFPB, and Treasury Issue a Fraud Alert to the Armed Services Community to Combat HAMP Mortgage Modification Scams
  

  April 10, 2012

  
  SIGTARP: Operator of Virginia-Based Mortgage Modification Scheme Pleads Guilty to Fraud
  

  December 1, 2011

  
  SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners
  

  November 30, 2010

  
  Maryland: Alleged Loan Modification Scammer Indicted by Prince George’s Grand Jury
  

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• Home Owners Protection Economics, Inc.

• On August 9, 2011, SIGTARP agents, with its law enforcement partners, arrested Christopher S. Godfrey, Dennis Fischer, Vernell Burris, Jr., and Brian M. Kelly. On August 3, 2011, a federal grand jury sitting in the District of Massachusetts returned an indictment against the four defendants for allegedly perpetrating a fraudulent home loan modification scam through a company named Home Owners Protection Economics, Inc. (“HOPE”). The 20-count indictment charges the four with conspiracy, wire fraud, mail fraud, and misuse of a government seal. Godfrey was the president and Fischer was the vice president of HOPE. Burris was the manager and primary trainer of HOPE telemarketers, and Kelly was one of the principal telemarketers and a trainer for other HOPE telemarketers. Godfrey and Fischer were charged with one count of conspiracy, nine counts of wire fraud, nine counts of mail fraud, and one count of misuse of a Government seal. Burris and Kelly were charged with one count of conspiracy, nine counts of wire fraud, and nine counts of mail fraud.

  The indictment alleges that, through a series of misrepresentations, the defen¬dants and their employees induced thousands of financially distressed homeowners to pay HOPE a $400-$900 up-front fee in exchange for HOPE’s home loan modifi¬cations, modification services, and “software licenses.” According to the indictment, the defendants misrepresented that, with their assistance, homeowners were virtually guaranteed to receive a loan modification under the Home Affordable Modification Program (“HAMP”), which is a federally-funded mortgage assistance program imple-mented under TARP. The indictment alleges further misrepresentations by defen¬dants, including that HOPE was affiliated with the homeowner’s mortgage lender, that homeowners had been approved for a home loan modification, that homeowners could stop making mortgage payments while they waited for HOPE to arrange their loan modification, that HOPE would refund the up-front fee if the modification was unsuccessful, and that HOPE was a non-profit organization.

  The indictment further alleges that, in exchange for homeowners paying the up-front fees, HOPE sent homeowners a “do-it-yourself” application package that was nearly identical to the application provided free of charge by the U.S. Government through HAMP. Through these misrepresentations, it is alleged, HOPE was able to persuade thousands of homeowners collectively to pay more than $3 million in fees to HOPE.

  This case is being investigated by SIGTARP, the FBI, the United States Attorney’s Office for the District of Massachusetts, and the Computer Crime and Intellectual Property Section of the Department of Justice’s Criminal Division.

  Additional Information:

  December 1, 2011

  
  SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners
  

  August 9, 2011

  
  SIGTARP: Four Florida Men Charged in Boston with Defrauding Homeowners in Home Loan Modification Scam
  

• Lori J. Macakanja

• On February 2, 2012, Lori J. Macakanja was sentenced by the U.S. District Court for the Western District of New York to 72 months in prison and ordered to pay restitution of $298,639, for orchestrating a scheme to defraud struggling homeowners seeking mortgage modifications. Macakanja had been charged in a criminal complaint filed on January 29, 2011, and she pled guilty to mail fraud and theft of government money on October 6, 2011.

  As previously reported, Macakanja was formerly employed as a housing counselor by HomeFront, Inc. (“HomeFront”), a HUD-approved housing counseling agency in Buffalo, New York. Macakanja abused her position of trust by unlawfully soliciting and collecting money from HomeFront clients by falsely claiming that the money would be used to prevent foreclosure on the clients’ homes by obtaining loan modifications, including modifications under HAMP. Instead, Macakanja misused the client funds to gamble at casinos and to pay her own mortgage.

  Macakanja failed to obtain loan modifications for the victims. A total of 136 HomeFront clients were defrauded with losses totaling $300,000.

  This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Western District of New York, the U.S. Postal Inspection Service (“USPIS”), HUD OIG, IRS-CI, Secret Service, and the FBI.

  Additional Information:

  February 2, 2012

  
  SIGTARP: New York Housing Counselor Sentenced for Defrauding 136 Clients Seeking Mortgage Modifications
  

  October 6, 2011

  
  SIGTARP: Former Buffalo Housing Counselor Pleads Guilty in Connection with Defrauding Clients Seeking Mortgage Modifications
  

• Flahive Law Corporation

• On May 16, 2012, Michael Kent Johnson entered a plea of no contest to misdemeanor conspiracy for his participation in a fraudulent loan modification scheme perpetrated through the Flahive Law Corporation (“FLC”). FLC was a law firm operated by Gregory and Cynthia Flahive. Johnson acted as the firm’s managing attorney. Johnson is required to serve three years of probation and 200 hours of community service, to pay restitution of $10,560, and to not participate in loan modification services.

  As previously reported, Johnson, Gregory Flahive, and Cynthia Flahive were arrested by SIGTARP agents and its law enforcement partners on March 8, 2012, pursuant to an indictment returned by a California grand jury. According to the indictment and court documents, from January 2009 to December 2010, FLC promoted its loan modification services to homeowners through advertisements, including a television infomercial. FLC falsely represented that experienced lawyers would negotiate with banks on behalf of homeowners seeking modifications, including under HAMP, misrepresented that FLC’s law firm status would give them extra leverage when negotiating with such banks, and overstated FLC’s rate of success in obtaining loan modifications on behalf of homeowners. FLC allegedly collected up-front fees of up to $2,500 from homeowners for loan modification services that were never performed. Johnson admitted to creating and using manipulative fee agreements in order to collect up-front fees from homeowners for loan modification service. Gregory Flahive and Cynthia Flahive are scheduled to go on trial on September 10, 2012.

  The case is being investigated by SIGTARP, the California Attorney General, Folsom Police Department, Rancho Cordova Police Department, and the El Dorado Sheriff’s Department.

  Additional Information:

  May 24, 2012

  
  SIGTARP: SIGTARP, CFPB, and Treasury Issue a Fraud Alert to the Armed Services Community to Combat HAMP Mortgage Modification Scams
  

  March 8, 2012

  
  SIGTARP: 3 Attorney’s Charged in California Loan Modification Scam
  

  December 1, 2011

  
  SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners
  

• United Law Group

• In March 2010, SIGTARP, along with USPIS, FBI, ICE, and the Orange County District Attorney’s Office, executed a publicly filed search warrant obtained by the U.S. Attorney for the Central District of California at the offices of United Law Group (“ULG”). This investigation focuses on allegations that ULG, taking advantage of the publicity surrounding HAMP, engaged in a mortgage modification advance-fee scheme. The search warrant affidavit alleges that ULG charged struggling homeowners fees ranging from $1,500 to $12,000 without performing services, while advising victims to stop paying their mortgages and terminate contact with their lenders. The affidavit further alleges that many ULG customers subsequently lost their homes to foreclosure.

  On June 30, 2010, ULG filed for bankruptcy protection. On December 20, 2010, as a direct result of SIGTARP’s investigative efforts, the Honorable Robert Kwan issued a preliminary injunction assigning control of a bank account held by ULG containing client funds to ULG’s bankruptcy trustee. The bankruptcy trustee assigned to wind down the operations of ULG in Irvine, California, estimates that approximately $1 million from the seized account will be returned to the estate to serve as restitution to victims.

  SIGTARP’s investigation with its law enforcement partners is ongoing.

  Additional Information:

  December 1, 2011

  
  SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners
  

• Compliance Audit Solutions, Inc.

• On February 14, 2012, Ziad al Saffar, Sara Beth Rosengrant, and Daniel al Saffar pled guilty to charges of conspiracy to commit wire fraud and mail fraud. As previously reported, on April 28, 2011, a Federal grand jury sitting in the Southern District of California returned an indictment against the three defendants for allegedly perpetrating a fraudulent mortgage modification business under the names Compliance Audit Solutions, Inc. (“CAS”) and CAS Group, Inc. (“CAS Group”).

  The defendants admitted to targeting homeowners who were unable to afford their mortgage payments and using fraudulent tactics to induce the homeowners to purchase an “audit” of their home mortgage loan. The defendants claimed the “audit,” for which they charged homeowners between $995 and $3,500, could identify “violations” in the homeowners’ loan documents that could be used to force banks to negotiate new terms for the loans. The defendants admitted to publishing numerous misrepresentations in advertisements, including claiming that the defendants were affiliated with or employed by the United States Department of Housing and Urban Development, and that CAS and CAS Group were participating in a Federal Government program called “Hope for Homeowners.” The defendants also used websites named www.obama4homeowners.com and www.hampnow.org, which implied affiliation with HAMP, the housing support program funded by TARP.

  As part of their guilty pleas, the defendants agreed to pay restitution to the victims of their criminal conduct in an amount to be determined by the Court. Sentencing for all three defendants is scheduled for April 2012.

  This case was investigated by SIGTARP, the U.S. Attorney’s Office for the Southern District of California and the FBI.

  Additional Information:

  July 23, 2012

  
  SIGTARP: Operators of California-Based Mortgage Modification Scam Sentenced for Conspiracy to Commit Fraud
  

  May 24, 2012

  
  SIGTARP: SIGTARP, CFPB, and Treasury Issue a Fraud Alert to the Armed Services Community to Combat HAMP Mortgage Modification Scams
  

  February 15, 2012

  
  SIGTARP: Operators of California-Based Mortgage Modification Scam Plead Guilty to Conspiracy to Commit Fraud
  

  December 1, 2011

  
  SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners
  

  April 29, 2011

  
  SIGTARP: Operators of Mortgage Loan Modification Business Charged with Conspiracy to Commit Fraud
  

• American Home Recovery

• On May 17, 2012, after a 10-day jury trial in U.S. District Court for the Southern District of New York, Isaak Khafisov was found guilty of conspiracy, mail fraud and wire fraud for perpetrating a scheme to defraud distressed homeowners and lenders. At sentencing on September 6, 2012, Khafisov faces a maximum sentence of 80 years in Federal prison.

  According to court documents and statements made during court proceedings, around spring 2008, Khafisov founded a mortgage modification business named American Home Recovery (“AHR”). Khafisov and AHR salespeople made false assertions to fraudulently induce distressed homeowners to pay AHR thousands of dollars in up-front fees for mortgage modifications. Specifically, Khafisov and AHR informed homeowners that they had been “pre-approved” for a mortgage modification by their lenders; that AHR would ensure participation in the TARP-funded Making Home Affordable program; and that AHR could obtain better interest rates and lower monthly fees on their mortgage. Khafisov and AHR also falsely promised to return the up-front fees if AHR did not secure a mortgage modification desired by the homeowner. They also falsely claimed that AHR was affiliated with government agencies and programs established by the Economic Stimulus Act of 2008 and that AHR possessed unique expertise in mortgage modifications and had special relationships with lenders. Khafisov also directed distressed homeowners to stop paying their mortgages and to pay fees to AHR instead. After receiving up-front fees from the distressed homeowners, Khafisov and AHR did little or no work to try to renegotiate the homeowners’ mortgages. As a result, many AHR clients were foreclosed upon by lenders and lost hundreds of thousands of dollars in fees.

  Jaime Cassuto and David Cassuto founded AHR with Khafisov. As previously reported, they each entered a guilty plea on April 2, 2012, relating to this mortgage modification scheme. In March 2011, Raymond Pampillonio, a former AHR employee, also pled guilty in connection with this scheme.

  This case is being investigated by SIGTARP, the U.S. Attorney’s Office for the Southern District of New York, and the FBI.

  Additional Information:

  May 24, 2012

  
  SIGTARP: SIGTARP, CFPB, and Treasury Issue a Fraud Alert to the Armed Services Community to Combat HAMP Mortgage Modification Scams
  

  May 18, 2012

  
  SIGTARP: Operator of National Mortgage Modification Scam Convicted of Fraud
  

  December 1, 2011

  
  SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners
  

  June 17, 2010

  
  Manhattan U.S. Attorney Charges 38 Defendants as Part of Nationwide Mortgage Fraud Sweep
  

• Nations Housing Modification Center

• Glenn Rosofsky, Roger Jones, and Michael Trap pled guilty to their involvement in a fraudulent loan-modification scheme. The conspiracy sold loan-modification services to homeowners who were delinquent on their monthly mortgage payments. Using the names “Nations Housing Modification Center” (“NHMC”) and “Federal Housing Modification Department,” the conspiracy used false and fraudulent statements and representations to induce customers to pay advance fees of $2,500 - $3,000 each to purchase loan-modification services from NHMC. The fraud grossed at least $900,000 from more than 300 homeowners.

  On January 24, 2011, Rosofsky was sentenced by the U.S. District Court for the Southern District of California to 63 months incarceration and 36 months of supervised release and ordered to pay restitution of $456,749 following his previous guilty plea to one count of conspiracy to commit wire fraud and money laundering; one count of money laundering; and one count of filing a false tax return.

  On January 18, 2011, Jones was sentenced in the same court to 33 months incarceration and 36 months of supervised release, and ordered to pay restitution of $456,749 following his previous guilty plea to one count of conspiracy to commit wire fraud and money laundering; one count of money laundering; and one count of filing a false tax return. At his guilty plea, Jones admitted not only to participating in the conspiracy, but also to making material false statements to SIGTARP agents that significantly obstructed or impeded an aspect of the SIGTARP investigation.

  Trap, who pled guilty to conspiracy to commit wire fraud and money laundering, is expected to be sentenced later this spring.

  This case was jointly investigated by SIGTARP, IRS-CI, the Federal Trade Commission (“FTC”), the San Diego District Attorney’s Office, and the U.S. Attorney’s Office for the Southern District of California, with the support of FinCEN and the New York High Intensity Financial Crime Area.

  Additional Information:

  December 1, 2011

  
  SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners
  

  June 10, 2011

  
  SIGTARP: Owner of Fraudulent Mortgage Loan Modification Scheme Sentenced
  

  October 1, 2010

  
  Court Document: Roger T. Jones Plea Agreement
  

  June 1, 2010

  
  Justice: Owner of Fraudulent Mortgage Loan Modification Scheme Pleads Guilty to Conspiracy, Money Laundering and Tax Charges
  

  June 1, 2010

  
  Court Document: Glenn Steven Rosofsky Plea Agreement
  

  March 24, 2010

  
  Court Document: Michael Trap Plea Agreement
  

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• Residential Relief Foundation, LLC / Silver Lining Services

• On September 30, 2011, at the request of the Federal Trade Commission (“FTC”), the U.S. District Court for the District of Maryland shut down the operations of Residential Relief Foundation (“RRF”); Silver Lining Services, LLC; and their owners, James Holderness, Bryan Melanson, Michael Valenti, and Jillian Melanson. The settlement agreement entered into between the FTC and the defendants bans the defendants from participating in the mortgage assistance relief and debt relief industries and imposes a judgment of more than $10.5 million against the defendants, which is the total amount the defendants made through their deceptive conduct.

  The civil complaint filed by the FTC as a result of an in¬vestigation by SIGTARP and the FTC alleged that the defendants violated Federal law by falsely claiming that they would obtain loan modifications, including under HAMP, and significantly lower mortgage payments for consumers in return for upfront fees. Consumers, who were assured quick results and a high success rate, were charged a $1,495 up-front fee. The complaint also charged the defendants with misrepresenting an affiliation with the Federal Government, falsely claiming to have taken reasonable and appropriate measures to protect consumers’ personal information from unauthorized access, and improperly disposing of consumers’ information in unsecured dumpsters, in violation of the FTC Act. The defendants engaged in their conduct amid the publicity surrounding the availability of free mortgage loan assistance and modification programs, including HAMP as imple¬mented under TARP by Treasury.

  The settlement agreement also bars the defendants from making misrepre¬sentations about any product or service, including claims about their government affiliation.

  The case was investigated by SIGTARP and the FTC.

  Additional Information:

  December 1, 2011

  
  SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners
  

  October 4, 2011

  
  FTC: At FTC’s Request, Court Shuts Down Deceptive Mortgage and Debt Relief Operation
  

  November 15, 2010

  
  Court Document: Temporary Restraining Order
  

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• Improper Use of “MakingHomeAffordable.gov”

• On Friday, May 15, 2009, at the request of the Federal Trade Commission (“FTC”), a Federal district court issued an order to stop an Internet-based operation that pretended to operate “MakingHomeAffordable.gov,” the official website of the Federal MHA program for mortgage loan assistance. The FTC alleged that the defendants deceptively diverted consumers who searched online for the free Government assistance program to commercial websites that offer loan modification services for a fee.

  According to the FTC’s complaint, the defendants purchased sponsored links for their advertising on the results pages of Internet search engines, including yahoo.com, msn.com, altavista.com, and alltheweb.com. When consumers searched for “making home affordable” or similar search terms, the defendants’ ads prominently and conspicuously displayed the website address “makinghomeaffordable.gov.” Consumers who clicked on this advertised hyperlink were not directed to the official website for the MHA program, but rather were diverted to websites that solicit applicants for paid loan modification services. These commercial websites, which are not part of or affiliated with the U.S. Government, require consumers to enter personally identifying and confidential financial information. The operators of these websites either purport to offer loan modification services themselves or sell the personally identifying information to others.

  The FTC filed an emergency request for a temporary restraining order in the U.S. District Court for the District of Columbia, Civil Case No. 1:09-cv-00894 (CKK). Judge Colleen Kollar-Kotelly entered a temporary restraining order, barring the defendants from using the “MakingHomeAffordable.gov” hyperlink or representing that they are affiliated with the U.S. Government. The order also requires the four search engine providers to identify those who paid them to place the ads and to refuse to place paid ads that contain active hyperlinks that are labeled “MakingHomeAffordable.gov” or any other domain name containing “.gov.”

  SIGTARP is providing assistance and support to the FTC during the investigation.

  Additional Information:

  May 24, 2012

  
  SIGTARP: SIGTARP, CFPB, and Treasury Issue a Fraud Alert to the Armed Services Community to Combat HAMP Mortgage Modification Scams
  

  December 1, 2011

  
  SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners
  

  June 17, 2010

  
  FTC: FTC Settlement Orders Ban More Than a Dozen Marketers from Selling Mortgage Relief Services; Repeat Offender Ordered to Pay $11.4 Million for Contempt
  

  March 12, 2010

  
  Court Document: Mortgage Relief Scam Permanent Injunction
  

  July 10, 2009

  
  Court Document: Mortgage Relief Scam Permanent Injunction
  

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• Legacy Home Loans and Real Estate

• As previously reported, on December 1, 2011, Magdalena Salas, Angelina Mireles, and Julissa Garcia, the owner, manager, and CEO, respectively, of Legacy Home Loans and Real Estate (“Legacy Home Loans”) in Stockton, California, were arrested on charges of conspiracy, grand theft, and false advertising for a mortgage modification scam. On July 10, 2012, all three defendants pled guilty in the San Joaquin County, California, Superior Court to conspiracy to collect upfront fees for mortgage modifications. Salas also pled guilty to felony foreclosure fraud.

  According to the charges and other information presented in court, the defendants collected thousands of dollars in up-front fees from distressed homeowners in Central California after making false promises to obtain loan modifications for the homeowners. The defendants falsely promised homeowners that they would receive loan modifications regardless of their financial situation through Federal Government programs allegedly referred to as the “Obama Plan.” The defendants also allegedly falsely overstated their success rate, made false money-back guarantees, and falsely represented that attorneys would work on the modifications. The defendants advertised similar false promises in flyers, billboards, television and radio, in English and Spanish. The modification services promised by the defendants allegedly were never carried out and many clients ended up losing their homes.

  On July 11, 2012, the three defendants were sentenced to probation and ordered to obey all laws, pay restitution, and complete 240 hours of community service. Salas was also ordered not to engage in any professional services requiring a license that she does not possess. The court will determine the restitution to be paid by the defendants at a hearing scheduled for August 30, 2012.

  The case is being investigated by SIGTARP, the California Attorney General’s office, the San Joaquin District Attorney’s office, the California Department of Real Estate, and the Stockton Police Department.

  Additional Information:

  May 24, 2012

  
  SIGTARP: SIGTARP, CFPB, and Treasury Issue a Fraud Alert to the Armed Services Community to Combat HAMP Mortgage Modification Scams
  

  December 1, 2011

  
  SIGTARP: SIGTARP and California Attorney General Kamala D. Harris Announce Arrests in Stockton, California Foreclosure Scam
  

• CSFA Home Solutions

• On May 16, 2012, Andrew M. Phalen pled guilty to felony charges for his role in connection with a mortgage modification scheme. On June 6, 2012, Phalen was sentenced by the Superior Court of California to one year in jail and five years of supervised probation and prohibited by the Court from associating with the other four defendants in the case and from engaging in services relating to loan modification, refinancing, and foreclosure. As previously reported, Phalen, Jacob J. Cunningham, Justine D. Koelle, Dominic A. Nolan, and John D. Silva were arrested in California on March 2, 2012, and charged with allegedly operating a mortgage modification scheme that defrauded hundreds of victims. According to court documents, between January 2009 and March 2012, the defendants allegedly enticed homeowners to participate in a fraudulent loan modification program by making numerous false misrepresentations to homeowners through advertisements, websites, promotional letters, and direct conversations. The misrepresentations allegedly included statements that: (1) HAMP would apply to homeowners’ circumstances; (2) the defendants had a 100% success rate in obtaining mortgage modifications for homeowners; and (3) homeowners would be refunded their paid fees if the defendants could not modify a homeowner’s loan. To evade detection by law enforcement, the defendants are accused of changing the names, phone numbers, and addresses of sham companies they operated. One company name the defendants used was CSFA Home Solutions.

  Cunningham, Koelle, Nolan, and Silva have been charged with multiple felony counts of violating California state law, including conspiracy to charge illegal upfront fees for mortgage modifications, conspiracy to commit forgery, grand theft by false pretenses, theft from an elder, and money laundering. The charges are currently pending.

  The case is being investigated by SIGTARP, Orange County, California, District Attorney’s Office, U.S. Secret Service (“Secret Service”), Huntington Beach Police Department, California Department of Real Estate, Orange County Probation Department, Orange County Sheriff’s Department, Costa Mesa Police Department, Irvine Police Department, and Santa Ana Police Department.

  Additional Information:

  May 24, 2012

  
  SIGTARP: SIGTARP, CFPB, and Treasury Issue a Fraud Alert to the Armed Services Community to Combat HAMP Mortgage Modification Scams
  

  March 2, 2012

  
  SIGTARP: 5 Charged in California-Based Mortgage Modification Fraud Scheme
  

  December 1, 2011

  
  SIGTARP: SIGTARP, CFPB, and Treasury Form Joint Task Force to Combat HAMP Mortgage Modification Scams; Release a Consumer Fraud Alert to Protect Homeowners
  

• ProTrust Management, Inc.

• On August 6, 2009, Gordon B. Grigg, a financial advisor and owner of ProTrust Management, Inc., formerly based in Franklin, Tennessee, was sentenced to serve a 10-year prison term after pleading guilty to four counts of mail fraud and four counts of wire fraud in the U.S. District Court for the Middle District of Tennessee. The charges stemmed from Grigg’s role in embezzling nearly $11 million from his investor clients through false statements, including claims that Grigg was making investments in fictional “TARP-guaranteed debt.” SIGTARP participated in the investigation of Grigg and supported the prosecution along with its law enforcement partners, the Securities and Exchange Commission (“SEC”), the Federal Bureau of Investigation (“FBI”), USPIS, the Tennessee Department of Commerce and Insurance, and the Franklin, Tennessee, Police Department.

  The prosecution was handled by the United States Attorney’s Office for the Middle District of Tennessee.

  Additional Information:

  August 6, 2009

  
  FBI: Franklin Financial Adviser Gordon B. Grigg Sentenced to 10 Years in Prison for Investment Fraud in Ponzi Scheme
  

  April 22, 2009

  
  FBI: Mail and Wire Fraud Charges Filed Against Franklin Financial Adviser Gordon B. Grigg
  

  January 28, 2009

  
  SEC: SEC Charges Nashville-Based Financial Planner with Fraud Involving Purported Investments in TARP
  

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