Nationally, More Than 400 Defendants Charged For Roles In Mortgage Fraud Schemes as Part of Operation “Malicious Mortgage”

St. Louis, Missouri: The Department of Justice and Federal Bureau of Investigation announced today a national takedown of mortgage fraud schemes, the culmination of substantial coordinated efforts during the last three and a half months to identify, arrest, and prosecute mortgage fraud violators through the United States. Operation Malicious Mortgage highlights the strong enforcement response undertaken by the Department of Justice and its law enforcement partners to combat the threat mortgage fraud poses to the U.S. housing industry and worldwide credit markets.

From March 1 to June 18, 2008, Operation Malicious Mortgage resulted in 144 mortgage fraud cases in which 406 defendants were charged. Yesterday, 60 arrests were made in mortgage fraud-related cases in 15 districts. Charges in Operation Malicious Mortgage cases were brought in every region of the United States and in more than 50 judicial districts by U.S. Attorneys’ Offices based upon the law enforcement and investigative efforts of participating law enforcement agencies. The FBI estimates that approximately $1 billion in losses were inflicted by the mortgage fraud schemes employed in these cases.

In St. Louis, U.S. Attorney Catherine Hanaway’s office has prosecuted nine mortgage fraud related cases during this time period.

“Misconduct like the cases described here only makes things worse for the troubled housing industry,” said Hanaway. “Federal law enforcement has responded to the crisis by stepping up fraud enforcement and emphasizing the prosecution of criminal misconduct and the aggressive collection of restitution for victims.”

In September 2006, James Sutton violated his probation from a 2005 sentence for mail fraud by purchasing more than 20 properties using his father’s social security number. As a result, Sutton pled guilty this spring to an additional felony charge of misuse of a social security number and was sentenced June 3, 2008, to a term of 16 months in prison. In addition, Sutton’s probation for the 2005 offense was revoked and he was sentenced to six months prison to run concurrent to the 16 months.

On June 9, Daryl W. Miller pled guilty to wire fraud for selling two properties and then, after he no longer owned these properties, taking out a mortgage against one and selling the other for a second time.

Last April, Christopher Rakel pled guilty to fraud charges involving a far-ranging scheme to defraud banks and other mortgage lenders and awaits sentencing next week.

On March 24, 2008 , Floyd Irons, former Vashon High School Coach, Michael Noll, and John Mineo, Jr., a local restaurant operator, were sentenced to 12 months, 20 months and 12 months and one day in prison, respectively, on wire and mail fraud charges in connection with a million dollar mortgage fraud scheme.

On February 15, 2008, Daniel Mann was sentenced to 15 months in prison for his participation in a mortgage fraud scheme. The scheme involved lining up properties from distressed sellers willing to take a below-market sale price for a property and matching them up with willing buyers. Mann and others arranged 100% financing for the buyers by means of false mortgage applications, which typically included lies about a buyer's finances and intention to occupy a property. In all, the scheme involved more than 60 properties, mostly in South St. Louis and ran from 2005 through 2006. In addition to Mann, Steven Heinrichs and Tracy Westmoreland have pled guilty to related charges for their participation in this same ring and are scheduled for sentencing in July.

John Gillies, Special Agent in Charge, FBI-St. Louis stated, “The ongoing initiative, known as Operation Malicious Mortgage, reflects the FBI's mission and efforts to identify, target, disrupt and dismantle criminal organizations and individual operations engaged in mortgage fraud schemes that target our nation's financial institutions and have an effect on our nation's economy.”

Operation Malicious Mortgage represents the joint collaborative efforts of the FBI, U.S. Postal Inspection Service, Internal Revenue Service-Criminal Investigation Division, U.S. Immigration and Customs Enforcement, U.S. Secret Service, U.S. Trustee Program, Department of Housing and Urban Development-Office of the Inspector General, Department of Veterans Affairs-Office of the Inspector General, and Federal Deposit Insurance Corporation-Office of the Inspector General. Operation Malicious Mortgage is the most recent coordinated sweep in an ongoing law enforcement effort to combat mortgage fraud, which also included Operation Continued Action in 2004 and Operation Quick Flip in 2005.

An indictment is not evidence of guilt. All persons charged with a crime are presumed innocent until proven guilty beyond a reasonable doubt.

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