Posts Tagged ‘Fraud’

WaMu Lent $24.5 Million To One Shady Family Of ID Thieving House Flippers [Mortgage Fraud]

24 Sep

If you're expecting this story to be about the worst bunch of shady house flippers from the height of the credit boom, you'll be disappointed. This story is about a family that took WaMu for huge amounts of money by buying homes and selling them to their friends and other family members for grossly inflated prices — and pocketing the profit while the homes fell into foreclosure. They did this as the California real estate market was imploding, and after WaMu had announced that it had tightened its lending standards.

The story begins several years ago, when Vijay and Supriti Soni were found guilty of forgery, falsifying real estate documents, identity theft and grand theft. According to court documents, the Sonis "obtained confidential information from various people – one of whom worked for Vijay and the rest who were clients for properties or mortgages – and then used it to acquire furniture, loan proceeds and commissions, real estate deeds and commissions, a Mercedes Benz automobile and cash for themselves."

So when the real estate bubble began to collapse, the Sonis saw an opportunity, and WaMu didn't do a criminal background check.

From the OC Register:

In July 2007, Vijay and Supriti Soni of Corona del Mar paid $440,000 for a home at 2129 W. Civic Center Drive in Santa Ana.

Five weeks later, they resold the house to Javier Hernandez – the family gardener and handyman – for $660,000. That's a 50 percent gain in 38 days – at a time when real estate prices in Santa Ana were plunging.

But the lender that financed both mortgages – Washington Mutual Bank – took a bath. In March of this year Hernandez's loan went into default and in July the bank foreclosed. On the trustee's deed, the bank listed the home's value at $377,137 – $220,000 less than the outstanding loan.

Records show that Washington Mutual, America's largest savings and loan and one of its most precariously perched lending institutions, financed at least 43 mortgages worth $24.5 million on properties bought and sold by members of the Soni family since early 2007.

So why didn't WaMu's new, stricter lending policies exclude the Sonis?

Experts told the OC Register that WaMu:

* Allowed financing of property flips that occur less than 90 days after purchase. The Federal Housing Administration imposed a ban on financing 90-day flips in 2006. The FHA also requires a second appraisal for homes sold at a 100 percent gain less than 180 days after purchase.
* Relied heavily on imperfect fraud detection software. Computers are good at flagging statistical aberrations – such as unrealistic income statements – but can be deceived by knowledgeable and determined insiders.
* Did not check criminal backgrounds. The Sonis had been convicted in 2003 of numerous felonies for a real estate fraud scheme. WaMu checks criminal backgrounds of loan originators, such as outside mortgage brokers, but not borrowers.

Last month, District Attorney investigators raided the family's homes and business offices. Now, prosecutors are investigating the Sonis and other members of their family for criminal behavior.

"Unfortunately, we are back looking at these characters again," said Doug Brannan, the deputy Orange County District attorney who prosecuted the Sonis in 2003.

The OC Register says that the Soni's effectively created their own market in Santa Ana, selling so many homes to each other for inflated prices that the sales were "later used by appraisers to give credibility to high asking prices for other properties in the area."

Here's an example:

Lohia bought the bank-owned house at 827 S. Flower for $249,500 on Jan. 4. She sold it 20 days later for $575,000 to her daughter, Suniti Shah, who financed the purchase with a $488,750 Washington Mutual mortgage.

That was a 121 percent increase in less than three weeks.

"Selling to each other, that's something an appraiser should definitely discover," said Mike Sanders, a Laguna Beach real estate appraiser and expert witness in property value litigation cases. "If the appraiser finds all the same people's names on transactions, then that's something suspicious."

WaMu loaned millions to O.C. home flippers with fraud history [OC Register]

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Verizon Tech Made 5,000 Sex Chat Calls On Customer Accounts [Verizon]

11 Sep

The next time you're disputing a 900 number call to a sex hotline and the CSR tells you nobody else could have made that call, remind them of this story. Over the past 10 months, a Verizon technician made 5,000 calls to sex chat hotlines, totaling 45,000 minutes of dirty talk at a cost of $220,000. He placed the calls from over 950 tapped residential and commercial accounts throughout Bergen county in New Jersey. He has since resigned, and been charged with theft by deception and theft of services.

Joseph R. Vaccarelli worked for Verion for 10 years but only started making the calls within the last 10 months, which makes us wonder what exactly happened last November or December to make him launch his non-stop telephone orgy of fraud—and how he got any work done during that time.

Verizon would like everyone to know that not all of its employees regularly call phone sex hotlines and charge the fees to customer accounts:

"We believe this was a highly isolated incident by an errant individual," Young said. "It should not reflect on the overwhelming majority of our workforce, who bring pride and respect to their jobs every day."

"Verizon Worker Charged in 5,000 Illicit Sex Calls" [redOrbit] (Thanks to skokieguy!)
(Photo: ernop)

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Who’s Smiling Now? Enzyte Scammer Gets 25 Years In Prison [Enzyte]

28 Aug

Steve Warshak, founder of the company responsible for "Enzyte," has been sentenced to 25 years in prison and ordered to pay a fine of $93,000, says the AP. U.S. District Judge S. Arthur Spiegel also ordered the company, along with other defendants, to forfeit more than $500 million that it bilked from consumers.

According to federal prosecutors the scam involved preying on customer's reluctance to admit that they had ordered the "male enhancement" pills. Customers ordered the pills, but were unable to cancel or get a refund. A former VP of the company testified that Warshak required customers to provide notarized documents from a doctor proving that they had small genitals in order to get a refund.

If customers complained, he said, employees were instructed to "make it as difficult as possible" for them to get their money back. In some cases, Teegarden said, Warshak required customers to produce a notarized statement from a doctor certifying Enzyte did not work.

"He said it was extremely unlikely someone would get anything notarized saying they had a small penis," Teegarden said.

The judge had strong words for Warshak:

"This is a case about greed," Spiegel said as he reviewed the case. "Steven Warshak preyed on perceived sexual inadequacies of customers."

Warshak's 75-year-old mother was also sentenced to jail time, but it's unlikely that she will serve it because she's 75 and has cancer. Meanwhile, Warshak has 30 days to report to prison.

Ohio company owner gets 25 years in fraud case [Associated Press]

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High School Students Bust Restaurants And Grocery Stores For Selling Mislabeled Fish [Something Fishy]

22 Aug

Two high school students decided to see if New Yorkers were really getting what they paid for when they ordered expensive fish. Guess what? Sometimes, they weren't.

From the New York Times:

They hit 4 restaurants and 10 grocery stores in Manhattan. Once the samples were home, whether in doggie bags or shopping bags, they cut away a small piece and preserved it in alcohol. They sent those off to the University of Guelph in Ontario, where the Barcode of Life Database project began. A graduate student there, Eugene Wong, works on the Fish Barcode of Life (dubbed, inevitably, Fish-BOL) and agreed to do the genetic analysis. He compared the teenagers’ samples with the global library of 30,562 bar codes representing nearly 5,500 fish species. (Commercial labs will also perform the analysis for a fee.)

Three hundred dollars’ worth of meals later, the young researchers had their data back from Guelph: 2 of the 4 restaurants and 6 of the 10 grocery stores had sold mislabeled fish.

This isn't really surprising, considering that the Chicago Sun-Times did essentially the same thing and found that none of their 14 samples of "red snapper" were actually "red snapper."

One fish monger who passed the DNA test was glad that the kids (with the help of one of the girl's father, who is a scientist) did the testing:

John Leonard, the owner [of Leonards’ Seafood and Prime Meats on Third Avenue], said he was not surprised to find that his products passed the bar code test. “We go down and pick the fish out ourselves,” he said. “We know what we’re doing.” As for the technology, Mr. Leonard said, “it’s good for the public,” since “it would probably keep restaurateurs and owners of markets more on their toes.”

Fish Tale Has DNA Hook: Students Find Bad Labels [NYT](Thanks, Jon!)

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