FBI charges 400-plus in Malicious Mortgage OperationMortgagePress.comFBI, Operation Malicious Mortgage, Presidents Corporate Fraud Task Force
The Department of Justice and Federal Bureau of Investigation
(FBI) have announced 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 addition to fraud directly related to individual mortgages,
the Department is committed to investigating and prosecuting cases
of mortgage-related securities fraud. The U.S. Attorney's Office
for the Eastern District of New York announced an indictment
against two senior managers of failed Bear Stearns hedge funds,
charging Ralph Cioffi and Mathew Tannin with conspiracy, securities
fraud and wire fraud. Cioffi was also charged with insider trading.
The indictment alleges that the managers marketed the two funds as
a low risk strategy, backed by a pool of debt securities such as
mortgages. The indictment alleges that by March 2007, the managers
believed the funds were in grave condition and at risk of collapse,
but made misrepresentations to stave off investor withdrawal. The
funds subsequently collapsed in the summer of 2007 resulting in
approximately $1.4 billion in losses to investors.
"Mortgage fraud and related securities fraud pose a significant
threat to our economy, to the stability of our nation's housing
market and to the peace of mind of millions of American
homeowners," said Deputy Attorney General Mark R. Filip. "Operation
Malicious Mortgage and our other mortgage-related enforcement
actions demonstrate the Justice Department's commitment and
determination to combat these criminal schemes, hold their
perpetrators accountable and help restore stability and confidence
in our housing and credit markets."
"Operation Malicious Mortgage is a concerted, joint law
enforcement and prosecutorial effort aimed at disrupting
individuals and groups engaged in mortgage fraud," said FBI
Director Robert S. Mueller, III. "This operation is an example of
our unified commitment to address this significant crime problem.
The FBI will continue to direct investigative and analytic
resources towards mortgage fraud and corporate securities fraud
that threaten our nations economy."
House Committee on Financial Services Ranking Member Rep. Spencer
Bachus of Alabama said, "For far too long unscrupulous brokers and
lenders have thrived because of the lack of adequate oversight and
enforcement. The efforts by the DOJ and the FBI through 'Operation
Malicious Mortgage' are needed to help protect Americans as they
navigate the home financing process. Last July, I introduced a bill
that will create a licensing and registration system for mortgage
originators. This system will enhance the protection of consumers
by increasing accountability in the mortgage origination process
and aiding regulators in weeding out bad actors. Congress must
create a national licensing and registration system."
Ranking Member Bachus introduced HR 3012, the Fair Mortgage
Practices Act, on July 12, 2007. The provisions in the legislation
were included in the sub-prime lending legislation passed by the
House of Representatives last November (HR 3915). Additionally,
Sens. Dianne Feinstein and Mel Martinez have introduced the SAFE
Mortgage Licensing Act, based on HR 3012, which has been included
in the housing legislation currently under Senate
consideration.
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.
Mortgage frauds employ a variety of tactics including
misrepresentations, deceit and other criminal abuses to fund,
purchase or insure mortgage loans. Operation Malicious Mortgage
addresses primarily three types of mortgage fraud schemes: Lending
fraud, foreclosure rescue scams and mortgage-related bankruptcy
schemes. Lending fraud frequently involves multiple loan
transactions in which industry professionals construct mortgage
transactions based on gross fraudulent misrepresentations about the
borrowers financial status, such as overstating the borrowers
income or assets, using false or fictitious employment records or
inflating property values. Foreclosure rescue scams involve
criminals who target legitimate homeowners in dire financial
circumstances and fraudulently collect fees for foreclosure
prevention services or obtain ownership interests in residential
properties. Both of these fraudulent mortgage schemes may be
furthered by filing bankruptcy petitions that automatically stay
foreclosure.
The President's Corporate Fraud Task Force, chaired by Deputy
Attorney General Filip, is also responding to issues raised by
mortgage fraud in the corporate sector. Created in 2002 to
investigate and prosecute significant financial crimes, the Task
Force includes representatives from ten federal departments,
commissions and agencies, in addition to seven U.S. Attorneys
Offices and two Divisions within the Department of Justice,
combining the experience of thousands of investigators, attorneys,
accountants and regulatory experts. Since July 2002, the Department
of Justice has obtained nearly 1,300 corporate fraud convictions,
including the convictions of more than 200 chief executive officers
and corporate presidents, more than 120 corporate vice presidents
and more than 50 chief financial officers.
An indictment is not evidence of guilt. All persons charged with
a crime are presumed innocent until proven guilty beyond a
reasonable doubt.
For more information, visit www.usdoj.com.
