Christy Romero, Special Inspector General for the Troubled Asset Relief Program (SIGTARP); Benjamin B. Wagner, U.S. Attorney for the Eastern District of California; and Kamala D. Harris, Attorney General for the State of California have announced that Ray Jan Kornfeld of Las Vegas, Nev., was sentenced to five years in federal prison for his role in a large scale mortgage relief fraud scheme. The sentencing hearing was presided over by U.S. District Judge Troy L. Nunley in federal court in Sacramento, Calif. Kornfeld was also ordered to pay more than $3 million in restitution to victims of the scheme.
According to court documents, between Jan. 7, 2010-Aug. 20, 2013, co-defendant Alan David Tikal was the principal behind a business known as KATN Trust, which targeted distressed homeowners throughout California and the nation, many of whom did not speak English. Members of the scheme promised to reduce victims’ outstanding mortgage debt by 75 percent, falsely claiming that Tikal was a registered private banker with access to an enormous line of credit and the ability to pay off homeowners’ mortgage debts in full. Homeowners were told that in return for various fees and payments, their existing loan obligations would be extinguished, and the homeowners would then owe new loans to KATN Trust in an amount equaling 25 percent of their original obligation. In reliance upon misrepresentations made by Tikal and others, homeowners stopped making payments on their existing mortgage loans, and many lost their homes to foreclosure as a result. In fact, the defendants never satisfied the homeowners’ mortgage debt and merely pocketed the money received through the scheme, which consisted of millions of dollars in fees and monthly payments. More than 1,000 homeowners were victimized.
Judge Nunley found that Kornfeld joined the conspiracy in September 2010. Kornfeld corresponded frequently with victims, reminding them to make their payments and assuring them the program would be successful even after Alan Tikal was indicted by state and federal authorities for his role in the scheme. Moreover, after promising federal authorities on Nov. 27, 2012, that he would contact and advise the victims to make alternative plans to address their mortgage debt, Kornfeld instead continued to collect payments and file bankruptcy documents to further the scheme.
“Kornfeld was sentenced to five years in federal prison for his part in a fraud scheme that swindled more than 1,000 struggling homeowners out of millions of dollars,” said Romero. “Kornfeld falsely promised these victims, many of whom didn’t speak English as their first language, that he could save their homes from foreclosure and reduce their mortgage debt by 75 percent if the homeowners agreed to pay him fees and regular ‘loan’ payments instead of making their monthly mortgage payments. Despite having the opportunity to stop his crime, Kornfeld kept the elaborate fraud going, frequently corresponding with victims, reminding them to pay up, while assuring them the operation would be successful. Many victims subsequently lost their homes to foreclosure. The scam also exploited bankruptcy law as a way to illegally halt foreclosure proceedings by mortgage lenders, including TARP recipients. SIGTARP and our law enforcement partners will ensure that perpetrators of fraud related to TARP are brought to justice for their crimes.”