A New Jersey real estate developer and an attorney each admitted last week to participating in a mortgage fraud scheme that led to over $3.5 million in losses for Fannie Mae, government officials said.
Philip R. Sellinger, the U.S. Attorney for the District of New Jersey, said Victor Santos, also known as Vitor Santos, 63, of Watchung, N.J., and Fausto Simoes, 69, of Millington, N.J., each pleaded guilty in federal court by videoconference to one count of an indictment charging them with conspiracy to commit bank fraud.
According to documents filed in this case and statements made in court, Santos, a real estate developer, and Simoes, an attorney, conspired with each other and others from September 2007 through November 2008 to fraudulently obtain mortgage loans with a total value of more than $4 million.
“Santos orchestrated the scheme to recruit fake, or ‘straw,’ buyers to purchase 12 properties in Newark,” Sellinger said in a news release. “Using the identity and credit of these straw buyers allowed Santos, Simoes, and their conspirators to conceal their identities from the lender as the actual purchasers of the properties.”
According to court documents, Santos and others induced people to serve as straw buyers by agreeing to pay each of them at least $5,000, as well as to secure tenants to lease the acquired properties and to cover costs associated with each property, including fees associated with the real estate purchases and the mortgage payments on each of the fraudulently obtained mortgages.
Santos, Simoes, and others also caused fraudulent and false loan applications and documents to be submitted to the mortgage lender, Fannie Mae, the U.S. Attorney’s office said.
Simoes conducted the closings of 10 of the fraudulent transactions and helped perpetuate the fraud by falsely reporting that the straw buyers were providing the cash required at closing when, in fact, Simoes received those funds from a shell company controlled by Santos and another conspirator, court documents show. For several transactions, Simoes also failed to disclose to the lender that the shell company controlled by Santos and another conspirator would receive a substantial payout from the loan proceeds, court documents show.
Shortly after the properties were acquired, Santos and his conspirators broke their promises to pay the mortgages, court documents show. The straw buyers — in whose names the mortgages were obtained and who were therefore responsible for the payments — did not have enough money to pay the fraudulently obtained mortgages and defaulted, causing Fannie Mae and insurers to lose more than $3.5 million, court documents show.
Conspiracy to commit bank fraud carries a maximum penalty of 30 years in prison and a fine of $1 million or twice the gross gain to the defendants or twice the gross loss to others, whichever is greatest.
Santos is scheduled to be sentenced on April 12, 2023, while Simoes is scheduled to be sentenced on April 13, 2023. Two other conspirators previously pleaded guilty and await sentencing, the U.S. Attorney’s Office said.
Sellinger credited special agents of the Federal Housing Finance Agency, Office of Inspector General, under the direction of Special Agent in Charge Robert Manchak, and special agents of the FBI, under the direction of Special Agent in Charge James E. Dennehy in Newark, with the investigation leading to the guilty pleas.