Ohio Attorney General Richard Cordray and Cuyahoga County Prosecutor Bill Mason today announced details of an 18-month investigation that led to indictments against 41 people and four companies. The defendants are alleged to have engaged in real estate transactions to purchase 453 homes with fraudulent loans totaling $44 million. The indictments are the result of work done by the Cuyahoga County Mortgage Fraud Task Force operating under the authority of the Ohio Organized Crime Investigations Commission.
“Mortgage fraud has cost this country billions of dollars and has caused much of the nation’s current economic hardship,” said Attorney General Cordray. “This case clearly demonstrates the value of teamwork and sends the message that if you are engaged in mortgage fraud, we will come after you and prosecute you to the fullest extent of the law.”
Uri Gofman of Beachwood, Oh., is alleged to have orchestrated one of the nation’s largest mortgage fraud cases by enlisting family, friends and others to invest in his real estate company, Real Asset Fund, with promises of profit. Gofman’s enterprise began with seed money from an investor who transferred funds from a bank account in Latvia. The scheme involved using straw buyers to purchase homes, falsely claiming home improvements were performed on houses in order to refinance them, and then selling houses to unqualified buyers with the assistance of real estate agents, mortgage brokers and title companies.
Lenders were tricked into believing that the buyers were making at least a 10% down payment when they were not, that the buyers had assets when they did not, and that the properties were worth more than they actually were. Gofman and others defrauded lenders through loan application fraud, down payment fraud and loan distribution fraud. The defendants siphoned off more than $31 million in profits from their criminal enterprise. Eventually, 358 of the homes fell into foreclosure.
The following 11 defendants were indicted on mortgage fraud-related offenses including engaging in a pattern of corrupt activity, a first degree felony: Uri Gofman, Tony Viola, Igor Gofman, Kevin Landrum, Dave Pirichy, Dale Adams, Steve Greenwald, George Gardner and James Leoni along with Real Asset Fund, owned by Uri Gofman, and Karka Inc., also owned by Uri Gofman. The other 34 defendants were indicted on mortgage fraud-related offenses.
Five defendants involved in this case were charged in December 2008 with mortgage fraud-related offenses in federal court: Uri Gofman, Paul Lesniak, Gennadiy Simkhovich, David Pirichy and Howard Sieferd, Jr.
With funding from the Ohio Attorney General’s Office and the Ohio Organized Crime Investigations Commission, the Cuyahoga County Mortgage Fraud Task Force was formed in December 2007. To date, 289 defendants have been indicted for approximately $111 million in fraudulent loans for 812 houses. Of the 812 houses, 616 fell into foreclosure.
So often I look at different mortgage fraud cases that have come up in Atlanta, GA, Spokane, Wa, the one in Ohio mentioned here as well as others. And it makes me wonder how much mortgage fraud occurred that did not get caught. I bet you it is 10 times the number that has been caught. This leads me to believe that it was a huge part of why we had such a run up in property values. How did all this fraud occur you must ask yourself? When look into the answer to this question it comes down in most cases to stated income loans that required no form of verification of income. NOT EVEN BANK STATEMENTS! I can understand why you would have stated income loans for self employed people that do a very good job excercising every possible tax write off leaving much larger amounts of actual income than tax returns show. But to have ever given W2 employees these loans was moronic and there were a huge number of stated income loans that were given to W2 employees. The banks were asking for fraud to be committed.