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Mortgage Fraud - Real Estate Fraud - The Hayes Law Firm
By: Dave Downey
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(December 1, 2009 - Tuesday) - Seven people allegedly involved in a massive Riverside County real estate fraud scheme that bilked victims out of more than $140 million triggered the foreclosure of more than 200 houses and caused home values to plummet in several neighborhoods have been charged with numerous felonies, District Attorney Rod Pacheco announced Thursday.
At a news conference in downtown Riverside, Pacheco said six defendants were in a county jail Thursday afternoon in connection with the Stonewood fraud case. John Hall, a spokesman for the district attorney, said the seventh was arrested at 6:20 p.m. Thursday at a fast-food restaurant in Torrance.
Pacheco said the investigation was conducted in concert with the U.S. attorney, FBI, IRS and U.S. Postal Service. He said the defendants carried out similar schemes in Arizona and Northern California.
Charges of grand theft, securities fraud, elder abuse and identity theft were filed against the seven in Riverside County Superior Court. The seven defendants facing state criminal charges are scheduled to be arraigned in a Riverside courtroom at 1:30 p.m. Friday on the state charges.
Charged were James Benjamin Duncan, 38, of La Cresta, 249 counts; Hendrix Moreno Montecastro, 37, of Murrieta, 249 counts; Helen Moreno Pedrino, 57, of Yucaipa, 207 counts; Maurice McLeod, 37, of Murrieta, 249 counts; Charlie Sung Muk Choi, 34, of San Diego, 249 counts; Cindi Gayle Kelly, 33, of San Diego, 236 counts; and Thuan Nhan Du, 33, of San Diego, 211 counts. Pedrino, the mother of Montecastro, was the one picked up in Torrance, Hall said.
As for the rest, they were being held at the Robert Presley Detention Center in downtown Riverside. Pacheco said bail was set at $144 million for Duncan, the alleged mastermind, at $20.2 million for Montecastro and at $17 million for each of the others.
In a telephone interview Thursday, one of the alleged victims of the scheme expressed delight that charges were finally filed. "Yes, yes," said Anna Richter, who moved to Houston after being coaxed into buying three Murrieta homes and later losing them. "That's where they should have been for the last three years. I can't even describe how happy I am to finally see some movement (in this case)."
Murrieta attorney Rich Ackerman, who represents 85 people who lost homes and money in the scheme, including Richter, said, "It's good to see that these ravenous animals are being caged." However, Ackerman said his clients weren't likely to be paid back all the money they lost. "Thieves typically steal to spend, they don't steal to save," he said. Even so, Pacheco vowed to pursue restitution for the victims, who are concentrated in the county's southwest corner.
"We're going to be very aggressive in looking for that," he said.
Also in connection with the case, plea agreements on federal charges were filed Thursday in U.S. District Court in Los Angeles, said U.S. Attorney George S. Cardona, who joined Pacheco at the news conference.
Cardona said Christopher J. Oetting, 47, of Palm Desert, pleaded guilty to money laundering and four counts of filing false tax returns; while Linda Brooks 54, of Murrieta and Steven Kayden, 51, of Cathedral City, pleaded guilty each to a single count of conspiracy to commit mortgage fraud. Pacheco said losses associated with the elaborate scheme totaled $124.5 million from mortgage fraud and $17 million from the sale of fraudulent securities.
The defendants are alleged to have collected millions of dollars by persuading people to refinance homes, investing the equity they were realizing from the housing boom into the purchase of new homes and securities. "They would say, 'You know what? We're going to make your payments for you,'" Pacheco said, after the news conference. Pacheco said the defendants repeatedly enticed victims to give money by working through circles of friends among churches, nurses and members of the military.
In Southwest County, the scheme was particularly prevalent in churches, Ackerman said. "They literally gutted congregations," he said. In a statement, Keith Bolcar, acting assistant director in charge of the FBI field office in Los Angeles, said, "The defendants in this case convinced investors to refinance their homes and hand over the equity in order to purchase new homes, using the same investors as straw buyers ---- in some cases, multiple times ---- by fabricating assets to inflate the victims' credit profile."
As a result, Pacheco said, families who already had homes agreed to buy a total of 249 other homes throughout the county, including 150 in Murrieta, 47 in Temecula, 17 in Wildomar, 14 in Menifee, four in Winchester, two in Canyon Lake, and one each in Lake Elsinore and Romoland.
Pacheco said 201 homes eventually fell into foreclosure, after the defendants abruptly stopped making house payments on behalf of the eventual victims in summer 2006, which triggered a series of lawsuits in early 2007.
"They damaged neighborhoods and contributed significantly to the collapse of our real estate market," he said, noting that in some areas as many as five homes on the same block were foreclosed upon. "It was especially bad in Murrieta because most of the homes were there," he said.
In setting the stage for the avalanche of foreclosures, Pacheco said the defendants created several false companies such as Stonewood Investments and Pacific Wealth Management, advertising a quick return of up to 19 percent on investments.
The scheme was orchestrated, he said, by Duncan, who billed himself "James the Cash King" in Internet videos. Accused of preying on older people elsewhere, Duncan previously had been ordered to stop selling securities in three states. "He has been kicked out of Iowa, Washington and Wisconsin," Pacheco said. "A cease-and-desist order is a get out of Dodge by sundown order." But, unfortunately, Pacheco said, he came to California.
Cardona said Duncan was able to take advantage of people because home values were exploding and people thought they would continue to climb. If there is a lesson to be learned by all the damage that occurred, Cardona said, it is this: "When things sound too good to be true, they often are." But Richter, one of the victims, said there also is a lesson in that investigators could spare more people pain if they were more quick to probe such schemes. She maintains that the district attorney didn't go after the Stonewood players until she and about 30 other victims protested in the lobby of the district attorney's office in summer 2007.
"It took us storming the DA," Richter said.
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