Bellevue attorney gets two months in jail for connection to state's largest mortgage fraud

A former Bellevue attorney was sentenced to two months in prison and four months home confinement Tuesday for his connection to the state's largest mortgage fraud scheme, in which seven other real estate professionals falsified $47 million in mortgages.

Jacob A. Korn, now of Seattle, pleaded guilty in September 2010 to not reporting income received from Bellevue-based Emerald City Escrow, one of three companies involved in the scheme, and failing to supply information about closed home sales to the Internal Revenue Service in 2007 and 2008.

According to U.S. District Court records, federal investigators determined that Korn didn't directly profit from the scheme in which homes were sold to "straw buyers" for significantly more than they worth. This allowed for greater loan sums than needed, and the members of the scheme would then pocket the extra funds.

Court documents said Korn allowed Emerald City Escrow, a company he helped found, to use a special legal trust used to keep client funds as a source for closing sales, many of which were fraudulent.

"While it appears that Mr. Korn lacked knowledge of the mortgage fraud scheme either because he was not an active participant or simply chose to ignore any indices of fraud and remain deliberately ignorant of the scheme, he nonetheless allowed his attorney's license and corresponding (trust) to be used without adequate oversight," Assistant U.S. Attorney Jim Oesterle wrote in a sentencing document.

Korn failed to report earnings of $50,000 in 2006 up to $86,000 in 2007 and 2008 that he received from Emerald City, documents said.

Oesterle told the Reporter that use of Korn's trust allowed the scheme to avoid the eyes of regulators. Additionally, having an escrow company involved in the scam also removes suspicion as those companies are responsible for determining whether the loan exceeds the amount needed.

Korn's three-month term will be accompanied by a year of supervised service. According to court documents, Korn has since repaid his back taxes, and will only be subjected to a nominal $2,000 fine because of a lack of financial resources. It remains unclear whether Korn could be disbarred for his actions, Oesterle said.

Among others involved in the scheme were Emerald City Escrow co-owner Donata Baydovskiy; mortgage brokers Vladislav Baydovskiy of Bellevue, Viktor Kobzar of Federal Way and Alla Sobol of Renton; as well as Issaquah real-estate agent David Sobol and Renton resident Camie Byron, a loan officer with Kobay Financial Corp. and Nationwide Home Lending.

Kobzar and Vladislav Baydovskiy were both sentenced to five years in prison. Byron received a two-year sentence. The Sobols also got two years a piece. Oesterle said Korn received a lesser sentence because it could not be proven that he was involved in the scheme, and none of the other defendants implicated him.

"The only things we felt confident we could prove were the tax violations," Oesterle said. "By his own admission he just didn't oversee the use of his (trust) fund."

Whether Korn knew of the scheme or not, the court was particularly alarmed that he violated the promise he made to the United States when he became a lawyer to defend and honor the country's laws.

"Any leniency may be viewed by others as potentially affording deference to Mr. Korn's status as a member of the bar rather than holding him to a higher standard, a standard he embraced when taking the oath of admission," Oesterle wrote.

Contact Bellevue Reporter Staff Writer Nat Levy at nlevy@bellevuereporter.com or 425-453-4290.

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