Six people, including a Bellevue man, were indicted by a Federal Grand Jury in Seattle on Wednesday for Conspiracy and Wire Fraud in connection with an estimated $8.5 million mortgage fraud scheme conducted in 2004 and 2005. Those indicted include a lawyer (since disbarred), a former bank loan officer and a mortgage broker, as well as the owner of shell companies involved in “flipping” dozens of properties as part of the fraud.
Some of the defendants made their initial appearances in U.S. District Court in Seattle on Thursday, including Robert Ernest Brandt, 40, the attorney who funneled money in the scheme through his client trust account.
The indictment was unsealed Wednesday in conjunction with a nationwide emphasis on mortgage fraud as part of Operation “Malicious Mortgage.”
From March 1 to June 18, 2008, Operation Malicious Mortgage resulted in 144 mortgage fraud cases in which 406 defendants were charged, convicted or sentenced. The effort is the culmination of coordinated efforts during the last three and a half months to identify, arrest and prosecute mortgage fraud violators through the United States, federal officials say.
According to the indictment returned in the Western District of Washington, Brandt and William Anderson, 47, of Bellevue, conspired with Mustafa “Marc” Khosraw, 46, of Sammamish, Isaac Palmer, 42, of North Bend, Kristyn Jupiter Moss, 38, of Tacoma and Zachary Joseph Namie, 30, of Seattle, to defraud banks and other financial institutions using a mortgage fraud scheme.
According to federal officials, the conspirators would identify houses and would use shell companies or third parties to purchase the homes. At the same time they recruited “straw buyers” who would enter into a purchase agreement to buy the same home from the conspirators at an inflated price (a “flip”).
The conspirators allegedly assisted the straw buyers with phony paperwork for the home loans, making it appear that they were qualified for the mortgage loans and planned to occupy the houses. Members of the conspiracy allegedly falsified numerous documents including appraisals, verifications of deposits, employment verification and closing documents.
Federal officials say the conspirators simply split the proceeds from the fraudulent mortgages, and the straw buyers defaulted on the loans after pocketing as much as $20,000 for their fee. The homes were foreclosed and financial institutions and mortgage lenders suffered substantial losses.
The defendants served various roles in the scheme, federal officials say.
Anderson operated SFN, LLC, and Sterling Investments – shell companies that initially purchased numerous properties. Anderson and Moss, then a loan officer for Viking Bank, allegedly created many of the false documents. Brandt and Anderson jointly ran a company called “Escrow Authority,” that closed the sales of the properties. Khosraw, a mortgage broker, and Namie, a loan officer with a mortgage company, allegedly created and submitted some of the false documents. Palmer operated a construction company called GMI Construction, and allegedly recruited straw buyers and falsely claimed that some of them worked for him.
The charges contained in the indictment are only allegations, federal officials say, and note that a person is presumed innocent unless and until he or she is proven guilty beyond a reasonable doubt in a court of law.
Wire Fraud is punishable by up to 20 years in prison and a $250,000 fine.
The case was investigated by the FBI, King County Prosecuting Attorney’s Office and the Washington State Department of Financial Institutions (DFI).
The case is being prosecuted by Assistant United States Attorneys Vincent T. Lombardi and Nick Brown.