Windfall for Lender – Or Will Natural Gas Discovery Benefit Victims of Ed Okun’s 1031 Tax Group Scam?

There’s a new ripple in the story of indicted 1031 exchange scammer Edward Okun, the 1031 Tax Group, and their victims.

Cordell Funding is a Miami-based hard money mortgage lender. Last fall, Cordell Funding sued Okun to recover $17 million it had loaned to Okun before his fraud-riddled real estate empire collapsed into bankruptcy actions and criminal indictments.

Cordell Funding initially sued Okun in a New York state court, but a federal judge transferred the suit to the U.S. Bankruptcy Court in Manhattan, where Gerard McHale, the court-appointed Chapter 11 trustee of Okun’s 1031 Tax Group, was selling off Okun’s assets.

As part of that bankruptcy case, McHale turned over the rights to several Okun properties to Cordell. One of the properties that McHale turned over to Cordell was the Shreveport Industrial Park, a nearly empty 42-year-old, 956,735-square-foot Class C industrial distribution building at 9595 Mansfield Road in Shreveport, Louisiana.

It wasn’t worth much — certainly not the $17 million that Cordell said it was owed by Okun.

Then natural gas was discovered in the area. 

In fact, it was discovered that under the Shreveport Industrial Park is the largest onshore natural gas field in North America.   It could hold as much as 20 trillion cubic-feet equivalent of natural gas reserves.

The mineral rights lease for the Sheveport Industrial Park is now valued at somewhere between $30 and $60 million.

And property values for the area have soared.

It looks like Cordell Funding got a windfall from the bankruptcy court. 

But when the natural gas field was discovered, bankruptcy trustee McHale went back to court to have the bankruptcy judge of the 1031 Tax Group vacate the order giving Cordell Funding rights to the Shreveport property. At the same time, McHale has asked the bankruptcy judge to approve a mineral rights lease with PetroHawk Energy for the benefit of the 1031 Tax Group victims.

Now whether Cordell Funding or the hundreds of creditors of the 1031 Tax Group gets the millions of dollars from the Shreveport natural gas discovery will be determined by the bankruptcy court.

UPDATE:

For the latest on Ed Okun (new federal indictments, plus the indictments of Laura Coleman and Richard B. Simring), click here.

Don’t Get Scammed! — 10 Tips to Avoid Getting Ripped Off by Real Estate and Foreclosure Investment Scams

There are a lot of real estate scams out there and many of them are now offering the bait of making easy money in the foreclosure market.

Scammers like to run with the hot trend — and right now the hot trend in real estate is foreclosures and distressed property.

Of course, there is money to be made by investing in distressed and foreclosed real estate.

But as with any other kind of investing, making money in distressed property and foreclosures requires significant expertise and experience and adequate capitalization. 

Before you trust your money to a stranger who tells you he has a sure-fire way to make lots of cash by investing in the hot, once-in-a-lifetime foreclosure and distressed property market, make sure that he has the expertise and experience and the capital (not just yours!) to back up his claims.

Here are 10 tips to avoid being taken in by scammers who promise you quick and easy returns on your real estate investment:

1. Be very skeptical and ask lots of questions. 

2. Get the names of the people who will be running the investment fund.  In particular, get the names of the people who will be making the investment decisions.  Demand that they tell you their business and investment track record and that they provide you with documentation of their claims. 

3. Check their qualifications.  Make sure that they are licensed securities or real estate professionals and not just telemarketers. 

4. Research all the names you get.  Use the Internet.  Do a google search for the investment fund and for anyone involved in the fund or business.  Search for their names and the name of the investment fund on scam.com, the Securities Fraud Search Engine, and  other community web sites and bulletin boards, as well as the Better Business Bureau.  Also check their names with your state Attorney General and the Securities and Exchange Commission.  Carefully read the online material on telemarketing fraud put out by the U.S. Department of Justice. 

5. Find out whether the people raising the money for the investment fund are licensed securities brokers.  If not, don’t invest.  You can check their broker status here.

6. Before you invest, get the advice of people you trust.  Ask your attorney, your real estate broker, your financial advisor, and your adult children what they think about the investment.  On the other hand, avoid pressure from relatives and friends to invest in “can’t miss” schemes.

7. Get all promises or claims in writing and save copies of the paperwork. Verbal agreements don’t mean anything. Demand documents and then review them carefully.  Ask your attorney, your real estate broker, your financial advisor, and your adult children to review them as well.  Even when you get promises in writing, remain skeptical, especially regarding revenue projections.  At best, these projections are guesses; at worst, they’re outright lies.  Be particularly skeptical about projections in a business plan.  Remember that a business plan is not a legal document — you can put anything you want in a business plan and scammers always do.

8. Take your time before deciding whether to invest.  Scammers use lots of tactics to pressure you to make a decision.  Don’t let anyone rush you into an investment.  If they tell you, “only a few lucky investors can get in, so you must act right away,” it is almost certainly a scam.

9. Demand to know how much of your investment, or the total fund raise, is actually going to purchase property and how much is going to pay the people who are raising the money.  Don’t trust any investment where more than 10-15 percent of the total raise is going into the pockets of the fund-raisers. 

10. Live by the rule: If something sounds too good to be true, it probably isn’t.  If someone tells you that there is a “guaranteed return on your investment,”  it is almost certain that you should invest your money somewhere else.  Scammers play on greed and fear.  Deals that promise exceptional returns — and deals that must be done now — are the hallmarks of a scam.

 

Who is Elham Assadi Jouzani?

Last March, we wrote about the federal indictment of 19 people for mortgage fraud-related offenses under what the government called “Operation Homewrecker.”

The indictment alleged that a scam operated by Charles Head, 33, of Los Angeles, California, along with 18 others under his direction, targeted homeowners in dire financial straits, and fraudulently obtained title to over 100 homes and stole millions of dollars through fraudulently obtained loans and mortgages.

Among the alleged conspirators was Elham Assadi, aka Elham Assadi Jouzani, aka Ely Assadi, 30, of Irvine, California.

In the past two weeks, many of our readers have found this blog by searching for the name Elham Assadi Jouzani (and, somewhat less frequently, by searching for Ely Assadi and Elham Assadi).

Who is Elham Assadi Jouzani?

Jouzani is alleged by federal prosecutors to have been part of a “foreclosure rescue” scam that netted approximately $6.7 million in fraudulently obtained funds taken from 47 homeowners, nearly all located in California.

The allegations are that from January 1, 2004 to March 14, 2006, the defendants contacted desperate homeowners, offering two “options” allowing them to avoid foreclosure and obtain thousands of dollars up-front to help pay mounting bills. If the homeowner could not qualify for the “ first option,” which virtually none could, they would be offered the “second option.” An “investor” would be added to the title of the home, to whom the homeowner would make a “rental” payment of an amount allegedly less than their mortgage payment, thereby allowing the homeowner to repair their credit by having the mortgage payments made in a timely fashion.

All of this was a scam.

The defendants recruited straw buyers as the “investors” who would then replace the homeowners on the titles of the properties without the homeowners’ knowledge. Once the straw buyer had title to the home, the defendants immediately applied for a mortgage to extract the maximum available equity from the home. The defendants would then share the proceeds of the ill-gotten equity and “rent” being paid by the victim homeowner.

When the defendants ultimately would sell the home, stop making the mortgage payment, and/or pursue an eviction proceeding, the victim homeowner was left without their home, equity, or credit.

These facts explain the interest in Operation Homewrecker.

But these facts don’t explain the recent particular interest in Jouzani.

We’ve searched the Internet ourselves, and we can’t find any reference to Elham Assadi, Ely Assadi, or Elham Assadi Jouzani outside of this case.

Nor can we find anything in the news that explains the current interest in Jouzani as compared to the other Operation Homewrecker conspirators.

If you’ve come to this blog by searching for Jouzani, please tell us why there is so much special interest in this particular Homewrecker.

And why the interest at this time?

We’d love to provide more reporting on Jouzani, so if you know something, please tell us so that we can pass it on to our readers.

 

One of Charles Head’s “Operation Homewrecker” Scammers Still Listed as Broker on Reverse Mortgage Website

Keith Brotemarkle, one of the people indicted with Charles Head in an alleged “equity stripping” scheme called Operation Homewrecker, was also involved in a reverse mortgage company called Reverse Mortgage Resources.

The company’s website “invites qualified brokers to become Approved Reverse Mortgage Advisors” with Reverse Mortgage Resources.  It asks potential affiliated brokers ” Who did you speak with at Reverse Mortgage Resources?” 

One of the brokers listed as being at Reverse Mortgage Resources is Keith Brotemarkle.

Brotemarkle was allegedly a participant in Charles Head’s “equity stripping” scheme that netted approximately $5.9 million in stolen equity from 68 homeowners in states across the nation. Targeting distressed homeowners and defrauding mortgage lenders through the use of straw buyers, Head would receive approximately 97 percent of the stolen equity, while the other defendants received either the remaining 3 percent of equity or a salary from the fraudulently-obtained funding. The defendants used referrals from mortgage brokers to identify and solicit new victim homeowners, and also sent “blast faxes” to mortgage brokers throughout the country and mass emails to potential victims. Through misrepresentations and omissions, desperate homeowners would be offered what appeared to be their last best chance to save their homes. Victims were left without their homes, equity, or credit.

The FBI has recently announced that it has begun an investigation to the misuse of reverse mortgages.  Reverse mortgages release the equity in a property to the homeowner in one lump sum or multiple payments. The homeowner’s obligation to repay the loan is deferred until the owner dies, the home is sold, or the owner leaves the home.  In the U.S., reverse mortgages are available for people 62 years old or older. Reverse mortgages are typically used to finance retirement or pay unexpected medical bills.  While reverse mortgages can make sense for seniors, the FBI is concerned about possible abusive sales practices that prey on seniors, such as aggressive and untruthful marketing and excessive fees.

Reverse Mortgage Resources is run by mortgage broker Don Marginson.  Its website states that it is located in Ranch Bernardo, California, and that it is “expanding again with offices to cover the Southeast and Northeast United States.”

We have no reason to believe that Reverse Mortgage Resources is not legitimate, and we would not want to assume that it is illegitimate simply because of its association with Brotemarkle.

But we would suggest that they remove Brotemarkle’s name from its website.

 

 

Property of 1031 Exchange Scammer Ed Okun Goes on Sale

High-end retail complex properties in Kansas and Texas owned by the notorious Edward H. Okun have been put up for sale by a federal bankruptcy trustee.

The properties are the 1.1 million square foot West Oaks Mall in Houston, Texas, and the 587,512 square foot Salina Central Mall in Salina, Kansas.

Okun is alleged to be behind the 1031 exchange scam run by The 1031 Tax Group (1031TG) that defrauded thousands of people out of millions of dollars.

Okun was arrested in Miami, Florida, last month and charged with mail fraud, bulk cash smuggling, false statements, and forfeiture from a scheme to defraud and obtain millions of dollars in client funds held by The 1031 Tax Group. 

Those who were defrauded by Okun’s 1031 Tax Group had hoped to recoup some of their missing funds from Okun’s remaining assets — including the West Oaks Mall and the Salina Central Mall — which were purchased from monies allegedly taken from victims in the 1031 exchange scam.

But the Okun-controlled companies that owned the malls declared Chapter 11 bankruptcy in October. 

It is now unclear whether the proceeds from the sale of the properties would go Okun’s 1031 exchange scam victims.

Both properties apparently have a long line of creditors.

The trustee in the bankruptcy case has hired Keen Consultants, the new real estate division of KPMG Corporate Finance, to market both properties.

You can read our earlier post on Okun and his 1031 exchange scam here.

 

 

Update: Mortgage Scam Website Sill Online

Here’s an update to our earlier post “Mortgage Scam Website Still Online.”

The Web page we originally linked to has been taken down. 

We have, however, found another page that is still on online.

The website says “Let technology and the power of the Internet work for you!  Take the headaches out of shopping for a home loan.”

You can find it here.

UPDATE:

We’ve also found a reverse mortgage website that lists Operation Home Wrecker scammer Keith Brotemarkle as one of its brokers.  You can read our post here.

Mortgage Scam Website Still Online

We blogged yesterday about the federal indictment in “Operation Homewrecker” of Charles Head and 18 others for what the FBI alleges to be a major mortgage scam that defrauded homeowners of their houses, their equity and their credit.

Today we saw that a website of Charles Head’s company is still online.

The website of Head Financial Services (“The Smart Way to Shop for a Lender”) is hosted by the website for Huntington Beach News.

The website promises that you can “Get 3 competing mortgage bids with one easy form” and that “Lenders are standing by now to serve you.” 

 

A representative of the Huntington Beach News told us that the page was a paid advertisement.

He also said that he didn’t know who had paid for the page, but that he needed to take the page down.

The only link on the page is to Charles Head’s email at charleschead@aol.com.

UPDATE:

The Web page we originally linked to has been taken down.  You can see another Head Financial Web page that is still online here.

We’ve also found a reverse mortgage website that lists Operation Home Wrecker scammer Keith Brotemarkle as one of its brokers.  You can read our post here.

“Operation Homewrecker” Nets 19 Indictments for Mortgage Fraud Scheme — With More Charges Soon. Mortgage Brokers Alleged to be Involved.

Federal prosecutors in Sacramento, California, announced today the indictment of 19 people for mortgage fraud-related offenses under what it called “Operation Homewrecker.”

The indictment alleges that the leader of this nationwide scam is Charles Head, 33, of Los Angeles, California, who targeted homeowners in dire financial straits, fraudulently obtaining title to over 100 homes and stole millions of dollars through fraudulently obtained loans and mortgages.

The charges are divided into two separate indictments.

“Head One” involved a “foreclosure rescue” scam, netting approximately $6.7 million in fraudulently obtained funds taken from 47 homeowners, nearly all located in California. The allegations in Head One are that from January 1, 2004 to March 14, 2006, the defendants contacted desperate homeowners, offering two “options” allowing them to avoid foreclosure and obtain thousands of dollars up-front to help pay mounting bills.

If the homeowner could not qualify for the “ first option,” which virtually none could, they would be offered the “second option.” An “investor” would be added to the title of the home, to whom the homeowner would make a “rental” payment of an amount allegedly less than their mortgage payment, thereby allowing the homeowner to repair their credit by having the mortgage payments made in a timely fashion.

All of this was a scam.

The defendants recruited straw buyers as the “investors” who would then replace the homeowners on the titles of the properties without the homeowners’ knowledge. Once the straw buyer had title to the home, the defendants immediately applied for a mortgage to extract the maximum available equity from the home. The defendants would then share the proceeds of the ill-gotten equity and “rent” being paid by the victim homeowner.

When the defendants ultimately would sell the home, stop making the mortgage payment, and/or pursue an eviction proceeding, the victim homeowner was left without their home, equity, or credit.

The following defendants were charged in the February 28, 2008 “Head One” indictment: Charles Head, 33, of La Habra, California; Jeremy Michael Head, 30, of Huntington Beach, California; Elham Assadi, aka Elham Assadi Jouzani, aka Ely Assadi, 30, of Irvine, California; Leonard Bernot, 51, of Laguna Hills, California; Akemi Bottari, 28, of Los Angeles; Joshua Coffman, 29, of North Hollywood; John Corcoran, aka Jack Corcoran, 52, of Anaheim; Sarah Mattson, 27, of Phoenix, Arizona; Domonic McCarns, 33, of Brea, California; Anh Nguyen, 36, of Los Angeles; Omar Sandoval, 32, of Rancho Cucamonga, California; Xochitl Sandoval, 29, of Rancho Cucamonga; Eduardo Vanegas, 28, of Phoenix; Andrew Vu, 39, of Santa Ana; Justin Wiley, 28, of Irvine; and Kou Yang, 32, of Corona, California.

“Head Two” involved an alleged “equity stripping” scheme, netting approximately $5.9 million in stolen equity from 68 homeowners in states across the nation.

While still targeting distressed homeowners and defrauding mortgage lenders through the use of straw buyers, in this version of the scheme, Charles Head would receive approximately 97 percent of the stolen equity, while his “sales agents” and employees, and the other defendants, would receive either the remaining 3 percent of equity or a salary from the fraudulently-obtained funding.

Instead of recruiting straw buyers, as in Head One, in Head Two the defendants allegedly recruited strangers via the Internet. They also used referrals from mortgage brokers to identify and solicit new victim homeowners. Beyond advertising on the Internet, the defendants also would send “blast faxes” to mortgage brokers throughout the country and generate mass emails to potential victims.

Through misrepresentations and omissions, victim homeowners would be offered what appeared to be their last best chance to save their homes. As in Head One, these victims also were left without their homes, equity, or credit.

Those charged in the Head Two indictment include Charles Head, John Corcoran, Kou Yang, each also charged in Head One, as well as Keith Brotemarkle, 42, of Johnstown, Pennsylvania; Benjamin Budoff, 41, of Colorado Springs, Colorado; Domonic McCarns, 33, of Brea, California; and Lisa Vang, 24, of Westminster, California.

The FBI has seized lavish sports cars, a fleet of high-end Italian motorcycles, thousands of documents and a condominium in Miami.

It remains to be seen how far this scam reached, or how many people and institutions were criminally involved.

Prosecutors made it clear that more charges would be filed. FBI Special Agent Drew Parenti said his agency is now “focusing on the industry professionals, the ‘insiders’ who have manipulated the mortgage loan process for their own financial gain.”

Particularly ominous is the statement by federal prosecutors that the defendants “used referrals from mortgage brokers to identify and solicit new victim homeowners”

Whatever the reach of this investigation, we know it is barely the tip of the iceberg of mortgage-related fraud.

We note too that the defendants’ scheme is alleged to have begun in January 2004 – well before the mortgage crisis grabbed national attention – and that the indictment only covers conduct up until March 2006 – well before the mortgage crisis drove many tens of thousands more people into the kind of desperation that the defendants manipulated.

This is only the beginning.

We’re going to see a lot more mortgage fraud indictments.

And as conditions worsen for more and more people who can not pay their mortgages, we’re going to see even more new mortgage fraud schemes.

UPDATE

We’ve discovered the website of Charles Head’s “Head Financial Services.”  To see the website and read the story, click here.

We’ve also found a reverse mortgage website that lists Operation Home Wrecker scammer Keith Brotemarkle as one of its brokers.  You can read our post here.

Man Behind 1031 Exchange Scam Indicted for Fraud

The long awaited indictment of Edward H. Okun took place yesterday. 

Okun is alleged to be behind the 1031 exchange qualifed intermediary (QI) scam run by The 1031 Tax Group (1031TG) that defrauded thousands of people out of millions of dollars.

Okun was arrested last week in Miami, Florida, and charged yesterday by a federal grand jury in Richmond, Virginia, with one count of mail fraud, one count of bulk cash smuggling, and one count of false statements and forfeiture.

According to the indictment, from August 2005 through April 2007, Okun used 1031TG and its subsidiaries, all owned by Okun, in a scheme to defraud clients of millions of dollars through false pretenses.

The indictment alleges that 1031TG promised clients that their money would be used solely to effect 1031 exchange as outlined in the exchange agreements. Instead, Okun is alleged to have misappropriated approximately $132 million in client funds to support his lavish lifestyle, pay operating expenses for his various companies, invest in commercial real estate, and purchase additional qualified intermediary companies to obtain access to additional client funds.

The indictment also alleges that Okun instructed employees to withdraw $15,000 in cash from Investment Properties of America’s (IPofA) bank account, a company owned by Okun, and smuggle the cash to his personal yacht on Paradise Island in the Bahamas to avoid federal currency reporting requirements; and that Okun made material false statements under oath before the U.S. District Court for the Eastern District of Virginia relating to conversations he had with the chief legal officer of IPofA.

Federal prosecutors are seeking the forfeiture of all funds and assets owned by Okun that were derived from or connected to the misappropriation of approximately $132 million in funds held by 1031TG and of all funds and assets traceable to the $15,000 in cash he instructed to be smuggled to his yacht in the Bahamas.

If convicted of all the charges in the indictment, Okun will face a maximum of 30 years in prison and fines.

1031TG is only one of several QIs that have been in legal trouble in the past year, leaving investors with millions of dollars of losses.

The Federation of Exchange Accommodators, the qualified intermediaries’ industry-trade group, requires background checks of all members except those that are subsidiaries of publicly traded parent corporations. The FEA says it is working with the states and may reach out to federal regulators about enhancing oversight of the business. 

Especially in light of the erosion of investor confidence in the credit, banking, and mortgage industries, we think that oversight of 1031 exchange QIs is long overdue.

UPDATE:

For our post on the sale by a bankruptcy trustee of Okun’s West Oaks Mall in Houston, Texas, and Salina Central Mall in Salina, Kansas, click here.