Tag Archives: schemes

A Simple Way to Avoid Getting Scammed

When we read CNN’s story about the FBI’s investigation of a massive Ponzi scheme operated out of the University of Miami, what struck us as most instructive was the statement from one of the scam’s victims that he had been promised an 18 percent return on his short-term investment.

The victim, Victor Gonzalez, said he put more than $3.5 million into the scheme.

Here is a simple rule to follow if you want to avoid being scammed:

Do not believe someone who promises you an 18 percent return on a short term investment.

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Greed, Power and Sex: Con-Artist with “Vatican” Connections Indicted for Scamming the Rich and Famous

Here’s a story about greed, power and sex that’s a mixture of The Da Vinci Code, Bonfire of the Vanities, Moliere’s Tartuffe and Herman Melville’s The Confidence Man

It is about a scam and a scammer.

We’ve written about scams and how to avoid them

We don’t like scammers, especially those who prey on the desperate and the vulnerable, such as people facing foreclosure. 

But sometimes a scammer is so outrageous, so inventive, so over-the-top, and his victims so well-heeled and incredulous, that we have to admit at least an ambivalent admiration.

One such scammer is Raffaello Follieri, one of the very few scammers we’ve seen who deserves the name con-artist.

Follieri’s story reads more like a novel than a crime report.

For months, Americans who were in-the-know knew Follieri as a suave and sophisticated Italian businessman, real estate mogul, socialite, philanthropist, and Vatican representative.

He was none of these, except Italian.

Using charm, good looks, unbelievable gall, and a network of gullible and greedy New York socialites, Washington insiders and Hollywood A-list connections, Follieri moved easily in exclusive circles of money, power, and glamor. He lived in a $40,000 a month Fifth Avenue apartment and travelled the world, going to parties, conferring with the Pope (he said), and receiving awards for his generosity. 

Among those who fell under Follieri’s spell was actress Anne Hathaway.

Another was billionaire entrepreneur Ron Burkle, Burkle’s investment business Yucaipa Companies LLC, as well as Burkle’s friend, former President Bill Clinton.

Then the scam collapsed.

According to the New York Times,  “Raffaello Follieri, from San Giovanni Rotondo on the spur of Italy’s boot, is alive and kicking in his $40,000-a-month duplex on Fifth Avenue. Age 29, he used empty claims of church ties to befriend Douglas Band, a top aide to Bill Clinton. Band then smoothed the way to Clinton’s moneyed entourage, including the California billionaire Ronald Burkle.”

“Mr. Follieri received an onstage thanks from Mr. Clinton after pledging $50 million to the Clinton Global Initiative. The money has not been paid.”

“Mr. Follieri’s business cachet — his link to the Catholic Church — was contrived, the government said. It consisted of an administrative employee at the Vatican whom he paid.”

“Mr. Follieri also hired a relative of a former Vatican official as well as his own father, claiming that his father had a special relationship with the Vatican. In an apparent effort to build ostensible ties to the church, Mr. Follieri also met with clergy and traveled with a monsignor.”

In another story, the Times further explains that “Attractive and charming, [Follieri] rapidly moved into the world of billionaires and political figures. His entree was helped when he met and befriended Douglas Band, a top aide to Bill Clinton who brought Mr. Follieri into contact with the former president and Mr. Burkle.”

“That relationship birthed the unhappy union of Burkle’s Yucaipa investment operation, of which Clinton is a senior adviser, and the Follieri Group in a venture to acquire Catholic Church property Follieri said he’d get on the cheap.”

“From mid-2005, Burkle plowed $55.6 million into this enterprise, only to conclude Follieri was devoting a chunk of it to good living. A suit filed by Yucaipa in Delaware in May contends Follieri has been ‘systematically misappropriating the assets’ to indulge in ‘massive charges for five-star lodging’, ‘dog care’ and ‘inappropriate jet travel’ for himself and ‘his actress girlfriend’.  That’s Anne Hathaway, of The Devil Wears Prada.”

Burkle’s lawsuit against Follieri was dismissed after Follieri agreed to pay back more than $1.3 million.

Then, last week, Follieri was arrested in New York and charged with 12 counts of fraud and money laundering.  He could get life in prison.

The charges against Follieri include:

  • Six counts of wire fraud and each count carries a maximum sentence of 20 years in prison.
  • Five counts of money laundering with each count  carrying a maximum sentence of 20 years in jail.
  • One count of conspiracy to commit wire fraud, which carries a maximum penalty of 5 years behind bars.

According to the press release from the U.S. Attorney’s Office, “From June 2005 through June 2007, FOLLIERI ran a fraudulent real estate investment scheme, falsely claiming that he had close connections with the Vatican that enabled him to purchase Catholic Church properties in the United States at a substantial discount. FOLLIERI claimed that the Vatican formally appointed him to manage its financial affairs and that he met with the Pope in person when he visited Rome, Italy.”

“In reality, FOLLIERI’s connections consisted of an administrative employee at the Vatican who was paid by FOLLIERI; FOLLIERI’s hiring of a relative of a former Vatican official; meetings with clergy, FOLLIERI’s travels with monsignors; and a reporter for a news publication in Italy. None of these connections entitled FOLLIERI to purchase Church real estate at below-market rates.”

“Based on his fraudulent representations about his ties to the Vatican, FOLLIERI was able to access and misappropriate hundreds of thousands of dollars in investor money to live a luxurious lifestyle, including expensive restaurants and clothes;dog walking services; an opulent apartment in Manhattan that leased for approximately $37,000 per month, overlooked Rockefeller Center, and had views of Central Park; medical expenses for his girlfriend at the time and his parents,including a “house call” by FOLLIERI’s physician which cost privately chartered airplanes to various locations around the world.”

“In addition, FOLLIERI stole money from an investor by falsely claiming, among other things, that FOLLIERI needed money for an office in Italy that did not exist, and claimed that he spent over $800,000 for “engineering reports” relating to real estate that did not reflect engineering work and were almost worthless. FOLLIERI caused hundreds of thousands of dollars in fraudulently obtained proceeds to be wired to a bank account in Monaco that he controlled in order to hide and conceal the source and control of the funds. From late 2006 through early 2007,FOLLIERI’s scheme started to unravel, and FOLLIERI’s principal investor cut its ties to FOLLIERI and fired him.”

The Times reports that “Judge Henry B. Pitman set bail at $21 million, to be secured by $16 million in cash and property and guaranteed by five financially responsible persons. Mr. Follieri had to surrender all travel documents and was ordered confined to his home in Manhattan with the exception of legal, religious and medical needs. Any trips must be made with an electronic-monitoring device.”

And Anne Hathaway has gotten smart and is no longer taking his phone calls.

 

FBI Hits Mortgage Fraud with “Operation Malicious Mortgage” — 400+ Indictments and the Arrests of Two Bear Stearns Execs

The FBI announced today that the Justice Department’s crackdown on mortgage fraud has resulted in more than 400 indictments since March — including dozens over the last two days.

Those arrested run the gamut of players in the mortgage industry, including lenders, real estate developers, brokers, agents, lawyers, appraisers, and so-called straw buyers.

The Department of Justice’s name for the crackdown is “Operation Malicious Mortgage,” which it describes as “a massive multiagency takedown of mortgage fraud schemes.”

According to the FBI, the on-going “Operation Malicious Mortgage” focuses primarily on three types of mortgage fraud — lending fraud, foreclosure rescue schemes, and mortgage-related bankruptcy schemes.

“To persons who are involved in such schemes, we will find you, you will be investigated, and you will be prosecuted,” said Federal Bureau of Investigation Director Robert Mueller. “To those who would contemplate misleading, engaging in such schemes, you will spend time in jail.”

In its statement, the FBI said that “Among the 400-plus subjects of Operation Malicious Mortgage, there have been 173 convictions and 81 sentencings so far for crimes that have accounted for more than $1 billion in estimated losses. Forty-six of our 56 field offices around the country took part in the operation, which has secured more than $60 million in assets.”

While most of those indicted so far are relatively small players in the industry-wide fraud crisis, Mueller today repeated his earlier promise that federal authorities are not ignoring the major players in the mortgage industry, but are investigating some “relatively large corporations” as part of its sweeping mortgage-fraud probe, including some 19 large companies, including mortgage lenders, investment banks, hedge funds, credit-rating agencies and accounting firms.

Most of these corporate fraud investigations, said Mueller, deal with accounting fraud, insider trading, and the intentional failure to disclose the proper valuations of securitized loans and derivatives.

The FBI’s announcement of Operation Malicious Mortgage coincided with the indictment and arrest in New York on Thursday of two former Bear Stearns managers, Ralph R. Cioffi and Matthew Tannin, who are charged with nine counts of securities, mail and wire fraud resulting in $1.4 billion in losses on mortgage-related assets.

According to the New York Times,  Cioffi and Tannin “are the first senior executives from Wall Street investment banks to face criminal charges, and the investigation by federal prosecutors based in Brooklyn is likely to become a test case of the government’s ability to make successful prosecutions of arcane financial transactions.”

“This is not about mismanagement of a hedge fund investment strategy,” said Mark J. Mershon, the head of the New York office of the Federal Bureau of Investigation at a news conference Thursday afternoon. “It’s about premeditated lies to investors and lenders. Its about the defendants prostituting their client’s trust in order to salvage their personal wealth.”

 

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.

 

 

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.