Colorado mortgage fraud probe uncovers kickbacks
$8 million wound up in pockets of buyers, brokers
By John Rebchook, Rocky Mountain News (Contact)
Published October 28, 2008 at 12:05 a.m.
Updated October 28, 2008 at 10 a.m.
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Photo by Brian Lehmann © The Rocky
1900 South Lake Road in Lakewood, Colorado Monday, October 27, 2008.
A $45 million Front Range mortgage fraud scheme involving 105 home sales in 2006 resulted in 88 foreclosures after $8 million was kicked back to buyers and brokers, a state probe has found.
"It's certainly the biggest case we have ever investigated," said Zachary Urban of the Colorado Division of Real Estate. "We would hope there isn't something bigger out there that we don't know about."
The home sales at inflated prices took place from Castle Rock to Greeley.
About three dozen real estate agents were involved in the suspect transactions. About a dozen of them have received sanctions from the real estate division, ranging from the revocation of their real estate licenses to small fines and requirements to complete education classes.
All of the sales in the alleged schemes took place during a time when lenders often did not carefully check the qualifications of buyers and it was easy to get loans. Also, mortgage brokers in Colorado were not required to be licensed in 2006, as they are now.
Erin Toll, director of the Division of Real Estate, has turned over information from the investigation to federal authorities including the FBI, the IRS, U.S. Postal Service and the Secret Service.
"Our fight song is 'be the best at being first.' All we can do is take their licenses and impose fines," Toll said. "Other groups can bring criminal charges."
The common thread through most of the transactions was a company called Broker One Real Estate Professionals LLC.
The investigation found that 98 of the 105 transactions involved Jerrold Minney, the broker owner of Broker One, and Steve Werner, a broker associate at the company.
In most of the cases, they played a role in selling 98 homes to members of a group called Synergy 2002 REI. Minney and Werner also were involved in seven other transactions not involved with Synergy 2002, according to Urban.
"I think you would best describe Minney as the 'matchmaker,' in the majority of these transactions," Urban said.
Minney did not respond to two phone messages or an e-mail from the Rocky Mountain News. A phone number for Broker One has been disconnected. Attempts to reach Werner also were unsuccessful.
The real estate division has recommended that Minney's and Werner's real estate licenses be revoked. In addition, the division is recommending that they receive a $50,000 fine each, if they reapply for a license.
Here is how one deal worked:
A member of Synergy 2002 paid $1.3 million in February 2006 for a home at 2630 S. Saint Paul St. in the Observatory Park area in Denver. Minney received a $27,625 commission.
At the closing, $176,256.76 of the sales price was given to a third-party company called Willow Property Management.
It's not unusual for third-party companies to receive money at the closing from the loan, if they are going to improve the house, Toll said. But that money should be placed in an escrow account, so it can be disbursed to cover the cost of the work, she said.
Instead, the $176,257 to Willow was returned to the buyer, Synergy 2002, the investigation shows.
Records indicate mortgage payments were made to the lender, American Home Mortgage, for about a year, before the home went into foreclosure, Urban said. American Home Mortgage went out of business last year because of all of the bad home loans on its books.
Overall, it isn't clear what type of loans the buyers received, how long they made mortgage payments before they went into foreclosure or if they made down payments. Urban said it is likely that the amount of money returned to the buyers at the closings would exceed the amount of any down payment.
The Observatory Park home went into foreclosure, and last Friday was sold for $785,000 - $515,000 less than the original price. In other words, it sold for almost 40 percent less than it did almost three years ago.
In another deal, Minney was paid a referral fee of $268,020 for a home sold in Greeley for $1.25 million in a sale to Synergy, the investigation shows.
Appraisers and mortgage brokers involved in the deals are being investigated, Toll said. But it may be difficult to go after mortgage brokers, because in 2006 they were not required to be licensed, as they are now.
"The hammer has come down again," Toll said. "The message is clear - if you commit real estate or mortgage fraud in Colorado, you will be caught and there will be consequences."
Toll and Urban said they are willing to publicize their investigation to alert consumers, and to gather more information from potential victims.
"We learned about this from an anonymous tip," Toll said. "Anonymous tips are our best source for leads. A lot of people don't want to identify themselves when ratting out somebody."
Penalties
Real estate agent sanctions from Colorado Division of Real Estate
Betty Shaw: Action: License surrendered
Greg Shaw: Action: License revoked, $10,000 fine*
Daniel Howell: Action: License revoked, $15,000 fine*
Joseph Reiss: Action: License revoked, $50,000 fine
Jerold Minney: Action: Revocation recommended, $50,000 fine*
Steven Werner: Action: Revocation recommended, $50,000 fine*
Jay Barry: Action: Revocation recommended, $10,000 fine*
James Patterson: Action: Revocation recommended, $10,000 fine*
Richard Bawiec: Action: Revocation recommended, $20,000 fine*
May Tran: Action: Revocation recommended, $10,000 fine*
Bernard Polzkill: Action: Revocation recommended, $35,000 fine*
Sylvia Acevedo: Action: Revocation recommended, $10,000 fine*
Rudolf Krupka: Action: Public censure, 30-day suspension, $5,000 fine
Kristi Oliva: Action: $500 fine, course work
Lisa Yoshimura: Action: Public censure, $500 fine, course work
Cory DeBaere: Action: Public censure, $500 fine
Lois Lee Smith: Action: $500 fine
Steve Stretz: Action: Public censure, $750 fine, course work
Jeff Manley: Action: Public censure, $250 fine, course work**
Renae Bombardiere: Action: Public censure, 30-day suspension, $750 fine**
Seven other agents were investigated and no actions were taken.
*They are fined if they reapply for a real estate license.
**Actions pending
Source: Erin Toll, Zachary Urban, Colorado Division of Real Estate
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October 28, 2008
12:28 a.m.
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jacka writes:
what about jail?
October 28, 2008
3:59 a.m.
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happymike44 writes:
We as the taxpayers bailing out the bank need to make those who created this mess.
Held accountable for their actions and if found guilty.
Forfeit their ill gotten gains and maybe some prison time for all involved in these scams.
This is to punish them for causing all the grief and costing the rest of us billions of dollars.
Hope these nice people have to watch the loss of their propety as repayment for the misery they have inflicted on so many.
October 28, 2008
5:41 a.m.
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roger44 writes:
The statement they will be caught is a joke, no one knows how many deals took place in a back room the state don't know about. Failure of the state to have regulations on them did it, and who knows how many and how much has gone on in the past. Colorado is in the dark ages in a lot of areas of regulations
October 28, 2008
6:26 a.m.
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Superstar writes:
Classes? Course work? These people are part of the giant problem of greed and corruption in this country and they get slapped with a judgement to do course work? What a joke! At least the Rocky listed their names so that people will never use these slim balls for real estate, which will hopefully really hit them where it hurts.
October 28, 2008
6:40 a.m.
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Gonzopozo writes:
Come up with a number and demand FULL restitution from each of them. If they don't have the cash, garnish their wages. Get tough with these criminals - some time in Canon will discourage further scams at the taxpayer's expense.
October 28, 2008
7:07 a.m.
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DahmersCookbook writes:
Yes put their names up there so we can tell if one of these sicko's lives next to us. These are SICK s.o.b's. They did dirty things to our economy that has traumatized it, and i'm a secondary victim!
October 28, 2008
7:15 a.m.
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denverinfidel writes:
Its too bad the real estate division is toothless. Hopefully they will get some authority to do more than suspend someones license in the future.
Also, lets hope the banks who bought the fraudulent loans come after some restitution on these deals (although they are idiots too). It may not be criminal, but their lawyers could make life hell for some of these crooks.
October 28, 2008
7:19 a.m.
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vudumom writes:
Real Estate agents are like cockroaches. For everyone you see, there are 100 more you don't.
There are a lot more real estate agents out there that could be investigated for fraud.
I've said this many times before.
Almost every foreclosure began with a real estate agent hooking up a unqualified buyer with a person they knew.
Instead of doing the right thing by telling someone they probably wouldn't qualify. They were seduced by the ease of money in there pockets.
Real estate agents are on the same scummy level as car salesmen.
Actually, I'd rather deal with a car salesman.
October 28, 2008
7:37 a.m.
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milesd writes:
FULL RESTITUTION!
October 28, 2008
7:58 a.m.
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landsharkdenver writes:
Get them Erin!!
As a Broker for 30 years this type of scam and others come and go.
A Broker owes a duty to his client not to their own financial enhancement. Take care of the client and you will be taken care of financially. This is nothing more than mortgage fraud and theft. Take the license (and don't let them have it back) and then let the law put them in jail and let the civil courts pick the bodies clean of the ill gotten gains.
October 28, 2008
8:04 a.m.
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SlouchingTowardBoulder writes:
Erin Toll is a major publicity hound.
October 28, 2008
8:08 a.m.
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ghoax writes:
misled, I mean milesd, you are wrong. Broker's are held to a higher standard, and will lose their license if they engage in fraudulent practices. Most brokers will tell you of a few lenders they trust, because the real estate broker becomes a level of protection to the buyer when looking over the type of loan the buyer's lender is trying to get them into. Ultimately, they type of financing is the buyer's choice.
The problem isn't that broker's used the products made available to them, just as you'd use the technology available to you. Those products and the government requiring that a higher percentage of bad loans be made, caused the first credit tightening to slow the market, which then caused it to cave in on itself.
Broker's are doing what they should and are the heartbeat of the market. It is much riskier to deal with a FSBO than with a licensed broker, as many will tell you.
One big issue that isn't discussed, is that record appreciation was fueled by the weak loans being made. The slowdown and price decline caused by the tightening of credit. Had the market not slowed and prices continued to appreciate, the above mentioned probably wouldn't have been caught.
Risky lending didn't just happen in the poor sections, the lenders have some culpability in this too. For example, in addition to the broker's culpability , why wasn't the cash back ever questioned by the lender?, why wasn't an escrow required, how did the loan get funded in the first place?
October 28, 2008
8:10 a.m.
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MaxPlanck writes:
Bravo to Erin Toll. In midst of the smoldering ruins of the subprime fiasco, here's a public servant who's actually going after the perpetrators instead of rolling over and playing dead! Send her to Wall Street next; those "masters of financial chicanery" will look great with numbers across their chests!
October 28, 2008
8:33 a.m.
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B300 writes:
ghoax, just because there are no laws stopping you from doing something does not necessarally make those thing right! I feel that those brokers new damn good and well those people could not repay those loans. This is crap! They should be fried for taking advantage of the system and its people!!
October 28, 2008
8:50 a.m.
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Spencer writes:
Where is the jail time? Steal a car valued at $5K and go to jail. Ripoff a million $ and no jail time!!
October 28, 2008
8:52 a.m.
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familyortiz writes:
For those of you using the words "Marxist" or "socialist" lately, because of Obama using the phrase, "spread the wealth" then you obviously support the ignorant notion of "trickle down economics." Well, this here's what you get and it's the same as the Wall Street crisis. Enjoy...
October 28, 2008
8:57 a.m.
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navymom writes:
Who appraised the homes and approved these loans? The mortgage company was just as much at fault as everyone else!
This particular company could not have gone out business over just these loans. The fact of the matter is that mortgage companies were willing to lend to almost anyone with no documentation, no down payments and big profits to themselves if people paid their mortgages out over the course of the 30 year note. Now they all are crying the blues because "people are defaulting on their mortgages".
This particular mortgage company hired some shady people, too. My husband and I were buying a house and went to one bank to talk about a loan. The employee did our paperwork, ran a credit check and neglected to tell us that she was leaving to work at American Home Mortgage. We then got paperwork from American Home Mortgage. She had taken our paperwork from the bank that we thought we were dealing with to American Home without our permission and was processing it at higher interest rates and more stipulations. We promptly called her on her dishonesty and changed companies.
Bottom line, there was no accountability and a lot of dishonesty in the industry, period. Just ask Senator Chris Dodd who received sweetheart mortgages.
October 28, 2008
9:04 a.m.
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TC writes:
Wait...I thought the problem was because Clinton let illegal aliens get home loans they couldn't afford? So these illegals were buying $1.3 Million homes? Bastards!
October 28, 2008
9:14 a.m.
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JINX writes:
What about the mortgage insurance, who collects on these defaulted loans or the so called deriviatives. Another layer of the mess. I just now trying to understand how this crossword puzzle works.
October 28, 2008
9:23 a.m.
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davies writes:
This was not about trickle down economics. This was about the federal government encouraging lenient lending practices in the name of "affordable housing" and the American Dream. Predictably, some people took advantage in a way that was unintended and unethical.
"Affordable housing" - who could be against that?
October 28, 2008
9:25 a.m.
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DenverTea writes:
TC you are funny after my own heart - thank you.
I worked for one of these felonious bastards in 2002, when I was needing work and fairly uninformed. He told me he was one of the good guys because he was helping people realize their dreams...then he started asking me to doctor documents - documents to get Him property, not benefit anyone else. I think, looking back now, that much of his business was corrupt - thank goodness I was let go - for not being a team player - Ha! Better to not work on That team.
October 28, 2008
9:27 a.m.
Suggest removal
navymom writes:
B300 writes:
ghoax, just because there are no laws stopping you from doing something does not necessarally make those thing right! I feel that those brokers new damn good and well those people could not repay those loans. This is crap! They should be fried for taking advantage of the system and its people!!
FYI, it is not the responsibility of the real estate broker to determine the financial stability and the ability or inability of the house buyer to repay a loan. That is solely the responsibility of the lender. If they appraise the home, check on someone's credit worthiness, and then loan the money, they are taking a risk the same as anyone who invests in the stock market.
Mortgage companies today are trying to come up with some way to make other people responsible for any bad decisions that the mortgage companies may make. My company has an employee who is trying to get a loan for a house. Two different companies in the past have asked me to write letters guaranteeing his employment. I refused. Now we are moving our company to a different state and they want me to give them a business plan stating where our companies income will come from if we move and guaranteeing, not just verifying which is normal, his employment. I basically told them to go somewhere as it was not the employers responsibility to produce business plans and guarantee employment for the purposes of employee mortgages. I told them that it is their responsibility to determine credit worthiness, not mine.
I can guarantee you, that if I had produced this paperwork for them, they would try to hold me responsible because they loaned the money, in part, based upon my assurances that we would keep him employed and he would be making enough money to repay the mortgage.
October 28, 2008
9:39 a.m.
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zippydapinhead writes:
Please give more of my tax dollars to these hard working entrepreneurs. I am sure they deserve it more than me.
October 28, 2008
9:51 a.m.
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Kimmikk writes:
you know,,, if the RMN puts a stupid * or ** on something in the story, shouldn't they explain what the heck it's for??? Dang! I hope it's not somewhere and now I'm the stupid one! :-)
October 28, 2008
10:15 a.m.
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forty5ford writes:
The Division of Real Estate needs to expose all they really know rather than selectively reveal a few of their unsavory practices. There are real estate appraiser's who were pushed by others in the real estate and mortgage industries with "incentives" to artificially inflate property appraisals. The above and under-the-table incentives involve money, favors and future business dealings. Persons and companies receiving the incentives include the real estate appraiser's, real estate agents, management companies, mortgage bankers, home improvement businesses and property owners -- both above and under the table. An appraiser's failure to comply typically resulted in being black-listed -- meaning appraiser's would get fewer or no future business referrals. None of these are new "revelations" to Urban. He just needs to be fully honest and come clean with the truth instead of acting to cover his behind and his industry.
October 28, 2008
10:21 a.m.
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Bob444 writes:
vudumom, Well said. you took the words right out of my mouth. Also, I cannot believe that in 2006, it was not mandatory for brokers to be licensed.
October 28, 2008
10:36 a.m.
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HSTOWEL writes:
Thank you Barney Frank, Chris Dodd, John Kerry, and yes, the Messiah Barack Obama for allowing this mess by pressuring even forcing the availability of home loans to unqualified persons. These are the real people responsible for this mess.
October 28, 2008
10:58 a.m.
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Labl123 writes:
There is another company that did the same thing with 102 homes and the majority of them forclosed. They were called Thousand Hills. They closed down but opened under a new name out of Castle Rock called Genesis. Investors be aware....they would get investors with good credit to get the loans then promise to use the "kickback" to pay the mortgage. When the payments weren't being made the homes would forclose and the investor would lose everything.
October 28, 2008
11:02 a.m.
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gs writes:
Kay, good comments. (I'll go be sick now). But those are excellent ideas in my mind. Who did write the contracts?
October 28, 2008
11:21 a.m.
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dbraden writes:
This is a REAL ESTATE scheme that reaches much further than one group. It involved mortgages as a vehicle to build the scheme. As it stands today the mortgage industry has taken a giant leap backward to a position 20 years ago so thousands of good potential borrowers won't be qualifying to buy or refinance and many good people will be caught in the unintended consequences and will fall into hardship without access to their home equity. We have enjoyed unprecendented levels of acces to home equity and credit, building home ownership in this country to unpresidented levels as the industry has been charged to do by the last 5 Presidential administrations. Yes the products were abused, but small business is being crushed and is not solely to blame. The remaining large banks (we no longer have a single free standing invesment bank in the United States) will enjoy increased profit share after independents are over regulated and pushed out. So many of the most guilty parties will benefit from this continued media bias and unjustified blame, and the banks will enjoy little or no further regulation on mortgage orignators they employ. Less competition never benfits the consumer it only disguises profits from them and diverts the public attention from one of the best allys they have had for home ownership the honest personal mortgage broker who works for both the consumer and the lender not just the lending institution. They are individuals who refused to participate in these schemes. There are still ethical people out there. Thank you Erin for going after the bad ones. DL Braden
October 28, 2008
11:43 a.m.
Suggest removal
navymom writes:
vudumom writes:
"Real Estate agents are like cockroaches. For everyone you see, there are 100 more you don't.
There are a lot more real estate agents out there that could be investigated for fraud.
I've said this many times before.
Almost every foreclosure began with a real estate agent hooking up a unqualified buyer with a person they knew.
Instead of doing the right thing by telling someone they probably wouldn't qualify. They were seduced by the ease of money in there pockets.
Real estate agents are on the same scummy level as car salesmen.
Actually, I'd rather deal with a car salesman."
And if they refused to work with a buyer because they believed that the buyer "wouldn't qualify", all the community organizers in the US would have started screaming "discrimination". Barack Obama would have led the fight.
Face it people, the mortgage industry, with the liberal government's blessing and encouragement, went wild. The fault can be placed squarely upon the shoulders of all those who believed that every person, qualified or not, deserved to own whatever home they chose to buy regardless of whether they qualiied for the size of loan needed to own that particular house or not.
This practice was not just loans for unqualified poor people, but also unqualified middle class people, upper class people and real estate speculators trying to flip houses.
October 28, 2008
3:14 p.m.
Suggest removal
seeingeyeseesall writes:
This is small potatoes... absolutely nothing in the overall scheme that was played on the world's investors when compared to the bundling of these loans in "certified AAA" securities and really nothing when compared to the unregulated "insurance" (so-called credit default swaps, so it wouln't fall under insurance law) sold to cover any loss should the mortgages not be repaid ... the derivatives of the securitization scam run by Wall Street investment banking amount to hundreds of trillions of dollars ... more than the GDP of the planet, by far. This type of fraud was expected, encouraged, but those who really profited at the top - and you and I just handed THEM 10% of that 700 billion bailout as bonuses!!
Vote Democrat. It's the only way we have to start cleaning this miserable bunch out of power.
October 28, 2008
7:45 p.m.
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johnhargissr writes:
We have AA education, DUI education, prision as a form of punnishment, driver education, but this Real estate fraud education is a first, and an idiocy in itself. Fraud is fraud and charges should be filed, good businesses fold over this type of thing and the times for slaps on the wrist are long sense past.
John Hargis Sr for U.S. Senate 2010
October 28, 2008
9:27 p.m.
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Logical writes:
seeingeye, the Democrats are who called for lending to everyone, regardless of ability to repay. Clinton asked congress for new laws regarding lending, and they forced them through. So, it is your Democrat politicians that made all this possible. Blame must also lie at the feet of consumers who entered into contracts, knowing they would some day walk away from the mortgage. Blame is due at all levels of these transactions, not just banks, or just brokers, or just buyers.
I will not tell you who to vote for, as I think Washington is a festering pool of self-interest, and both parties are guilty of abuse of power. I will support McCain, though, as I don't want higher taxes to pay for socialized medicine, and I want a strong military.
October 29, 2008
1:12 a.m.
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BillORights writes:
let me get this right.
make a 100k dishonestly, pay a 10k fine. maybe a plea with community service, probation. no jail. but hey- at least 60k leftover. not bad and beats honest work wages. who says crime doesnt pay? it does compete if average work is 30k.
if the d.a. pleas it down and the judge doesnt give them hard jail time and the perps keep most of their ill begotten money,then the system does in effect correctly not condone white collar crime but equates it to a credible risk.
jail is the best deterrent to white collar crime. theres room in cannon city.
October 29, 2008
9:37 p.m.
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denvernorthwest writes:
holy soap on a rope for the ringleaders. If they don't go to jail?
December 21, 2008
7:34 p.m.
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intheknow2 writes:
I had personel dealings with one of these realtors and she was pulling this same crap in 2005. The FBI and Realtor board needs to simply look for properties being sold for more than they are listed and the red flag should have gone up. When our house failed apraisal the first time she came up with and apraiser that would meet the price. MY bulls sh!t flag went up when I received an offer for 50 k more than my house was listed for. I called a lawyer and he told me what was going on so we told her to take a hike. These people can steal millons and recieve only small fines and course work???? Crime does pay.