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5 Indicted in Multimillion Dollar Texas Fraud Scheme
A licensed Texas attorney and real estate developer, a sports agent, two bank loan officers, and a real estate appraiser have been indicted in a multimillion dollar mortgage fraud scheme. The indictment alleges involvement in a mortgage fraud scheme that reached every aspect of a real estate loan: seller, buyer/borrower, loan officer, appraiser, escrow officer, and title company.
5 Indicted in Multimillion Dollar Texas Fraud Scheme
Thursday, June 14, 2007
A licensed Texas attorney and real estate developer, a sports agent, two bank loan officers, and a real estate appraiser have been indicted in a multimillion dollar mortgage fraud scheme. The indictment alleges involvement in a mortgage fraud scheme that reached every aspect of a real estate loan: seller, buyer/borrower, loan officer, appraiser, escrow officer, and title company.
The Defendants are:
Jay Westrick, licensed appraiser, Houston, Texas;
Jerome Karam, 44, real estate developer and licensed Texas lawyer, Friendswood, Texas; Dwight Sean Jones, 44, former NFL player and sports agent, Beverly Hills, California;
Tommy Jay Trammel, 44, loan officer, Houston, Texas; and
David Ranostaj, 40, loan officer, Houston, Texas.
Trammel and Ranostaj are former loan officers with Southwest Bank of Texas, Bank of Houston and Whitney National Bank.
All five defendants surrendered at the offices of the Federal Bureau of Investigation in Houston, Texas and are expected to appear in federal court for arraignment and bond consideration.
”Mortgage fraud affects our communities and financial markets, victimizing lenders, homeowners, and others,” said United States Attorney DeGabrielle. ”My office has dedicated significant resources to work with our law enforcement partners to detect and prevent mortgage fraud and to prosecute and hold accountable those responsible.”
The indictment charges the defendants with 12 counts of bank fraud in connection with loans funded by three different banks between 1999 and 2001.
The scheme was the same at each bank, according to the indictment – collusion between the seller, buyer/borrower, and lender to lend more money than the property was worth, and thereby reap personal profit. Most properties were appraised by the same appraiser and all closed at the same title company. The indictment alleges that the loans transactions took place between September 1, 1999 and April 5, 2001, involving Southwest Bank of Texas, Bank of Houston, and Whitney National Bank.
The value of all the loans made by the Defendants, pursuant to this alleged scheme, totaled more than $42 million.
According to the indictment, Karam was an attorney and real estate developer who specialized in converting apartments to condominiums. His alleged frequent co-investor was Jones, a former NFL football player who played with the Los Angeles Raiders, Houston Oilers and Green Bay Packers from 1984 to 1996, and who now works as a licensed sports agent for professional athletes. Allegedly, Jones both invested in many of Karam’s projects, and recruited additional investors from among his professional football player clients.
Karam and Jones allegedly induced the loans based on false representations as to the value of the property and the distribution of the loan funds. They did so, according to the charges, with the assistance of two former bank loan officers, Trammell and Ranostaj. The two men are accused of facilitating loans to unqualified lenders, and for amounts in excess of the properties’ values, in exchange for loan proceeds diverted to themselves at the closings. They kept their allegedly unlawful conduct a secret from their employers, who were the ultimate lenders.
In order to divert money from closings, Karam, Jones, Trammell and Ranostaj allegedly created shell corporations, using names that would disguise their true ownership. For example, the indictment alleges Karam created a company called Jet Landscaping, which never actually did any business. But at closings where investors or individuals bought condominium units from Karam, he would supposedly include a line-item in the HUD-1 closing statement for substantial fees owed to Jet Landscaping. That money would simply go into Karam’s hands, according to the indictment. The line-item disbursements were hidden from the lenders.
Westrick, a licensed appraiser, is alleged to have prepared false and inflated real estate appraisals to further the scheme. Westrick allegedly wrote appraisals in amounts dictated by Karam, without regard to independent analysis or the standards of conduct for licensed real estate appraisers.
Specifically, Karam allegedly directed that the signature page of the lender approved closing statement/HUD-1 be attached to a closing statement/HUD-1 with a different distribution of the seller’s funds. Thus, according to the indictment, the lenders were left to rely on the prior, fraudulently certified, closing statements/HUD-1s in deciding whether to fund the loans and in reviewing their loan portfolio.
In 2002 Whitney Bank filed a civil complaint alleging appraiser malpractice against Jay Westrick, Charles A. Brown, Westrick & Associates and O’Connor & Associates. Chicago Title Company was named as a defendant in a third party complaint filed by O’Conjfonor & Associates. The case settled prior to trial.
Each of the 12 counts of bank fraud carries, upon conviction, a possible sentence of up to 30 years imprisonment, and a possible fine of up to $1 million ”Mortgage fraud continues to be a major crime problem here in the Houston area,” said Interim Special Agent in Charge Alex J. Turner of the FBI Houston division. “Mortgage fraud affects everyone and we have seen communities in distress due to excessive foreclosures that impact all of us through lower home values and increased property taxes. The FBI continues to be proactive in combating mortgage fraud through several investigative initiatives to include the Houston Area Mortgage Fraud Task Force. We ask that the public contact us at 713-693-5000 whenever they have any information relating to mortgage fraud.” |
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