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Feds say Sacramento-area realty ring bilked banks for $16 million Share

 
 
Reply Tue 8 Nov, 2011 11:41 am
November 8, 2011
Feds say Sacramento-area realty ring bilked banks for $16 million Share
By Rick Daysog - [email protected]
Nov. 8, 2011

The collapse of the housing bubble exposed Sacramento as one of the nation's centers for mortgage fraud. Yet even here, prosecutors say, their latest case stands out for its scope and the number of people involved.

In the past six months, 25 Sacramento-area residents have been indicted on charges of defrauding $16 million from banks, most of it from a single subprime lender now owned by Bank of America. Prosecutors say more indictments are on the way.

"This is certainly one of the biggest cases we've done in the Sacramento area," said U.S. Attorney Benjamin Wagner. "There are a lot of properties involved."

The case is also notable because so many of those charged belong to the Sacramento area's Russian American community. Some are related. Prosecutors said some of the people they describe as key players have said they knew each other through their families' involvement in the Bethany Slavic Missionary Church on Jackson Road, the region's largest Slavic Pentecostal congregation.

All of those charged have pleaded not guilty. Some defendants contacted by The Bee complained that federal prosecutors are unfairly targeting them based on ethnicity.

"If you took a poll, many would feel that this (investigation) is clearly against the Russian community," said Vera Zhiry, who faces fraud charges.

Those charged include Pyotr Bondaruk, 40, son of Bethany's co-founder and head pastor, Adam Bondaruk. Vera Kuzmenko, who was indicted along with her brother Peter Kuzmenko and sister Nadia Kuzmenko, told The Bee that her uncle was a deacon at Bethany and that her father worked in the church's funeral operations.

A Bethany official said the people charged in the case are not actually members of the 3,000-member church.

The federal probe, a joint operation of the FBI, the Internal Revenue Service and the U.S. attorney's office, provides a look into the murkier side of the housing-boom years, when middle-class buyers bought million-dollar homes with no money down, and when lax lenders churned out massive numbers of risky loans they immediately unloaded on Wall Street.

Investigators say they are focusing on the purchase of more than two dozen homes in 2006 and 2007 that later went into foreclosure. The homes ranged in price from a two-bedroom house that sold for $280,000 to new homes that topped $1 million.

According to the indictments, all the purchases were made by straw buyers, most of whom stopped paying their mortgages after six months.

Prosecutors describe the case as a "cash back to buyer" fraud, in which organizers recruited the buyers and helped them submit phony loan documentation that inflated their income levels and assets.

Investigators contend that the organizers also helped create fake invoices for hundreds of thousands of dollars in construction work that was never done, and that these nonexistent home improvements were then incorporated into the sales price.

Normally, profits from such a fraud go to the seller, investigators said. But in these cases, they allege, the proceeds went to the organizers and the straw buyers. The sellers, most of them underwater on their mortgages, were happy to go along with the arrangement so long as they could get out of their mortgages without owing anything, federal investigators allege.

The incidents cited in the federal allegations took place in 2006 and 2007. At the time, home prices were plummeting, but these homes fetched prices higher than they had a couple of years earlier, when the market was near its peak.

Prosecutors say that's because their prices were artificially inflated.

Defendants blame lender

So far, the probe has centered on Vera Kuzmenko, a 41-year-old tax preparer who was convicted by a state court in 1994 for fraud connected to a workers' compensation case.

Kuzmenko, who came with her family from Estonia to the United States in 1988, recruited dozens of straw buyers and sellers, according to a May 2011 court filing by IRS Special Agent Christopher Fitzpatrick. Many of those buyers and sellers were clients of Kuzmenko's tax-preparation business, Fitzpatrick said.

Reached by phone, Kuzmenko denied personally handling any of the deals and blamed the problems on lender First Franklin Financial Corp. She said First Franklin's loan officers were responsible for any irregularities in the loan applications.

Another defendant, Zhiry, also pointed her finger at the lender.

"Where are the appraisers in this? Where are the bankers?" said Zhiry, whom prosecutors accused of receiving and distributing money generated from the alleged fraud.

Nearly all the mortgages came from First Franklin, a subprime lender that later shut down its mortgage-lending operations.

No First Franklin employees have been charged with a crime. The company now is owned by Bank of America Corp., which took over the lender when it acquired Merrill Lynch in 2009. BofA declined to comment.

Among the other defendants prosecutors describe as key players: Peter Kuzmenko, 33, Vera Kuzmenko's brother; Angela Shavlovsky, 52, a construction executive; and Valeri Mysin, 31, a real estate agent who once served a three-year prison term for fleeing the scene of a car accident that killed a 63-year-old driver.

Aaron New, a local real estate agent and owner of New Dream Real Estate and Financial Services Inc., also played a major role in recruiting buyers, according to a May indictment. New's company shared office space with Vera Kuzmenko's tax business.

$55,100 or $269,000?

In his court filing, Fitzpatrick said 15 of the straw buyers allegedly recruited by Kuzmenko and New "greatly inflated" their incomes when they filled out loan applications.

One of those recruits was contractor Andrey Andreyev, who bought an $850,000 home in Roseville in 2007 with no money down, according to Fitzpatrick's complaint.

Andreyev's loan application included a federal tax filing that listed his annual income at $269,000, and a Golden 1 Credit Union bank statement that placed his account balance around $23,000, Fitzpatrick said.

Fitzpatrick said he checked records with Golden 1 and Andreyev's tax filings with the IRS. His findings: Andreyev earned $55,100 in 2007 and his credit union bank account had no more than $1,063 at the time.

Fitzpatrick also alleged that the home seller and Andreyev inflated the sales price by $200,000 by submitting invoices from two construction companies for work that was never done. The home later went into foreclosure, resulting in a $368,000 loss for the bank, Fitzpatrick said.

Andreyev could not be reached for comment. He has not been charged in the case.

Vera Kuzmenko, who also holds a real estate license, denied any role in helping Andreyev obtain a loan or purchase a home. She said New handled all real estate transactions that came through the office they shared, and she reiterated her allegations that First Franklin's loan officials manipulated loan applications.

"I've never been involved in mortgage fraud," she said. "I just do taxes."

Read more: http://www.sacbee.com/2011/11/08/4037831/feds-say-sacramento-area-realty.html#ixzz1d8UVDE83
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