Monday, October 25, 2010

FED Opens Investigation Into Mortgages and Improper Foreclosures

 LivingLies Newsletter

Editor's Comment: Whether they stick to it or not is another story. But in a sharp break with the Obama administration's efforts to avoid the inevitable crash of the mega banks, Bernanke has made it clear that there is something rotten in Denmark. Bernanke's concern is whether we can reach an equilibrium where asset values are properly reported and the workings of the finance industry reflect reality --- so that the economy that depends upon the ability of the finance industry to provide much needed capital does the job instead of the reverse --- consuming the capital it creates.

This development is another step toward reality. If the FED continues down this road, the illusory assets of the mega banks will be revealed and the stark truth of our condition will be admitted. Bernanke seems to understand what the Obama advisers do not get --- the entire world knows the truth. If we want to maintain our high moral ground and our status on the world stage, we need to take the lead on this instead of pretending the explorer's clothes are real. The snickering is getting increasing louder amongst central bankers and it isn't going to be long before the IMF, G-20, and EU, along with the Asian associations decide that they had enough of using the dollar as the reserve currency of the world. Our 15 minutes are up. Either we fess up or lose our position entirely.

MEMO TO OBAMA: You don't need a degree in economics to understand the reality of this situation. Ask most people on the street and you'll get the correct diagnosis and prognosis. Stop listening to advisers who are stuck in serial ideological ineptitude and start using your own prodigious brain power. You'll get it right if you figure it out for yourself.

The anger is not about TARP. It's about the continuing effort to "save" the mega banks at the expense of the rest of the country while ignoring an extremely obvious available alternative. We don't need the Mega banks. They are an obstacle to our success. We have a perfectly intact and workable infrastructure with more than 7,000 community banks and credit unions and a EFT (electronic funds transfer) backbone that can do anything the large banks do, if you let it. We have passed the point where people care about whether some homeowner gets an over-sized benefit from this mess. People want relief, they want jobs, they want their country back to the way it was when innovation, job creation and economic leadership was oozing from our core.

October 25, 2010

Mortgage Lenders Under Review, Bernanke Says

WASHINGTON (AP) — Federal banking regulators are examining whether mortgage companies cut corners on their procedures when they moved to foreclose on people’s homes, the Federal Reserve chairman, Ben S. Bernanke, said Monday.

Preliminary results of the in-depth review into the practices of the nation’s largest mortgage companies are expected to be released next month, Mr. Bernanke said in remarks prepared for delivery to a housing finance conference in Arlington, Va.

“We are looking intensively at the firms’ policies, procedures and internal controls related to foreclosures and seeking to determine whether systematic weaknesses are leading to improper foreclosures,” Mr. Bernanke said in remarks that echoed those made last week by several administration officials.

Mr. Bernanke’s remarks come as attorneys general in all 50 states plus the District of Columbia are jointly investigating whether mortgage companies improperly evicted people from their homes. They are looking into whether paperwork and legal procedures were handled properly.

At the same time, staff members at the Fed and other federal agencies are evaluating the potential effects of the foreclosure debacle on the real-estate market and on financial institutions, he said. Federal officials said last week that several agencies were investigating mortgage lenders, but Shaun Donovan, the secretary of housing and urban development. said that the government had found no evidence of “systemic issues in the underlying legal documents.”

Bank of America and Ally Financial Inc.’s GMAC Mortgage have resumed processing foreclosures, after halting them temporarily to review documents. Both lenders face allegations that employees signed but didn’t read foreclosure documents that may have contained errors. Other companies, including PNC Financial Services and JPMorgan, have halted tens of thousands of foreclosures after similar practices became public.
Dubious mortgage practices and lax lending standards were blamed for contributing to a housing bubble that eventually burst and thrust the economy beginning in 2007 into the worst recession since the 1930s. Many Americans took out home loans that they did not understand and bought homes that they could not afford.
As a result, foreclosures have soared to record highs, and remain one of the negative forces restraining the economy’s ability to get back on sounder footing.

Now more than 20 percent of borrowers owe more than their home is worth, and an additional 33 percent have equity cushions of 10 percent of less, putting them at risk should house prices decline much further, Mr. Bernanke said.

“With housing markets still weak, high levels of mortgage distress may well persist for some time to come,” Mr. Bernanke warned.

While homeowners suffer, foreclosure mills make millions

Lawyers exploiting the boom in foreclosures allegedly forged documents while booting people from their homes!

What the Video!! Here

Thursday, October 21, 2010

Judges, Lawyers, Prosecutors, Legislators Apply the Brakes to Foreclosures

Posted on
COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

EDITOR'S COMMENT: While I commend the reporting and the acts by Judges, lawyers and government officials, they still don't "get it." The presumption is that the homeowner owes the money that the servicer says is due. That is a lie. Thus the assertion that the homeowner is in default is also a lie and so is the amount claimed as due in principal. They continue to ignore that this was NOT a transaction between the borrower and the loan originator. It was a transaction between the homeowner and a remote undisclosed lender who had no connection with the loan originator.

In between the these two real parties in interest were multiple players who assumed liabilities they never intended to pay and who assert claims to which they are entitled to nothing. Dozens of terms, conditions, parties and counterparties were added to the transaction between the homeowner and the investor. To cover their tracks these parties did pay some of the time and in some cases paid everything due to the lender, thus extinguishing the original transaction and maybe giving rise to a new obligation --- but in most cases they waived subrogation and do not have any new asset or obligation in exchange for what they paid. They did this because they were being paid ridiculously high fees to look the other way.

These payments are presently allocated to the lenders' accounts, not allocated to the obligation owed tot he lender, and not allocated to the individual borrower accounts claimed by the creditor's agent to have justified the sale of mortgage backed bonds. It is simply not true that "the borrowers owe the money." They only owe, if anything, the amount of money due, less any offsetting claims they have as affirmative defenses and counterclaims. And the amount due starts with a much lower amount than the amount claimed by servicers because of the receipt by the lender (not the servicer) of loss mitigation payments.

Jonathan Lippman, the chief judge of New York’s courts, ordered lawyers to verify the validity of all foreclosure paperwork.

J Boyco, Ohio:  ...lenders “seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance.” Now that their practices were “put to the test, their weak legal arguments compel the court to stop them at the gate,” the judge ruled.

Banks “have essentially sidestepped 400 years of property law in the United States,” said Rebel A. Cole, a professor of finance and real estate at DePaul University. “There are so many questionable aspects to this thing it’s scary.”

“The misbehavior is clear: they lied to the courts,” she said. “The fact that they are saying no one was harmed, they are missing the point. They did actual harm to the court system, to the rule of law. We don’t say, ‘You can perjure yourself on the stand because the jury will come to the right verdict anyway.’ That’s what they are saying.” -Katherine Porter, Prof U/Iowa

Robert Willens, a tax expert, said that documentation issues had created potentially severe tax problems for investors in mortgage securities and that “there is enough of a question here that the courts might well have to resolve the issue.”

Frederick B. Tygart, a circuit court judge overseeing a foreclosure case in Duval County, Fla., recently ruled that agents representing Deutsche Bank relied on documents that “must have been counterfeited.” He stopped the foreclosure.

October 20, 2010

Battle Lines Forming in Clash Over Foreclosures

About a month after Washington Mutual Bank made a multimillion-dollar mortgage loan on a mountain home near Santa Barbara, Calif., a crucial piece of paperwork disappeared.

But bank officials were unperturbed. After conducting a “due and diligent search,” an assistant vice president simply drew up an affidavit stating that the paperwork — a promissory note committing the borrower to repay the mortgage — could not be found, according to court documents.

The handling of that lost note in 2006 was hardly unusual. Mortgage documents of all sorts were treated in an almost lackadaisical way during the dizzying mortgage lending spree from 2005 through 2007, according to court documents, analysts and interviews.

Now those missing and possibly fraudulent documents are at the center of a potentially seismic legal clash that pits big lenders against homeowners and their advocates concerned that the lenders’ rush to foreclose flouts private property rights.

That clash — expected to be played out in courtrooms across the country and scrutinized by law enforcement officials investigating possible wrongdoing by big lenders — leaped to the forefront of the mortgage crisis this week as big lenders began lifting their freezes on foreclosures and insisted the worst was behind them.

Federal officials meeting in Washington on Wednesday indicated that a government review of the problems would not be complete until the end of the year.

In short, the legal disagreement amounts to whether banks can rely on flawed documentation to repossess homes.

While even critics of the big lenders acknowledge that the vast majority of foreclosures involve homeowners who have not paid their mortgages, they argue that the borrowers are entitled to due legal process.

Banks “have essentially sidestepped 400 years of property law in the United States,” said Rebel A. Cole, a professor of finance and real estate at DePaul University. “There are so many questionable aspects to this thing it’s scary.”

Others are more sanguine about the dispute.

Joseph R. Mason, a finance professor who holds the Louisiana Bankers Association chair at Louisiana State University, said that concerns about proper foreclosure documentation were overblown. At the end of the day, he said, even if the banks botched the paperwork, homeowners who didn’t make their mortgage payments still needed to be held accountable.

“You borrowed money,” he said. “You are obligated to repay it.”

After freezing most foreclosures, Bank of America, the largest consumer bank in the country, said this week that it would soon resume foreclosures in about half of the country because it was confident that the cases had been properly documented. GMAC Mortgage said it was also proceeding with foreclosures, on a case-by-case basis.

While some other banks have also suggested they can wrap up faulty foreclosures in a matter of weeks, some judges, lawyers for homeowners and real estate experts like Mr. Cole expect the courts to be inundated with challenges to the banks’ actions.

“This is ultimately going to have to be resolved by the 50 state supreme courts who have jurisdiction for property law,” Professor Cole predicted.

Defaulting homeowners in states like Florida, among the hardest hit by foreclosures, are already showing up in bigger numbers this week to challenge repossessions. And judges in some states have halted or delayed foreclosures because of improper documentation. Court cases are likely to hinge on whether judges believe that banks properly fulfilled their legal obligations during the mortgage boom — and in the subsequent rush to expedite foreclosures.

The country’s mortgage lenders contend that any problems that might be identified are technical and will not change the fact that they have the right to foreclose en masse.

“We did a thorough review of the process, and we found the facts underlying the decision to foreclose have been accurate,” Barbara J. Desoer, president of Bank of America Home Loans, said earlier this week. “We paused while we were doing that, and now we’re moving forward.”

Some analysts are not sure that banks can proceed so freely. Katherine M. Porter, a visiting law professor at Harvard University and an expert on consumer credit law, said that lenders were wrong to minimize problems with the legal documentation.

“The misbehavior is clear: they lied to the courts,” she said. “The fact that they are saying no one was harmed, they are missing the point. They did actual harm to the court system, to the rule of law. We don’t say, ‘You can perjure yourself on the stand because the jury will come to the right verdict anyway.’ That’s what they are saying.”

Robert Willens, a tax expert, said that documentation issues had created potentially severe tax problems for investors in mortgage securities and that “there is enough of a question here that the courts might well have to resolve the issue.”

As the legal system begins sorting through the competing claims, one thing is not in dispute: the pell-mell origination of mortgage loans during the real estate boom and the patchwork of financial machinery and documentation that supported it were created with speed and profits in mind, and with little attention to detail.
Once the foreclosure wheels started turning, said analysts, practices became even shoddier.

For example, the foreclosure business often got so busy at the Plantation, Fla., law offices of David J. Stern — and so many documents had to be signed so banks could evict people from their homes — that a supervisor sometimes was too tired to write her own name.

When that happened, Cheryl Samons, the supervisor at the firm, who typically signed about 1,000 documents a day, just let someone else sign for her, court papers show.

“Cheryl would give certain paralegals rights to sign her name, because most of the time she was very tired, exhausted from signing her name numerous times per day,” said Kelly Scott, a Stern employee, in a deposition that the Florida attorney general released on Monday. A lawyer representing the law firm said Ms. Samons would not comment.

Bill McCollum, Florida’s attorney general, is investigating possible abuses at the Stern firm, a major foreclosure mill in the state, involving false or fabricated loan documents, calling into question the foreclosures the firm set in motion on behalf of banks.

That problem extends far beyond Florida.

As lenders and Wall Street firms bundled thousands of mortgage loans into securities so they could be sold quickly, efficiently and lucratively to legions of investors, slipshod practices took hold among lenders and their representatives, former employees of these operations say.

Banks routinely failed to record each link in the chain of documents that demonstrate ownership of a note and a property, according to court documents, analysts and interviews. When problems arose, executives and managers at lenders and loan servicers sometimes patched such holes by issuing affidavits meant to prove control of a mortgage.

In Broward County, Fla., alone, more than 1,700 affidavits were filed in the last two years attesting to lost notes, according to Legalprise, a legal services company that tracks foreclosure data.

When many mortgage loans went bad in the last few years, lenders outsourced crucial tasks like verifying the amount a borrower owed or determining which institution had a right to foreclose.
Now investors who bought mortgage trusts — investment vehicles composed of mortgages — are wondering if the loans inside them were recorded properly. If not, tax advantages of the trusts could be wiped out, leaving mortgage securities investors with significant tax bills.

For years, lenders bringing foreclosure cases commonly did not have to demonstrate proof of ownership of the note. Consumer advocates and consumer lawyers have complained about the practice, to little avail.
But a decision in October 2007 by Judge Christopher A. Boyko of the Federal District Court in northern Ohio to toss out 14 foreclosure cases put lenders on notice. Judge Boyko ruled that the entities trying to seize properties had not proved that they actually owned the notes, and he blasted the banks for worrying “less about jurisdictional requirements and more about maximizing returns.”

He also said that lenders “seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance.” Now that their practices were “put to the test, their weak legal arguments compel the court to stop them at the gate,” the judge ruled.

Yet aside from the actions of a few random judges, little was done to force lenders to change their practices or slow things down. Since March 2009, more than 300,000 property owners a month have received foreclosure notices or lost their home in a foreclosure, according to RealtyTrac, which tracks foreclosure listings.
What finally prompted a re-examination of the foreclosure wave was the disclosure in court documents over the last several months of so-called robo-signers, employees like Ms. Samons of the Stern law firm in Florida who signed affidavits so quickly that they could not possibly have verified the information in the document under review.
Lenders and their representatives have sought to minimize the significance of robo-signing and, while acknowledging legal lapses in how they documented loans, have argued that foreclosures should proceed anyway. After all, the lenders say, the homeowners owe the money.
People who have worked at loan servicers for many years, who requested anonymity to protect their jobs, said robo-signing and other questionable foreclosure practices emanated from one goal: to increase efficiency and therefore profits. That rush, they say, allowed for the shoddy documentation that is expected to become evidence for homeowners in the coming court battles.
For example, years ago when banks made loans, they typically stored promissory notes in their vaults.

But the advent of securitization, in which loans are bundled and sold to investors, required that loan documents move quickly from one purchaser to another. Big banks servicing these loans began in 2002 to automate their systems, according to a former executive for a top servicer who requested anonymity because of a confidentiality agreement.

First to go was the use of actual people to determine who should be liable to a foreclosure action. They were replaced by computers that identified delinquent borrowers and automatically sent them letters saying they were in default. Inexperienced clerical workers often entered incorrect mortgage information into the computer programs, the former executive said, and borrowers rarely caught the errors.

Other record-keeping problems that are likely to become fodder for court battles involve endorsements, a process that occurs when notes are transferred and validated with a stamp to identify the institution that bought it. Eager to cut costs, most institutions left the notes blank, with no endorsements at all.
Problems are also likely to arise in court involving whether those who signed documents required in foreclosures actually had the authority to do so — or if the documents themselves are even authentic.
For example, Frederick B. Tygart, a circuit court judge overseeing a foreclosure case in Duval County, Fla., recently ruled that agents representing Deutsche Bank relied on documents that “must have been counterfeited.” He stopped the foreclosure. Deutsche Bank had no comment on Wednesday.
Cynthia Veintemillas, the lawyer representing the borrower in the case, Patrick Jeffs, said the paperwork surrounding her client’s foreclosure was riddled with problems.

“Everybody knows the banks screwed up and loaned out money to people who couldn’t pay it back,” she said. “Why are people surprised that they don’t know what they are doing here either?”

Meanwhile, another judge on Wednesday indicated that the courts would not simply sign off on the banks’ documentation. Jonathan Lippman, the chief judge of New York’s courts, ordered lawyers to verify the validity of all foreclosure paperwork.

“We cannot allow the courts in New York State to stand by idly and be party to what we now know is a deeply flawed process, especially when that process involves basic human needs — such as a family home — during this period of economic crisis,” Judge Lippman said in a statement.

Wednesday, October 20, 2010

Chicago Sheriff Says NO to Enforcing Foreclosures

The sheriff for Cook County, Illinois, which includes the city of Chicago, said on Tuesday he will not enforce foreclosure evictions for Bank of America Corp, JPMorgan Chase and Co. and GMAC Mortgage/Ally Financial until they prove those foreclosures were handled "properly and legally."
Bank of America, the largest U.S. mortgage servicer, and GMAC, on Monday both announced rollbacks from their foreclosure moratoriums.

The announcement by Cook County Sheriff Thomas Dart comes after weeks of damaging accusations of shoddy paperwork that may have caused some people to be illegally evicted from their homes.
"I can't possibly be expected to evict people from their homes when the banks themselves can't say for sure everything was done properly," Dart said in the statement.

"I need some kind of assurance that we aren't evicting families based on fraudulent behavior by the banks. Until that happens, I can't in good conscience keep carrying out evictions involving these banks," he added.

Or as Denniger puts it...


The sheriff for Cook County, Illinois, which includes the city of Chicago, said on Tuesday he will not enforce foreclosure evictions for Bank of America Corp, JPMorgan Chase and Co. and GMAC Mortgage/Ally Financial until they prove those foreclosures were handled "properly and legally."
Imagine that: A lawman who understands that The Bill of Rights actually applies to the people!
The 5th Amendment, specifically: You may not be deprived of liberty or property without due process of law.

"Robosigned" documents violate that right.  So does perjury in court proceedings.
"I need some kind of assurance that we aren't evicting families based on fraudulent behavior by the banks. Until that happens, I can't in good conscience keep carrying out evictions involving these banks," he added.
Now that's even better.  Will Sheriff Dart extend this all the way back to the origination of these loans, their pooling into securities, and questions about whether or not they were in fact sold more than once, rendering the person who claims to be foreclosing not necessarily the real party at interest?

What if the note has been bifurcated and nobody has a right to foreclose? Sue to collect, yes.  Foreclose, maybe not.

Let's see lawmen and law-women all across this nation refuse to accede to the banksters demands until they prove that the law was complied with - up and down the line.
Sheriffs are elected officials.

The elections are coming.

We the people must demand that each and every Sheriff standing for election take a position on this - will you stop enforcing foreclosures NOW and continue to do so until the banks prove that each and every one is 100% legal, including all required transfers and endorsements, from origination to eviction?

Foreclosuregate: Time to Break Up the Too-Big-to-Fail Banks?

With risky behavior by big finance again threatening economic stability, how can we get things right this time?

by Ellen Brown
Looming losses from the mortgage scandal dubbed "foreclosuregate" may qualify as the sort of systemic risk that, under the new financial reform bill, warrants the breakup of the too-big-to-fail banks. The Kanjorski amendment allows federal regulators to pre-emptively break up large financial institutions that-for any reason-pose a threat to U.S. financial or economic stability.
[The Kanjorski amendment-which slipped past lobbyists largely unnoticed-allows federal regulators to preemptively break up large financial institutions that pose a  threat to U.S. financial or economic stability.  If the current foreclosure scandal doesn't qualify, what would? (Graphic: ABC news)]The Kanjorski amendment-which slipped past lobbyists largely unnoticed-allows federal regulators to preemptively break up large financial institutions that pose a threat to U.S. financial or economic stability. If the current foreclosure scandal doesn't qualify, what would? (Graphic: ABC news)
Although downplayed by most media accounts and popular financial analysts, crippling bank losses from foreclosure flaws appear to be imminent and unavoidable. The defects prompting the "RoboSigning Scandal" are not mere technicalities but are inherent to the securitization process. They cannot be cured.  This deep-seated fraud is already explicitly outlined in publicly available lawsuits.There is, however, no need to panic, no need for TARP II, and no need for legislation to further conceal the fraud and push the inevitable failure of the too-big-to-fail banks into the future.

Federal regulators now have the tools to take control and set things right. The Wall Street giants escaped the Volcker Rule, which would have limited their size, and the Brown-Kaufman amendment, which would have broken up the largest six banks outright; but the financial reform bill has us covered. The Kanjorski amendment-which slipped past lobbyists largely unnoticed-allows federal regulators to preemptively break up large financial institutions that pose a threat to U.S. financial or economic stability.

Rep. Grayson's Call for a Moratorium

The new Financial Stability Oversight Council (FSOC) probably didn't expect to have its authority called on quite so soon, but Rep. Alan Grayson (D-FL) has just put the amendment to the test. On October 7, in a letter addressed to Timothy Geithner, Shiela Bair, Ben Bernanke, Mary Schapiro, John Walsh (Acting Comptroller of the Currency), Gary Gensler, Ed DeMarco, and Debbie Matz (National Credit Union Administration), he asked for an emergency task force on foreclosure fraud. He said:
The liability here for the major banks is potentially enormous, and can lead to a systemic risk. Fortunately, the Dodd-Frank financial reform legislation includes a resolution process for these banks. More importantly, these foreclosures are devastating neighborhoods, families, and cities all over the country. Each foreclosure costs tens of thousands of dollars to a municipality, lowers property values, and makes bank failures more likely.
Grayson sought a foreclosure moratorium on all mortgages originated and securitized between2005-2008, until such time as the FSOC task force was able to understand and mitigate the systemic risk posed by the foreclosure fraud crisis. But on Sunday, White House adviser David Axelrod downplayed the need for a national foreclosure moratorium, saying the Administration was pressing lenders to accelerate their reviews of foreclosures to determine which ones have flawed documentation. "Our hope is this moves rapidly and that this gets unwound very, very quickly," he said.

According to Brian Moynihan, chief executive of Bank of America, "The amount of work required is a matter of a few weeks. A few weeks we'll be through the process of double checking the pieces of paper we need to double check."

"Absurd," say critics such as Max Gardner III of Shelby, North Carolina. Gardner is considered one of the country's top consumer bankruptcy attorneys. "This is not an oops. This is not a technical problem. This is not even sloppiness," he says. The problem is endemic, and its effects will be felt for years.

Rep. Grayson makes similar allegations. He writes:
The banks didn't keep good records, and there is good reason to believe in many if not virtually all cases during this period, failed to transfer the notes, which is the borrower IOUs in accordance with the requirements of their own pooling and servicing agreements. As a result, the notes may be put out of eligibility for the trust under New York law, which governs these securitizations. Potential cures for the note may, according to certain legal experts, be contrary to IRS rules governing REMICs. As a result, loan servicers and trusts simply lack standing to foreclose. The remedy has been foreclosure fraud, including the widespread fabrication of documents.

There are now trillions of dollars of securitizations of these loans in the hands of investors. The trusts holding these loans are in a legal gray area, as the mortgage titles were never officially transferred to the trusts. The result of this is foreclosure fraud on a massive scale, including foreclosures on people without mortgages or who are on time with their payments. [Emphasis added.]

Why Wasn't It Done Right in the First Place?

That raises the question, why were the notes not assigned? Grayson says the banks were not interested in repayment; they were just churning loans as fast as they could in order to generate fees. Financial blogger Karl Denninger says, "I believe a big part of why it was not done is that if it had been done the original paperwork would have been available to the trustee and ultimately the MBS owners, who would have immediately discovered that the representations and warranties as to the quality of the conveyed paper were being wantonly violated." He says, "You can't audit what you don't have."

Both are probably right, yet these explanations seem insufficient. If it were just a matter of negligence or covering up dubious collateral, surely some of the assignments by some of the banks would have been done properly. Why would they all be defective?

The reason the mortgage notes were never assigned may be that there was no party legally capable of accepting the assignments. Securitization was originally set up as a tax dodge; and to qualify for the tax exemption, the conduits between the original lender and the investors could own nothing. The conduits are "special purpose vehicles" set up by the banks, a form of Mortgage Backed Security called REMICs (Real Estate Mortgage Investment Conduits). They hold commercial and residential mortgages in trust for the investors. They don't own them; they are just trustees.

The problem was nailed in a class action lawsuit recently filed in Kentucky, titled Foster v. MERS, GMAC, et al. (USDC, Western District of Kentucky). The suit claims that MERS and the banks violated the Racketeer Influenced and Corrupt Organizations Act, a law originally passed to pursue organized crime. Bloomberg quotes Heather Boone McKeever, a Lexington, Ky.-based lawyer for the homeowners, who said in a phone interview, "RICO comes in because the fraud didn't just happen piecemeal. This is organized crime by people in suits, but it is stil l organized crime. They created a very thorough plan."

The complaint alleges:
53. The "Trusts" coming to Court are actually Mortgage Backed Securities ("MBS"). The Servicers, like GMAC, are merely administrative entities which collect the mortgage payments and escrow funds. The MBS have signed themselves up under oath with the Securities and Exchange Commission ("SEC,") and the Internal Revenue Service ("IRS,") as mortgage asset "pass through" entities wherein they can never own the mortgage loan assets in the MBS. This allows them to qualify as a Real Estate Mortgage Investment Conduit ("REMIC") rather than an ordinary Real Estate Investment Trust ("REIT"). As long as the MBS is a qualified REMIC, no income tax will be charged to the MBS. For purposes of this action, "Trust" and MBS are interchangeable. . . .

56. REMICS were newly invented in 1987 as a tax avoidance measure by Investment Banks. To file as a REMIC, and in order to avoid one hundred percent (100%) taxation by the IRS and the Kentucky Revenue Cabinet, an MBS REMIC could not engage in any prohibited action. The "Trustee" can not own the assets of the REMIC. A REMIC Trustee could never claim it owned a mortgage loan. Hence, it can never be the owner of a mortgage loan.

57. Additionally, and important to the issues presented with this particular action, is the fact that in order to keep its tax status and to fund the "Trust" and legally collect money from investors, who bought into the REMIC, the "Trustee" or the more properly named, Custodian of the REMIC, had to have possession of ALL the original blue ink Promissory Notes and original allonges and assignments of the Notes, showing a complete paper chain of title.

58. Most importantly for this action, the "Trustee"/Custodian MUST have the mortgages recorded in the investors name as the beneficiaries of a MBS in the year the MBS "closed." [Emphasis added.]
Only the beneficiaries-the investors who advanced the funds-can claim ownership. And the mortgages had to have been recorded in the name of the beneficiaries the year the MBS closed. The problem is, who ARE the beneficiaries who advanced the funds? In the securitization market, they come and go. Properties get sold and resold daily. They can be sliced up and sold to multiple investors at the same time. Which investors could be said to have put up the money for a particular home that goes into foreclosure? MBS are divided into "tranches" according to level of risk, typically from AAA to BBB. The BBB investors take the first losses, on up to the AAAs. But when the REMIC is set up, no one knows which homes will default first. The losses are taken collectively by the pool as they hit; the BBBs simply don't get paid. But the "pool" is the trust; and to qualify as a REMIC trust, it can own nothing.

The lenders were trying to have it both ways; and to conceal what was going on, they dropped an electronic curtain over their sleight of hand, called Mortgage Electronic Registration Systems or "MERS." MERS is simply an electronic data base. On its website and in assorted court pleadings, it too declares that it owns nothing. It was set up that way so that it would be "bankruptcy-remote," something required by the credit rating agencies in order to turn the mortgages passing through it into highly rated securities that could be sold to investors. According to the MERS website, it was also set up that way to save on recording fees, which means dodging state statutes requiring a fee to be paid to establish a formal record each time title changes hands.

The arrangement satisfied the ratings agencies, but it has not satisfied the courts. Real estate law dating back hundreds of years requires that to foreclose on real property, the foreclosing party must produce signed documentation establishing a chain of title to the property; and that has not been done. Increasingly, judges are holding that if MERS owns nothing, it cannot foreclose, and it cannot convey title by assignment so that the trustee for the investors can foreclose. MERS breaks the chain of title so that no one has standing to foreclose.

Sixty-two million mortgages are now held in the name of MERS, a ploy that the banks have realized won't work; so Plan B has been to try to fabricate documents to cure the defect. Enter the RoboSigners, a small group of people signing thousands of documents a month, admittedly without knowing what was in them. Interestingly, it wasn't just one bank engaging in this pattern of cover-up and fraud but many banks, suggesting the sort of "organized crime" that would qualify under the RICO statute.

However, that ploy won't work either, because it's too late to assign properties to trusts that have already been set up without violating the tax code for REMICs, and the trusts themselves aren't allowed to own anything under the tax code. If the trusts violate the tax laws, the banks setting them up will owe millions of dollars in back taxes. Whether the banks are out the real estate or the taxes, they could well be looking at insolvency, posing the sort of serious systemic risk that would bring them under the purview of the new Financial Stability Oversight Council.

No need for disaster

As comedian Jon Stewart said in an insightful segment called "Foreclosure Crisis" on October 7, "We're back to square one." While we're working it all out, an extended foreclosure moratorium probably is in the works. But this needn't be the economic disaster that some are predicting - not if the FSOC is allowed to do its job. We've been here before, and not just in 2008.

In 1934, Congress enacted the Frazier-Lemke Farm Bankruptcy Act to enable the nation's debt-ridden farmers to scale down their mortgages.  The act delayed foreclosure of a bankrupt farmer's property for five years, during which time the farmer made rental payments. The farmer could then buy back the property at its currently appraised value over six years at 1 percent interest, or remain in possession as a paying tenant. Interestingly, according to Marian McKenna in Franklin Roosevelt and the Great Constitutional War (2002), "The federal government was empowered to buy up farm mortgages and issue non-interest-bearing treasury notes in exchange."  Non-interest-bearing treasury notes are what President Lincoln issued during the Civil War, when they were called "Greenbacks."

The 1934 Act was subsequently challenged by secured creditors as violating the Fifth Amendment's due process guarantee of just compensation, a fundamental right of mortgage holders. (Note that this would probably not be a valid challenge today, since there don't seem to be legitimate mortgage holders in these securitization cases. There are just investors with unsecured claims for relief in equity for money damages.) The Supreme Court voided the 1934 Act, and Congress responded with the "Farm Mortgage Moratorium Act" in 1935. The terms were modified, limiting the moratorium to a three-year period, and the revision gave secured creditors the opportunity to force a public sale, with the proviso that the farmer could redeem the property by paying the sale amount. The act was renewed four times until 1949, when it expired. During the 15 years the act was in place, farm prices stabilized and the economy took off, retooling it for its role as a global industrial power during the remainder of the century.

We've come full circle again.  We didn't get it right in 2008, but with the newly empowered Financial Stability Oversight Council, we already have the ready-made vehicle to avoid another taxpayer bailout, and to put too-big-to-fail behind us as well.

Sunday, October 17, 2010

Save My Home Law Group - Part of the Cabal of Warrior Lawyers - Fighting for Homeowners and the Justice System

Trap 1: Not hiring a mortgage defense attorney who believes in winning.
Truth: You will lose your home.

Trap 2: Trusting the bank is delaying your foreclosure lawsuit while “considering” your loan modification application.
Truth: That’s a LIE. The Bank’s game is to keep you from defending the foreclosure until the Court orders your house sold and you lose your home.

Trap 3: Paying a Loan Modification Company or Loan Modification Attorney for a loan modification. THERE ARE NO loan modifications.
Truth: The Home Affordable Mortgage Program (HAMP) is not  guaranteed loan modification; it’s free, if your lender is participating; and, if you agree to a HAMP loan modification, you become worse off than a renter. The truth is, loan modification is not available because the Banks DO NOT own your Note. The Note was sold to a Trust, whose investors often won’t agree to a loan modification.

Trap4: Trusting the Loan Modification Company or Loan Modification Attorney handling your foreclosure suit.
Truth: No one is DEFENDING your foreclosure suit. Result: You lose your home.

Trap 5: Signing an answer handed to you by a non-attorney or Loan Modification Attorney as a “Pro Se” defendant.
Truth: “Pro Se” means you are representing yourself and you may be admitting to something you do not want to admit. Result: you lose your home.

Trap 6: Ignoring the foreclosure complaint.
Truth: Big Mistake! Result: You lose your home.

Trap 7: Thinking Bankruptcy will solve the foreclosure.
Truth: Bankruptcy may be an option but in most cases it only stalls the foreclosure. You need to seek an attorney who will explain the difference as well as your options.

Trap8: Mortgage Defense Attorneys are expensive.
Truth: Not True! It’s more cost effective and adventitious to defend the foreclosure than to seek a Loan Modification or walk away. Fighting is the ONLY way you will win. And you CAN win!

Trap 9: There are no defenses against foreclosure.
Truth: NOT True! Foreclosure defenses are available because of the securitization of the Notes to Trusts, who sold unregulated securities to investors for three times the value of your Note. Like any Ponzi Scheme, it has holes.

You can win

Forged notes, lost notes, intentional destruction of notes, unauthorized people signing mortgage assignments or endorsing notes, missing documentation, fraudulently fabricated documents, different plaintiffs foreclosing on the same property, plaintiffs who do not exist and the inability or refusal to provide proof of purchase and/or ownership of the promissory notes.

These are some of the situations I have encountered in my practice of over 24 years.

In addition, there are more and more claims arising from predatory lending practices of the Plaintiffs bank; including, violations of state and federal law, deceptive trade practices, and unfair or abusive dept collection.
Fighting the bank is advantageous to you. The goal of any good litigation attorney is to utilize all defenses/strategies in order to obtain the best possible outcome for the borrower. Depending on the evidence, litigation may even lead to a home free and clear of any mortgage. It is all about giving you options and creating leverage against the banks.

You need to have a plan of action, a direction, and understanding of why that plan is good for you.

For more information fill out the contact form
I guarantee that it will be the most honest, informative conversation you will ever have.

Carol C Asbury
Attorney at Law
Save My Home Law Group
Part of the Cabal of Warrior Lawyers
Fighting for Homeowners and the Justice System

Foreclosure Fraud of the Week – Two “Original” Wet Ink Notes Submitted in the Same Case by the Florida Default Law Group and JPMorgan Chase

Sometimes you get the feeling that these banks think that they are so high above everyone and the law that they will never get caught. Well THINK AGAIN....I am very thankful to both Michael Redman of 4foreclosurefraud and Carol Asbury of Save My Home Law Group, Part of the Cabal of Warrior Lawyers Fighting for Homeowners and the Justice System for  OUTSTANDING work identifying the fraud as well as how to determine if your documents are fraudulent. Please read the article below, and visit to learn more, for those in other states.

Here is a new little game I am going to play. Each week I will be taking ten random foreclosure cases out of the Palm Beach County court house and picking out the one that has the most fraudulent document in the file.

Be it a Pleading, a BOGUS Assignment, a Fabricated Note, a Forgery, or an Assistant Attorney General that works for both the AG Office and a Foreclosure Mill at the same time…

Two “Original” Fabricated Notes?

In my last Foreclosure Fraud of the Week we talked about Poor Photo Shop skills.

This week we will expand on that topic.

Hold onto your hats. This one could possibly be a game changer.

Below are TWO “Original” Wet Ink Notes submitted in the same OPEN case by the notorious Florida Default Law Group.

One submitted by Ms. Ashleigh Politano Esq and the other by Tamara M. Walters Esq.

I am very grateful for this find since it corroborates some theories I have had.

I personally believe, that in most cases, the “Original” notes are purely high quality COPIES. The reason I say this is because almost EVERY “Original” note I examine, the blue “wet ink” signature is always the same odd colored blue. You know, the blue that comes off a printer or copy machine. I have yet to find that same elusive blue colored pen in any stationary store.

I think that the Foreclosure Mills and the Default Processing firms have electronic copies of the notes and just print them out however they need them, or they just replace the last page with a fabricated one that is endorsed to the plaintiff.

Not only that, the last page of the note, in many cases, is a different quality paper then the first few pages.
Now I know these are some conspiracy theorist type allegations, so bear with me and see for yourselves below.

Most judges do not want to hear those theories, so lets take it a step further to possibly opening their eyes.

Remember that these are both “Original” Notes filed in the same case, both with “wet ink” signatures, by the Florida Default Law Group, so they should be identical, right?

I took the liberty on taking screen shots of the “Notes” where I thought there might be frauds perpetrated on the court.

Examine the full Certified Copies below to compare…

I labeled them;

NOTE ONE (Submitted by Ashleigh Politano Esq)


NOTE TWO (Submitted by Tamara M. Walters Esq)

I highly doubt that the TRUE note holder had both of these as originals on hand.

Worm your way out of this one FDLG…

There are more to come…


Florida Foreclosure Defense
Law Offices of Carol C. Asbury

UPDATE 04/29/10

UPDATE 04/29/10

Click on Images to Enlarge

Notices of Filing Original “Notes”

1st Page of Notes

1st Page of Notes

Last Page of Notes
Documentary Tax

Last Page of Notes
Borrowers Signature

Last Page of Notes
Endorsement to Plaintiff by Plaintiff

Last Page of Notes
Original Endorsement to VOID

To See additional Docs please click HERE

For more Fraudulent Activity see the Links Below

Another WSJ Smackdown! Florida Judges Bash Banks in Foreclosure Cases

OVERRULED!!! Florida Judge Reverses His own Summary Judgment Order!

WSJ Strikes Again – Judge Finds “Fraud” in Foreclosure Mess

NY Post – Florida Judge Reverses own Summary Judgement after GMAC Lawyer Could Only Manage a Ralph Kramden-like hamina-hamina-hamina

Mortgage Assignment Fraud – David Sterns Office Commits Fraud on The Court – Case Dismissed WITH Prejudice

Wells Fargo Motion for Judgment of Foreclosure and Sale for the Premises is DENIED WITH PREJUDICE Complaint is Dismissed

Foreclosure Mill Attorney for Marshall Watson or Foreclosure Defense Attorney for Homeowners?

SHOCKING REVELATION! J.P. Morgan Chase / LPS Produced a Fraudulent Assignment of Mortgage! 

Verification of Mortgage Foreclosure Complaints

Saturday, October 16, 2010

Wednesday, October 13, 2010

By ALAN ZIBEL, AP Real Estate Writer

WASHINGTON – Officials in 50 states and the District of Columbia have launched a joint investigation into allegations that mortgage companies mishandled documents and broke laws in foreclosing on hundreds of thousands of homeowners.

The states' attorneys general and bank regulators will examine whether mortgage company employees made false statements or prepared documents improperly.

Alabama initially did not sign on to the investigation. It reversed course after the joint statement was released.
Attorneys general have taken the lead in responding to a nationwide scandal that's called into question the accuracy and legitimacy of documents that lenders relied on to evict people from the homes. Employees of four large lenders have acknowledged in depositions that they signed off on foreclosure documents without reading them.

The allegations raise the possibility that foreclosure proceedings nationwide could be subject to legal challenge. Some foreclosures could be overturned. More than 2.5 million homes have been lost to foreclosure since the recession started in December 2007, according to RealtyTrac Inc.

The state officials said they intend to use their investigation to fix the problems that surfaced in the mortgage industry.

"This is not simply about a glitch in paperwork," said Iowa Attorney General Tom Miller, who is leading the probe. "It's also about some companies violating the law and many people losing their homes."

Ally Financial Inc.'s GMAC Mortgage Unit, Bank of America and JPMorgan Chase & Co. already have halted some questionable foreclosures. Other banks, including Citigroup Inc. and Wells Fargo & Co. have not stopped processing foreclosures, saying they did nothing wrong.

In a joint statement, the officials said they would review evidence that legal documents were signed by mortgage company employees who "did not have personal knowledge of the facts asserted in the documents. They also said that many of those documents appear to have been signed without a notary public witnessing that signature — a violation of most state laws.

"What we have seen are not mere technicalities," said Ohio Attorney General Richard Cordray. "This is about the private property rights of homeowners facing foreclosure and the integrity of our court system, which cannot enter judgments based on fraudulent evidence."

Remember, these are felonies in Florida...

117.105  False or fraudulent acknowledgments; penalty.--A notary public who falsely or fraudulently takes an acknowledgment of an instrument as a notary public or who falsely or fraudulently makes a certificate as a notary public or who falsely takes or receives an acknowledgment of the signature on a written instrument is guilty of a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.

TALLAHASSEE, FL – Attorney General Bill McCollum today announced an on-going effort to reign in mortgage servicers and protect Floridians from purported deceptive and unfair practices. Attorney General McCollum, along with 48 other Attorneys General, are part of a multistate effort to stop mortgage loan servicers from allegedly submitting affidavits or signing notices that appear to have procedural defects of either a judicial or non-judicial foreclosure.

Investigators allege that many mortgage documents have been signed without personal knowledge of the facts asserted in the documents. In addition, it appears that many affidavits were signed outside of the presence of a notary public. This process of signing documents without confirming their accuracy has come to be known as “robo-signing” and is in direct violation of Florida law.

The 49 states are joining together to form a multistate group comprised of both state Attorneys General and state banks and mortgage regulators to more effectively address the issue. The multistate group, led by Iowa Attorney General Tom Miller, plans to speak with all relevant mortgage servicers as soon as possible to determine whether or not each company has improperly submitted affidavits or signed notices in support of a foreclosure in the states. State bank and mortgage regulators are participating both individually and through their Multistate Mortgage Committee, which represents mortgage regulators from all 50 states. Florida is taking a leading role in this multistate initiative as a member of the Executive Committee of the multistate group. The Executive Committee is also comprised of the following Attorneys General Offices: Arizona, California, Colorado, Connecticut, Illinois, Iowa, North Carolina, Ohio, Texas, and Washington; and the following state banking regulators: the Maryland Office of the Commissioner of Financial Regulation and the New York State Banking Department.
Participating Attorneys General
Hawaii Department of the Attorney General / Hawaii Office of Consumer Protection
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Rhode Island
South Carolina
South Dakota
West Virginia
Participating State Bank and Mortgage Regulators
Arizona Department of Financial Institutions
Arkansas Securities Department
Connecticut Department of Banking
D.C. Department of Insurance Securities and Banking
Florida Office of Financial Regulation
Idaho Department of Finance
Illinois Secretary of Financial and Professional Regulation
Indiana Department of Financial Institutions
Iowa Division of Banking
Kentucky Department of Financial Institutions
Louisiana Office of Financial Institutions
Maine Bureau of Consumer Credit Protection
Maine Bureau of Financial Institutions
Maryland Office of the Commissioner of Financial Regulation
Division of Banks, Commonwealth of Massachusetts
Michigan Office of Financial & Insurance Regulation
Minnesota Department of Commerce
Mississippi Department of Banking and Consumer Finance
Montana Division of Banking and Financial Institutions
Nebraska Department of Banking and Finance
Nevada Financial Institutions Division and Mortgage Lending Division
New Hampshire Banking Department
New Jersey Department of Banking & Insurance – Office of Consumer Finance
New York State Banking Department
North Carolina Commissioner of Banks
North Dakota Department of Financial Institutions
Ohio Division of Financial Institutions
Oregon Department of Consumer and Business Services – Division of Finance
and Corporate Securities
Pennsylvania Department of Banking
Rhode Island Department of Business Regulation - Division of Banking
South Carolina Department of Consumer Affairs
Tennessee Department of Financial Institutions
Texas Department of Banking
Texas Finance Commission and Consumer Credit Commissioner
Vermont Department of Banking, Insurance, Securities and Health Care Administration
Washington State Department of Financial Institutions
West Virginia Division of Banking
Wisconsin Department of Banking
Wyoming Division of Banking

Tuesday, October 12, 2010

Former President of Park Avenue Bank Pleads Guilty to Fraud, Bribery and Embezzlement

There's an awful lot of fraudsters getting caught. I guess the big banks that are robbing the people, are also thinking they can do it to our government and skate free. The only problem is that President Obama, established the Financial Fraud Enforcement Task Force in November 2009 to hold accountable those who helped bring about the last financial crisis, and to prevent another crisis from happening.

The Financial Fraud Enforcement Task Force is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. The task force is composed of senior-level officials from the following federal departments, agencies and offices: Department of Justice; Department of the Treasury; Department of Commerce; Department of Labor; Department of Housing and Urban Development; Department of Education; Department of Homeland Security; Securities and Exchange Commission; Commodity Futures Trading Commission; Federal Trade Commission; Federal Deposit Insurance Corporation; Board of Governors of the Federal Reserve System; Federal Housing Finance Agency; Office of Thrift Supervision; Office of the Comptroller of the Currency; Small Business Administration; Federal Bureau of Investigation; Social Security Administration; Internal Revenue Service, Criminal Investigations; Financial Crimes Enforcement Network; United States Marshals Service; United States Postal Inspection Service; United States Secret Service; United States Immigration and Customs Enforcement; and relevant Offices of Inspectors General and related Federal entities, including the Office of the Inspector General for the Department of Housing and Urban Development, the Recovery Accountability and Transparency Board and the Office of the Special Inspector General for the Troubled Asset Relief Program; and such other executive branch departments, agencies, or offices as the President may, from time to time, designate or that the Attorney General may invite. 

In addition, state and local partners have been invited to join the task force and the National Association of Attorneys General and others are active members at this time. This unprecedented partnership between federal, state and local agencies is a key component of the task force’s success.

U.S. Department of Justice

United States Attorney
Southern District of New York

Thursday, October 8, 2010

NEW YORK – Charles J. Antonucci, Sr., former president and Chief Executive Officer (CEO) of The Park Avenue Bank, pleaded guilty in Manhattan federal court to multiple criminal charges announced U.S. Attorney for the Southern District of New York Preet Bharara; Special Inspector General for the Troubled Asset Relief Program (SIGTARP) Neil M. Barofsky; Superintendent of the Banks of New York (NYSBD) Richard H. Neiman; Special Agent-in-Charge of the New York Homeland Security Investigations (HSI) office James T. Hayes, Jr.; Assistant Director-in-Charge of the FBI New York office Janice K. Fedarcyk; and Inspector General of the Federal Deposit Insurance Corporation (FDIC-OIG) Jon T. Rymer. The charges to which Antonucci pleaded guilty include securities fraud relating to Antonucci’s attempt to fraudulently obtain more than $11 million worth of taxpayer rescue funds from the Troubled Asset Relief Program (TARP), bank bribery, embezzlement of bank funds, and participating in a $37.5 million scheme that left an Oklahoma insurance company in receivership.

"Today's guilty plea, the first ever conviction for fraud against the TARP, should send a strong message to all those who would attempt to loot the public fisc or steal from our financial institutions,” said U.S. Attorney Bharara. “This office and our law enforcement partners will be watching. Whether you are a bank teller or a bank president, you are not above the law."

SIGTARP Special Inspector General Neil M. Barofsky said: "In March, Charles Antonucci become the first defendant charged with attempting to steal from the taxpayers' investment in TARP. Today, he becomes the first to be convicted. Today's plea marks an important chapter and demonstrates that SIGTARP and its law enforcement partners will ensure that would-be wrongdoers who seek to profit criminally from this historic program will be caught, charged, and brought to justice."

"Over the past few years, New York has seen too many cases of unscrupulous individuals using their positions at financial institutions for their own personal gain, leaving a shaken financial system in their wake. Charles Antonucci used his role at a state-chartered bank to defraud TARP and the system it was meant to stabilize," said Richard H. Neiman, Superintendent of Banks and Member of the TARP Congressional Oversight Panel. "I am particularly proud of our bank examiners and Criminal Investigations Bureau for their diligence and persistence in substantiating this fraud, and the cooperative efforts of the state and federal agencies that contributed to today's resolution."

HSI Special Agent-in-Charge James T. Hayes, Jr., said: "The TARP fund was designed to strengthen American financial institutions during unprecedented economic difficulties. Mr Antonucci devised a scheme to subvert federal banking laws at the taxpayers expense, exploiting a soft economy for his own personal gain. ICE, through its El Dorado Task Force, will continue to work to expose this type of financial duplicity that poses a significant risk to the stability of banks and other institutions that are of critical importance to the American economy."

FBI Assistant Director-in-Charge Janice K. Fedarcyk said: "Charles Antonucci committed serious crimes, including flagrant self-dealing, but perhaps the most offensive affront to taxpayers was his admitted attempt to defraud TARP. The FBI is determined to ensure the integrity of a program created to strengthen the financial system, not line the pockets of swindlers."

FDIC-OIG Inspector General Jon T. Rymer said: "The Federal Deposit Insurance Corporation Office of Inspector General is pleased to join the U.S. Attorney's Office for the Southern District of New York and our law enforcement colleagues in announcing this guilty plea. We are particularly concerned when senior bank officials, who are in positions of trust within their institutions, are involved in criminal activity. Prosecutions of individuals and entities involved in criminal misconduct help maintain the safety and soundness of the Nation's financial institutions."

According to the information, the complaint previously filed in Manhattan federal court, statements made during the guilty plea proceeding, and other information in the public record:

The Park Avenue Bank was a federally-insured and state-chartered bank that was headquartered at 460 Park Avenue, New York, New York, with retail branches in Manhattan and Brooklyn. The bank's clients consisted primarily of small businesses, for whom the bank made loans, extended lines of credit, and maintained depository accounts. As of the end of 2009, the bank had approximately $500 million on deposit, and over $520 million in assets. Antonucci served as president and CEO of The Park Avenue Bank from June 2004 to October 2009, and also served on its Board of Directors.

On March 12, 2010, the NYSBD seized the offices, branches, and assets of the bank, citing ineffective management and inadequate capital, and immediately appointed the FDIC as receiver. Three days later, on March 15, 2010, federal authorities arrested Antonucci at his home in Fishkill, N.Y., for engaging in a broad range of illegal conduct that contributed, in part, to the bank’s demise.

With his guilty plea today, Antonucci became the first defendant convicted of fraud on the TARP, a program whose purpose was to provide funds to viable financial institutions to stabilize and strengthen the nation's financial system, and to enable those financial institutions to increase the flow of financing to U.S. businesses and consumers. TARP funds were made available to qualifying banks; one of the critical elements of the TARP qualification process was the capital position of the applicant bank, which was evaluated by the FDIC as one of the bank’s regulators. Among other things, Antonucci misled the FDIC and NYSBD by misrepresenting the source of millions of dollars of money that he claimed to have invested in the bank out of his own pocket to recapitalize the bank. He then attempted to use that sham recapitalization to fraudulently obtain over $11 million in TARP funds by convincing the bank’s regulators that Antonucci had recapitalized the bank when, in fact, he had not.

Specifically, Antonucci pleaded guilty in count one of the information to deceiving the FDIC and NYSBD by falsely stating that he had invested $6.5 million of his own funds into the bank. Instead, Antonucci had engaged in a complicated round-trip loan transaction in which he merely borrowed from the bank itself the funds that he purportedly invested in the bank, meaning that the bank received no additional capital from the transaction. When the bank’s regulators began investigating the source of the purported $6.5 million capital infusion, Antonucci lied to them about the true nature of the transaction.

Antonucci also pleaded guilty to engaging in fraud in connection with the offer and sale of securities relating to the bank’s application for TARP funds through the Capital Purchase Program. As charged in count two of the information and in the complaint, Antonucci tried to induce the U.S. Government to provide TARP funds in exchange for securities issued by the bank by misrepresenting the bank’s capital position. In furtherance of this scheme, Antonucci fraudulently used the round trip transaction to support his application, in, among other things, telephone calls to FDIC regulators reviewing the bank’s TARP application, and falsely represented that his purported substantial, personal capital contribution to the bank should factor in favor of the bank’s TARP application. Again, the supposed personal contribution by Antonucci was actually money loaned by the bank itself. Ultimately, the bank’s application for an $11,252,480 investment from TARP was denied.
Antonucci also pleaded guilty to a pattern of self-dealing and accepting bribes to influence his decisions as the president and CEO of the bank. For example, as charged in count three of the information and described in the complaint, Antonucci accepted bribes from customers of the bank, including but not limited to over $250,000 in cash bribes, free use of a customer’s airplane, and free use of another customer’s luxury automobile, in exchange for Antonucci’s approval of various banking transactions. Indeed, on more than ten occasions in 2008 and 2009, Antonucci used a private plane owned by a co-conspirator (CC-1) to fly to, among other places, Florida, Panama, Arizona (so that Antonucci could attend the Super Bowl) and Augusta, Ga., (so that Antonucci could attend the Masters Golf Tournament). All the while, Antonucci approved over $8 million in overdrafts on accounts for entities controlled by CC-1 at Park Avenue Bank.

In addition to this self-dealing, Antonucci pleaded guilty to personally embezzling and misappropriating bank funds, as charged in count four of the information. Among other things, Antonucci approved a $400,000 loan through the bank to an entity he controlled called Easy Wealth, through which Antonucci obtained tens of thousands of dollars in proceeds. Antonucci also had the bank pay rent to him for one or more properties that heowned and which the bank did not use, including a property in Fishkill, N.Y., and directed bank employees to perform substantial work on non-bank matters in which he had personal financial interests.

To hide and repay a $2.3 million loan that was part of the fraudulent round-trip loan transactions described above, between June and October 2008, Antonucci and his co-conspirators engaged in a series of sham transactions using the funds of another Park Avenue Bank depositor, General Employment Enterprise, Inc. (GEE). As charged in count five of the information, to hide these transactions from GEE’s auditors, Antonucci caused a counterfeit certificate of deposit (CD) to be created by Park Avenue Bank, making it appear that GEE’s $2.3 million had been invested in a 90-day CD at the bank. In fact, and as Antonucci well knew, there was no CD, and the $2.3 million was wire transferred from GEE’s account into an account controlled by Antonucci, which was then used to repay a loan. Later, when GEE’s auditors requested certification from Park Avenue Bank that the CD existed, Antonucci fraudulently signed that certification, when he knew that no CD in fact existed.

Further, from July 2008 through November 2009, as charged in count six of the information, Antonucci conspired with others to defraud the state of Oklahoma Insurance Department in connection with the $37.5 million sale of an insurance company that was later placed in receivership. In connection with this, Antonucci made various false statements to the Oklahoma Insurance Department regarding the financial state of the insurance company.
* * *
As part of his guilty plea today, Antonucci also admitted the $44 million in forfeiture allegations in the Information, and reached an agreement with the government to pay an $11.2 million money judgment and forfeit various assets owned by him.

Antonucci, 59, faces a maximum sentence of 135 years in prison on the charges to which he pleaded guilty. He is scheduled to be sentenced by the U.S. District Judge Naomi Buchwald on April 8, 2011.

Antonucci resigned as president and CEO of the bank in November 2009.

Following the NYSBD’s seizure of the bank on March 12, 2010, the FDIC, as receiver entered into a purchase and assumption agreement with Valley National Bank, Wayne, N.J. Valley National Bank assumed all deposits and certain assets of Park Avenue Bank, except certain brokered deposits, which are being paid out by the FDIC.

Mr. Bharara praised the investigative work of SIGTARP, the NYSBD and its Criminal Investigations Bureau, HSI, the FBI, the FDIC-OIG, and New York High Intensity Financial Crime Area. Mr. Bharara added that the investigation is continuing.

This case was brought in coordination with President Barack Obama's Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as Co-Chair of the Securities and Commodities Fraud Working Group and Mr. Barofsky serves as Co-Chair of the Rescue Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

This case is being handled by the Office’s Complex Frauds and Asset Forfeiture Units. Assistant U.S. Attorneys Lisa Zornberg, Zachary Feingold, Danya Perry, and Kan Min Nawaday are in charge of the prosecution.