Palo Alto Weekly

News - August 19, 2011

Federal grand jury indicts pair for mortgage fraud

Local mortgage broker, lender allegedly victimized East Palo Alto residents as part of $40 million financial scheme

by Sue Dremann

A San Jose mortgage broker and a private lender who allegedly gave false information to banks that inflated potential borrowers' incomes, assets and employment in order to qualify them for upwards of $40 million in loans were indicted by a federal grand jury in May, according to court documents.

Among their victims were an East Palo Alto homeowner and his brother, from whom the broker and lender stole nearly $200,000, according to a civil suit filed by the brothers.

Linda Dung Tran, 33, is accused of 29 felony counts that include conspiracy to commit bank fraud, bank fraud, making false statements to a bank, engaging in monetary transactions using criminally derived property and aiding and abetting. Pablo Curiel, 71, of San Jose is charged with 17 counts that include conspiracy to commit bank fraud, bank fraud, making false statements to a bank and aiding and abetting.

If convicted of all charges, Tran faces a maximum of 760 years in federal prison and more than $24.5 million in fines. Curiel faces 390 years in prison and more than $13 million in fines, according to the indictment.

Tran and Curiel are accused of being part of a group that included Norma and Claudia Valdovinos, agents at Century 21 Golden Hills Realtors, and others that allegedly defrauded a series of banks from 2005 to 2007.

The defendants' scheme involved kickbacks and secret down payments, all without the borrowers' knowledge, according to the indictment. Upwards of $40 million in loans were provided to buyers who would not have received loans if not for the defendants' fraud, according to the U.S. Department of Justice.

Tran allegedly paid Norma Valdovinos kickbacks to overlook fraudulent stated-income information on the borrowers' applications. Tran also arranged for Curiel to provide down payments for the stated-income loans, the indictment stated.

But the down payments to the banks were made in secret through escrow companies with notes from the borrowers, according to the indictment. Curiel thus secured the loans through a deed of trust, which he filed after the close of escrow so the banks that were providing first and second loans did not learn about the third deed of trust.

Curiel and Tran made sure the down payment was funded in a way that disguised that the down payment was borrowed, according to the indictment. Curiel allegedly charged borrowers, including an East Palo Alto family, Miguel and Rafael Cacho Vega, interest-only payments for two years at 10 percent, plus a balloon payment of 110 to 125 percent at the end of the 2-year term.

Financial institutions that were defrauded included Greenpoint Mortgage, Washington Mutual, Countrywide Home Loans, National City Bank and Downey Savings and Loan, according to the indictment.

In the East Palo Alto case, Miguel Cacho Vega, a tile setter, was referred by Century 21 Golden Hills Realtors to Tran in 2006 to secure a $20,000 loan to pay off credit-card debts.

Tran agreed and told him that she needed his brother Rafael to co-sign the loan.

But instead of obtaining a $20,000 loan, Tran allegedly "sold" Miguel Cacho Vega's home to Rafael without either man's knowledge, according to the lawsuit filed by the nonprofit Community Legal Services in East Palo Alto. She did so by taking out a $675,000 loan from Downey Savings & Loan Association to pay off Cacho Vega's original home loan, allegedly without his knowledge.

She obtained a down payment for the Downey loan from Curiel for $75,000. Curiel received a deed of trust after the fact without the bank knowing, then charged exorbitant balloon payments to the Cacho Vegas, the indictment states.

Tran gave Cacho Vega the $20,000 he wanted, but took his name off the title without telling him and pocketed $190,000, according to court papers.

Cacho Vega lost the home to foreclosure in 2008, the civil suit alleged. (The Weekly published a story about the Cacho Vega case on June 26, 2009.)

Miguel and Rafael Cacho Vega sued Tran and Curiel in December 2007 for fraud. A federal judge in February 2010 awarded Miguel Cacho Vega $136,942 and Rafael $30,000, plus $22,385 to both brothers after Tran defaulted in their cases.

Robert Kane, one of the Cacho Vegas' attorneys, said the brothers have not yet received any compensation. Tran filed for bankruptcy and the brothers could have to wait until after the criminal trial. If Tran and Curiel are convicted, compensation could be a requirement of their sentence or any plea deal, he said.

Similar cases involving Tran and Curiel have emerged in federal court.

In a separate civil case, 12 Latino clients in San Jose were allegedly similarly defrauded, according to a lawsuit by the nonprofit Law Foundation of Silicon Valley and Greenberg Traurig, LLP, an East Palo Alto law firm. The plaintiffs' attorneys declined to comment because the case is still actively being litigated, they said.

In another federal civil case filed July 2, 2010, the Federal Deposit Insurance Corporation (FDIC), is suing seven Latino victims of Tran and Curiel including Rafael Cacho Vega for fraud along with Curiel and Tran's companies as a result of the fraudulent loans taken out on their behalf from the now-collapsed Downey Savings & Loan Association.

Kane said he was successful in getting the FDIC to drop Cacho Vega from the suit once a declaration was received that detailed how he was misled.

The victims are from East Palo Alto, San Jose, Santa Clara, Gilroy, Newark and Beaumont (in southern California), according to court papers.

Robert Carey, attorney for Tran, said he could not comment on the case because it is in litigation.

Tran conducted business as Absolute Investment Group, Palacio Mortgage and Tara Home Financial Services in San Jose.

Staff Writer Sue Dremann can be emailed at sdremann@paweekly.com.

Comments

Posted by Steve C, a resident of Menlo Park
on Aug 16, 2011 at 12:31 pm

Sadly, this type of crime is not an extremely rare occurrence. Variations on this scam happened all over the place, to varying degrees, so more commission-seekers could get their piece of the action. It's right down close to the core of why we have the mortgage crisis we a re dealing with today.


Posted by Hmmm, a resident of East Palo Alto
on Aug 16, 2011 at 2:27 pm

[Post removed by Palo Alto Online staff.]


Posted by Sad, a resident of Midtown
on Aug 16, 2011 at 4:47 pm

I work with a man who got a second on his house. The house itself was repossessed. The lender has been contacting our company, faxing us copies of fake W-2's that were provided to them by a mortgage broker to substantiate the guy's income as over $90K per year. This is approximately double what he earns. It appears they took a genuine W-2 from this guy and then changed the figures.

I sincerely hope this Tran person and her accomplice rot in jail. Fraud of any kind is awful, but taking advantage of immigrants whose ability to decipher documents is less than par, deserves a special cell, one of the old fashioned kinds with damp, mold, and a few rats to keep them company.


Posted by musical, a resident of Palo Verde
on Aug 16, 2011 at 4:55 pm

Wow. I wonder whether anyone has optioned the movie rights to this cautionary tale.


Posted by Real-Estate-Fraud-Is-Everywhere, a resident of Another Palo Alto neighborhood
on Aug 16, 2011 at 5:57 pm

The breadth and depth of the fraud in the real estate industry that contributed to the collapse of the so-called "sub-prime" market was/is extremely wide spread. The following web-site carries a list of the indictments/prosecutions that are on-going in California--

California Real Estate Fraud Report:
Web Link

The FBI also issues a yearly report on its activities in trying to stem these abuses--

FBI/Mortgage Fraud:
Web Link

Sadly, the cancer spread years ago, and it's unlikely that very many people will go to jail, because of the vast number of agents/brokers/brokerages that were/are complicit in this fraud and theft.


Posted by Hmmm, a resident of East Palo Alto
on Aug 16, 2011 at 6:00 pm

There is a professional term for these people: scum-sucking parasites.


Posted by Outside Observer, a resident of another community
on Aug 16, 2011 at 9:14 pm

Once again the wisdom of Shakespeare comes through the ages:

"Neither a borrower nor a lender be"

This, along with his advise for the disposition of lawyers is even more relevant in today's society than it was then.

And going back even much further, there is a reason usury is a universal sin.


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