US Attorneys, FBI Announce Operation Malicious Mortgage

At a news conference held this afternoon at FBI Headquarters in Dallas, Rebecca A. Gregory, U.S. Attorney for the Eastern District of Texas, Richard B. Roper, U.S.. Attorney for the Northern District of Texas, and Robert E. Casey, Jr., Special Agent in Charge, Dallas, FBI, announced the Department of Justice's and FBI's latest national takedown of mortgage fraud schemes.  This national takedown is the culmination of substantial coordinated efforts during the past three and a half months to identify, arrest and prosecute mortgage fraud violations throughout the U.S.  Operation Malicious Mortgage highlights the strong enforcement response undertaken by the Department of Justice and its law enforcement partners to combat the threat mortgage fraud poses to the U.S. housing industry and worldwide credit markets.

Nationally, from March 1 to June 18, 2008, Operation Malicious Mortgage resulted in 144 mortgage fraud cases in which 406 defendants were charged.  Yesterday, 60 arrests were made in mortgage fraud-related cases in 15 districts ---- eight of those were in the Northern District of Texas where defendant Eric Rulack Farrington, Jr., and seven of his associates, were arrested on charges outlined in a 51-count indictment, unsealed the previous day, that charged conspiracy, bank fraud, wire fraud, money laundering, and engaging in a monetary transaction with criminally derived property.  Charges in Operation Malicious Mortgage cases were brought in every region of the U.S. and in more than 50 judicial districts by U.S. Attorneys' Offices based on the law enforcement and investigative efforts of participating law enforcement agencies.  The FBI estimates that approximately $1 billion in losses were inflicted by the mortgage fraud schemes employed in these cases.

U.S. Attorney Roper said, "Pernicious mortgage fraud has a profound negative effect on our community.  Our success in bringing to justice those involved in this fraud is a result of the teamwork between federal and state law enforcement and regulatory agencies.  While these

investigations are lengthy and complicated, we will continue to prosecute anyone who manipulates the mortgage loan process for their own financial gain, we so that we can put a stop to such criminal conduct."

U.S. Attorney Gregory said, "We have a solemn obligation to continue to use all available resources - local, state and Federal - to protect hard working homeowners from business practices that can threaten the security of the very thing  they hold most dear - their homes."

"The FBI has seen a steady growth in pending mortgage fraud cases over the last few years," said Special Agent in Charge Casey.  Casey continued, "No single law enforcement agency is charged exclusively with monitoring this crime, so cooperation and information sharing is essential.  Through the North Texas Mortgage Fraud Working Group the FBI and our local, state and Federal law enforcement partners work closely to combat this crime.  We will continue to work hard along with our law enforcement partners to stem the mortgage fraud problem."

Operation Malicious Mortgage represents the joint collaborative efforts of the FBI, U.S. Postal Inspection Service, Internal Revenue Service-Criminal Investigation Division, U.S. Immigration and Customs Enforcement, U.S. Secret Service, U.S. Trustee Program, Department of Housing and Urban Development Office of the Inspector General, Department of Veterans Affairs Office of the Inspector General, and Federal Deposit Insurance Corporation Office of the Inspector General.  Operation Malicious Mortgage is the most recent coordinated sweep in an ongoing law enforcement effort to combat mortgage fraud, which also included Operation Continued Action in 2004 and Operation Quick Flip in 2005

Mortgage frauds employ a variety of tactics including misrepresentations, deceit and other criminal abuses to fund, purchase or insure mortgage loans. Operation Malicious Mortgage addresses primarily three types of mortgage fraud schemes:  lending fraud, foreclosure rescue scams and mortgage-related bankruptcy schemes. Lending fraud frequently involves multiple loan transactions in which industry professionals construct mortgage transactions based on gross fraudulent misrepresentations about the borrower's financial status, such as overstating the borrower's income or assets, using false or fictitious employment records or inflating property values. Foreclosure rescue scams involve criminals who target legitimate homeowners in dire financial circumstances and fraudulently collect fees for foreclosure prevention services or obtain ownership interests in residential properties. Both of these fraudulent mortgage schemes may be furthered by filing bankruptcy petitions that automatically stay foreclosure.

"Mortgage fraud and related securities fraud pose a significant threat to our economy, to the stability of our nation's housing market and to the peace of mind of millions of American homeowners," said Deputy Attorney General Mark R. Filip. "Operation Malicious Mortgage and our other mortgage-related enforcement actions demonstrate the Justice Department's commitment and determination to combat these criminal schemes, hold their perpetrators accountable and help restore stability and confidence in our housing and credit markets."

"Operation Malicious Mortgage is a concerted, joint law enforcement and prosecutorial effort aimed at disrupting individuals and groups engaged in mortgage fraud," said FBI Director Robert S. Mueller, III. "This operation is an example of our unified commitment to address this significant crime problem. The FBI will continue to direct investigative and analytic resources towards mortgage fraud and corporate securities fraud that threaten our nation's economy."

The President's Corporate Fraud Task Force, chaired by Deputy Attorney General Filip, is also responding to issues raised by mortgage fraud in the corporate sector.  Created in 2002 to investigate and prosecute significant financial crimes, the Task Force includes representatives from ten federal departments, commissions and agencies, in addition to seven U.S. Attorneys' Offices and two Divisions within the Department of Justice, combining the experience of thousands of investigators, attorneys, accountants and regulatory experts. Since July 2002, the Department of Justice has obtained nearly 1,300 corporate fraud convictions, including the convictions of more than 200 chief executive officers and corporate presidents, more than 120 corporate vice presidents and more than 50 chief financial officers.

An indictment is not evidence of guilt. All persons charged with a crime are presumed innocent until proven guilty beyond a reasonable doubt.