Author Archives: Marie Browning

About Marie Browning

Marie Browning Marie Browning serves at SBFI’s Editor for the ‘Capital’ series of information pages, tracking the people, events, training and opinions of business lending across the U.S. In addition,she serves as Project Coordinator to manage the production of several content initiatives for the website and production of training presentations. Her background includes experience in general business, financial management and banking, and has worked with Managing Director Charles Green at two other companies. When not focused on business lending, Marie is a nature photographer and has published an impressive body of work from her hobby. She can be contacted at Marie@SBFI.org

Burlingame Businessman Pleads Guilty to $1.96M Loan Fraud

By Ogozi John

A former grocery store owner in the Bay Area neighborhood has pleaded guilty to defrauding banks and the Small Business Administration of about $1.96 million.

Nimer Anton Massis, 40, of Burlingame, CA., pleaded guilty to the charges before a federal Good Loan Officercourt in San Francisco for making false statements in several loan applications to three banks and the SBA.

In 2007 alone, Massis applied for and obtained three sets of loans from Citibank totaling $700,000 using three different business names and he defaulted on each of the loans.

The following year,  Massis applied for a ’working capital’ of $250,000 through an SBA loan which was approved and issued by Mission National Bank. In the loan application, Massis was required to disclose “business indebtedness” and “all outstanding installment debts, contracts, notes and mortgages payable.” He failed to do so as he did not disclose the outstanding debt owed to Citibank, neither was it included in his personal financial statement.

Massis later defaulted on this loan, leading to losses for the SBA and Missions National Bank.

Massis obtained yet another loan under the SBA 504 loan program where $965,000 was disbursed to hum through One California Bank and Capital Access Group. In the loan application, which was under another business name, Massis failed to disclose his indebtedness to Citibank and three months after, he defaulted on this loan.

In all, Massis received about $1.96 million and was still owing about $1 million in debt before the fraud was uncovered by the FBI which led to the charges and his guilty plea.

Massis will be sentenced on July 23, and he faces an obligatory 30 years in prison and $1 million in fines.

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Former VP at TARP-Recipient Bank Convicted for Wire Fraud

By Ogozi John

A senior loan officer at a TARP-recipient bank has been convicted on five counts of wire fraud, according to an announcement by John W. Vaudreuil, United States Attorney for the Western District of Wisconsin and Christy Romero, Special Inspector Weimert General for TARP.

David Weimert , 64, of Madison, Wis., served as the senior vice president in Lending Administration Anchor BankCorpof Anchor BanCorp Wisconsin, Inc. (ABCW) and as the president of Investment Direction Inc. (IDI), a subsidiary of ABCW.

Weimert used his position to defraud the bank in order to obtain ownership stakes and receive commission in the sales of properties which the bank sold to raise funds to remedy financial trouble during the financial crisis.

Evidence in court also revealed how Weimert lied and misrepresented facts in order to gain an ownership interest and a 4% commission fee in the sales of Chandler Creek, a joint venture partnership to develop an industrial park in Round Bank, Texas.

In a testimony by his bank supervisors, Weimart reported that Burke Group, a California-based real estate developer, gave the condition they would only purchase IDI’s share of Chandler Creek if Weimart would also purchase a minority interest in Chandler Creek.

But Weimart did not tell the Board of Directors that he actually desired to own a minority interest for himself, and not as a demand by the Burke Group.

Based on this misleading information, IDI’s Board approved the Burke’s group offer, and Weimert received 4.785% interest in Chandler Creek and pocketed $311,680 as 4% commission fee from the sale.

In January 2009, ABCW, the parent company of Anchor Bank, received $110 million through the Troubled Asset Relief Program. In August 2013, Anchor Bank filed for bankruptcy and the federal government suffered a loss of $104 million on the investment and another $23 million that was owed to TARP.

Weimart now faces up to 20 years in prison on each count; sentencing has been scheduled for June 16 by U.S. District Judge James D. Peterson.

 

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Developer Arrested for Fraud and Bankruptcy Crimes

By Vijay Daundkar

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney John S. Leonardo of the District of Arizona and Inspector in charge Gary Barksdale of the Criminal Investigation Group of the U.S. Postal Inspection Service announced the arrest of Alex Papakyriakou, an Arizona shopping center developer. He was charged with fraud and bankruptcy. He allegedly concealed his control of approximately $17 million in assets.

Alex Papakyriakou, aka Alex Papas, 57 of Phoenix, Arizona was indicted in the District of Shopping CenterArizona with eight counts of bank fraud, one count of conspiracy to commit bankruptcy related offenses, four counts of concealing assets in bankruptcy, one count of making a false oath in bankruptcy and three counts of falsification of records in bankruptcy.

Papas and a now deceased business partner organized over 200 limited liability companies from 1997 to 2008 to develop shopping centers and other real estate projects in Arizona and elsewhere according to the allegations in the indictment. The project was funded by approximately $150 million from investors and $250 million in bank loans. Papas is alleged to have created Cobea Associates, LLC (Cobea), which is nominally owned by his sister in South Africa in order to shield his valuable family assets from creditors and investors. Actually Papas was the one who operated and controlled it. He then allegedly transferred title of his assets to Cobea, including a luxurious home in Paradise Valley, Arizona, a vacation beach house and a condominium in Laguna Beach, California, and a business entity in Scottsdale, Arizona, which bought and sold expensive vintage collector automobiles.

Papas also allegedly mislead many banks regarding the transfer of the assets and his financial condition to both obtain new loans and extend existing loans secured by his assets. He also filed for bankruptcy in 2011. He claimed that he had less than $1 million in assets and over $144 million in liabilities, while allegedly concealing and denying his control of the millions of dollars in assets he transferred to Cobea.

Criminal Investigations Group of the U.S. Postal Inspection Service is investigating the case. Senior Litigation Counsel Jack Patrick and Trial Attorney Sarah Hall of the Criminal Division’s Fraud Sections are prosecuting the case where as Assistant U.S. Attorney Raymond Woo of the District of Arizona is assisting them.

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Former Officers of Bank Charged with Disclosure Fraud

By Vijay Daundkar

Four members of Wilmington Trust were charged with fraud by the Securities and Exchange Commission for intentionally understating loan dues during the financial crisis. M&T Bank acquired the former Delaware based bank holding company. It also paid $18.5 million in September 2014 to settle related SEC charges of improper accounting and disclosure fraud.

According to the complaint filed in federal district court in Wilmington, Delaware by the Wilmington TrustSEC, the four participated in a scheme to mask the impact of real estate market declines on the bank’s portfolio of commercial real estate loans. They violated the requirement to fully disclose the amount of loans that are 90 or more days past due by improperly excluding hundreds of millions of dollars of past due real estate loans from financial reports filed by Wilmington Trust in 2009 and 2010.

“Corporate officials bear important responsibility for ensuring that corporate filings provide the investing public with accurate information about the company’s financial condition.  We allege these defendants doctored a key financial metric to make it appear to investors that the bank was financially sound, when the reality was quite the contrary,” Andrew M. Calamari, Director of the SEC’s New York Regional Office said.

Former Chief Financial Officer of the bank, David R. Gibson, former Chief Operating Officer and President Robert V.A. Harra, former Controller Kevyn N. Rakowski, and former Chief Credit Officer William B. North are also named in the complaint. According to the complaint, approximately $351 million of matured loans that were 90 days or more past due were omitted by Gibson, Rakowski, and North.

The complaint also alleges that the Gibson, Rakowski and North conspired to substantially misreport past due loans that fall under this category in the first half of 2010. Gibson is also accused of substantially understating the amount of non-accruing loans in Wilmington Trust’s portfolio in the third quarter of 2009 and the bank’s loan loss provision and allowance for loan losses in the fourth quarter of 2009. Gibson, Harra, Rakowski and North are each charged with violating or aiding and abetting violations of the antifraud provisions of the federal securities laws. The SEC wants to have all four of them return the alleged ill-gotten gains with interest and civil monetary penalties. It is also seeking to have Gibson and Harra barred from serving as corporate officers and directors.

Meanwhile, criminal charges were also announced against  Rakowski and North by the U.S. Attorney’s Office for the District of Delaware. Margaret Spillane, James Addison, and Thomas P. Smith, Jr. of the New York Regional Office conducted the SEC investigation. The SEC also appreciated the assistance of the U.S. Attorney’s Office of the Special Inspector General for the Troubled Asset Relief Program.

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Real Estate Developer, Others Indicted in $6.7 M Loan Fraud

By Ogozi John

A real estate developer, his wife, and an accomplice, have been arrested and arraigned before a U.S. District Court on a 39-count charge of conspiracy.

According to the indictment, Ray Mubarak, 54, of Knoxville, Tenn., Dianna Mubarak, 52, Ray Mubarakof Knoxville, Tenn., and Blythe Bond Sanders, III, 35, of Norris, Tenn., were allegedly involved in a conspiracy that defrauded five banks of more than $6.7 million.

In a statement by Assistant U.S. Attorney Matthew Morris, it is alleged that Mubarak and his wife forged several documents that included tax forms and financial statements, which they submitted to banks for the receipt of loans and extended lines of credit. One line of credit obtained from Pinnacle Bank in Nashville totalled about $1.5 million.

Mubarak used two of his companies; Mubarak Properties and Tennessee Mortgage Connections to convince the banks that he needed these loans and lines of credit to enable him to purchase and make repairs to homes and real estate.

“Rather than using loan proceeds that defendant Ray M. Mubarak obtained from (the banks) for the reasons that he had stated and for which the loans had been approved, (he) used loan proceeds from loan payments, cash withdrawals and deposits into a Scottrade personal investment account, paying gambling debts and purchasing vehicles,” said Morris.

Blythe, a realtor, helped Mubarak in preparing loan documents “knowing that the said loan closing documents were false and fraudulent,” the indictment stated.

All three accused persons have pleaded not guilty to the charges before U.S. Magistrate Judge Bruce Guyton.

Stephen Johnson, Mubarak’s attorney, said: “Mr. Mubarak entered a plea of not guilty and we look forward to continuing to assist him in this matter.”

Trial in the case has been scheduled for May 5.

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Convicted Sacramento Businessman to Pay Millions in Restitution to Investors

By Ogozi John

At last, victims of the decade-long Ponzi scheme perpetrated by the now convicted Sacramento-based businessman, Deepal Wannakuwatte will finally have some reprieve, as a federal judge has ordered that he pays millions of dollars in restitution to the victims.

For more than 10 years, Wannakuwatte used several false claims to deceive his investors Deepal Wannakuwatteand lenders that they were putting in funds to support the growth and expansion of his companies. He succeeded in fraudulently obtaining more than $230 million from at least 150 victims that included individuals, businesses, government agencies and financial institutions.

It took more than one year of painstaking investigations by the FBI, Internal Revenue Service Criminal Investigation and the Department of Veterans Affairs Office of Inspector General, for law enforcement to finally unravel how the scheme worked.

Wannakuwatte told his victims that his companies, International Manufacturing Group (IMG) and Relyaid Global Health Care were doing business worth tens of millions of dollars in the manufacture and sales of latex gloves to federal agencies like the Department of Veterans Affairs (VA).

Wannakuwatte then offered several bogus high-yield investment opportunities to the investors and lenders, most of which were tied to his ‘juicy’ contract with the VA.

Although, IMG which had been in operation for more than 25 years actually had a business contract from the VA, it was worth about $25,000 a year. IMG had been running on huge losses for several years and Wannakuwatte was barely keeping the company afloat with proceeds of the scheme.

He mixed several false and authentic documents, overstated personal and business income, and set up conference calls between himself, investors and a fake representative of the VA, all in a bid to convince his victims to lend him money.

Initially, Wannakuwatte was able to make payments to some of the investors with the proceeds from the other businesses that he diverted their investments into, but he could not sustain these payments, as many of the investors began to suffer devastating losses, while Wannakuwatte bought luxury homes, vehicles, airplanes and even a professional tennis team.

Wannakuwatte, who pleaded guilty last year, is currently serving a 20-year sentence in a federal prison from where he has been ordered to pay millions in restitution to victims of his fraud scheme.

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Two Indicted in Multimillion Dollar Commercial Loan Fraud

By Vijay Daundkar

Abolghasseni “Abe” Alizadeh, 56, of Granite Bay, and Mary Sur Weaver, 62, of Roseville were today indicted in a 21 count indictment. They are charged with various counts of mail fraud, wire fraud and bank fraud. According to the announcement made today by the United States Attorney Benjamin B. Wagner, they are involved in various schemes that defrauded lenders in large commercial real estate transactions between 2004 and 2008.

Alizadeh is a property developer and was formerly the principal partner in Kobra Abe AlizadehProperties. The company owned several commercial real estate properties in Northern California. He also owned numerous restaurants, which included Jack in the Box, TGI Fridays, Sonic Burger, Qudoba Mexican Grills as well as other well known restaurants in the region.

Alizadeh allegedly owed $1.5 million in delinquent state taxes when a local franchise closed temporarily due to unpaid taxes in early 2009.  The local franchise restaurant is still owned officially by Kobra Propertise according to the Nevada County Tax Assessor’s office.  A representative of Kobra Properties said that the Jack in the Box restaurants will soon reopen under protection from a new Chapter 11 bankruptcy filing. Kobra Properties and several other entities owned by Alizadeh filed for bankruptcy in 2008. His total assets had an estimated value of $1 billion at one point. The other accomplice 62 year old Mary Sur Weaver was working as an escrow officer with Placer Title Company.

According to the court indictment, Alizadeh and Weaver hatched a conspiracy to get loans at inflated amounts on commercial and residential real estate. Alizadeh forged documents to carry out their plans. He would submit false information to federally insured banks to make it appear that he was buying the properties for a much higher price than the actual purchase price of the properties. He would often alter purchase contracts for million-dollar property purchases for that purpose. The court documents show that Weaver helped Alizadeh in his illegal activities in various ways. Weaver took money from other clients and temporarily moved the funds into accounts controlled by Alizadeh.

The case was investigated by the Federal Bureau of Investigation, the Criminal Investigation wing of the Internal Revenue Service and Federal Deposit Insurance Corporation Office of Inspector General. Assistant United States Attorneys Michael D. Anderson and Heiko P. Coppola are prosecuting the case. Alizadeh and Weaver are facing a maximum of 30 years in prison and a $1 million fine for each count.

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Alabama One CU Lending Fraud

By Vijay Daundkar

According to sources familiar with the situation at Alabama One Credit Union, the NCUSIF and NCUA may soon face the biggest regulatory failure since the corporate credit union meltdown in 2008 and 2009. The Tuscaloosa based $603 million dollar cooperative is the eighth largest in Alabama by asset size.

A federal Jury indicted Danny Ray Butler, a long-time member of the credit union in Alabama One Credit UnionOctober 2013 in its 51-count indictment. With that the legal problems for the $603 million dollar cooperative started. Butler pleaded guilty in February 2014 and went to federal prison in Talladega, Ala., in September 2014.  The credit union has been saying that the conspiracy did not cause any losses to them.

Members started raising questions about the loans Butler was receiving from the credit union and some of them started to file suits over the losses they suffered because of the loans made to Butler in their names. As of now six members of the credit union have come forth to file complaints against the credit union. Alabama One is blaming it on some of the employees who, according to them committed fraud when they persuaded the members to make business loans to help Butler. Though two of the cases have almost been settled, five cases are active and lot more are expected to come up. Both the Alabama Credit Union and NCUA have refused to comment upon the issue, saying that they don’t comment on supervisory issues.

Jerry and Brenda Griffin joined Alabama One in 1976 according to their complaint. They made it their primary financial institution in 2004 and consolidated about $2 million in personal and business assets with the credit union.

Danny Ray Butler and Griffin met in 2009, and started business dealings in 2010 when Tammy Ewing, Alabama One’s manager of business lending, allegedly approached Griffin with a business opportunity. Ewing told Griffin that Alabama One could not give Butler a business loan that he needs because the credit union was prohibited from making commercial loans. According to the complaint, “Ewing also represented to Griffin that he could make a higher rate of return than he could receive with his monetary assets held in Alabama One, Ewing also represented to Griffin that she (Ewing) would complete the paperwork and Griffin would loan Butler the money. Ewing completed an unsecured note, loaning four hundred and fifty thousand dollars ($450,000.00) from Jerry Griffin to Danny Butler.” Griffin secured a six-month balloon not to fund the transaction, which was secured with a certificate deposit account with Alabama One.

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Former Credit Union Officers Plead Guilty to Bank Fraud

By Vijay Daundkar

Tino Ninotti and Jason Anthony, both retired police officers, have pleaded guilty to one count each of conspiracy to commit bank fraud according to the sources. Sentencing will take place on August 17. Ninotti and Anthony were both part of the $38 million Wilkes-Barre City Employees Federal Credit Union. Federal prosecutors dropped bank fraud charges against Tino Ninotti in exchange for the guilty pleas. If Ninotti and Anthony accept the responsibility for their actions, the judge will also recommend a reduced sentence for both of them.

Ninotti fraudulently obtained a $25,086 car loan by using another credit union member’s Jason Anthonyname. The other accomplice Jason Anthony forged an individual’s signature to secure a $7,159 credit union loan according to the federal prosecutors.  They both entered their pleas before U.S. District Judge A. Richard Caputo. They were reminded by the judge that they face maximum of 30 years in prison. Both Ninotti and Anthony also gave up their right to appeal their impending sentences, which their lawyers said they felt was fair.

The prosecutors told the court that city towing contractor Leo A. Glodzik III gave Ninotti a fake vehicle identification number that he provided to the credit union and also forged his brother’s name on the loan application. “Mr. Ninotti had no intention of purchasing the truck, nor did the owner have any intention of selling it,” the Assistant U.S. Attorney Michelle Olshefski told the court.

Magda who allegedly signed a loan document as a witness to a signature of an individual who did not actually sign the documents according to the Federal prosecutors, has pleaded not guilty to bank fraud and conspiracy to commit bank fraud charges. She is also believed to be aware of the fact that co-defendant Jason Anthony had forged the individual’s signature to obtain a $7,159 credit union loan. Both Glodzik and Magda will stand trial on June 15, according to court documents.

“Regardless of sentence, (Anthony) has said he would accept whatever sentence is handed down,” his lawyer Joseph Nocito said. Both Ninotti and Anthony will also be required to submit to interviews and testifying before future grand juries and in trial. “Mr. Ninotti has cooperated from the very beginning of the investigation and he intends to follow through with that cooperation,” his attorney, Demetrius Fannick said.

 

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JP Morgan Investment Adviser Indicted for $20 Million Fraud

By Ogozi John

According to a release by the office of the U.S. Attorney for the Southern District of New York, an investment adviser, while working at JP Morgan Chase, has been charged in a scheme that defrauded his clients of more than $20 million.

Michael Oppenheim, 48, of Livingston, NJ, is facing charges of wire fraud, investment JPMorgan Chaseadviser fraud, investment fraud and embezzlement. The federal Securities and Exchange Commission have also brought civil charges against Oppenheim.

In a statement, U.S. Attorney Preet Bharara said that Oppenheim sustained this fraud scheme for four years, starting in March 2011 until last month when it was discovered and he was fired from his job. He lied and misappropriated about $20 million belonging to at least seven clients, using their money to finance his home loan, fund his online trading and to pay for other personal expenses.

Oppenheim allegedly told the clients that the funds were being invested in low-risk municipal bonds when he had actually deposited the money into bank accounts that he controlled. Authorities said he also withdrew the money without informing the clients and he then engaged in creating counterfeit documents in order to conceal the fraud.

Oppenheim, who is now being held on a $1 million bail, is facing several decades in prison and more than $5 million in fines, if found guilty of the alleged crimes.

Oppenheim’s attorney, Richard Gamburg said his client will be filing a not guilty plea and that he expects him to be released soon.

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