FBI Links Fraudulent Appraisers with Terrorism and Organized Crime
This article is the third in a four part series on valuation fraud and the appraiser.
By Terrie Petree
On March 12, 2007, the FBI’s official internet portal, www.fbi.gov, featured two prominent pictures on its homepage; the first was a close-up photo of Osama Bin Laden, the second was a picture with a “For Sale” sign in the foreground and a well kept, two story, red brick home in the background. Above Osama Bin Laden’s picture was the caption, “Most Wanted Terrorist.” Above the picture of the red brick home was the caption, “Mortgage Fraud: New Partnership to Combat Problem.” There they were, side by side: terrorism and mortgage fraud.
Equating mortgage fraud with terrorism is not an FBI scare tactic. In 2005, a grand jury charged Tarik Hamdi with mortgage and immigration fraud, but it’s not Hamdi’s white collar crimes that raise the most serious suspicions. In 1998, Hamdi delivered a satellite phone battery to Afghanistan in order to coordinate an interview between ABC News and Osama Bin Laden. The phone is suspected to have been used to coordinate the 1998 U.S. Embassy bombings in Kenya and Tanzania. Additionally, Hamdi and Bin Laden appear together as co-defendants in Burlingame, et al v. Laden, et al, the case filed against the alleged perpetrators of the 9/11 attacks. Hamdi has not been held on any of the charges because he left the United States before he could be arrested.
The fact that Hamdi is suspected of both mortgage fraud and terrorist activity might seem coincidental if not for the rash of fraud-to-pay-for-terrorism schemes in Dearborn, Michigan. A string of mortgage fraud crimes led federal authorities to investigate, and subsequently charge, Nemr Ali Rahal and Mahmoud Youssef Kourani for their involvement in fraudulent deals that generated funds for Hezbollah. Rahal pleaded guilty to immigration and bank fraud as part of a plea deal that spared him from being charged for supporting terrorist activities by fraudulently obtaining more than $500,000 for Hezbollah. On March 1, 2005, Kourani pleaded guilty to Conspiracy to Provide Material Support to Hizballah [Hezbollah] after transferring more than $200,000 illegally generated through real estate fraud to his brother, the chief of military security in southern Lebanon. Also in Dearborn, Ahmad and Musa Jebril were convicted of mortgage fraud in June 2005. Together, the two men defrauded banks and people of up to $650,000 while actively supporting Hamas. (After the 1995 car bombing in Riyadh, Saudi Arabia that killed four Americans, Ahmad and Musa Jebril faxed a statement to CNN voicing their support for the attack.)
Appraisers John Nicolo, Juan Carlos Suarez, and Dennis Wiese, Jr., are not terrorists. They have no known links to terrorist activity, but their alleged involvement in fraudulent schemes means that they are being prosecuted under the same statutes that condemn terrorists and mobsters to long prison terms. Though mortgage fraud is not specifically enumerated as a crime, under Title 18 of the U.S. Code, depending on the way the crime was committed, it can be prosecuted as separate counts of mail, wire, bank fraud, and/or violation of the Racketeering Influenced and Corrupt Organizations Act (RICO). RICO is a subsection of Title 18 aimed at increasing the penalties for crimes that may contribute to racketeering and organized crime—the well-known mob boss, John J. Gotti, and the ex-military dictator of Panama, Manuel Noriega, were both charged with and convicted of racketeering.
How did Nicolo, Suarez, and Wiese fall in with Hamas, Hezbollah and John J. Gotti? Under Title 18, fraud is fraud and these three appraisers may be, or have been, convicted under the same statute that targets fraud-for-terrorism and sent Gotti to prison for life. In United States v. John Nicolo, the government alleges that Nicolo paid kickbacks to employees of Eastman Kodak Company and the city of Greece, New York in return for their continued use of his appraisal services. John Nicolo is charged with three counts of conspiracy to commit mail and wire fraud and seventeen counts of mail and wire fraud in addition to various counts of money laundering and other charges. If convicted, Nicolo will face up to twenty years in prison for the charges of mail fraud alone.
In April 2006, Appraiser Dennis Wiese, Jr. pleaded guilty to bank fraud and mail fraud for “fraudulently inflating [properties] to substantially higher than their reasonable value,” according to Assistant U.S. Attorney Timothy bass. Wiese will be sentenced in May, but because bank fraud involving a federally insured bank is a federal crime, Wiese will face up to thirty years imprisonment. “We have seen in the recent past some amendments in fraud cases that heighten penalties. The fines for bank fraud are up to $1,000,000,” Bass said.
In fact, in August 2006 appraiser Juan Carlos Suarez was fined $1,051,537.20 when found guilty for one count of conspiracy to commit bank and mail fraud, two counts of bank fraud and three counts of mail fraud. In addition to the fine, Suarez is currently serving a forty-one month prison sentence. If not for his clean record prior to the fraud convictions, Suarez may have received more prison time because prosecutors are becoming increasingly aware of the vital role a fraudulent appraisal plays in an overall mortgage fraud scheme. “In our case, Mr. Suarez was an integral part of the fraud in our opinion. He wasn’t the organizer, but the organizer needed his help. He was an integral part,” said Assistant U.S. Attorney Lois Foster-Steers.
For appraisers who dabble in questionable numbers, or for those appraisers who up the value of a property every now and then just to keep a loyal lender happy, the links between mortgage fraud and terrorism, and the convictions of Suarez and Wiese ought to be a warning. If not dissuaded by the prospect of serving time for RICO violations or for abetting terrorism, appraisers might also take note of the FBI’s new anti-mortgage fraud endeavors. In order to fight what the FBI calls the “growing scourge of mortgage fraud,” the bureau officially announced its partnership with the Mortgage Banking Association (MBA) on March 8, 2007. The immediate result of the partnership was the release of the “Mortgage Fraud Warning Notice” intended to be a “proactive means of educating consumers and mortgage-lending professionals of the penalties and consequences of this criminal activity,” as stated in the FBI’s March 8, 2007 press release.
The language of the “Mortgage Fraud Warning Notice” lumps appraisers into the “mortgage-lending professionals” category. In the past, this convenient catch-all has sometimes shielded appraisers from stiff penalties. Cases like United States v. Nicolo in which the appraiser allegedly pursued or instigated the fraud are rare. When it comes to mortgage fraud schemes, appraisers are usually billed as minor, unwitting players.
“They [appraisers] do view it as 'being caught up' in the situation. It reminds me of when my mother said that she 'found herself pregnant.' It comes across as so passive, but we usually don't commit felonies passively. Agreeing to inflate an appraisal in order to obtain a steady source of business is fraud, and that’s what appraisers go to jail for. They go to jail because they blur the lines for their best customers,” said Rachel Dollar, attorney, Certified Mortgage Banker, and nationally recognized speaker on mortgage fraud.
The FBI is wise to the pseudo passivity of appraisers involved in fraud schemes. “Fraudulent appraisers are vital to any mortgage fraud scheme. The FBI views the appraiser as an equal partner,” said FBI spokesperson Steve Kodak.
The press release that accompanied the issuance of the “Mortgage Fraud Warning Notice” and announced the FBI/MBA partnership includes appraisers in its specific breakdown of who the FBI plans to investigate. FBI mortgage fraud investigations will focus on “large-scale frauds perpetrated by organized crime and industry insiders, including attorneys, brokers, appraisers, and realtors.” There it is again; like mortgage fraud and Osama Bin Laden sharing homepage space, the FBI puts crooked appraisers in the same category as organized crime on their Web site.
The FBI’s site is meant to teach and warn the American public about serious crimes. Visitors to the site are invited to take a close look at photos of America’s ten most wanted criminals; visitors are asked to inform themselves about the threat of chemical, biological and radioactive warfare; visitors are encouraged to understand the perils and devastation of human trafficking. And, as of mid-March, visitors to the site are warned that “Equity skimming, property flipping, straw buyers, [and] inflated appraisals…are some of the fraud schemes criminals are using to take advantage of a $2.37 trillion mortgage market in the United States.”
“We’re taking it [mortgage fraud] seriously. This is our commitment,” Kodak said.
