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Feds indict 'mortgage-elimination' scheme creators... Dorean Group
| | Monday, October 10, 2005 @ 09:45 AM EDT
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Contributed by: tony mandravellos
tony mandravellos Properties
Read more archived articles about Law and Legal Issues
Duo faces 46-count federal indictment;
FBI continues investigation
Friday, September 23, 2005
By Glenn Roberts Jr.
Inman News
A federal grand jury in Oakland, Calif., has indicted the promoters of a national mortgage-elimination scheme on a series of charges, including mail fraud, bank fraud and conspiracy to commit wire fraud, mail fraud and bank fraud, the U.S. Attorney's Office for the Northern District of California and the FBI announced this week.
The 46-count indictment against Dale Scott Heineman, 45, of Union City, Calif., and Kurt F. Johnson, 42, of Sunnyvale, Calif., could mean a maximum penalty of millions of dollars in fines and life in prison for the duo, if they are found guilty.
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(Inman News earlier this year reported a three-part series on Heineman and Johnson's operation. Click here to read Part 1, Part 2 and Part 3.)
In a statement Thursday, the U.S. Attorney's Office announced that the charges in the indictment relate to 17 properties in California, Nevada, Texas, North Carolina, Florida, Colorado, Washington, Idaho and South Carolina with a value of more than $5 million.
Heineman and Johnson are already in custody in Utah, where both face a series of felony charges filed by state authorities.
Johnson, who dodged arrest for several weeks, earlier served a prison sentence for a securities fraud conviction, and he faces communications fraud, racketeering, theft, false or fraudulent insurance act and conspiracy charges in Utah – a total of 10 counts. Heineman is facing 13 counts in that state, including communications fraud, racketeering, unlawful dealing of property by a fiduciary, theft, fraudulent handling of recordable writings and conspiracy.
Doug LeDoux, a fraud investigator for the Utah Insurance Fraud Division, said today that Utah officials are aware of the federal charges. "We have been in contact with the U.S. Attorney's Office and are cooperating in every way with them," he said.
The Utah case could be deferred to the federal case, he said, "and it is likely that a larger group of victims can be addressed in that way. However, we have not seen the federal warrants yet and so will proceed with our case on Sept. 27."
Brennon Fuelling, a criminal defense lawyer in Salt Lake City who is reportedly representing Heineman, could not be reached for comment today. There is a hearing date scheduled for Oct. 6 in California relating to the federal case against Heineman and Johnson.
"The FBI is continuing to investigate more than 480 properties throughout 35 states with a potential value of $88 million in loans that may have been affected by this alleged scheme. The FBI is investigating properties in 19 California counties affected by this alleged scheme," according to the U.S. Attorney's Office announcement.
Among the states that are a part of the ongoing investigation: Alabama, Alaska, Arizona, California, Colorado, Florida, Georgia, Hawaii, Idaho, Illinois, Iowa, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, Texas, Utah, Virginia, Washington, and Wisconsin.
Earlier court filings by the U.S. Attorney's Office for the Northern District of California stated that the Dorean Group's operators "are continuously alienating or disposing of funds they have obtained as a result of...fraudulent practices," and there are reports that $2.8 million was deposited into one Dorean Group bank account over the course of a year, with at least $230,000 wired to a bank account in Latvia. FBI officials have raided Dorean Group offices on more than one occasion, seizing documents and freezing bank accounts.
And the North Carolina Attorney General's Office filed a lawsuit against the group in an effort to shut down its activities in that state.
The Dorean Group had earlier maintained an office in Union City, Calif.
Inman News has earlier reported about the extensive network of Web sites and online chatter relating to the Dorean Group and its affiliates, which purported to enter homeowners into a mortgage-elimination process in exchange for a flat fee of several thousand dollars.
According to Web site descriptions, the Dorean Group was at the center of a process through which homeowners would set up Dorean Group principals as trustees for their properties. The Dorean Group principals would then, through creative paperwork filings with county property agencies, attempt to show that a mortgage debt no longer existed on the properties.
Real estate industry lawyers have said that the process put homeowners at risk of foreclosure, fraud or other problems relating to a clouded title for their properties.
According to the U.S. Attorney's Office, homeowners allegedly paid a fee ranging from $1,000 to $3,000 per loan that they wished to enter into the process. The homeowners then allegedly transferred title of their properties to a trust formed with the Dorean Group, according to the office.
The Dorean Group then sent a package to lenders demanding that lenders prove the validity of their loan within 10 days -- if the lender did not respond in that time, the Dorean Group filed a document on the title "falsely claiming that they are acting as the agent/attorney-in-fact for the lender," the office alleges.
Next, the Dorean Group allegedly filed documents relating to the property title, falsely claiming that the title was fully paid. Web site descriptions have also described a process through which a second loan would be sought for the same property, with proceeds of that loan largely going to the Dorean Group and its affiliates and a portion going to the homeowner. Real estate industry professionals, including at least one mortgage broker and real estate agent, are among the Dorean Group's promoters.
According to a statement by the U.S. Attorney's Office, the Dorean Group scheme allegedly caused home loans "to falsely appear satisfied when they actually had not been paid. With this fraudulently generated free and clear title, certain clients, at the direction of the Dorean Group, obtained hundreds of thousands of dollars in home equity loans from independent lenders."
Dorean Group promoters have used Internet discussion groups, www.Craigslist.org, e-mail, conference calls, conventions and dozens of Web sites to advertise the mortgage-elimination scheme. Among the names associated with The Dorean Group are Capital Creation Resource and DTE Financial. Several Web sites contain information alleging flaws, deception and conspiracy in the federal banking and monetary system.
The U.S. Attorney's Office indictment names Heineman, Johnson, The Dorean Group, The Oxford Trust, Baylor Trust and Universal Trust Services. "The Dorean Group is an unincorporated, fictitious entity which operates a purported debt-elimination program that is unlicensed to do business in the state of California," the indictment alleges.
Johnson and Heineman have said that they are not legal experts and were exploiting a loophole in the financial system. A blog, http://thedoreangroup.blogspot.com/, was purportedly set up by Johnson and has remained active even after his arrest.
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