Andrew Michael Phalen was sentenced today to a year in jail and five years of formal probation today for his role in a scam that offered home loan modification assistance to struggling mortgage holders across the country.
But four of the Mission Viejo 25-year-old's cohorts are looking at much more serious prison time for the scheme that relied on letters forged with CitiFinancial or CitiMortgage logos.
Phalen's co-defendants are: Jacob John Cunningham, 25, of Irvine; Justin Dennis Koelle, 22, of Costa Mesa; Dominic Adam Nolan, 31, of Irvine; and John D. Silva, 27, of Irvine. According to the Orange County District Attorney's office (OCDA) Phalen was convicted of--and the others are accused of--the following:
Between January 2009 and March 2012, they created numerous fraudulent loan modification businesses including CSFA Home Solutions, Mortgage Solution Specialists, Inc., CS & Associates, National Mortgage Relief Center, National Mortgage Relief Center, NMRC, NMRC Inc., N.M.R.C. Inc., Allied Home Servicing and Allied Loan Servicing.
All five allegedly sent promotional letters to people throughout the U.S. with offers to restructure their home loans, with references to the individual homeowner's specific lender and principal balance. Those who signed on were charged upfront fees for loan modification services, despite California having outlawed such charges on Oct. 11, 2009.
Those who called a number on the letter were told they could get a complete refund of the fee if their loan was not modified, something that was unlikely, or so it seemed, because the company boasted a 95 to 100 percent success rate.
But Phalen pleaded guilty to, and the others are accused of, taking the money people paid without securing loan modifications, and of failing to return or refund the fees.To hide the thefts, company names, addresses and phone numbers constantly changed.
By late December 2011, more than 100 victims from California and other states had submitted complaints against the companies to various law enforcement agencies and better business bureaus, according to an OCDA statement.
It was then that Cunningham, Nolan and Silva are accused of launching a new fraud. Forged "Conditional Approval" letters with CitiFinancial or CitiMortgage logos in the letterhead were sent to distressed homeowners offered interest rates of 2.8 percent or lower to refinance their loans. "Escrow Instructions" attached to the letters directed the homeowner to deposit between $3,500 and $4,600 directly into the bank accounts of the accused.
Of course, Cunningham, Nolan and Silva had no real affiliation to CitiFinancial or CitiMortgage, and they allegedly made no efforts to secure loans through those financial institutions.
Losses are currently pegged at more than $200,000, but authorities fear other victims in California and other states have not come forward.
An investigation led to all five suspects being arrested in March. Phalen pleaded guilty May 16 to one felony count of conspiracy to charge illegal upfront fees and one felony count of conspiracy to commit grand theft. Besides the jail time, he is prohibited from engaging in similar activities during his probation.
Silva is charged with 23 felony counts of grand theft by false pretenses, two felony counts of theft from an elder, and one felony count each of conspiracy to commit forgery, conspiracy to charge illegal upfront fees, and money laundering. If convicted on all counts, he faces up to 17 years and four months in state prison.
Facing the same maximum sentence is Cunningham, who was charged with 14 felony counts of grand theft by false pretenses and one felony count each of conspiracy to charge illegal upfront fees, conspiracy to commit forgery, and money laundering.
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Nolan was hit with 14 felony counts of grand theft by false pretenses, and one felony count each of conspiracy to commit forgery, conspiracy to charge illegal upfront fees, and money laundering. He's looking at maximum 15 years and four months as a convict.
Koelle faces seven felony counts of grand theft by false pretenses, a felony count of conspiracy to charge illegal upfront fees and, with a conviction, up to 10 years and eight months in prison.
All four have a pre-trial hearing scheduled Monday in Santa Ana.