John Hancock, played by Will Smith, is not your typical superhero, and as you’ll see, neither is Columbia Pictures.

Whenever and wherever Hancock attempts to stop a crime or save someone, he causes mass bedlam and terror. After an awful business presentation, Public Relations stiff Ray Embrey, played by Jason Bateman–who is always trying to convince companies, as a sign of their good nature, to give away their products and services to needy people–somehow manages to get his car stuck in the path of an oncoming train.

It’s against this backdrop that Hancock, the misunderstood superhero, and Embrey, the good-hearted public relations executive, meet; and it also serves as the inspiration for Columbia Pictures’ own PR stunt, the “Hancock Helping Hand Mortgage Payoff Contest.”

According to Steve Elzer, Senior Vice President of Media Relations at Columbia Pictures, the motion picture company will pay off the mortgage debt of one deserving family, with a grand prize worth up to $360,000. But according to the Contest website, you are ineligible if your home is currently subject to any tax, mechanic or another type of lien, foreclosure, or a judgment.

Interesting… so what Columbia Pictures is really saying is this… we’re totally psyched about our movie, we want you to see it, and just like our ill-conceived superhero, we’re going to piss all over you while attempting to help you. Are you kidding me? (To see the official contest rules for yourself, visit the Helping Hand Mortgage Payoff Contest rules page.)

Just as insulting is the fact that entrants are judged on a measly 200-word essay (authenticity counts for 30%, grammar 10%, clarity of thought 20%, presentation 10%, articulation 10%, passion 10%, and personality 10%). I don’t know about anyone else, but to me the notion of someone authentically and passionately expressing a need as great as having their mortgage paid off in 200-words or less is absurd and downright laughable.

Hey, Columbia Pictures and your parent company, Sony Pictures… wake up:

1. We live in a country where a full 2% of all existing home mortgages are in foreclosure because of fraud and institutional greed (with more foreclosures on the way) and you say you want to lend a helping hand but not to those who need it most?
2. Come on… get real; you wouldn’t be running this contest in the first place were it not for the current mortgage meltdown and foreclosure crisis.
3. While I have no doubt a “worthy” homeowner will benefit from your PR stunt, the most deserving of the lot will not even be afforded the benefit of the doubt that created your moronic eligibility requirement in the first place.

Next time, Columbia/Sony, do us all a favor by sticking to what you do best… making movies, some of them disappointing, just like the Hancock Helping Hand Mortgage Payoff Contest.

More than two years agp, I wrote a blog entry titled “Call To Action: Automated Notification Systems Are Needed for Change in Status of Property Ownership.” Now, someone’s finally doing something about it. But before I go there, take a look what I wrote (in part) back on June 22 of 2006:

Here’s a better approach to stopping unscrupulous mortgage ‘rescue’ firms and others who prey off the ignorance of unsuspecting homeowners: Just like they do in the credit scoring industry, start a national campaign aimed at getting homeowners to be more in tune with what their local government says is the ownership status of their property. How many times have you seen those advertisements on television for companies selling credit score monitoring services? As a result, more American’s know their credit score now than at any other time in history.

Local governments should act now to establish notification systems to alert homeowners of any changes to the ownership rights of their property. How simple would it be for an automated system to be kicked into place once real estate-related documents are filed with the proper authorities? Pretty darned easy! If I can do it for the people who inquire about my real estate services (send them automated e-mail messages, that is), surely local government can procure a system that e-mails and snail-mails notification immediately upon any attempted change in status to real estate.

With the stakes being as high as they are, can we really afford not to have automated notification of the change of property ownership status in place?

Now, some two years later, word comes from the Dane County, Wisconsin, Register of Deeds that they just launched a free online service that affords consumers the ability to have their name monitored within the Register of Deeds office in order to track possible fraudulent activity. According to Kristi Chlebowski, Dane County’s current register of deeds, county residents are notified only when the name they have submitted to the new Property Fraud Alert system is found on a document recorded in the Register of Deeds office.

“Protecting consumers information and real estate property are our top priorities,” says Chlebowski. “While the Property Fraud Alert will not prevent fraud from happening, it will provide an early warning system that will allow our citizens to take appropriate actions should they deem possible fraud activity has occurred with their property.”

Flipping Frenzy salutes Kristi Chlebowski and the staff of the Dane County, Wisconsin, Register of Deeds office. Your Property Fraud Alert system is a step in the right direction!

In a highly unpublicized development, Wells Fargo Bank (NYSE: WFC) and one of Fidelity National Financial, Inc’s (NYSE: FNF) companies–the Ticor Title Agency of Arizona–agreed last week to pay over $4 million and $200k respectively for their roles in preparing and submitting false claims to the Federal Housing Administration (FHA).

According to the Office of the United States Attorney District of Arizona, Well Fargo Bank submitted more than 70 false claims to FHA under the pre-foreclosure sales program, and Ticor Title prepared inaccurate escrow documents which allowed lenders to submit false claims to the FHA. The U.S. Attorney for Arizona estimates loses of more than $2.1 million dollars as a result )$2,156,078.00 to be exact), and for their part, Wells Fargo Bank and Ticor Title deny any wrongdoing yet still agreed to pay $4,046,786 and $265,370 respectively.

Under certain circumstances, the FHA’s pre-foreclosure sales program allows homeowners with federally-insured loans to avoid foreclosures by listing their homes for sale. If a sales price is not enough to pay-off a loan, then the lender submits an insurance claim to the FHA, which will pay the lender the balance owing on the loan.

What’s most interesting about this case is that neither company–not Wells Fargo & Company (NYSE:WFC) or Ticor Title Agency’s parent company, Fidelity National Financial, Inc. (NYSE:FNF)–have any information about the settlement on either of their corporate websites. Moreover, none of the national news media outlets picked up on the story, and even the New York Stock Exchange’s (NYSE) own stock quote pages for each company makes no reference whatsoever to the development, which first broke 10 days ago, on the 20th of June.

In February of 2006, I posted a blog entry here on FlippingFrenzy.com about a real estate education-related offer that just seemed too good to be true. From my February 22, 2006, blog entry titled “Is This Offer Too Good To Be True?”:

According to the voice booming from my television, a woman from Colorado claims to be able to teach me how to take my last $10 and turn it into $10,000 or more using her real estate investing techniques. The narrator went on to say, and I’m paraphrasing here, “anyone can become a millionaire using Dwan’s system… let Dwan show you just how easy it is.”

Now, nearly two-and-a-half years later, proof may finally exist that Millionaire Mindset, LLC, and its owners–Bill and Dwan Bent-Twyford–and an advisor to the company, Sharon Restrepo–are running what is perhaps a very questionable business operation that may be taking advantage of customers.

Here is a letter I received just the other day from a former Millionaire Mindset customer (Gayle Bu of Georgia) who found our February 2006 post and wants to spread the word about her own experience in dealing with Bill Twyford, Dwan Bent-Twyford, and their advisor and friend (and now Dwan’s co-author), Sharon Restrepo:

On March 9, 2007, I invested $5,995.00 to be personally mentored by Bill and Dwan Bent-Twyford as part of their Millionaire Mindset “FastTrack” course. The “boot camp” I attended, where I learned about their real estate investing coaching services, was hosted by the Millionaire Mindset, LLC., a.k.a. The Investors Edge University, a.k.a. Financial Freedom Through Foreclosures. The course I paid for began around one month later, on April 16, 2007, and lasted for approximately one year (it included four modules – “Level I” thru “Level IV” — each encompassing seven weeks of once-a-week scheduled coaching calls plus unlimited coaching on-demand).

During their very compelling sales presentation, Bill and Dwan Bent-Twyford spoke about their huge success in real estate investing and how successful their students were. They promised unlimited daily coaching, which I–along with several other students–did not receive. What coaching I did receive was not “unlimited” and was not provided by Dwan Bent-Twyford as promised, but rather by an employee of their company–someone named Jayson Norris.

Long story short, I completed Level I of the program, but since my calls to the Millionaire Mindset office were often taking 72 hours or longer to be returned, were not daily as promised, and since I never received coaching from Dwan Bent-Twyford (and I received coaching from Bill Twyford only two or three times at most), I attempted to share my concerns with the Twyford’s and the Millionaire Mindset office.

I tried several times by email and phone to get a response from the Twyford’s as to if they were going to provide the coaching as promised and paid for, but my requests were ignored. They then ignored further requests from both myself and an attorney that I hired to look into the matter on my behalf, the Georgia Real Estate Investors Association (GaREIA), and even the Better Business Bureau (BBB). Despite the fact that they ended up with a poor rating with the BBB and that GaREIA is no longer endorsing them as speakers,Bill Twyford and Dwan Bent-Twyford remained non-responsive.

Editor’s Note: At this stage, Gayle decided to take Millionaire Mindset, LLC a.k.a. The Investors Edge, into small claims court in Gwinnett County Magistrate Court in Lawrenceville, GA (about 45 minutes north of Atlanta).

When a court date was set (4/3/08), the Twyford’s postponed it, and then did not appear at the re-scheduled hearing. This lead to a judgment in my favor on 4/17/08 in the amount of $7,682.59 (which is accruing interest at a rate of 8.25% per year).

Editor’s Note: A copy of the judgment against Dwan Bent-Twyford can be found here. Again, from Gayle…

On 4/25/08, my attorney sent a letter to Millionaire Mindset’s Colorado and Florida business addresses requesting payment in full within 10 days.

On 5/16/08, I sent a fax to Dwan Twyford’s home requesting payment.

On 6/9/08, after a year of non-communication from Bill and Dwan Bent-Twyford and Millionaire Mindset, LLC, I finally received communication from the company. Sharon Restrepo, Registered Agent of Millionaire Mindset, LLC, called me in response to a conversation I had with an online moderator at the Real Estate Exchange Forum on www.foreclosure.com. Sharon was appearing as a guest speaker on a foreclosure.com “Live Presentation” (delivered via the phone) and I had called Foreclosure.com to inform them of the judgment against Millionaire Mindset, LLC. For their part, Foreclosure.com asked Sharon to deal with the matter herself.

Sharon told me that she broke ties with Millionaire Mindset on October 1, 2006, and that it would appear that Dwan Bent-Twyford did not file the appropriate paperwork with the Florida Secretary of State’s office reflecting the change. She stated that she was not to blame as she was no longer part of the company. I recommended that she call Dwan Bent-Twyford, to which she stated that she does not have communication with the company anymore.

While I was inclined to believe her, my research since that 6/9/08 conversation indicates that Dwan Bent-Twyford and Sharon Restrepo co-authored a book that is being released later this month by Wiley Publishing entitled Short-Sale Pre-Foreclosure Investing: How to Buy “No-Equity” Properties Directly from the Bank — at Huge Discounts.

My research has also shown that Sharon Restrepo filed a 2007 For Profit Corporation Annual Report for a business entity called Piranha Properties, Inc. in May 2007 with her own and Dwan Bent-Twyford’s name on it.

Sharon, as co-founder of the Florida Real Estate Investors Association (FLREIA), also lists Dwan Bent-Twyford via 1234closures.com as an FLREIA Corporate Sponsor, and the May 2008 edition of the FLREIA newsletter lists The Investors Edge University (one of Millionaire Mindset, LLC’s known aliases) as a vendor.

Millionaire Mindset, LLC uses a street address of 711 Desparado Road, Bailey, Colorado, 80421, however, it is not registered with the Colorado Secretary of State’s office, but rather in Del Ray Beach, Florida, in the names of Dwan Bent and Sharon Restrepo at the address of Sharon’s other businesses — 32 SW 5th Avenue, Del Ray Beach, Florida.

I have since contacted the Florida Attorney General’s office. They will not launch an investigation until there are other complaints.

I have also contacted the Secretary of State in Colorado, Florida and New York, in addition to Dun & Bradstreet, Park County Court, and the City of Del Ray Beach (FL). Below is a summary of my research to date (sadly, it’s a never-ending maze):

Florida Secretary of State

• Millionaire Mindset, LLC is active (Sharon/Dwan). Filed 07 report.
• Piranha Properties (Sharon/Dwan). Filed 07 report.
• Financial Freedom Through Foreclosures (Sharon/Dwan). Active. Filed 07 report.
• 32 West Realty Inc (Sharon/Juan). Active. Filed 08 report.
• 32 West Financial Group (Sharon/Dwan). Dissolved in 2006.
• 32 West Realty, LLC (Sharon/Manthal Guhn). Dissolved in 2005.
• No matches for Bentford, The Investors Edge, Certified Investors Gear.

Colorado Secretary of State

• Dwan Bent has one current company – Bentford Investment Group. Formed 7/7/03 and incorporated by Corporate Creations International, Inc. — 941 Fourth Street, Miami Beach, FL, 33135. In good standing. 08 report filed.
• Bill Twyford has had the following companies:
  - Bill Twyford and Associates, LLC – dissolved in 2/05
  - JBLS Ventures – dissolved in 5/02
  - BK Ventures, LLC – dissolved in 11/04
  - Metrobrokers/Team Twyford, LLC – dissolved in 1/04
• No matches for Investors Edge, The Investors Edge, Financial Freedom Through Foreclosures, Certified Investors Gear, 32 West, Piranha, Bent-Twyford.

New York Department of State

• Sunshine Direct LLC – Active (this is the company that produces Dwan’s television infomercials).
• No matches for Millionaire Mindset, LLC or Financial Freedom Discoveries

Dun and Bradstreet

• Financial Freedom Through Foreclosures at 711 Desparado Road, CO. Active.
• Piranha Properties at 8782 NW 21st Ct, Coral Springs, FL. Active.
• 561-819-1900 (Sharon Restrepo) is shared by 3155 West Coast Realty Development (someone by the name of Charles Kelpsch), 21st Century Investors Inc. (Sharon and Juan Restrepo – active company, filed a report in 08), and Palm Beach Realty Consultants (Sharon was an officer, but it was dissolved in 07).
• No matches for Millionaire Mindset, LLC in Colorado or Florida, Financial Freedom through Foreclosures in Florida, 32 West Realty in Florida, Bentford Investment in Colorado or Florida, The Investors Edge in Colorado.

Park County, Colorado, Public Records

• Phone inquiry revealed that there is no property listed in Park County for Millionaire Mindset, The Investors Edge University, Financial Freedom Through Foreclosures or Bentford Investment, Bent, Bent-Twyford, or Twyford.
• Bill Twyford has a ’93 trailer at 702 Desparado Road (near 711 Desparado Road)
• Dwan Bent has a residential property at 702 Desparado Road (3,566 sq ft, 1982, land and house valued at $567,139). Bill Twyford purchased it from a trustee deed in the year 2000, it was transferred to James Bent in 2002 and Dwan’s name was then added.
• There are no vehicles, including leases under any of the above names.

City of Del Ray Beach, Florida

• No business licenses for Millionaire Mindset, 32 West Financial Group, Piranha Properties, Financial Freedom Through Foreclosures, 32 West Realty LLC. in Del Ray Beach. Active business license for 32 West Realty, Inc.

Sharon Restrepo

• Sharon is the co-founder of the Florida Real Estate Investors Association (FLREIA) and is currently doing several speaking appearances.
• She publishes REIP (Rewards Real Estate Investors Publication). There is a link for this publication on Bill and Dwan’s site - www.theieu.com.
• www.realestatesuccessmagazine.com – Run by Sharon and her husband Juan Restrepo.

Websites

• www.theieu.com - Bill and Dwan Bent-Twyford’s website. They reference Sharon and her husband Juan Restrepo as “Special Advisors” and there’s a large link back to the REIP publication on the homepage.
• www.1234closures.com – same site as above.
• www.millionairemindsetcollection.com. Dwan Bent-Twyford short sale system. Copyright 2007 Sunshine Direct (this just appears to be the promotional company for the website and videos).
• www.financialfreedomdiscoveries.com - Same site as above.

Dwan Bent published touring schedule for 2008:

• Denver, CO — June 18-20
• Chicago, IL — July 7-9
• Atlantic City, NJ — July 15-17
• Nashville, TN — July 30-Aug 1
• Dallas, TX — Sept 17-19
• Phoenix, AZ — Dec 10-12

According to an e-mail dated 6/14/08 Dwan promoted the Bruce Norton bus tour event at the 2008 Maryland Foreclosure Summit in Baltimore on June 20th (scroll down the page on www.marylandforeclosuresummit.com for more info).

I sincerely hope that by getting the word out, that others avoid the troubles and unfortunate financial issues that I have had to deal with as a result of signing up for the Twyford’s program.

Gayle Bu, Georgia USA

Thank you Gayle for your letter and for granting FlippingFrenzy.com permission to share it with our readers.

As one might suspect, there are many troubling things associated with Gayle’s experience with Millionaire Mindset, Bill Twyford, Dwan Bent-Twyford, and the Twyford’s advisor/friend, Sharon Restrepo. Among them:

• First and foremost, it’s a common marketing technique for get-rich-quick enterprises like Millionaire Mindset to make absurd claims about the availability of their key and titled personnel. Therefore, it’s not all that surprising that the company positioned Bill Twyford and Dwan Bent-Twyford as being available for unlimited coaching. Clearly, expectations where generated that the Twyford’s would be available—and I’m guessing that’s why so many people fall victim to “coaching” offers from the Bill Twyford’s, Dwan Bent-Twyford’s, and Millionaire Mindset’s of this world. When they’re on stage delivering their pitch to an audience full of people looking for answers, they sound quite convincing. And when they portray themselves as being available for personal and one-on-one coaching, and then fail to deliver, it’s no wonder the Gayle Bu’s of this world stand up and say, “Wait a Minute… what the heck’s going here?”
• Sharon Restrepo’s apparent role in all of this is very troubling as well. If indeed she claimed no ties to Dwan Bent-Twyford and Millionaire Mindset, she clearly misspoke, because as Gayle was able to learn through simple inquiries into public records and reviews of public websites, the facts seem to indicate otherwise. Why, for example, would Sharon Restrepo tell Gayle she had broken ties with Dwan Twyford and Millionaire Mindset back in October of 2006, when she was clearly in the process of writing a book with Dwan at the time she spoke with Gail?
• Looking a little further into Sharon Restrepo’s real estate-related interests, we are able to determine that despite being pitched as a “membership association,” the organization she co-founded with her husband (Juan Restrepo) and Dwan Bent-Twyford–the Florida Real Estate Investors Association–is nothing more than a for-profit business entity that plays off of the values associated with true nonprofit associations. Why should this matter? Well it matters because as a society, we treat (i.e., trust) “associations” different than we do for-profit business entities. Conventional wisdom dictates that when we think of “associations,” we generally tend to think that they are nonprofits and that they are run at the Board of Directors level by the members themselves (members who are voted onto the Board by their association peers). In Sharon Restrepo’s case, the Florida Real Estate Investors Association is run by herself and her husband, Juan Restrepo, and apparently, they call the shots. This is troubling because in a for-profit membership-based association, the interests of the association’s owners (in this case, the Restrepos’), will always come first; whereas nonprofit membership associations do not have to worry about any one individual’s personal financial claims or interests — they, the not-for-profit membership-based associations, are free to operate without personal interests getting in the way. For Sharon Restrepo to be so heavily involved in an organization like FLREIA may speak volumes about her business character.
• Another troubling aspect of Sharon Restrepo’s connection to real estate is that she may in fact be using religion to build trust. Take a look at this, from the Florida Real Estate Investors Association website:
  

  Florida Real Estate Investors’ Association Vision Statement

  “We are committed to providing aspiring and experienced real estate investors a venue where continuing education, networking, & products and services worthy of our Maker’s approval are provided. We aspire to share our knowledge and God-given talents to promote the well-being of all we come in contact with on a daily basis with a Christ-like attitude.“

  It’s that last part, “with a Christ-like attitude” that gives me serious cause for concern about these people and the way they conduct business. Religion should never have anything to do with real estate investing, and anyone who brings religion into the equation should be ashamed of themselves. Look a little further on the FLREIA website and you’ll even find a link for the association’s “Prayer Request” service. Are you kidding me? I don’t know about anyone else but I hate to see people using religion to build trust. It just gives trust a bad name!

At the end of the day, the Gwinnett County Magistrate Court in Lawrenceville, GA, sided with Gayle Bu, and as of today, Millionaire Mindset, LLC, has failed to meet its court-ordered obligation to pay Gayle what she is owed.

If you are researching any of the businesses or individuals referenced in this post, you may want to think twice about doing business with them. Similarly, if you feel you have been taken advantage of by any of the people or business entities mentioned in this post, consult an attorney (like Gayle did), and keep us posted on your efforts to recoup your losses.

New federal laws and regulations in Canada dealing with money laundering and anti-terrorist financing that go into effect today require real estate agents and brokers to collect and verify more personal information from buyers and sellers. Canada’s real estate agents must also now track the source of funds received during the course of a real estate transaction, such as the deposit.

These new regulations are part of federal legislation (Bill C-25) passed in 2007 that requires a number of industries, including real estate, to do more to help stop money laundering and terrorist financing. The regulations are enforced by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).

“Real estate agents have had legal obligations under the federal government’s push to prevent criminal activity and terrorism since 2001, when Canada’s first comprehensive laws to combat money laundering and terrorist financing were introduced,” says the President of The Canadian Real Estate Association, Calvin Lindberg. He is a REALTOR® in Vancouver.

“In the first phase of compliance, real estate agents were required to report only suspicious transactions, or transactions involving more than $10,000 in cash,” the CREA President explains. “Now, verified personal information must be kept of the buyer and seller for each and every real estate transaction in Canada. That personal information includes details such as occupation.”

Real estate agents are now required to ask for proof of the identity of all buyers or sellers involved in a Canadian real estate transaction. If the client is a corporation, that information must include corporate documentation, and the names of the corporation directors. They must also ascertain if a third party is involved in the transaction.

This also applies if a buyer or seller involved in a transaction is not represented by a real estate agent, but the other individual involved is represented. Those buying or selling privately will be asked by the agent representing the other party involved in the transaction to provide proof of identity as well, andmust be kept by the real estate agent involved in the transaction.

Also under the new FINTRAC regulations, Canada’s real estate agents dealing with clients they never meet must also verify personal information. The broker office involved can do this with a service agreement with an agent in the area where the client is located. That agent must then meet the client, verify their identification, and provide the information to the broker office handling the real estate transaction.

In addition to verification of personal information, real estate agents must also now complete a report on the receipt of all funds received during the real estate transaction.

In order to comply with these new regulations, Canada’s real estate agents are required to keep the identification and receipt of funds information on file for five years and provide it to FINTRAC whenever requested.

My apologies for the length of this post but there was an interesting joint announcement today from the U.S. Department of Justice (DOJ) and the Federal Bureau of Investigation (FBI) that bears (no pun intended) commenting on. According to a press release titled “More Than 400 Defendants Charged for Roles in Mortgage Fraud Schemes as Part of Operation “Malicious Mortgage”,” from March 1st of this year until yesterday (June 18), a coordinated effort between the two agencies resulted in 144 mortgage fraud cases being cracked and 406 defendants being charged with related crimes.

On the surface, this looks like very big news, and as one would suspect, almost every media outlet in the country is covering the story. But when you really stop to think about it, sadly, the numbers touted in today’s announcement amount to very little. Certainly, every real estate and mortgage fraud-related arrest helps, but when you consider that there were 110 days between March 1st and yesterday, Operation Malicious Mortgage netted less than two real estate and mortgage fraud scams per day (or to be more precise, 1.30909091 scams per day for each day of the 110-day effort). I don’t know about anyone else, but less than two real estate and mortgage fraud-related scams being shut down per day–when by one estimate, more than 75% of all home loans closed leading up to the current mortgage meltdown contained some level of fraud–isn’t really that big of a deal.

But Ralph, you’ll say, 406 people who were committing these horrible crimes are no longer in the business of intentionally destroying the American dream of homeownership (which is like 3.69 arrests per day); doesn’t count for something?

Of course it does… it does count for something… it counts for what’s already happening across the country in terms of arrest volume for real estate and mortgage fraud-related crimes, and it’s still not enough to make much of a difference. By my own estimate, if I were to only report real estate and mortgage fraud-related arrests or indictments here on FlippingFrenzy.com (which I don’t because this site is about more than just indictments and arrests), and we were to go back and count the number of scams that were shut down (or the number of people arrested or indicted), I could come up with a pretty sexy number to rival that which the DOJ and FBI came out with today. In the grand scheme of things, today’s announcement is actually a little bit disappointing.

Of more interest to me than the 144 mortgage fraud cases being cracked and the 406 defendants being charged with related crimes, was this (from the same press release and summarized by Kate Kelly of The Wall Street Journal):

A federal grand jury in Brooklyn, N.Y., indicted two former Bear Stearns Cos. hedge-fund managers, alleging they misled investors when their fund was in peril, lied about their financial interest in the portfolios and destroyed evidence in the investigation. The high-profile criminal case, along with a parallel civil securities-fraud action by the Securities and Exchange Commission, marks the first criminal securities-fraud charges stemming from the mortgage-market crisis. The 27-page indictment paints a picture of the scramble by the managers, Ralph Cioffi and Matthew Tannin, to keep their hedge funds alive…

Everyone, including the FBI, likes to talk about how there are two types of real estate and mortgage fraud… Fraud for Housing and Fraud for Profit. Well, what about Fraud for Wall Street?

Read the following (from the Associated Press’ Tom Hays), and tell me if you too can spot the Fraud for Wall Street:

2 charged on Wall Street in mortgage meltdown
By TOM HAYS

NEW YORK (AP) — Two former Bear Stearns hedge fund managers were hauled into jail Thursday and charged with lying to investors about the collapse of the subprime mortgage market, perhaps signaling the start of a wave of prosecutions arising from the housing meltdown.

Ralph Cioffi and Matthew Tannin were accused of encouraging investors to stay in their hedge funds, heavily exposed to subprime mortgages, even as they knew the credit market was in serious trouble.

They were indicted on conspiracy and fraud counts, the first criminal charges to hit Wall Street in the housing market meltdown.

The eventual implosion of their two hedge funds cost investors $1.8 billion and started the domino effect that led the demise of Bear Stearns itself, which barely avoided bankruptcy in a rescue buyout by JP Morgan Chase & Co.

“This is not about mismanagement of a hedge fund,” Mark Mershon, head of the New York FBI office, told reporters. “It is about premeditated lies to investors and lenders.”

The arrests came as the Justice Department in Washington announced the indictments of more than 400 players in the real-estate industry since March in a crackdown on mortgage fraud. Sixty were arrested on Wednesday alone.

That alleged fraud includes misstatement of income or assets, forged documents, inflated appraisals and misrepresentation of a buyer’s intent to occupy a property as a primary residence.
The Bear Stearns case against Cioffi and Tannin appears to be based heavily on a series of e-mails that reveal panic and disorder behind the scenes at the hedge fund as its investments began to slide.

“The subprime market looks pretty damn ugly,” Tannin wrote to Cioffi in April 2007. If Bear’s internal reports were accurate, Tannin suggested, “I think we should close the funds now,” and “the entire subprime market is toast.”

The situation became so dire that Cioffi pulled $2 million of his own cash from the fund, but the pair still told investors that they should stay in and that the outlook was good, prosecutors said.

Cioffi, 52, was arrested by FBI agents at his home on the Upper West Side of Manhattan on Thursday morning, and Tannin, 46, was taken into custody outside his New Jersey home.

Both men pleaded not guilty at an afternoon arraignment and were released on bond. Each faces up to 20 years in prison. They left court with their wives and without speaking to reporters.

The mortgage market crisis “took the whole financial world by surprise,” said Cioffi’s attorney, Edward Little. “So our question is, why is Ralph Cioffi being charged in this case?” Tannin’s lawyer, Susan Brune, said he was “being made a scapegoat for a widespread market crisis. He looks forward to his acquittal.”

Legal experts said more Wall Street figures would probably be charged in the credit crisis, the latest front for white-collar prosecutors who brought — and in most cases won — high-profile cases earlier this decade after the fall of Enron.

“There is no doubt the government is always looking to go as high as they can,” said Bill Leone, a former U.S. Attorney in Colorado. “Any time you get losses into the billions, the likelihood that higher-level executives participated in decisions increases.”

Subprime mortgages were sold to people with less-than-ideal credit. Many of them began defaulting on their loans when the housing market fell and their introductory “teaser” interest rates shot up, making their payments unaffordable.

Because many of those mortgages were sliced and repackaged as securities that could be bought and sold, the mass defaults caused widespread pain among large U.S. banks.

The collapse of the two Bear Stearns funds is just a small part of the subprime crisis, which is still rippling through the economy.

Amid the fallout for banks, prominent CEOs have lost their jobs, including Citigroup Inc.’s Charles Prince, Merrill Lynch & Co.’s Stanley O’Neal and Bear Stearns Cos.’ own James Cayne, who was stripped of his CEO title.

Hedge funds cater to large investors and the very wealthy and use complex, speculative investing methods in hopes of winning enormous gains. They operate with little government supervision and have lately come under fire from regulators.

In the Bear case, the internal e-mails provide a window into the trouble that began to engulf the hedge funds in 2007.

The indictment describes a meeting of Cioffi, Tannin and two unnamed colleagues in which Cioffi confided the hedge funds had narrowly “averted disaster” in February 2007 — news that “led to a vodka toast to celebrate surviving the month.”

The complaint says Tannin expressed doubt about Cioffi’s management in an one e-mail last March to a third fund manager with only question marks in the subject line. The e-mail said, “Is Ralph doing what he should be doing right now?”

Around the same time, Cioffi wrote to a Bear Stearns economist: “I’m fearful of these markets. … As we discussed it may not be a meltdown for the general economy but in our world it will be. Wall Street will be hammered with lawsuits.”

Tannin and Cioffi were repeatedly telling investors and Bear Stearns brokers responsible for selling funds that the outlook was good.

In once instance, prosecutors said, Tannin encouraged an investor to add money to the fund and said he would do the same, but never did.

At the same time, prosecutors say, Cioffi pulled $2 million of his own money out of the fund, about a third of his stake, and put it into a separate fund without telling investors. He was charged with insider trading in addition to fraud.

The Bear Stearns hedge funds had more than $20 billion in assets before collapsing in June 2007. Just before the collapse, Cioffi fretted in an e-mail that “I’ve effectively washed a 30-year career down the drain” if he couldn’t turn things around, the indictment said.

The case demonstrates yet again how e-mail can trip up Wall Street executives.

Prosecutors used e-mail exchanges against former Credit Suisse Group banker Frank Quattrone and famed stock analysts Jack Grubman and Henry Blodget. But prosecutors struggled to win and maintain convictions in all of those cases.

Cioffi and Tannin have already been named in lawsuits brought last year by hedge fund investors who allege they were purposely misled.

The fortunes of Bear Stearns began to crumble around the same time that the fund collapsed, getting so bad that the Federal Reserve and JPMorgan had to intervene to save the once-mighty institution from bankruptcy earlier this year.

AP Business Writer Joe Bel Bruno contributed to this report.

As I told many of the reporters who called about today’s developments (including The Detroit News), what the popular media is finally getting around to reporting isn’t even the tip of the iceberg that sank the Titanic. While it’s true that today’s announcements are a step in the right direction, its also true that this nation’s real estate and mortgage fraud-related woes go much deeper than what Operation Malicious Mortgage has uncovered. Sadly, as I recently reported, our own Attorney General, Michael Mukasey, said just last week that the Justice Department, the FBI’s parent agency, won’t create a national task force to combat mortgage fraud as the government did with corporate crime after Enron. “This isn’t that kind of phenomenon,’’ Attorney General Mukasey says.

Hey, Mr. Attorney General… to paraphrase James Whitcomb Riley: If it walks like a duck, quacks like a duck, and looks just like a duck, I would call it a duck.

The U.S. Attorney for the Eastern District of California announced last week that a federal grand jury returned an indictment today charging Joel Blanford, 40, of San Ramon, Calif., with six counts of mail fraud and one count of conspiring to engage in money laundering in connection with a multi-million dollar mortgage fraud scheme.

From April 2003 through October 2005, Blanford participated in a scheme to defraud Long Beach Mortgage, a wholesale subprime lender and former subsidiary of Washington Mutual, Inc. While working as a sales representative for Long Beach Mortgage, Blanford paid a Long Beach Mortgage loan coordinator in cash and checks to falsify documents, provide false verification of borrowers’ employment or professional licensing status, and to turn a blind eye to fraudulent representations contained in loan applications and other documents submitted to Long Beach Mortgage.

In 2003, 2004, and 2005, the indictment against Blanford alleges he received, before taxes and payroll deductions, more than $1,000,000 in commissions and other compensation from Long Beach Mortgage. The indictment also charges that between April 2003 and October 2005, Blanford conspired with others to engage in money laundering in order to conduct financial transactions to promote the carrying on of the fraud scheme and to conceal and disguise the nature and source of the payments to the loan coordinator. Between April 2003 and October 2005, Blanford is said to have paid the loan coordinator more than $54,000 in checks alone.

In connection with this ongoing investigation, Manpreet Singh, Jose Serrano, John Ngo, and Iftikhar Ahmad have all pleaded guilty to perjury, mail fraud, and/or money laundering charges.

From U.S. Attorney McGregor Scott:

“This indictment reflects the commitment of this office, the FBI and the IRS-CI to follow the facts to wherever they lead us,” said Scott.

“We have now convicted several individuals who participated at different levels of the loan origination process in mortgage fraud transactions centered in the Stockton, California area. The indictment returned today charges an individual who allegedly worked inside a major subprime lender and who received significant commissions and other compensation in his capacity as a sales representative.“

The maximum penalties for mail fraud affecting a financial institution is 30 years in prison and a fine of up to $250,000, or twice the value of the gain or loss, whichever is greater. The maximum penalty for conspiring to engage in money laundering is 20 years in prison and a fine of up to $500,000 or twice the value of the money that was laundered, whichever is greater. However, the actual sentence will be determined at the discretion of the court after consideration of the Federal Sentencing Guidelines, which take into account a number of variables, and any applicable statutory sentencing factors.

As a United States Senator, I would never ask or expect to be treated differently than anyone else refinancing their home. This suggestion is outrageous and contrary to my entire career in public service.

When my wife and I refinanced our loans in 2003, we did not seek or expect any favorable treatment. Just like millions of other Americans, we shopped around and received competitive rates.

~ U.S. Senator Christopher Dodd

What you just read is a statement issued last Friday by U.S. Senator Christopher Dodd (D-CT), who according to Portfolio.com’s Daniel Golden, is one of two members of Congress that we now know received loans from Countrywide Financial through a “little-known program that waived points, lender fees, and company borrowing rules for prominent people.”

From strong>Portfolio.com’s Daniel Golden:

Countrywide VIPs: In the Senate and Beyond

Senators Christopher Dodd, Democrat from Connecticut and chairman of the Banking Committee, and Kent Conrad, Democrat from North Dakota, chairman of the Budget Committee and a member of the Finance Committee, refinanced properties through Countrywide’s “V.I.P.” program in 2003 and 2004, according to company documents and emails and a former employee familiar with the loans.

Other participants in the V.I.P. program included former Secretary of Housing and Urban Development Alphonso Jackson, former Secretary of Health and Human Services Donna Shalala, and former U.N. ambassador and assistant Secretary of State Richard Holbrooke. Jackson was deputy H.U.D. secretary in the Bush administration when he received the loans in 2003. Shalala, who received two loans in 2002, had by then left the Clinton administration for her current position as president of the University of Miami. She is scheduled to receive a Presidential Medal of Freedom on June 19.

Holbrooke, whose stint as U.N. ambassador ended in 2001, was also working in the private sector when he and his family received V.I.P. loans. He was an adviser to Hillary Clinton’s presidential campaign.

James Johnson, who had been advising presidential candidate Barack Obama on the selection of a running mate, resigned from the Obama campaign Wednesday after the Wall Street Journal reported that he received Countrywide loans at below-market rates.

Most of the officials belonged to a group of V.I.P. loan recipients known in company documents and emails as “F.O.A.’s”—Friends of Angelo, a reference to Countrywide chief executive Angelo Mozilo. While the V.I.P. program also serviced friends and contacts of other Countrywide executives, the F.O.A.’s made up the biggest subset.

According to company documents and emails, the V.I.P.’s received better deals than those available to ordinary borrowers. Home-loan customers can reduce their interest rates by paying “points”—one point equals 1 percent of the loan’s value. For V.I.P.’s, Countrywide often waived at least half a point and eliminated fees amounting to hundreds of dollars for underwriting, processing and document preparation. If interest rates fell while a V.I.P. loan was pending, Countrywide provided a free “float-down” to the lower rate, eschewing its usual charge of half a point. Some V.I.P.’s who bought or refinanced investment properties were often given the lower interest rate associated with primary residences.

Unless they asked, V.I.P. borrowers weren’t told exactly how many points were waived on their loans, the former employee says. However, they were typically assured that they were receiving the “Friends of Angelo” discount, and that Mozilo had personally priced their loans.

The V.I.P. loans to public officials in a position to advance Countrywide’s interests raise legal and ethical questions. Countrywide’s ethics code bars directors, officers and employees from “improperly influencing the decisions of government employees or contractors by offering or promising to give money, gifts, loans, rewards, favors, or anything else of value.” Federal employees are prohibited from receiving gifts offered because of their official position, including loans on terms not generally available to the public. Senate rules prohibit members from knowingly receiving gifts worth $100 or more in a calendar year from private entities that, like Countrywide, employ a registered lobbyist.

Why is it that the people who seem to need extra help the least often receive it the most? Here’s more from today’s issue of The Wall Street Journal:

The Countrywide Financial sweetheart loan scandal continues to grow, spreading to Senators and other Beltway potentates. We are about to find out if Congress’s passion for investigating business ethics extends to conflicts of interest and cash that involve fellow Members.

Take Senator Kent Conrad, the North Dakota Democrat whose office issued a Friday statement saying that “I never met Angelo Mozilo.” What he did not say then but admitted under later questioning by a Journal reporter is that, although he may not have had a face-to-face meeting with the Countrywide CEO, Mr. Conrad had called Mr. Mozilo and asked for a loan. The result was a discounted loan on his million-dollar beach house and a separate commercial loan of a type that residential lender Countrywide did not even offer to other customers, regardless of the rate.

So after calling the CEO of a company with various matters before the Senate, asking for a loan and then receiving at least two sweetheart deals, Mr. Conrad now says: “I did not think for one moment – and no one ever suggested to me – that I was getting preferential treatment.” Lawyers will immediately wonder if this isn’t a version of the “ostrich defense,” which judges describe during jury instruction as willful blindness or deliberate ignorance. For what other reason, besides preferential treatment, would one call the CEO of the mortgage company? Does Mr. Conrad call August Busch IV when he wants to buy a six-pack?

Almost as breathtaking is Senator Conrad’s attempt to use a charitable contribution for the estimated amount of any mortgage savings – $10,500 – to make the issue go away. So while the Senator says he did nothing wrong, now that his nonmistake has been discovered he’ll nonetheless give away the nonspecial treatment cash. There is ample evidence here to warrant an investigation, including subpoenas for relevant documents.

The same goes for Senator Christopher Dodd (D., Conn.), who chairs the very Banking Committee responsible for drafting the laws that govern Countrywide’s market.

You can rest assured that Flipping Frenzy will cover this story in further detail in the weeks and months to come. For now, feel free to leave a comment or two of you own. Do you think politicians deserve breaks like the ones Senators Christopher Dodd and Kent Conrad received?