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Jim McConville needed help to pull off a massive mortgage swindle.
He couldn’t let the banks making the mortgages know that he was sucking at least $120,000 each out of more than 80 condo sales in Escondido and San Marcos in 2008.
He got the help he needed, federal prosecutors say, from Bay Area escrow officer Donna Demello of Stewart Title of California.
Demello cloaked the payments to McConville by creating two versions of the official receipts from the real estate deals, according to prosecutors. One version included the payout to McConville’s company. The other version, the one that went to the banks, didn’t.
The payout would’ve been of special interest to the lenders because it could have signified that the price they were making a loan for was inflated.
In any real estate deal, the escrow officer has a big job. Escrow is supposed to be a neutral third party, a kind of impartial holding place for all of the money involved. The escrow officer disburses the money following instructions agreed upon by all parties.
In this case, escrow wasn’t neutral, prosecutors say. They allege Demello was a key part of the mortgage scheme McConville orchestrated using straw buyers to purchase hundreds of condos throughout California. New details about those roles emerged in an indictment released Friday, which charged McConville and five others with conspiracy to commit fraud.
In North San Diego County, McConville picked up condos for a low price from distressed developers and arranged for them to be sold to buyers who’d rented their identities to him, our investigation showed.
By arranging high purchase prices, McConville could pay off the developers and rake in a chunk of money for himself on each condo — a payout the developers’ records showed to be more than $12.5 million on just the San Marcos and Escondido properties.
Other bogus pieces went into making this scam possible, according to the indictment.
Defendant Jason Piette created falsified bank records using Adobe Photoshop, it says, deluding the banks into thinking the straw buyers had more assets or greater incomes and thus making them look like better credit risks.
The conspirators offered cashiers’ checks in the straw buyers’ names to show the banks the down payments came from the buyers, when really McConville was paying the down payments, the indictment says. Banks want to see that the buyers themselves are producing enough money for the down payment.
Prosecutors say Rasul Rasuli “regularly forged signatures” on documents sent to banks.
Defendant Laura Caton mailed mortgage payments to banks in the straw buyers’ names to keep the loans from going into default at first, according to the indictment.
Araks Davoudi, a banker, allegedly generated false deposit statements to look like the assets of straw buyers.
The indictment doesn’t include details about what McConville’s associates got out of their purported involvement with these deals.
While the banks didn’t see the receipt showing McConville’s payout, the developers who sold the condos to him did know about it.
That’s why the sellers, Premier Coastal Development, created disclosures to inform every party in the transaction that a big chunk of the purchase price was going to McConville’s company, a Premier Coastal representative told us last year.
They instructed the escrow officer on the sales, Demello, to have the disclosures signed by the buyers and the lenders before closing the sale, he said.
But McConville employee Raymond Davoudi posed as the lenders and signed off on those disclosures, the indictment says. By doing that, Davoudi falsely represented that the lender — and the straw buyer as well — were aware of the large payout to McConville, the indictment says.
In an interview last year, Davoudi said McConville often gave him papers to sign as “a simple seller technicality.”
“It was basically a ‘don’t sign, don’t get paid’ type of thing with him,” Davoudi said of his employer.
Demello wasn’t the only one of McConville’s team who thumbed her nose at remaining neutral, prosecutors say.
McConville employee Bahareh Shamlou served as his in-house notary and flew all over the state to obtain signatures on loan documents from the straw buyers who never intended to make payments on the condos themselves.
Shamlou is also charged in relation to the scheme. “Shamlou, in her capacity as a Notary Public in the State of California, regularly notarized documents when the signer was not present and when she knew the signatures were forged,” the indictment says.
For our story last year, Shamlou told us she just handled the paperwork, that she was just one member of McConville’s team.
“Nobody knew exactly how he did things,” Shamlou said last year. “He kept everything secret. He brought in different people and we all did a different portion. Everybody had a small part so nobody knew everything.”
The indictment doesn’t answer some questions we still have, like who performed the appraisals on the properties that dramatically overvalued the condos two years into the real estate slump.
The indictment says, “Members of the conspiracy obtained and provided to the mortgage lenders materially false and misleading appraisals that inflated the value of the real property secured by the loans to Straw Buyers.”
Nor does it name anyone involved in renting the condos out to tenants. McConville’s team of conspirators illegally continued to collect rent even after he’d stopped making the mortgage payments, the prosecutors say.
Please contact Kelly Bennett directly at firstname.lastname@example.org with your thoughts, ideas, personal stories or tips. Follow her on Twitter: @kellyrbennett.