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General News    H2'ed 6/21/08

Blowing the Whistle on Mortgage Fraud

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Washington, DC Â- Yesterday, two Bearn Stearns executives were indicted on criminal charges related to sub-prime lending and the U.S. Department of Justice and the Federal Bureau (FBI) of Investigations announced operation "Malicious Mortgage" in which 406 other real estate and investment professionals were charged in a federal crackdown on mortgage fraud schemes. These investigations support the Congress Against Racism and Corruption in Law Enforcement (CARCLE)'s contention that the sub-prime lending crises is the result of lax local law enforcement of predatory lending and mortgage fraud. Â

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The Congress Against Racism and Corruption in Law Enforcement (CARCLE) and the National Judicial Conduct and Disability Law Project (NJCDLP) have joined forces with other grassroots consumer advocacy groups and initiated a national Predatory Lending and Mortgage Fraud Taskforce. During the closing plenary at the National Press Club, IAW sponsors presented victims of mortgage fraud, grassroots advocates, and banking and finance companies the need for stronger judicial and law enforcement engagement to combat this problem. Â

The recent Sub-Prime and Global Market Collapses have resulted in billions, if not trillions, of dollars in financial losses to the general public. Predatory and fraudulent loans have been securitized packaged and sold on national and international financial markets. The resulting defaults and losses have potentially plunged the United States into a global recession. Unfortunately, these devastating losses could have been mitigated or avoided if regulators and law enforcement had headed the warnings of consumer advocates and whistleblowers relating to Predatory Lending and Mortgage Fraud. Â Â Â Â Â

CARCLE's mortgage fraud taskforce found that a major contributor to this problem is the lack of local law enforcement and judicial apathy. The problem is that many small loans of dubious origins and/or containing predatory or fraudulent features are "packaged" and allowed to be sold to unsuspecting investors. Like other "white collar" crimes, local law enforcement officials ignore allegations of predatory lending or mortgage fraud for a variety reasons; some of which include racism, bias and actual public corruption. The lack of effective law and judicial enforcement of these underlying loans has resulted in billions, if not trillions, of dollars in consumer losses and the impending global securities crisis. Unfortunately, these devastating losses could have been mitigated or avoided if regulators and law enforcement had heeded the warnings of consumer advocates and whistleblowers relating to Predatory Lending and Mortgage Fraud. Â

The Winecoff Mortgage Fraud Case was cited as a prime example of this national epidemic. "This travesty has gone on long enough and the ongoing perpetuation of this fraud, which is being supported by taxpayer dollars and the City of Atlanta must stop", states Chief Deputy Marshal Matthew Fogg (INA) and President of CARCLE. "Today, we call on the Federal government and the African-American community to voice their outrage over this criminal theft which could be the worst case of federally funded mortgage fraud I've seen in my 25 year history in law enforcement." In letters to Senator Chuck Grassley and the United States Justice Department the co-chairs of the International Association of Whistleblowers (IAW) have asked federal agencies to launch a full scale congressional investigation into the illegal acquisition and fraudulent federal funding of the Historic Winecoff Hotel in Atlanta, Georgia. Â

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During the week long assembly of whistleblowers, Michael McCray and James Murtaugh, Co-chairs of the International Association of Whistleblowers (IAW) have sought a congressional investigation of the actual ownership of the historic hotel, and nearly $30 million of federal funds on behalf of American taxpayers. And on behalf of Courtney Dillard, an African-American developer, whose 1998 acquisition of the hotel makes Dillard-Winecoff the rightful owner of the property. The IAW co-chairs have  also sought a criminal civil rights investigation by the U.S. Justice Department due to allegations of racism and bias by the Atlanta Police Department in their refusal to investigate sub-prime predatory lending and mortgage fraud to minority borrowers.   The subject property is the Winecoff Hotel in Atlanta, Georgia. Â

Unfortunately, Courtney Dillard fell victim to Georgia's mortgage fraud epidemic by InterBank Funding an unlicensed New York investment company in a sub-prime mortgage fraud scheme. The purported owners are Kelco/FB Winecoff, which Dillard alleges is a co-conspirator with InterBank Funding & Brokerage Services and "straw purchaser" of the Winecoff Hotel. A similar hotel fraud occurred in New York City last year, when a Brooklyn man was arrested after trying to steal New York City's SoHo Grand Hotel by filing a fraudulent deed to transfer ownership of the $76 million establishment to himself. The only difference between the cases is that the Winecoff Case involves nearly $30 million dollars of federal funding, and New York authorities actually investigated the SoHo case, whereas Georgia has refused all local law enforcement requests.   Georgia has led the nation in mortgage fraud according to recent FBI statistics. More importantly, many of Georgia's mortgage fraud scams often involve substantial federal financing, most of which is intended for disadvantage minority businesses and/or low to moderate income families. Â

Thus, the Winecoff mortgage fraud case highlights the current sub-prime lending crisis and lack of local law enforcement related to sub-prime mortgage loans, including projects with significant federal funding and resources; and how private sector whistleblowing positively impacts federal government operations by exposing private sector fraudulent schemes which rely upon significant federal funding resources.

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Michael McCray is a public interest advocate who combats racism and corruption in the government and other institutions which deprive individuals of their basic civil rights, human rights and constitutional liberties. McCray is co-chair (more...)

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