Title
Receive and accept the Annual Real Estate Fraud Report for Fiscal Year 2013-14 submitted by the District Attorney's Office in accordance with California Government Code section 27388(d).
Report
RECOMMENDATION:
It is recommended that the Board of Supervisors:
Receive and accept the Annual Real Estate Fraud Report for Fiscal Year 2013-14 submitted by the District Attorney's Office in accordance with Government Code section 27388(d).
SUMMARY:
The District Attorney's Office submits its annual Real Estate Fraud Report for Fiscal Year 2013-14 in order for the Board of Supervisors to evaluate the District Attorney's effectiveness in investigating, prosecuting and deterring real estate fraud activity. Cases adjudicated in Fiscal Year 2013-14 include approximately 766 victims, with losses and restitution of approximately $11.4 million.
DISCUSSION:
For Fiscal Year 2013-14, the District Attorney's Office received 28 new referrals involving suspected real estate fraud activity. Of those referrals, the District Attorney opened 16 new investigations. Two of those investigations concluded during Fiscal Year 2013-14 with two separate criminal cases being filed and guilty pleas entered in each.
As for the other investigations opened during Fiscal Year 2013-14, the District Attorney's Office has assigned District Attorney Investigators to evaluate the allegations. Several of these investigations will require significant investigative resources as they involve interviewing multiple victims and witnesses and obtaining and analyzing considerable real estate and financial records.
During Fiscal Year 2013-14, criminal convictions and sentences were obtained in five cases that had been investigated and charged in prior fiscal years. Three of those convictions were obtained in related federal criminal prosecutions against former Monterey County residents Barbra Alexander, Michael Swanson and Beth Pina. Those cases arose out of the District Attorney's criminal investigation in 2009 of a real estate and investment brokerage company owned by Alexander and Swanson. Several Monterey County victims contacted the District Attorney in 2009 with complaints that monies invested with Alexander between 2007 and 2009 could not be accounted for. The victims had invested the monies with the belief that Alexander's company was loaning their monies to qualified borrowers seeking to finance real property transactions. Based upon representations made to them by the defendants, the victims believed these loans were secured with Deeds of Trust. The District Attorney coordinated a complex criminal investigation with the Monterey and Carmel Police Departments, interviewed several victims and obtained extensive records. That investigation identified 49 victims, many of whom lived out of state, who had suffered $6.3 million in losses. The District Attorney joined with the United States Attorney to investigate and prosecute the scheme. Federal indictments were filed in December 2010. While Pina entered a guilty plea, Alexander and Swanson elected to go to trial. Both were found guilty by separate juries in Fiscal Year 2013-14. The federal court sentenced Alexander to nine years in federal prison and ordered her to make $6.3 million restitution to 49 victims. Swanson received three years and one month in federal prison and was ordered to make the same restitution. Pina received three years of formal probation, including one year of electronic monitoring.
The fourth and fifth criminal cases, now being appealed on restitution grounds only, were filed in Fiscal Year 2012-2013 in the Monterey County Superior Court against Daniel Furness and Collen Gsell. In Fiscal Year 2013-14, Mr. Furness and Ms. Gsell entered guilty pleas and received sentences. Mr. Furness received the maximum criminal sentence permitted under California's new sentencing law: one year county jail and five years felony probation. Ms. Gsell received one year county jail and three years misdemeanor probation. The criminal court ordered restitution to 716 victims in the amount of $5,040,527.90.
In March 2014, the District Attorney's Office obtained a verdict and civil judgment following a ten day trial in Monterey County Superior Court against licensed loan brokerage Estates on the Bay, Inc. and its two principals, licensed salesperson Susana Silva and licensed broker Deanna Gobert. The Court ordered the Defendants to make restitution in the amount of $29,475.00 and to pay civil penalties of $120,425. The Court also issued a permanent injunction. The Defendants have filed an appeal of the Final Judgment.
During Fiscal Year 2013-14, the District Attorney continued its investigations into real estate fraud activity associated with the aftermath of the California foreclosure crises in Monterey County. In particular, the District Attorney is continuing to investigate foreclosure rescue schemes and complaints which continue to impact the communities in the Cities of Seaside and Salinas.
During Fiscal Year 2013-14, the District Attorney's Office expended in excess of 100 hours of administrative time in support of start-up and implementation of Real Estate Fraud activities, which were not fully charged against the funds generated by the Real Estate filing fee.
The investigation and successful prosecution, criminal or civil, of real estate fraud activity in Monterey County will continue to be resource-intensive. The continued availability of revenue from recording fees is critical to the District Attorney's effort to deter, investigate and, when appropriate, prosecute real estate fraud cases. To the extent possible, in accordance with Government Code section 27388, subdivision (f), emphasis will continue to be placed on fraud involving the largest number of victims and individuals whose residences are in danger of, or actually in, foreclosure.
Real Estate Fraud Statistics for Fiscal Year 2013-14
New Referrals: 28
Investigations Opened: 16
Arrests: 2
Filed Complaints (Civil or Criminal): 2
Convictions: 7
Civil Judgments: 1
OTHER AGENCY INVOLVEMENT:
As noted in "Discussion" section, above.
FINANCING:
The District Attorney's Real Estate Fraud program is fully supported by the Real Estate Filing fee. Available funding totaled $508,188 while expenses totaled $446,514, resulting in an ending fund balance of $61,674.
Total Estimated Revenues and Costs:
Revenues
Beginning Balance: $150,565
FY 2013-2014 Income: $357,623
Total Available: $508,188
Expenditures
Salaries & Benefits: $446,514
Total Costs: $446,514
Prepared by: John Hubanks, Deputy District Attorney IV, Ext. 7705
Bruce Suckow, Finance Manager II, Ext. 5259
Approved by: Dean D. Flippo, District Attorney, Ext. 5470
Attachments:
None