WMLRO.com: Five years for mortgage fraud

Espinoza pleaded guilty in December 2006 to conspiracy to defraud HUD, two counts of bankruptcy fraud, one count of money laundering and one count of wilful failure to pay tax to the Internal Revenue Service.

When he pleaded guilty, Espinoza admitted that he engaged in a scheme that ran from April 1995 until approximately May 2001 and caused HUD to suffer losses when he and his associates fraudulently purchased nearly 100 residential properties.

The properties were sold at inflated market values to “straw buyers,” who were unable to make payments on the homes. Espinoza and his associates supplied the down payments for the straw buyers and in some cases obtained bogus tax forms and pay-cheque stubs that were submitted with the loan applications. The lenders relied on the false documents when they approved the loans, and HUD relied on the false documents in insuring the home loans. When the straw buyers defaulted on the home loans and the lenders foreclosed on the properties, HUD reimbursed the lenders for their costs and took possession of the properties. HUD ultimately suffered losses of more than USD2 million when it sold the properties for far less than the fraudulent purchase prices of the homes.

In addition to defrauding lenders and HUD, Espinoza committed bankruptcy fraud in 1999 when he filed for bankruptcy and failed to tell the United States Trustee that he owned a Rolex Daytona watch, two Ferraris and a Lamborghini. In late 2002, Espinoza laundered the proceeds of his bankruptcy fraud when he sold the Ferrari automobiles for USD127,500.

Espinoza also pleaded guilty to wilfully failing to pay income tax, admitting that he did not pay USD199,053 due for the 1996 tax year. In court papers filed in relation to the sentencing, prosecutors pointed out that Espinoza had not filed tax returns for well over 10 years and owes the Internal Revenue Service more than USD5 million in taxes, interest and penalties.

In rejecting the defendant’s request for lenient sentencing, Judge Wilson noted the multifaceted nature of Espinoza’s fraud and his “extreme greed.” Judge Wilson ordered Espinoza to begin serving his sentence on 4 June.