Mortgage Scheme is "Most Sophisticated and Arrogant Fraud" Judge David O. Carter Has Seen
According to court documents, Tornow fraudulently provided mortgage services from 2001 until 2006 through several companies, including Orange-based Lucrativo Real Estate Solutions, soliciting home buyers and assisting them in obtaining mortgages, often by submitting fraudulent paperwork to lending banks.
During the last two years of the scheme, Tornow worked with Mikhail Kosachevich, who pleaded guilty last year to conspiracy to commit mail fraud and money laundering.
According to a statement issued today by the FBI, which joined the Internal Revenue Service and U.S. Postal Inspection Service in investigatating Tornow, Kosachevich and a third man, Jeffrey Gerken:
As a part of the scheme, Tornow and others inflated borrowers' income and assets on loan applications, leading lenders to believe that their clients were creditworthy. In an effort to substantiate the false statements made on the loan applications, Tornow and others fabricated W-2 forms, paycheck stubs, bank statements and other documents. Relying upon the false statements made on loan applications by Tornow and others, lenders issued more than $40 million in residential loans to Tornow's clients. When a number of the properties went into foreclosure, the banks suffered losses of more than $7 million.
Tornow and his co-schemers received hundreds of thousands of dollars in commissions and payments from loans that were funded based upon their false statements and submission of fraudulent documents to lenders. Tornow concealed his commission income from the Internal Revenue Service and failed to pay more than $300,000 in federal income taxes. Tornow, who had been ordered not to work in the mortgage industry by California authorities about 10 years ago, used the names of legitimate brokers when he submitted loan packages to lenders. To cash the commission checks he received in the name of licensed brokers, Tornow created fictitious business names that were similar to the companies whose names appeared on the checks, and then cashed the commission checks at a check-cashing business.
Carter sentenced Tornow to 70 months in federal prison on the tax evasion, mail fraud and credit card fraud charges. The schemer was also ordered to return to court March 3 for a hearing to determine the amount of restitution he will be ordered to pay to victim lenders.
Kosachevich and Gerken, who already pleaded guilty to conspiracy to commit mail fraud, go before Carter for sentencing on Jan. 25. Kosachevich faces up to 25 years in federal prison and Gerken could get five years behind bars.