Va. Bollywood Investor Admits $33 Million Fraud

One area business owner said her credit was ruined because she obtained several mortgages with Taneja and only later realized that he had taken out several more in her name. "When I went to refinance my house, they told me I had $6 million in mortgages," said the woman, who declined to be identified.

Court documents say Taneja's main company, Financial Mortgage Inc., also did refinancings and defrauded banks by not paying off the first mortgages. For example, a customer would borrow $500,000, intending to receive $100,000 as cash and use $400,000 to pay off his first mortgage. Taneja would give the customer the $100,000 and pocket the $400,000. The bank that held the first mortgage wouldn't notice because it didn't know there had been a refinancing.

Taneja also admitted that he would take out a mortgage loan and then sell that loan on the secondary mortgage market to more than one investor, pocketing the proceeds. Federal investigators said the banks were slow to catch on to the schemes because they were eager to lend money in the soaring housing market.

"The banks were not doing due diligence," said one law enforcement official, who declined to be identified because he was not authorized to speak about the case. "They saw mortgages as a good source of revenue, and he took advantage of that mentality. He took advantage of the height of the real estate boom."

Federal officials said Taneja's scheme escalated as the nation's economy spiraled downward. He was also a real estate developer -- his four companies filed for bankruptcy protection this year -- and officials said he booked more phony mortgages as housing prices fell.

Agent Lee said that mortgage fraud is "an absolute top priority" for the FBI and that investigators are focusing on Northern Virginia because of a high rate of foreclosures. A spokesman for the Internal Revenue Service, which also investigated Taneja, said that agency is zeroing in on mortgage fraud as well.

Federal mortgage fraud prosecutions have more than tripled in the past two years, according to Justice Department statistics, and experts said even more cases are coming as banks take bad loans off their books.

"That's when we'll see why these loans went so bad, and there will be criminal investigations," said Curt Novy, a California broker who testifies as an expert witness in mortgage fraud cases.