Va. Bollywood Investor Admits $33 Million Fraud

By Jerry Markon
Washington Post Staff Writer
Friday, November 14, 2008

He was an icon in the local Indian community, a flashy movie producer who invested millions in Bollywood films and brought Indian musical acts to the Washington area.

Vijay K. Taneja had an aura about him, a celebrity image that made people trust him, according to people who know the Fairfax County businessman. Problem was, Taneja admitted in federal court yesterday, his entertainment ventures were financed with money obtained through an extensive mortgage fraud scheme.

Taneja pleaded guilty in U.S. District Court in Alexandria to a fraud enterprise that cost banks at least $33 million, the largest mortgage fraud case in Virginia in almost 20 years and among the largest nationally. Prosecutors said he created bogus mortgage loans, sold legitimate loans to more than one buyer and pocketed the proceeds of refinancings.

"That's an incredible amount of loss," said Adam Lee, supervisory special agent for financial crimes in the FBI's Washington field office, which operates one of 42 new bureau task forces nationwide focusing on escalating mortgage fraud.

Taneja, 47, of Fairfax City entered his plea to one count of conspiracy to commit money laundering in a soft, hesitant voice. U.S. District Judge Claude M. Hilton asked him no specific questions about the case, and he declined to comment afterward. His attorney, Robert P. Trout, declined to comment as well. Taneja faces up to 20 years in prison when he is sentenced Jan. 30.

Prosecutors told the judge that Taneja invested millions of his mortgage proceeds in Indian films and theatrical productions through one of his companies, Elite Entertainment, and that they are still trying to untangle the financial web. "He has millions of dollars unaccounted for," Assistant U.S. Attorney Stephen Learned said as he asked Hilton to order Taneja to be electronically monitored to ensure that he doesn't flee before sentencing. "There's so much money, and it's difficult to figure out where it all went."

Trout emphasized that Taneja, a U.S. citizen, has cooperated extensively with the government, and Hilton ordered him released on a personal recognizance bond.

Members of the Washington region's tightly knit Indian community said Taneja was revered by many because of his show business connections and insistence on doing business mainly with others in the community.

He brought renowned Indian acts to the United States and also invested in the entertainment industry in India.

"He knew people in the film and music industry, and he produced these shows," said Anuj Sud, a Maryland lawyer who said several of his relatives were victimized by Taneja. "People see this guy out there involved in Bollywood and the attraction is, 'Hey, this guy is popular.' "

David Lamb, a Washington lawyer who represents several of Taneja's victims, said that "everyone looked up to him. He had all this big flashy money, and they thought he was a star. He could get them to do things for him."

Although the $33 million loss was borne by four financial institutions -- First Tennessee Bank, Franklin Bank, Wells Fargo Bank and EMC Mortgage Corp. -- prosecutors said numerous area residents were victimized as well. They said Taneja prepared some legitimate mortgages, mostly for members of the Indian community, but would dupe people into signing dual sets of loan documents. He would then create a fictitious mortgage based on the second set of documents and sell the phony loan to an investor, which would leave the victims with mortgages they didn't know they had.

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.

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