1 arrested, 2 sentenced in mortgage fraud scheme
Saturday, December 18, 2010; 6:18 PM
The federal investigation into a massive mortgage fraud scheme that roped in hundreds of Washington area residents and dozens of Fairfax County school employees has escalated with the arrest of a top official at a Woodbridge real estate company and the sentencing Friday of two of the company's employees.
Another of the company's top officials is cooperating with investigators and has worn a wire to the home of a former colleague. The cooperation might open the door into a wider federal probe of banks, developers and perhaps politicians allegedly involved in the type of mortgage fraud that led to the nationwide collapse of the real estate market.
The Woodbridge company, Total Realty Management, was formed in the mid-2000s by real estate agents Mark Dain and Mark Jalajel. The company marketed vacant pieces of land in the Carolinas as investment properties to be bought with no money down and no payments for two years.
Buyers said that Dain and Jalajel told them the properties could be flipped quickly for easy profit and that the modest salaries of a schoolteacher or a delicatessen worker, who were already paying a home mortgage, were not a problem.
But the buyers, and now federal authorities, say that TRM was submitting phony loan applications for their buyers, inflating their salaries, their jobs and their assets. About 500 people were left holding virtually worthless "slivers of undeveloped dirt," as one lawsuit termed it, paying as much as $400,000 for lots now valued at less than $20,000.
Many buyers sued TRM along with the banks who made the loans and the developers who created the properties. The FBI targeted TRM and three of the company's employees are headed to prison.
Last week, a fourth TRM employee, Michael J. McCracken, was arrested at his home in the Herndon area and ordered held without bond until trial. McCracken, 31, was the chief financial officer of TRM. A federal affidavit said he "routinely falsified the loan applications of prospective lot purchasers who did not otherwise qualify for financing" and that the scheme had caused banks to lose more than $10 million.
But the most fascinating detail to emerge from the McCracken affidavit was that "the majority owner of TRM" is a cooperating witness and wore a wire to capture a conversation at McCracken's home last month.
In that conversation, an informant known as CW-3 [cooperating witness number 3] visited McCracken on Nov. 23 and asked him about his gun collection, according to an affidavit written by FBI Special Agent Kendra S. McLamb. McCracken then opened a gun safe and showed CW-3 about 10 rifles, a .45-caliber handgun and about six boxes of ammunition, McLamb wrote.
McCracken has a felony conviction in Fairfax County for assault on a police officer and may not legally own a firearm, the affidavit states. So in addition to bank fraud, McCracken also was charged with a federal gun violation and a federal magistrate ruled that he was a flight risk and denied him bond.
CW-3 is identified in the affidavit as "the majority owner of TRM and an officer of the company from approximately 2006 to 2008," when it folded. Lawyers who have been investigating, and suing, TRM said that Dain and Jalajel were co-owners of the company. Both are in bankruptcy, and they have been accused in court of hiding millions of dollars through their scheme of buying properties in the Carolinas and immediately selling them to their customers for twice the purchase price, or more, and pocketing vast profits.
Dain could not be reached for comment Friday, and Jalajel's lawyer did not return a phone call. McCracken's lawyer, John K. Zwerling, also did not respond to messages.
According to McLamb's affidavit, CW-3 began cooperating with the investigation in June and the government has agreed not to use his statements against him. But if Dain is CW-3, he could provide detailed information about his dealings with various banks that made hundreds of questionable loans and also any involvement in the scheme by R.A. North Development, the company that sold the vacant lots to TRM. R.A. North and the banks have denied any wrongdoing.
Hundreds of e-mails between Dain, bank loan officers and R.A. North marketing official Mace Watts were uncovered in North Carolina earlier this year, leading a federal judge in Alexandria to reverse himself and reinstate Bank of America as a defendant in the civil suit after previously dismissing it.
Another cooperating witness in the case, CW-2, is Cari V. Deuterman, 32, of Raleigh, N.C., who was TRM's vice president of finance. According to court papers, she worked with Jalajel at another company and then joined him when he started TRM.
Deuterman began working with investigators soon after being confronted, her lawyers said in a sentencing brief, and she pleaded guilty in July to conspiracy to commit mail fraud and bank fraud. Deuterman acknowledged falsifying loan documents, which she said she did at McCracken's direction. She was sentenced Friday to two years in prison.
Also Friday, Christopher E. Tonkinson, 32, of Centreville was sentenced to a two-year prison term. He acknowledged falsifying bank documents as a TRM employee. And a former TRM employee, Aaron V. Hernandez, 41, of McLean, who told investigators he learned the mortgage scheme at TRM and then formed his own company, was sentenced in August to more than five years in prison.