Just In: Acquittal - Real Fraudsters were the Banksters!

83
Wed, Aug 27, 2014 - 4:12pm

Real estate flippers avoided criminal conviction because they argued, and persuaded the jurors, that the REAL criminals were the banksters!! No way!!!

“In an unprecedented trial, four people charged with mortgage fraud were acquitted Friday by a jury in Sacramento federal court after defense attorneys argued the real culprits are the so-called victim lenders.” https://www.sacbee.com/2014/08/22/6648529/sacramento-federal-court-jury....

Let’s do a little background.

We all know of the real estate boom, and bust, particularly in California, and specifically localized in massive numbers in California’s Central Valley. Essentially, some of us have correctly pointed out that the root cause of the onset of the bubble, were criminal bankers, beginning with Blythe Masters of JPMorgan, who conjured up the scheme of securitized finance for home mortgages. The scheme was simple: the big banks would write loans, using investor money, and none of the banks’ own money. Once the loans were made, the banks would in turn package a thousand loans or so, and bundle them up, then sell them as a whole to investors, as a security. Investors getting first dibs at repayment streams [upper tranches] were paid less interest, than investors who were last to be paid [lower tranches]. The whole theory was that out of the pool of the thousand home loans, not all would default and go bad. Since in the aggregate, most of the loan payments would be paid on time, then those investors at the upper tranches were not risking non-payment as compared to the investors and the lower tranches. The interest rates were balanced against this risk, and the securities were marketed and sold off to investors.

The problem, though, crystal clear to anyone with a brain, from the inception of the whole scheme, is in the incentive structure of the whole mess.

Not a single participant in the scheme had a single incentive to scrutinize the deal. The prospective home loan applicant, wanted a home, and inflated the income and other figures on the application. None of the bankers cared about the fake applications, because the bankers were only going to bundle the loans and sell them off, having no skin in the game and having massive incentives to get more and more loans bundled regardless of the underwriting standards or risk of default.

The investors at the upper tranches cared not. They were guaranteed first payment from the income stream. Their risk of loss was near zero. The lower tranch investors cared not either, as they were getting astronomically high rates of return, and on balance, the risk to them of defaulting payment streams was outweighed by the lucrative returns, much like unsecured credit cards. They figured there would be defaults, but the high interest rates made it, on balance, perfectly acceptable.

The various middlemen in all the transactions, like appraisers, real estate agents, escrow companies, and all the durable goods manufacturers filling all those new homes with shiny new appliances cared not one bit either. Local governments, always desperate for tax dollars, care not one bit either that the mortgage applications were filled with false incomes, and outright lies.

Then, of course, the incentive structure, understood as it was, created a new class of opportunists: the flippers and fraudsters.

These criminals, correctly realizing that there existed NO incentive by any of the participants to scrutinize mortgage applications, began scheming with straw buyers to flip properties.

In Sacramento, this type of fraud was particularly rampant.

Here is where the story gets fun.

The basic crime details are set out here:

“According to prosecutors’ filings, Charikov, a 42-year-old real estate agent who lives in West Sacramento, used straw buyers to purchase properties in a declining real estate market and then immediately resold them to another straw buyer at fraudulently inflated prices. To qualify for the mortgage loans, prosecutors contended, the defendants submitted fraudulent loan applications to lenders, falsely stating the straw buyer’s income, liabilities, and intent to occupy the home as a primary residence.

“The indictment alleges that Charikov recruited his loan officer wife, Romanishin, 32, of West Sacramento; Tuzman, 42, of Citrus Heights; and Talybov, 32, of Antelope, as straw buyers in transactions involving the sale and purchase of two West Sacramento properties in 2006 and 2007.

“After the first set of straw buyers obtained the proceeds from Talybov’s fraudulent purchases, they allegedly split the take with Charikov. Subsequently, Talybov defaulted on loans for both properties.

All four were charged with fraud that resulted in alleged losses to the lenders of at least $710,000. Charikov and Tuzman were also charged with laundering their ill-gotten gains.”

Got it so far? The United States Attorney, in a hard-hit part of California, used its massive massive, taxpayer-funded resources, and made the decision to charge the low-level fraudsters, and none of the bankers. No plea deals were reached.

Instead, in an act of incredible lawyering, the defense attorneys turned the case on its head by arguing the real criminals were the banksters! Unbelievable.

Remember, to prove fraud, one element is reliance. That means the banksters, who lost the $710,000, had to prove that they relied upon the statements in the loan application to lend the money. The criminal defendants showed that the loans would have been made anyway, whether the application information was true or completely false. Thus, there was no reliance, an essential element, and the jury acquitted the criminal defendants. Brilliant, simply brilliant, and my hat is off to those fine lawyers who advocated a winning position. It was a risky move, too, one that drew sharp objections from the prosecution:

“In this trial, U.S. District Judge Lawrence K. Karlton, over the government’s strenuous objection, allowed testimony meant to show that the lenders in the two transactions at issue – Aegis Wholesale Corp. and Greenpoint Mortgage Funding – didn’t care whether information on the applications was true or false. Under those circumstances, the defense argued, the information was not material because, either way, the loan would have been approved.”

As an aside, I am a bit miffed that the criminals got away with fraud, as this now sends a message that prosecuting low level fraud may not achieve the desired convictions. This now creates a MOPE problem for the Feds. That means those idiots and criminals in Washington have to dream up a new class of criminal defendants to pursue. Who knows what the next set of criminals will be? Maybe us bloggers who dare to challenge the government spin machine? Perhaps returning war veterans who dare to criticize the inept commander in chief? Stay tuned on this one.

Anyhow, back to the story.

In a statement given after losing a sure winner, the US attorney, Benjamin Wagner, did not mention his own office’s lack of pursuing the real criminals, the banksters:

“U.S. Attorney Benjamin Wagner, in a statement issued at The Sacramento Bee’s request, said:

“Criminal trials are inherently uncertain endeavors. We have had tremendous success in convicting scores of persons in mortgage fraud cases over the last several years, but it is unrealistic to expect that we will get the outcome we are seeking in every single case.

“We respect the criminal trial process, and accept the jury’s verdict in this case. It will not dissuade us from pressing forward in the many other mortgage fraud cases currently pending in this courthouse.”

What is telling here, is the UA attorney’s reliance on PAST success, attempting to foreshadow future success: “An acquittal in Sacramento federal court is rare, regardless of the charges. But with respect to mortgage fraud, it is virtually unheard of. There was little or no difference between the mail fraud charges against Yevgenity Charikov, Vitaliy Tuzman, Nadia Talybov and Juliet Romanishin and charges brought against hundreds of other defendants prosecuted by the U.S. attorney’s office in the Sacramento-based Eastern District of California. The office has often described the Central Valley as “ground zero” for mortgage fraud, and noted it has been a national pacesetter in pursuing the perpetrators.”

The winning defense attorney, naturally, highlighted the real issue:

““The big banks and other lenders made as many loans based on patently false information as they could, packaged them as securities and passed them up the chain to Wall Street’s investment and management bankers, who peddled them to an unsuspecting public,” said defense lawyer Tim Pori after the verdict.

“No bank executives have been prosecuted,” Pori said. “Sure, there have been multibillion-dollar settlements with some big banks, but none of their officers – the ones who really pulled the strings – will ever see the inside of a cell.”

“In the week when details of the United States government’s $16.5 billion civil settlement with Bank of America was disclosed, I hope the jury’s verdict causes the U.S. attorney’s office to readjust its priorities and investigate criminally the true culprits of our country’s financial collapse, the mortgage lenders’ officers who committed the real fraud – not those who allegedly lied on the industry’s ‘liar’s loans,’ ” said defense lawyer John Balazs.”

The star defense witness, none other than William Black, chimed in as well:

William Black, who boasts long academic and regulatory careers, was a key expert witness for the defense, again over Coppola’s objection. Black is an associate professor of economics and law at the University of Missouri, Kansas City, and the “distinguished scholar in residence for financial regulation” at the University of Minnesota’s School of Law.

His testimony purportedly connected the fraud in the Sacramento case directly to the lenders, and he explained to the jury why the false information on the applications had no bearing on lending decisions.

“This is the first time that the overwhelming fraud at the banks has been discussed in a criminal courtroom by the person with the greatest expertise on the issue, William Black,” said defense lawyer Toni White after the verdict.

“Prosecutors have refused to criminally prosecute the elite bankers responsible for the mortgage crisis that decimated our economy. The jurors heard shocking testimony from ‘control fraud’ expert William Black that regular people who got loans they were unable to pay back did not (defraud) the banks. The elite bankers commit the fraud while prosecutors look the other way and prosecute the wrong people.”

If Rand Paul wins the presidency, he could do no better than to appoint William Black as Attorney General. Will we see that?

Prepare accordingly.

About the Author

  83 Comments

DeaconBenjamin
Aug 27, 2014 - 4:19pm

Jury refuses to convict

Kudos to Professor Black.

So, will the prosecutors in future prosecutions seek to prevent the case from reaching the jury, like in IRS cases?

DeaconBenjamin
Aug 27, 2014 - 4:23pm

Hey Cal, Did you ever comment on this?

Suspect's silence allowed as evidence at trial, court rules

After Richard Tom's car slammed into another vehicle at a Redwood City intersection in 2007, killing an 8-year-old girl and injuring her sister, he asked police if he could go home, then talked with them in the patrol car. One thing he didn't ask about - as the prosecutor repeatedly told the jury at his manslaughter trial - was the victims' condition.

Tom's conviction and seven-year prison sentence were overturned in 2012 by a state appeals court, which said the prosecution had wrongly taken advantage of Tom's right to remain silent in police custody.

But Thursday, a divided state Supreme Court established a different standard: Prosecutors can introduce evidence of a suspect's silence - even someone like Tom, who hadn't been questioned or advised of his rights. The exception is a suspect who has invoked those rights by telling police he won't discuss the subject.

Tom "needed to make a timely and unambiguous assertion of the privilege (against saying anything that might incriminate him) in order to benefit from it," Justice Marvin Baxter wrote for a four-member majority.

The court returned the case to the appellate court to decide whether Tom had told the police he wanted to remain silent - or, if not, whether evidence of his failure to ask about the victims was too prejudicial to present to the jury.

Tom's speeding car struck a car driven by Lorraine Wong, who was turning left onto Woodside Road from Santa Clara Avenue after stopping at a stop sign. Wong's 8-year-old daughter, Sydney Ng, was killed, and another daughter, 10-year-old Kendall Ng, was seriously injured.

There was no stop sign on Woodside, and Tom's lawyer argued that he had the right-of-way. But prosecutors said Tom was at fault because he was driving at least 67 mph, according to a prosecution investigator, on a road with a 35 mph limit. A defense investigator estimated his speed at 49 to 52 mph.

During final arguments to the jury, the prosecutor said one aspect of Tom's post-accident conduct was "particularly offensive - he never, ever asked, 'Hey, how are the people in the other car doing?' " That showed, the prosecutor said, that "he was obsessed with only one thing ... saving his own skin."

In a dissenting opinion Thursday, Justice Goodwin Liu said the prosecutor's comments were improper and might have influenced the jury's verdict that Tom had been grossly negligent, defined in the jury instructions as an "I-don't-care attitude."

Tom had served about three years of his sentence before being freed on bail following the 2012 appellate ruling.

His lawyer, Marc Zilversmit, said the court apparently is insisting that a defendant "invoke his right to remain silent about a question they never asked him."

https://www.sfgate.com/bayarea/article/Suspect-s-silence-allowed-as-evid...

kardnul
Aug 27, 2014 - 4:35pm

Land of the free

So the flipper fraudsters get off scott free by implicating the banksters and the court agrees, but because the banksters are Too Big To Jail, everybody goes free and the lawyers make bundles and everyone goes home happy.....ain't Amurikah great, or what?

Aug 27, 2014 - 4:47pm

Great, CaL.

Just great.

ancientmoneykardnul
Aug 27, 2014 - 4:52pm

kardnul, LMAO!

"So the flipper fraudsters get off scott free by implicating the banksters and the court agrees, but because the banksters are Too Big To Jail, everybody goes free and the lawyers make bundles and everyone goes home happy.....ain't Amurikah great, or what?"

----------------------------------------------------------------------------------

You hit the freakin' nail right on the FREAKIN' head! The justice system at work in 2014 ameriKa.

Mr. Fix
Aug 27, 2014 - 4:56pm

Oh! goodie, I've been looking forward to your post

I just love your well researched articles, as you expose the lawlessness overtaking our society.

Well worth the price of admission, and much much more.

Edit:

California Lawyer,

I've been going through my inbox trying to find a past correspondence with you, referring to the possibility of a “silent title”, I think that was the term, and the MEARS scam, with all of the destroyed documentation, and you didn't think such a case would survive in court.

After searching 20 pages of correspondence, I can't find the conversation, (where did it go?),

But I was wondering since your exposé clearly shows that such a case might survive a trial, has your opinion on the matter changed?

There are literally millions of people drowning with mortgage payments in upside down houses that would really like to know.

If this became widely publicized, it could destroy the banks very quickly.

Oh yeah,

third.

AlienEyes
Aug 27, 2014 - 4:58pm

Great Job, Cal !

I love it when the rat-bastards get to hold the soiled end of the stick.

.

@kardnul

"Land of the free. Home of the knave".

Aug 27, 2014 - 5:02pm

@DeaconBenjamin

I believe I did comment about that. If not, my comment is simple.

The Constitution strictly limited the power of the federal government, while expressly recognizing liberties of the citizenry, including, the 5th Amendment, extended to the States by the 14th Amendment, which supposedly mandates that the state cannot use evidence from one's own mouth to support a conviction. This right is known as the privilege against self-incrimination, also referred to as coerced confessions. If a suspect invokes the right to remain silent, we all know this as "taking the 5th," then the interrogator is not allowed to further inquire, or risks having anything said by the suspect excluded in court as a violation of the suspects 5th Amendment right to remain silent.

Unfortunately, as we see over and over again, the powers of the federal government are not strictly limited; rather, the courts "interpret" the constitution as providing the government with expanded powers. This same argument is applied in reverse as to individual rights as well. The courts strictly construe, or narrowly interpret the scope of individual rights as guaranteed by the Bill of Rights.

There is no further proof of this than the article you cited above. There is NO way that 20 years ago, any statements of the criminal suspect would have been allowed in front of that jury. Nowdays, the right to self incrimination basically does not apply.

The prosecutors have the ability to bring in all sorts of statements, and indeed silence as an admission of guilt! How's that for a bit of irony?

Remember, in this police state we live in, even if one keeps one's mouth shut, the prosecution will still argue that silence evidences consciousness of guilt.

This is the very same shill argument that the cops use in police brutality cases. They always claim that the victim provoked the officers, the officers were in fear for themselves, and had to use whatever force they are accused of using. Now, they just shoot multiple holes in the suspects, summarily executing them, and argue that the suspect reached for the gun and the officer was in fear for his safety.

See, if the perp has a gun, the officer claims he was afraid of being shot. If the perp is found to be holding a cell phone, or a pack of cigarettes, or just his finger extended, the cop shoots, kills, and claims the suspect was reaching for the cops' gun.

People, it is time to wake up. If one is confronted by the police, the goal is to NOT GET KILLED during the encounter!!!!! Do NOT forget this. We live in a police state. There is no such thing as justice. Stop deluding one's self otherwise.

Now, I am not just saying this because of the Ferguson, MO situation. This kind of violence is on the news regularly, all over the country, and in particular, here in So. Cal. Just last month, a nice family man was killed in Victorville. His heirs will get millions from this case, because there is no justification at all for the killing. Similarly, in this week's headlines, there is mention of cops swarming a Cal State campus because they found a menacing umbrella.

When there is NO REGARD for civil liberties, and the rule of law is malleable depending upon the person accused, there is no rule of law, and we are all at the mercy of the state. Be alert, and be careful.

One of my theories of survival is to become part of the system, so that the system cannot kill you. Volunteer as a ride-along cop, that is one way. Become a reserve deputy cop, or sheriff, that is another way. Or, as I do, represent cops free of charge as part of the effort to give pro bono legal work. Now, I am part of the system, and they will not view me as a threat.

Just my $0.02

Aug 27, 2014 - 5:06pm

Kardnul, exactly

Precisely my friend. You nailed it.

Look at the incentive structure of the prosecution effort. They took on CLEARLY guilty criminal defendants, but the judge allowed the kryptonite into the courtroom, defeating the prosecution's case.

Why has there NOT been a SINGLE prosecution of a SINGLE bankster? Not a one.

Certainly, someone knew of the fake paper, the fraud, the scheme, but still, no one has been charged?

Shocked, shocked there was fraud in the mortgage applications . . .

The powers that be are not about to let their praetorian guard turn on them. Remember that.

Bollocks
Aug 27, 2014 - 5:07pm

"the place to avoid"

Here's a BBC News article I bookmarked back in July as I wanted to post it up here when I returned.

This lady (the link to the article is at the bottom) didn't enjoy her visit to a restaurant, so said it was "the place to avoid" on her blog site.

It so happened that when conducting a search on the restaurant's name at Google, her blog post appeared in fourth position. The restaurant then took her to court because it was "unfairly hurting their business".

All she was doing was speaking her mind. She gave her opinion, that is all.

The judge fined her for the blog post.

This is an outrageous example of how free-speech is being destroyed. Firstly, all she did was speak her mind. Secondly it is GOOGLE, it is their algorithm, which made her post appear so high in the search results. It has nothing to do with her that her blog appeared so high in the rankings and was seen by so many people.

But Google aren't seen as the ones that are responsible for this, yet it's clear they are as it was Google that ranked the blog so high. She has no control at all over what the Google search engine did.

But most importantly, she was just speaking her mind. She was only giving her opinion.

Wow. Just look at the message, a creeping message. Don't criticise on the Internet. Keep your mouth shut, or you'll suffer consequences.

This is one of the most blatant examples of how freedom of speech is being destroyed that ever I've seen. Just ten years or so ago something like this would have been thrown out of court.

The implications go much further of course. Don't speak out against the government... you are being watched.

1984.

George Orwell was one of the greatest visionaries of all time.

https://www.bbc.co.uk/news/technology-28331598

----

Great post CaL!

Bill Black is one of the few who isn't afraid to speak out. You've reminded me of this...

https://www.youtube.com/watch?v=yKRBqaoQPAU

Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

Subscribe or login to read all comments.

Contribute

Donate Shop

Get Your Subscriber Benefits

Private iTunes feed for all TF Metals Report podcasts, and access to Vault member forum discussions!

Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

Key Economic Events Week of 10/7

10/8 8:30 ET Producer Price Index
10/9 10:00 ET Job Openings
10/9 10:00 ET Wholesale Inventories
10/9 2:00 ET September FOMC minutes
10/10 8:30 ET Consumer Price Index
10/11 10:00 ET Consumer Sentiment

Key Economic Events Week of 9/30

9/30 9:45 ET Chicago PMI
10/1 9:45 ET Markit Manu PMI
10/1 10:00 ET ISM Manu PMI
10/1 10:00 ET Construction Spending
10/2 China Golden Week Begins
10/2 8:15 ET ADP jobs report
10/3 9:45 ET Markit Service PMI
10/3 10:00 ET ISM Service PMI
10/3 10:00 ET Factory Orders
10/4 8:30 ET BLSBS
10/4 8:30 ET US Trade Deficit

Key Economic Events Week of 9/23

9/23 9:45 ET Markit flash PMIs
9/24 10:00 ET Consumer Confidence
9/26 8:30 ET Q2 GDP third guess
9/27 8:30 ET Durable Goods
9/27 8:30 ET Pers Inc and Cons Spend
9/27 8:30 ET Core Inflation

Key Economic Events Week of 9/16

9/17 9:15 ET Cap Ute & Ind Prod
9/18 8:30 ET Housing Starts & Bldg Perm.
9/18 2:00 ET Fedlines
9/18 2:30 ET CGP presser
9/19 8:30 ET Philly Fed
9/19 10:00 ET Existing Home Sales

Key Economic Events Week of 9/9

9/10 10:00 ET Job openings
9/11 8:30 ET PPI
9/11 10:00 ET Wholesale Inv.
9/12 8:30 ET CPI
9/13 8:30 ET Retail Sales
9/13 10:00 ET Consumer Sentiment
9/13 10:00 ET Business Inv.

Key Economic Events Week of 9/3

9/3 9:45 ET Markit Manu PMI
9/3 10:00 ET ISM Manu PMI
9/3 10:00 ET Construction Spending
9/4 8:30 ET Foreign Trade Deficit
9/5 9:45 ET Markit Svc PMI
9/5 10:00 ET ISM Svc PMI
9/5 10:00 ET Factory Orders
9/6 8:30 ET BLSBS

Key Economic Events Week of 8/26

8/26 8:30 ET Durable Goods
8/27 9:00 ET Case-Shiller Home Price Idx
8/27 10:00 ET Consumer Confidence
8/29 8:30 ET Q2 GDP 2nd guess
8/29 8:30 ET Advance Trade in Goods
8/30 8:30 ET Pers. Inc. and Cons. Spend.
8/30 8:30 ET Core Inflation
8/30 9:45 ET Chicago PMI

Key Economic Events Week of 8/19

8/21 10:00 ET Existing home sales
8/21 2:00 ET July FOMC minutes
8/22 9:45 ET Markit Manu and Svc PMIs
8/22 Jackson Holedown begins
8/23 10:00 ET Chief Goon Powell speaks

Key Economic Events Week of 8/12

8/13 8:30 ET Consumer Price Index
8/14 8:30 ET Retail Sales
8/14 8:30 ET Productivity & Labor Costs
8/14 8:30 ET Philly Fed
8/14 9:15 ET Ind Prod and Cap Ute
8/14 10:00 ET Business Inventories
8/15 8:30 ET Housing Starts & Bldg Permits

Recent Comments

Forum Discussion

by Solsson, 13 hours 35 min ago
by Pete, 17 hours 27 min ago
by SteveW, 18 hours 10 min ago
randomness