Alleged Scheme Caused Home Mortgages to Falsely Appear Paid
OAKLAND – LAWFUEL – The Law News Network – United States Attorney Kevin V. Ryan announced that a federal grand jury in Oakland indicted Dale Scott Heineman, 45, Kurt F. Johnson, 42, the Dorean Group, and four Dorean Group “brokers” in a 68-count superseding indictment charging mail fraud, bank fraud, conspiracy to commit mail fraud, wire fraud and bank fraud, and contempt of court. The superseding indictment, returned late yesterday, has added charges of mail fraud, bank fraud, and conspiracy to commit mail fraud, wire fraud and bank fraud against the following four Dorean Group “brokers”:
William Julian, 42, Cayce, South Carolina,
Farrel J. LeCompte, Jr., 35, Kingwood, Texas,
Sara J. Magoon, 29, Hamilton, Montana, and
Charles Dewey Tobias, 58, of Longwood, Florida.
These charges are the result of an investigation by the FBI.
The principals of the Dorean Group are Dale Scott Heineman of Union City, California, and Kurt F. Johnson, of Sunnyvale, California. They, along with the Dorean Group and four of its brokers, are charged with operating a debt elimination scheme whereby fraudulent documents are recorded as part of their clients’ titles to allegedly transfer lenders’ secured interests in the properties when the corresponding mortgage and home equity loans had not been paid. With this fraudulently-generated free and clear title, some clients, at the direction of the Dorean Group, obtained hundreds of thousands of dollars in home equity loans from independent lenders.
Heineman and Johnson also face contempt of court charges for violating a restraining order and preliminary injunction which prohibited the Dorean Group from engaging in any activities related to its mortgage elimination scheme.
The charges in the superseding indictment relate to 24 properties in California, Colorado, Florida, Idaho, Montana, Nevada, North Carolina, South Carolina, Texas, Utah and Washington with a value of over $6 million. The FBI continues to investigate more than
550 properties throughout 35 states with a potential value of greater than $88 million in loans that may have been affected by this alleged scheme. The FBI is also investigating properties in 19 California counties affected by this alleged scheme.
U.S. Attorney Kevin V. Ryan stated, “Homeowners should be cautious of offers that sound too good to be true. This alleged scheme violates mortgage agreements between the lender and borrower and taints property titles by recording false documents on the title of a home. Manipulating property titles and interfering with mortgage loans with the intent to defraud is illegal and will result in prosecution.”
Joseph Ford, Special Agent in Charge of the FBI in San Francisco, stated, “Mr. Heineman and Mr. Johnson are accused of being con artists in a sophisticated telemarketing scheme. They are alleged to have incorporated the internet to further their criminal enterprise, which is nationwide in scope and has significant impact on the housing market in the U.S. Because cyberspace has no borders, the FBI is working with its law enforcement partners from around the world to address these growing crimes.”
According to the indictment, the Dorean Group is an unlicensed and unincorporated entity that has been operating a purported debt elimination program since at least January 2004. The Dorean Group uses brokers to promote its program. On various websites, the Dorean Group and its brokers publically advertise that they have a “PROVEN, legal and moral way of eliminating your mortgage while adding $32K to your pocket (*based on a $200,000 mortgage).”
According to the superseding indictment, the Dorean Group’s scheme to defraud operated as follows:
(1) Fee: The client pays an up-front fee of approximately $1,000 to $3,000 per loan to be eliminated and promises to make a “free-will offering of 50% of the REDEEMED mortgage.” The redeemed mortgage (dubbed a refinance loan in websites promoting this scheme) refers to a subsequent equity loan obtained from a separate lender based upon the Dorean Group’s fraudulent recordation representing that the initial mortgage loan secured by the property had been fully satisfied.
(2) Transfer of Title: Once the initial fee is paid, the Dorean Group forms a trust with its client, the trustees of which are Heineman and Johnson. The client records a quitclaim deed with the local county recorder’s office, which allegedly transfers the borrower’s title interests to this trust. However, typical mortgage agreements between a borrower and a lender require the lender’s consent before the borrower may transfer his/her title interests. According to the superseding indictment, no lender granted Heineman, Johnson, or the Dorean Group permission to act on behalf of the borrower under the applicable mortgage agreements.
(3) Self-Executing Presentment Packet: The Dorean Group subsequently mails a “self- executing presentment packet” to the lender of its client’s loan. In this packet, the Dorean Group claims to act on behalf of the borrower, demanding proof of the validity of the lender’s loan “to the unilateral satisfaction of the Dorean Group” within 10 days. If this burden is not met, documents in the packet allege that, due to the lender’s “tacit assent” and “default,” Heineman and/or Johnson of the Dorean Group will act as the lender’s agent and attorney-in-fact as to the loan and the secured property. In addition, if the lender elects to attempt to prove the validity of its loan, but fails to do so “to the unilateral satisfaction of the Dorean Group,” the lender, according to the packet, is liable to the Dorean Group for damages twenty times the amount of the loan.
(4) Substitution of Trustee: After 10 days has elapsed, Heineman, Johnson and the Dorean Group prepare a “Substitution of Trustee,” or, depending on jurisdiction, a “Specific Power of Attorney” or “Power of Attorney,” that is recorded as part of the title to its client’s property. This recordation claims that Heineman and/or Johnson is acting as agent and attorney-in-fact on behalf of the lender. According to the indictment, no lender has authorized Heineman, Johnson, or the Dorean Group to act either as its agent or attorney-in-fact.
(5) Full Reconveyance: Under this false representation, Heineman, Johnson and the Dorean Group prepare a “Full Reconveyance” or, depending on jurisdiction, “Discharge of Mortgage” or “Satisfaction of Mortgage,” that is recorded as part of the title to its client’s property. In this document, Heineman and/or Johnson of the Dorean Group – allegedly acting on behalf of the lender – represents that the loan secured by the property has been fully satisfied, when the loan had not been repaid. In this recordation, Heineman and/or Johnson purportedly transfers the lender’s secured interests in the client’s property to the client’s trust established by the Dorean Group, causing the property title to falsely appear unencumbered.
(6) Subsequent Home Equity Loan: With what appears to be free and clear title, and pursuant to its standard client service agreement, the Dorean Group directs its clients to seek a subsequent “refinance loan,”or home equity loan, from a separate lender with the apparently-unencumbered property serving as the security for the loan. When the loan disbursement is obtained, the Dorean Group receives 50% of its proceeds, the Dorean Group broker (who solicited the client) receives 10-25% of the funds, and the client keeps the remaining 25-40% of the loan. The refinance loan is subject to the Dorean Group’s debt elimination program and is not repaid.
Mr. Heineman and Mr. Johnson are also each charged in the superseding indictment with contempt of court. On July 6, 2005, the Civil Division of the United States Attorney’s Office filed a complaint for injunctive relief, and a motion for a temporary restraining order directing that Messrs. Heineman and Johnson, doing business as the Dorean Group, to cease engaging in their mortgage elimination scheme. On July 6, 2005, Judge William H. Alsup granted the government’s motion for a temporary restraining order. On August 1, 2005, Judge Alsup converted the temporary restraining order to a preliminary injunction, prohibiting the Dorean Group from engaging in any activities related to its mortgage elimination scheme, pending final judgment in the civil action. According to the superseding indictment, after they were served with the temporary restraining order and the preliminary injunction, respectively, Heineman and Johnson executed an “appointment of successor trustee” to allegedly transfer their interests as trustees of the Dorean Group’s clients’ trusts to a Dorean Group employee.
Mr. Heineman and Mr. Johnson were previously arraigned on the initial indictment before Judge Wayne D. Brazil in Oakland on February 13, 2006. Mr. Heineman and Mr. Johnson appeared before Magistrate Judge Brazil for arraignment on the superseding indictment on February 17, 2006, at 10:00 a.m. They are also set to make an initial appearance before Judge D. Lowell Jensen in Oakland on February 17, 2006, at 11:00 a.m. No bail arrest warrants were issued for Mr. Julian, Mr. LeCompte, Ms. Magoon, and Mr. Tobias.
The maximum statutory penalty for each count of mail fraud in violation of 18 U.S.C. § 1341 and affecting a financial institution is 30 years imprisonment and a fine of $1,000,000, plus restitution. The maximum statutory penalty for each count of bank fraud in violation of 18 U.S.C. § 1344 is 30 years imprisonment and a fine of $1,000,000, plus restitution. The maximum statutory penalty for each count of conspiracy to commit mail fraud, wire fraud and bank fraud in violation of 18 U.S.C. § 1349 is 30 years imprisonment and a fine of $1,000,000, plus restitution. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
An indictment contains only allegations against an individual and, as with all defendants, Mr. Heineman, Mr. Johnson, Mr. Julian, Mr. LeCompte, Ms. Magoon, Mr. Tobias, and the Dorean Group must be presumed innocent unless and until proven guilty.
James Keller is the Assistant U.S. Attorney who is prosecuting the case. The prosecution is the result of a fourteen-month investigation by the Federal Bureau of Investigation. Several law enforcement entities, including the Alameda County District Attorney’s Office, the California Attorney General’s Office among many others, provided valuable assistance and information about this alleged scheme to the United States Attorney’s Office.
