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Financial Crimes
02/07/2012

Elder care facility owners, real estate agents plead guilty in multi-million dollar mortgage fraud scheme

Defendants agree to pay more than $8 million in restitution

OAKLAND, Calif. – A Bay Area couple, who operated local elder care facilities, and two area real estate agents have pleaded guilty to federal charges stemming from a multi-agency investigation involving a large-scale multi-million dollar mortgage fraud scheme.

Edith Nelson, 53, and her husband Ronald Nelson, 76, who ran numerous residential care facilities, appeared in court Feb. 3 and admitted making fraudulent representations involving more than 60 real estate loans totaling in excess of $20 million. The charges are the result of an investigation involving U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI) and the Internal Revenue Service – Criminal Investigation (IRS-CI).

According to the plea agreement, the pair owned and operated Placement Services, a referral business in Pleasant Hill that placed elderly individuals in residential care facilities. In August 1998, the California Department of Social Services banned the couple from having any involvement in state licensed care facilities due to various violations. Despite the exclusion order, the Nelsons continued to operate numerous such facilities using other people's identities and acquiring new properties using straw buyers.

"We have all paid the price for mortgage loan fraud, which has had a devastating effect on the United States' economy," said U.S. Attorney Melinda Haag. "The Department of Justice will continue to vigorously pursue and prosecute offenders of mortgage loan fraud and violators of immigration law as occurred in this significant case."

According to the plea agreement, the Nelsons maintained full control over the residential care facilities by directing the straw buyers to sign grant deeds that either transferred the title of the property to Edith Nelson or added her name to the title. In addition, some of the straw buyers were instructed to open bank accounts that were controlled by the couple.

In addition to the financial violations, the Nelsons also admitted hiring illegal aliens to work as caregivers in their facilities. The caregivers worked long hours at less than minimum wage and often resided in the same facilities where they worked.

Also pleading guilty to charges stemming from the probe were two Bay Area real estate agents, Nelda Asuncion, 68, co-owner of Realty World Pacific West in Concord, Calif., and Cristeta Lagarejos, 49, owner of Legacy Financing in Pleasant Hill. The two women admitted participating in the mortgage fraud scheme with the Nelsons. They acknowledged preparing the mortgage loan applications in the names of the straw buyers, using false information about the buyers' employment, income and assets.

"The defendants' actions in this case were calculated and brazen," said Clark Settles, special agent in charge, HSI San Francisco. "They exploited their foreign workers; they exploited our nation's legal immigration system; and they exploited the mortgage lending process. Fortunately, through our joint investigative efforts, we exposed this large-scale fraud scheme and now those involved will be held accountable for the considerable harm they caused."

"IRS-CI takes mortgage fraud seriously. The impact of these types of crimes cannot be overstated," said Clarrisa Balmaseda, acting special agent in charge for IRS-CI. "IRS-CI is committed to pursuing individuals who commit this type of offense. Those who line their pockets with profits from these schemes should know they will not go undetected and will be held accountable."

As part of their pleas, Edith and Ronald Nelson have agreed to pay $5.2 million in restitution. That includes restitution for the lending institutions and other victims of the mortgage fraud scam as well as more than $1.5 million in back wages owed to their employees and former employees. Defendant Asuncion has agreed to pay $2.8 million in restitution and Lagarejos has agreed to pay $318,500.

The four defendants are scheduled to be sentenced May 11 before Judge D. Lowell Jensen. The maximum penalty for conspiring to commit bank fraud and wire fraud is 30 years in prison and a $1 million fine. The charge of making monetary transactions using criminally derived property is 10 years in prison and a $250,000 fine. The tax evasion count carries a maximum penalty of five years in prison and a $100,000 fine. Harboring illegal aliens is punishable by up to five years in prison and a $250,000 fine.