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Financial Crimes
05/11/2012

Residential care home owners, real estate agents sentenced in $20 million mortgage loan fraud scheme

Charges include bank fraud, wire fraud, money laundering, tax evasion and alien harboring

SAN JOSE, Calif. — A Bay Area couple, who operated local elder care facilities, and two area real estate agents were sentenced Thursday in federal court for their role in a far-reaching mortgage loan fraud scheme involving at least 20 northern California properties and more than $20 million in loan proceeds.

"Mortgage loan fraud has had a devastating effect on the United States' economy," U.S. Attorney Melinda Haag said. "My office will continue to work with our law enforcement partners to bring those who commit these crimes to justice."

In February, Edith Nelson, 53, and her husband, Ronald Nelson, 76, who ran numerous residential care facilities, admitted in court to making fraudulent representations involving numerous 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 (IRS)-Criminal Investigation.

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.

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.

"IRS-CI takes mortgage fraud seriously. The impact of these types of crimes cannot be overstated. Fraud in the mortgage industry has played a major role in almost crippling this nation's economy," said Marcus Williams, special agent in charge, IRS-Criminal Investigation. "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."

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. Many of the Nelsons' illegal alien workforce were paid under the table in cash and did not pay taxes.

"As the defendants learned yesterday, those who defraud our financial system face serious consequences," said Clark Settles, special agent in charge for HSI San Francisco. "These individuals callously exploited foreign workers; our nation's legal immigration system; and the mortgage-lending process, all for their own enrichment. Justly, they are now going to pay a significant price for their crimes."

Also sentenced Thursday for their role in the scheme 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 previously 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 sentences below were handed down by U.S. District Court Judge D. Lowell Jensen:

  • Edith Nelson – sentenced to 37 months in prison and ordered to pay restitution of more than $5.2 million (plus interest and penalties on the restitution owed for income tax evasion);
  • Ronald Nelson – sentenced to 32 months in prison and ordered to pay restitution of more than $5.2 million (plus interest and penalties on the restitution owed for income tax evasion);
  • Nelda Asuncion – sentenced to 30 months in prison and ordered to pay more than $2.8 million in restitution; and
  • Cristeta Lagarejos – sentenced to 18 months in prison and ordered to pay more than $318,000 in restitution.

The $5.2 million in restitution the Nelsons were ordered to pay includes restitution to lending institutions and other victims of the mortgage fraud; taxes owed based upon their income tax evasion and back wages of more than $1.5 million owed to 49 of the Nelsons' employees and former employees.

Assistant U.S. Attorney Deborah Douglas prosecuted, aided by Paralegal Noble Hughes and Legal Assistant Daniel Charlier-Smith.