Three arrested, fourth sought in mortgage fraud

A mortgage scam spawned during the Southern Nevada housing boom led to the arrest Thursday of three defendants and pursuit of a fourth, the attorney general's office said Friday.

Many of the 33 counts in the criminal complaint revolve around "straw man" schemes.

In such schemes, the scammers urge someone -- the "straw man" -- to borrow money for a home purchase. The borrower doesn't make payments on the loan, but rather is told someone else will make the mortgage payments and then split profits with him when the home is sold later.

Some of the defendants are charged with making false statements about the income and assets of home loan applicants in order to obtain home loans. The fraud was easier during the recent housing boom when many lenders required no documentation or limited documentation for home loan borrowers, said John Kelleher, assistant chief deputy attorney general and mortgage fraud task force chief.

The arrests are the first made by the task force, which Attorney General Catherine Masto formed with other state agencies in January.

The investigation started when a consumer told the attorney general's Bureau of Consumer Protection that he didn't get a promised refund of advance fees for foreclosure protection services, Kelleher said.

The attorney general's criminal division obtained a search warrant for offices used by Jeffrey Tye Brown, who ran DB Financial Group.

Brown was charged on March 27 with two counts of theft, two counts of deceptive trade practices and one count of forgery. The charges said that Brown charged one couple $999 in foreclosure prevention fees and a second couple $750, but Brown failed to provide any services.

Brown has disappeared and is believed to be in the Philippines, Kelleher said.

The new charges against Brown and three others include theft by misrepresentation, forgery, making false statements to obtain credit and racketeering.

"They were putting anything it took on the documents, even blatant lies to get banks to approve the loans," Kelleher said.

Attorney general's senior investigator Isabel Camp and investigator Shelley Neiman on Thursday arrested Cindy Birkland, 38, owner of Sapphire Mortgage; Bryan Sears, 46, a general contractor who did business as Searco; and Searco employee Claudia Koziol, 59.

Sears and Koziol were in the Clark County Detention Center Friday in lieu of posting $50,000 in bond each. Birkland was in custody Friday, rather than posting $93,000 in bond.

Defense attorney James Ruggeroli, who represents Birkland, said he cannot comment until he has studied the allegations.

Sears attorney Richard Schonfeld said: "It's the beginning of the legal process, and we look forward to him being exonerated from these charges."

Birkland and Brown are accused of straw man schemes. In one, they persuaded janitor Faye Smith to sell her condominium and turn over the $19,000 profit from the sale for a down payment on a house, according to the criminal filing. Instead, Brown and Birkland kept the money.

Loan documents showed that Smith was earning $8,522 monthly while her income was $3,434. The loan application indicated Smith's assets included $99,000 in a bank account which belonged to Birkland, the complaint said..

Sears and Koziol are accused of helping Birkland borrow $205,000 for office improvements, many of which weren't made to Sapphire's offices at 2637 W. Horizon Ridge Parkway, Suite 120. The complaint said that Birkland fabricated invoices from phony subcontractors.