A federal jury began hearing evidence Wednesday in a multimillion-dollar mortgage fraud case against a former Las Vegas real estate broker and her estranged husband.
Prosecutors allege Eve Mazzarella and her husband, mortgage broker Steven Grimm, participated in a scheme to defraud banks over a five-year period. From 2003 to 2008, according to the indictment, the pair used "straw buyers" to obtain control of 227 properties worth more than $107 million.
"They did this by deceiving the banks and by outright lying to them," Assistant U.S. Attorney Brian Pugh told the jury.
A straw buyer is a person who pretends to be a legitimate buyer to conceal the identity of the actual buyer. Pugh said many of the straw buyers in the case were investors who "didn’t know that they were being defrauded as well."
Jurors are expected to spend the next month hearing evidence about Mazzarella and Grimm, who are going through a divorce, and former Las Vegas mortgage broker Melissa Beecroft, former owner of Secured Mortgage Services. Several other defendants in the case have entered guilty pleas.
According to the indictment, Mazzarella and Grimm eventually defaulted on mortgage payments and caused properties to go into foreclosure, resulting in losses to financial institutions of more than $20 million.
All three defendants who are on trial are accused of conspiring to commit bank fraud, mail fraud and wire fraud.
Prosecutors allege the object of the conspiracy was to obtain money and property by causing false information to be placed in the mortgage loan applications of straw buyers, who were paid for their participation in the purchases.
Once Mazzarella and Grimm obtained control of a property, prosecutors allege, they resold it to another straw buyer at an inflated price.
Assistant Federal Public Defender William Carrico, who represents Grimm, denied that his client used straw buyers. He said Grimm used investors who kept control of the property they bought.
San Francisco attorney E. Robert Wallach, who represents Mazzarella, said evidence will show that his client "did not have an intent to deceive."
He said Mazzarella moved to Las Vegas in 2000 as a single mother with two young children. She completed her education at the University of Nevada, Las Vegas, where she received a degree in marketing, and began working as a real estate agent in 2003.
The attorney said Mazzarella entered the market at a time when it was experiencing a dramatic transformation. Subprime mortgages were on the rise, making it easier for people to buy homes.
"All of the sudden residential homes became commodities," Wallach said. "They became a vehicle for making money."
The attorney said Mazzarella met the older Grimm, a successful mortgage broker in Las Vegas, at a Halloween party. They fell in love and decided to go into business together. They also had a child together.
Wallach said Grimm went to a lawyer who helped him create a business plan to take advantage of the booming real estate market.
Using that plan, Mazzarella "was swept into success almost instantly," Wallach said.
"And by the way, the government has not yet alleged that making profit is a crime," the defense attorney told jurors.
Mazzarella started her own company, Distinctive Real Estate & Investments. In 2007, at age 29, she made REALTOR Magazine’s "30 Under 30" list.
When the housing market collapsed, Wallach said, Mazzarella poured $2.5 million of her own money into the properties in an unsuccessful attempt to save them.
The lawyer said Mazzarella finally went bankrupt and lost everything.
Pugh told jurors they would hear evidence that lenders had been irresponsible.
But even though a bank teller may leave a cash drawer open, he analogized, "you still can’t reach over the counter and grab the cash."
Beecroft’s attorney, Larry Semenza, agreed that lenders acted irresponsibly.
"They opened the vault and shoved the money out," he told jurors. "That’s what the evidence is going to show in this case."
Semenza said Beecroft’s involvement with Mazzarella and Grimm did not make her rich. He said she received a flat $500 fee for each loan application she processed.
Senior U.S. District Judge Roger Hunt is presiding over the trial, which is scheduled to continue today . The trial will be in recess Friday.
Contact reporter Carri Geer Thevenot at email@example.com or 702-384-8710.