A multimillion-dollar real estate scam orchestrated by a pair of Las Vegans worked this way, federal authorities say:
The pair, real estate agent Eve Mazzarella and husband Steven Grimm, recruited fake — or "straw" — buyers to apply for loans to buy 227 properties worth nearly $110 million. The recruits often were their own employees, people with good credit, who posed as buyers in exchange for a fee of about $5,000.
A straw buyer would offer more than the asking price for a home, persuading the owner to turn over the extra money to Mazzarella and Grimm purportedly for repairs and renovations.
The pair then applied for a mortgage for the straw buyer, inflating his financial worth to underpin a loan conforming to the higher sales price.
The buyer then would transfer the property to a company controlled by Mazzarella and Grimm. Authorities say the pair arranged sales on the same house with straw buyers up to five times, each time skimming funds, then left lenders in the lurch with the homes sliding into foreclosure.
The last straw buyer, whose name was on the loan, wouldn’t know until it was too late that the house he was responsible for was going into foreclosure. His credit would be ruined.
Such real estate schemes have had devastating consequences for the Las Vegas Valley, authorities say.
"These schemers have contributed significantly to the demise of the real estate market in Las Vegas and have inflated entire new developments by establishing bogus comparatives," FBI agent Steven Martinez said earlier this year. "The end result is that home buyers purchase properties in communities that are greatly overvalued, and they are then unable to sell or refinance the property, eventually leading to foreclosure."
In March, Mazzarella and Grimm were indicted in federal court in Las Vegas on six counts of bank fraud, later revised to 13 counts. They are accused of skimming thousands of dollars from more than 400 transactions.
Other charges against the couple include mail fraud and wire fraud. Mazzarella is also charged with money laundering in the $100 million fraud that authorities say netted the pair $9 million, with money squirreled away in 80 accounts.
Assistant U.S. Attorney Brian Pugh said Wednesday that authorities have been able to locate only $50,000 of the money.
"They lived a high lifestyle," he said, explaining that in addition to fast cars, beautiful homes and frequent travel, Grimm started a trucking business that was unsuccessful.
Rod and Sandee Malina count themselves among the victims of the pair’s schemes.
In January 2007, the Malinas entered into a lease-purchase transaction for a home through Mazzarella’s firm, Distinctive Real Estate & Investments.
Months later, they learned the house was in foreclosure, their down payment lost. They eventually located the property’s owner, Wayne Davenport, who said his credit was ruined when the home went into foreclosure.
"He apologized for what happened, but he said he didn’t know Steve Grimm wasn’t making payments on the house. He said it was too late for him to do anything."
Rodd Malina said an official at a firm overseeing the foreclosure confirmed that no payments were going toward the house.
"We wanted to take over payments but they said we couldn’t because we weren’t the owners," Rodd Malina said.
According to the indictment, Grimm and Mazzarella created numerous limited liability companies, or LLCs, naming most of them after straw buyers, "typically using the straw buyers’s first initial and last name."
On Page 2 of the indictment, Steven Grimm is listed as the agent and manager of the "WDAVENPORT, LLC."
Attempts to reach Davenport for this story were unsuccessful.
Sandee Malina says she hopes she doesn’t stumble again into real estate fraud upon her return to Hawaii.
"What happens in Vegas should stay in Vegas," she said.
Contact reporter Paul Harasim at email@example.com or 702-387-2908.REPORT FRAUD U.S. Attorney Gregory Brower said that anyone who has information about potential mortgage fraud may contact the Southern Nevada Mortgage Fraud Task Force at 584-5555.