Two Men Indicted on 28 Counts of Fraud

David Gaouette, United State Attorney General for the District of Colorado; James Davis, Special Agent in charge for the Federal Bureau of Investigation and Christopher M. Sigerson, Special Agent in charge for the Internal Revenue Service Criminal Investigation announced the indictment of Cedric Lipsey and Phillip A. Martinez for mortgage fraud.

Cedric Lipsey, 35 and Phillip A. Martinez, 34, both of from Denver Colorado have been accused of a conspiracy to commit mortgage fraud. Lipsey and Martinez were both arrested and have been released on fifty thousand dollars property bond each.

The indictment states that between April 2004 and March 2006 Lipsey and Martinez knowingly formulated a plan intended to defraud mortgage lenders on residential mortgage loans to acquire proceeds by misrepresentation of documents presented to those lenders. Lipsey was a licensed real estate agent and investor and Martinez was a loan officer and mortgage broker in the district of Colorado and elsewhere.

Lipsey arranged which home would be purchased and resold in the scheme using the information he obtained through mortgage listings. Lipsey even used his own home as one of the properties. Lipsey paid straw buyers to act as investors and or borrowers for the scheme. He recruited straw buyers by enticing individual with an investment opportunity and that they could participate in the investment. Lipsey and Martinez used the superior credit of these individuals to acquire mortgage loan approvals on purchase transaction by mortgage lenders. The purchase transactions were approved and then the defendants would sell the properties to a second set of straw buyers for a higher property value. The defendants acquired more commissions, fees and proceeds second transaction.

Lipsey presented that the first purchasers would be purchasing the property and that the property was being purchase for less than the actual market value. He would present the first sales as distressed in order to mask the scheme. The first purchase of the properties did in most cases sell for close to the actual market value of the property. The second purchase of the same property often sold with an inflated property value.

Martinez assisted Lipsey in acquiring fraudulent documents to support the straw buyers’ income, employment, assets, liabilities and creditworthiness to mortgage lenders. They often forged signatures to further the scheme. Lipsey enlisted appraisers to create fraudulent property value reports that would reflect the subject property being comparable to higher market value properties when the subject property was indeed inferior to the comparables.

David Gaouette stated that mortgage fraud not only weakens our economy but threatens the recovery of the housing market.  It is making is difficult for honest home buyers to purchase a new home.

James Davis stated that it hurts borrowers, financial institutions and legitimate homeowners across the country and that his office is committed to bring in the individuals who commit mortgage fraud.

Christopher Sigerson commitment that mortgage fraud creates loss of tax revenue to communities, leaves homeowners without homes, leaves lenders burdened with losses and leaves neighborhoods abandoned.

Lipsey and Martinez both face twenty seven counts of wire fraud and one count of monetary transaction in property derived from unlawful activity. The first twenty seven counts have a penalty maximum sentence of up to twenty years in federal prison and a two hundred fifty thousand dollar fine per count. The last count has a penalty sentence of ten years in federal prison and a two hundred fifty thousand dollar fine.

The case will be prosecuted by United States Attorney General Linda Kaufman. It was investigated by the Federal Bureau of Investigation and the Internal Revenue Service Criminal Investigation Unit.

Gauette affirms that indictments are merely an accusation of a crime and that the defendants are innocent until proven guilty in a court of law.