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Fannie Mae worker found guilty in foreclosure kickback trial

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A former Fannie Mae employee was convicted late Friday of soliciting kickbacks from a broker with promises to steer lucrative listings of foreclosed homes his way.

The federal court jury in Santa Ana convicted Armando Granillo of three counts of fraud, rejecting his contention that he intended to cheat only the broker, not Fannie Mae, the nation's largest home-finance firm.

At the end of a two-day trial, the jury took less than two hours to convict Granillo, who sat grimly as each of the jurors affirmed the guilty verdicts. He left the court without commenting, accompanied by his wife. He was freed on bond with orders to return for sentencing May 27.

Asst. U.S. Atty. Stephen I. Goorvitch lauded federal agents for their investigation but reserved his highest praise for the broker who tipped them off to the scheme.

"The real hero here is Gus Maughan, who reported this crime," Goorvitch said.

Granillo broke down in front of the jury Friday, saying the scheme was motivated by a desperate desire to aid his disabled child.

"We need money. My daughter is afflicted with autism, and the therapy she was getting was canceled," testified Granillo, who was videotaped last year in a sting by federal agents, clutching an envelope stuffed with $11,200 in cash.

He had appeared calm in the witness box but began sobbing Friday as the jurors looked on. "She came a long way and she needs help," he said, his voice cracking. "Her therapy is very expensive."

The disclosure came on the second and final day of testimony at Granillo's trial on three counts of defrauding Fannie Mae, where he worked as a sales representative for foreclosures. The bailed-out mortgage giant was stuck with hundreds of thousands of seized homes when the housing bubble burst — a trove of deals for brokers entrusted to liquidate the backlog.

Granillo, 44, of Huntington Beach said he grew up in Huntington Park, a heavily Latino suburb of Los Angeles. He dropped out of high school to work at a fabric company, drying and folding linens. An office skills program at USC led to a series of jobs with subprime mortgage lenders, where he learned to manage foreclosed properties.

In late 2009, he was hired by Fannie Mae in that role, working at an Irvine office along with about 50 other employees assigned to supervise foreclosure cleanups, repairs and sales in the Western United States.

Much of the trial testimony involved details of Granillo's duties and limitations at Fannie Mae. The prosecution contended he had wide discretion to approve sales for less than the asking price. The defense countered that he had so little leeway, he was incapable of causing the company significant losses.

Under questioning by Goorvitch, Granillo acknowledged that Fannie Mae employees are barred from exploiting their positions for personal gain. He said he knew he could be fired for the kickbacks, so he concealed the scheme.

He maintained, though, that he carefully followed the firm's guidelines for unloading foreclosures quickly and at the best price, and that he never did anything to cost the company money.

Granillo said he instead intended to cheat Arizona broker Angus "Gus" Maughan, whom he recruited by promising to provide foreclosure listings in return for 20% of the resulting sales commissions. Maughan alerted authorities, triggering an investigation by the inspector general of the Federal Housing Finance Agency, Fannie Mae's federal regulator.

In a sting orchestrated by Special Agent James Shields and others from the inspector general's office, the government secretly recorded a series of conversations between Maughan and Granillo.

The jurors were shown a video of a meeting at a Mexican restaurant in a Tempe, Ariz., mall, where a "button cam" worn by Maughan showed an animated Granillo promising to help Maughan close sales and "put other Realtors in Tucson out of business."

Suggesting that kickbacks were common at Fannie Mae, Granillo complained that his take-home pay was inadequate, especially since his wife was at home caring for their daughter. "I feel I'm just trying to help my family," he told Maughan. "My daughter has autism."

Of his colleagues, he said: "I think they're a bunch of crooks."

The defense had said Granillo might testify about Cecelia Carter, another Fannie Mae foreclosure specialist, who contends in a state court lawsuit that the finance firm fired her after she tried to expose widespread corruption. She and Granillo have said they discussed the kickbacks and the company's alleged lack of interest in doing anything about them.

But Granillo was not asked to testify about Carter, who was out of the country and could not take the stand.

The prosecution had prepared a rebuttal witness, Mary Irvine, a former Fannie Mae supervisor who had overseen both Carter and Granillo. Irvine said outside court that she was infuriated by what she called Carter's unfounded attack on her reputation.

"It's all false," said Irvine, who had been prepared to testify about an internal Fannie Mae investigation that had turned up no evidence of kickbacks. "She has no facts, no proof."

In closing arguments, Granillo attorney David Wasserman told the jurors that they might well conclude that Granillo had acted in a morally corrupt way, but said that was not the issue. He said they should instead focus on the evidence that the defendant had defrauded only Maughan and not Fannie Mae.

"You will come out with the conclusion that Mr. Granillo is not guilty of defrauding Fannie Mae of his honest services," Wasserman said.

Goorvitch, the prosecutor, argued that Granillo had a clear conflict of interest, since he intended to claim part of Maughan's commissions — money paid by Fannie Mae from the proceeds of the foreclosure sales.

"The defendant was taking this money at the expense of Fannie Mae," he said.

scott.reckard@latimes.com

Twitter: @ScottReckard

Copyright © 2014, Los Angeles Times
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