Indictment Cites Phony Mortgage Loan Plot

A Laguna Beach man who was operating with a suspended real estate license has been indicted by a federal grand jury in San Diego on 34 counts of mail fraud and making phony loan applications in a two-county scheme that allegedly defrauded home sellers and lenders of at least $1.2 million.

Austin J. Leahy was arraigned Friday before U.S. Magistrate Edward Infante and charged with using nine aliases and a string of phony businesses in Orange County to purchase houses in San Diego County that were later lost to foreclosure. According to the indictment unsealed Friday, Leahy obtained funding based on the phony loan applications from various lending institutions in San Diego County.

Leahy, who is being held on $1-million bail, pleaded innocent in a brief appearance before Infante. He was ordered to return to court Tuesday for a bail review hearing. A trial date will be set Dec. 9.

The charges in the 26-page indictment allege that Leahy and other unknown accomplices used a company called Corporate Relocation to perpetrate the fraud. The company was registered as a fictitious business in Orange County on Nov. 13, 1984. The indictment says that Leahy contacted people who were selling their own homes and told them he was in the business of finding homes for corporate executives who were going to be transferred to San Diego.

Typically, Leahy used one of his aliases to identify non-existent buyers, and while acting as the purported buyers’ agent, offered the sellers full price for their homes, according to the indictment. He made the full-price offer on the condition that the sellers would finance a second mortgage for the buyer after obtaining a first loan from a bank. Prosecutors charged that Leahy also used women who posed as the wives and fiancees of the phony buyers to inspect the homes.

According to the indictment, after obtaining funding for the non-existent buyers, Leahy took title and possession of the homes. He then rented out the houses to tenants who made monthly rental payments to him under one of his assumed identities, prosecutors charged.

Special Assistant U.S. Atty. Judith F. Hayes charged that, after escrow closed, Leahy failed to make any mortgage payments on the properties, while at the same time he was receiving rental income from tenants. This arrangement continued until the lenders foreclosed on the properties, Hayes said in the indictment.

The indictment alleges that Leahy’s real estate license was suspended by the California Department of Real Estate at an unknown date for fraud in connection with the sale of real estate property.

Lending institutions in San Diego County that were victimized by Leahy include Great American First Savings Bank in National City and San Diego; Home Savings of America in Escondido, La Mesa and San Diego, and Glendale Federal Savings and Loan in Vista and San Diego. Some of the banks made more than one loan to Leahy. According to the indictment, these lenders provided Leahy with loans totaling $1.2 million.

The mail fraud counts stem from government allegations that Leahy used the U.S. mail to send false loan documents from the phony businesses in Orange County to San Diego County.