A Tarzana tax preparer has been sentenced to five years' probation for his role in a $7.6-million mortgage fraud scheme that involved the purchase of expensive houses in Los Angeles and Ventura counties.
Arnold Arend, 62, who pleaded guilty to two counts of mail fraud, was also ordered to pay $10,000 in restitution, Assistant U.S. Atty. Peter Spivack said.
The restitution is "a drop in the bucket, compared to the total losses in this case," Spivack said.
Arend was a tax preparer for Navtej Kohli, 35, of Malibu and Charles Myers, 49, of Camarillo, who orchestrated the complicated scheme, Spivack said. The two pleaded guilty in February and will be sentenced July 21, Spivack said.
Others involved in the scheme have also pleaded guilty and are awaiting sentencing. They are Ross Como, 34, of San Juan Capistrano, owner of Westwood Escrow Co. in West Los Angeles; Walter Pituch, 43, of Chino Hills, owner of W.P. Escrow Co. in Brea; Norbert Arriola, 60, of Las Vegas; Harvey Diamond, 58, of Manhattan Beach; Douglas Sefton, 56, of Phelan and Don Stout, 46, of Long Beach.
Kohli and Myers managed to cheat banks and homeowners out of millions of dollars with the help of fraudulent escrow companies and fake buyers.
Kohli and Myers would approach owners who were selling residences worth $500,000 or more and offer to buy the property, Spivack said.
Working with Como and Pituch at the escrow companies, Kohli and Myers would prepare documents that actually listed the buyer as another person--a fake buyer who was paid $5,000 to $10,000 by Kohli and Myers. The escrow papers would also inflate the sale price of the house.
"It's a paper sell only and the real seller never sees any of the documents," Spivack said. "It's created solely to fool the banks."
The two would use the name of the fake buyer to apply for loans from banks and other lending institutions, Spivack said.
"One of the things they would submit to show that the straw buyers could pay off the loans were tax returns prepared by Arend," he said.
The bogus tax returns would show high yearly incomes that led banks to fund the loan, Spivack said. Twelve properties were involved.
When Kohli and Myers received the loan money, the two paid the straw buyers and paid the sellers of the house a portion of the purchase price. They issued promissory notes for the remaining amount.
"They wouldn't pay off the full purchase price," Spivack said. "They would take the rest and spend it on personal expenses, living well."
The loans were never paid or were defaulted on after one or two payments, leaving the banks and the sellers out millions.
The straw buyers are now being sued by the lenders and their credit is ruined, Spivack said.
"That's an awful lot of consequences for $5,000 to $10,000," he said.
Arend, who could have received 60 years in prison for his role in the scheme, received a light sentence in exchange for his early cooperation and his agreement to testify against Kohli and Myers, Spivack said.
Kohli pleaded guilty in February to one count of conspiracy and 10 counts of mail fraud. He could be sentenced to up to 305 years prison but will probably receive six to 10 years, Spivack said. Myers pleaded guilty to one count of conspiracy and seven counts of mail fraud. He also faces up to 305 years in prison but will probably receive between six and 10 years.