4 Sought in $60-Million HUD Fraud

The president of a Whittier mortgage company and three other suspects are fugitives after being indicted in what authorities believe is the largest case ever of fraud against the Department of Housing and Urban Development, officials announced Monday.

A federal grand jury last week indicted Douglas Alfonso Estrada, 52, of Whittier, the owner of Allstate Mortgage Co., who prosecutors said fraudulently obtained $60 million in federally insured loans during the last year.

Estrada and two of his loan officers--Alberto Jose Rivas, 31, of Pico Rivera, and Louis Alberto Vallardes, 44, of Hacienda Heights--are charged with 30 counts of mail fraud and money laundering for using straw companies and phony buyers to inflate the value of Los Angeles residential buildings, then securing loans for those properties, Assistant U.S. Atty. Jonathan Shapiro said.

Also indicted was Shirley Da Silva, 36, of Los Angeles, the wife of an accomplice who has already pleaded guilty to mail fraud charges.

“We call these cases equity skims,” Shapiro said. “This is the granddaddy of them all. This was the Rose Bowl of the equity skims. They were into volume.”

Here’s how the scheme worked, according to Shapiro and the indictment:

Straw companies run by accomplices Victor Jesus Noval of Los Angeles--Da Silva’s husband--and James Weatherly, 45, of Hidden Hills located apartment buildings mostly valued between $100,000 and $180,000. They enlisted phony buyers and forged paperwork qualifying them for HUD loans and assessing the properties at $100,000 to $150,000 above market value.

Allstate Mortgages, a multimillion-dollar mortgage company, received the loans to cover mortgages on the properties, Shapiro said. Allstate Mortgages, which is not connected to Allstate Insurance Corp., sold those loans to funding companies.

Such scams “put at risk the whole HUD program,” Shapiro said. “That money is supposed to be going to pay for legitimate houses for middle-income families.”

Noval and Weatherly were indicted on mail fraud charges in October and pleaded guilty to five counts. They are scheduled to be sentenced in February.

Thom Mrozek, spokesman for the Los Angeles U.S. attorney’s office, said the indictment against the remaining defendants was handed down Thursday but authorities withheld their announcement in the hopes that some of the suspects would turn themselves in.

The four current defendants were each charged with 20 mail fraud counts, which carry a maximum of five years in prison apiece, and 10 money-laundering counts, each carrying up to an additional 10 years.

In a statement, HUD Secretary Andrew Cuomo said: “Any con artists who try to rip off HUD and the American taxpayer will be caught and prosecuted to the full extent of the law.”