Loan Fraud Suspect Keeps Authorities Frustrated

For much of the past 20 years, state authorities have been investigating Frederick Tucker, expressing open concern about what they say is his habit of defrauding low-income Southern Californians and ruining their credit ratings.

Authorities have moved repeatedly against him over the years. Mostly, they have sought to take away one broker’s license or another, attempting to stop Tucker from engaging in what they allege is a continuing plot to represent his companies as federal loan agencies to swindle unwitting victims.

But after each proceeding, U.S. Bankruptcy Court investigator Pat McClellan says, Tucker “fakes to the left and keeps on going.”

In January, the district attorney’s office finally succeeded in bringing Tucker into civil court on charges of fraud and unfair business practice--four years after initially targeting him.

For two weeks, Deputy Dist. Atty. Dana Aratani paraded one alleged victim after another before Judge Judith Meisels Ashmann in Superior Court downtown, as well as regulators, investigators and Tucker’s own employees.

Tucker, 56, and lawyer Larry Lieberman deny any wrongdoing. He had nothing to say when questioned by The Times, but on the stand, Tucker testified that he is only “trying to help people” by offering affordable loans.

That’s not what his alleged victims say about the hundreds of thousands of dollars they have lost.

Their testimony, as well as dozens of court and law enforcement documents, paint a portrait of Tucker as an unrelenting con artist engaged in an almost continuous pursuit of unsophisticated victims through a variety of ruses--even as regulators tell him not to. In documents and court testimony, authorities allege that Tucker conned what may have been hundreds of unsophisticated people into applying for loans that they thought were part of a special government low-rate loan program to help low-income homeowners, then slapped them with as much as $3,000 apiece in loan charges or cancellation fees after they agreed to apply for loans.

Authorities have refused to specify how much money they say Tucker swindled from homeowners, but Aratani said a conservative estimate tops $100,000 between 1992 and 1998.

Ashmann could slap Tucker with $250,000 or more in restitution and civil fines and a restraining order limiting his ability to solicit loans in the future.

But whatever the judge does, some authorities suspect that no enforcement action will stop Tucker, who has shut down several of his loan companies when they were targeted by state Department of Real Estate regulators, only to reopen at the same Beverly Hills and Torrance addresses under other names.

Regulators say that they have done their best to put Tucker out of business but that they are hamstrung by scarce investigative resources and lax state laws that seem to invite fraud by providing many loopholes.

For instance, the state Department of Corporations issues licenses to loan brokers, as does the Department of Real Estate. But people without either license can hire “rent-a-brokers” to handle the deals that people like Tucker arrange.

A Knowledgeable Foe

In Tucker’s case, regulators say, they are up against a formidable foe: a man who appears to be a student of the arcane minutiae of real estate laws.

“Tucker is not interested in obeying the law,” state Department of Real Estate investigator Daniel Hatt wrote in a memo two years ago, noting that Tucker has used at least five different names to continue his “various fraudulent operations” in the face of continued scrutiny.

Aratani, in a Sept. 23, 1996, letter to Tucker’s lawyer, warned that Tucker and the loan firm he was heading at the time--First Federal Credit Corp.--engaged in “a textbook example of oppressive and unscrupulous practices which harm a vulnerable consumer group” long after being warned not to by authorities.

Here’s how Tucker operates, according to documents and testimony at trial:

Tucker creates companies with official-sounding names such as the Housing Rehabilitation and Redevelopment Management Resource.

Then he blankets low-income neighborhoods with “public notice” mailings, complete with logos and fictitious Washington addresses that make them look almost identical to notices from the federal government.

In the letters, a fictitious “administrator” tells homeowners that because of their economically depressed ZIP Code, they are eligible for special government-insured loans at amazingly low rates. The money, they are told, can be used not just to buy or refinance a house, but also to repair earthquake damage, do home improvements, consolidate bills, make investments, buy a car, even pay for “your child’s education.”

Homeowners are warned to act fast though, because the loans are limited and on a first-come, first-served basis.

If you’re poor and in need of money, Tucker’s “clients” say, such a pitch is hard to resist.

“The paper said it was a government loan,” testified alleged victim Lillian Brickner. “You can’t go wrong with the government.”

After a homeowner calls a toll-free number, a Tucker agent promptly visits the home and has the potential borrower sign a stack of forms.

Then the complications ensue. When the loans come through at much higher rates than promised, or the customers find out the loan firms have no connection to the federal government. And they find that they can’t back out of the loans without paying 1% cancellation fees, authorities allege.

Joseph Bautista says he ended up paying $2,700 in cancellation fees to one of Tucker’s firms so that he could preserve his credit rating and obtain a loan elsewhere. “I had to,” Bautista said, “because I was buying a house. I was taken advantage of.”

Others, like Lilia Ocegueda, refused to pay Tucker’s customary--and often allegedly hidden--1% cancellation fee. She says she couldn’t get another loan, and was forced to declare bankruptcy. “It was the last straw,” she said. “Having to pay this bill on top of all my other bills.”

Others Testified

Many other victims testified that Tucker reported them to TRW and other credit-reporting agencies when they balked at taking the loans or paying the fees, ruining their credit ratings for many years.

During his testimony, Tucker said many customers didn’t mention their bad credit ratings in initial consultations, which prevented them from getting the low rates initially quoted. He also said most of the loan fees and cancellation charges went to pay for credit reports, appraisals and other costs. His lawyer, Lieberman, said few of Tucker’s customers actually paid high loan fees or cancellation costs--or even found their credit ratings affected.

Authorities disagree, alleging that Tucker may have victimized hundreds of people, and that Tucker has done very well by profiting from ill-gotten gains. Even though his latest company recently declared bankruptcy, Tucker lives in a spacious $600,000 Palos Verdes Estates home owned by his mother, drives a Mercedes 500 class sedan and wore a different tailored suit to court each day.

And even though Tucker and his lawyer refused to comment outside of court, he said during his testimony that he hasn’t done anything wrong.

Tucker says he complied with an order last year to enlarge the disclaimer on his solicitations, to make it clear he has no affiliation with the federal government. And despite all the regulatory moves against him, Tucker said, “there were licenses in place at all times” from one state agency or another.

That may be true, but it doesn’t mean Tucker hasn’t been skirting the law--if not outright violating it--the whole time, authorities allege.

Tucker has been using a finance lender’s license from the Department of Corporations since 1980, especially during times when the Department of Real Estate was clamping down on one of his companies.

The Real Estate Department revoked Tucker’s real estate license in 1976, a year after he was convicted of a federal felony--making false statements to a government agency in connection with obtaining a fraudulent loan in South Los Angeles. Sentenced to three years in prison and a $2,500 fine, he served 40 days in a “jail-type institution,” court papers show.

Since 1982, the Real Estate Department has issued at least five so-called “desist and refrain” orders against Tucker or companies he’s been affiliated with, alleging, among other things, that he was continuing to operate without the required license.

A ‘Pattern of Fraud’

The Corporations Department moved to revoke Tucker’s finance lender’s license too last year, because he denied on his original 1980 application that he’d ever been convicted of a fraud or had a state license revoked--when both had occurred--and for a host of other violations.

“Taken together,” a Department of Corporations memo says, Tucker’s actions “demonstrate a continuous pattern of fraud and deceit over a 23-year period, overwhelmingly justifying [Tucker’s] removal from an industry where the need for honesty and fair dealing are paramount.”

Tucker is appealing that revocation.

But even if his appeal is unsuccessful, Tucker could still stay in business by employing a licensed broker--as long as that broker is not engaged in any fraudulent activity.

And if that broker’s license is revoked or suspended for fraud--a fate that’s befallen at least one broker in Tucker’s employ--Tucker can simply hire another one, Grant and other regulators say.

Tucker’s trial left off with both sides scheduled to submit final arguments in the coming weeks. Ashmann will then make her decision.

Prosecutors want a restraining order with some teeth, so that if Tucker commits loan fraud they can try to put him behind bars for contempt.

Tucker’s lawyer has argued that he’s already fixed any problems he may have had, and should be allowed to stay in business.

The judge has repeatedly urged both sides to settle out of court, an indication that may signal her willingness to let Tucker get on with his life--and his loan business.

Meanwhile, Tucker isn’t waiting for a green light. He testified that he’s currently soliciting loans legally, using a licensed, on-site broker.

Authorities however, believe Tucker is employing another “rent-a-broker”--someone paid a minimal fee for use of the broker’s license, but who does little, if any, work.

Aratani said Tucker appeared to confirm that in his testimony. When Aratani asked who his new broker is, Tucker said: “I don’t recall.”