By Kate Conger
By Brian Rinker
By Rachel Swan
By Anna Pulley
By Erin Sherbert
By Chris Roberts
By Erin Sherbert
By Rachel Swan
As in the Rincon Hill case, after the Oakland property was fraudulently transferred, a straw buyer took out a bank loan, the proceeds of which were divided among alleged coconspirators.
It turns out that deal was only one of many transactions involving Tran that have become the target of fraud allegations.
Last November, she and her husband, Quan Le, filed for bankruptcy in San Jose federal court. In January and February, several banks including JP Morgan Chase, Wells Fargo, and Wachovia Mortgage filed complaints in bankruptcy proceedings, alleging that she helped steal millions of dollars through mortgage fraud.
They accused her of organizing a series of so-called double-escrow frauds, in which buyers took out home mortgages on the same property nearly simultaneously, without either bank knowing that the property was burdened with nearly double its value in loans.
According to allegations made by Countrywide Bank in a Jan. 22 filing, Tran "aided and abetted a far-reaching mortgage loan fraud conspiracy in which buyers, sellers, and other co-conspirators, acting in concert, fraudulently obtained loans and other benefits from federally insured depository institutions."
According to other similar bank complaints, Tran helped orchestrate frauds worth at least $35 million. The complaints describe transactions conducted in 2006, when California's no-questions-asked mortgage-lending frenzy was nearing its peak.
Attorneys for the banks did not return calls requesting comment. Calls to Tran's home, her business and her husband's businesses, and to an attorney who until recently had been representing her were not returned.
One curious aspect of the district attorney's characterization of the Rincon Hill fraud is that there appears to be no obvious victim. Hwang endured some panicked months when she discovered her property was mysteriously in someone else's name. But her attorney eventually had the fraudulent deed expunged from city records, and Hwang was again officially the rightful owner.
So was this a victimless crime? Hardly. Somebody has to end up holding the bag on the fraudulent loan.
"The elephant in the room is, who's the person who lost the $2.2 million?" Newsom notes. "Somewhere down the line there is a legitimate, but very unhappy lender."
According to Ovanessian, the loan included instructions to prepay the first 13 months' installments, meaning the lender got stuck with only $1.7 million in outstanding debt.
Documents filed with the San Francisco recorder show that de Witte sold the note a month after the deal closed to Los Padres Bank in Solvang.
Kerry Steele, chief financial officer for the bank, did not return calls requesting comment. But records show that on April 23, the federal Office of Thrift Supervision notified Los Padres Bank that its finances were deteriorating so swiftly that "it was subject to prompt corrective action" to ensure it had sufficient capital to cover its deposits.
By Newsom's reckoning, the bank is in such a perilous financial condition that the Rincon Hill loan could create serious problems. The bank apparently remained unaware the note was fraudulent even after police had cracked the case.
And as of mid-June, de Witte had yet to make good on what had turned out to be a fraudulent note. "Pretty soon, it's not going to be a problem because [Los Padres Bank will] be paid in full," says de Witte, who says he has sufficient insurance coverage to repay. "When you pay off a bank, then the problem is gone for them, right? Isn't that the way it works with banks? If you pay them, there's no problem."
In a case of complex criminal fraud, it's normal for prosecutors to go after small players first, trying to get them to flip and give up bigger ones, all the way to the top. Key to this technique is a willingness to send noncooperative suspects to jail.
So the fact that detectives and prosecutors have not indicted additional suspects doesn't mean they won't in the future. And there's plenty to pin on Lum — even if it's true that Niroula duped him.
"Dumb or not dumb, he did receive $225,000 for his troubles, which he promptly spent," Ovanessian notes. "And it's kind of an unusual arrangement for someone in his kind of situation to come across, where money is raining down on you in droves."
Indeed, Lum had reason to believe something was amiss. The way Lum rationalizes it, Niroula, who had promised him a fancy job and place to live, owed him the money, and by spending it he was merely collecting a reneged debt.
Lum used this fragile logic to withdraw money for himself, checking into the fanciest downtown hotels, buying a $5,000 used Mercedes-Benz, eating at fine restaurants, and giving nice gifts to friends.
His love life began looking up, too. A woman he'd met at a bail bonds office near the San Bruno jail spent the night with him. She even said she'd marry him; she also suggested he give her one of the Rincon Hill condos.
It would seem that nobody could be so stupid as to give away a stolen condo for sex. But, it turns out, the San Francisco recorder shows that he indeed signed a quitclaim deed on one of them. Also on record are legal filings against the erstwhile girlfriend to get the property back.