‘Run for wealth’ could mean hard time for teacher turned loan officer, by LEVI PULKKINEN, SEATTLEPI.COM


He was a teacher and a coach, and mortgage lending was the Wild West.

He became a loan officer — a crooked one — and the money came rolling in.

Now, Christopher DiCugno is a convicted felon and may be headed to federal prison.

Set to be sentenced Thursday in Seattle, DiCugno was a loan officer and branch manager at the now-defunct Pierce Commercial Bank. He previously admitted to taking part in a mortgage fraud led by disgraced Bellevue businessman Mark Steven Ashmore that contributed to the collapse of his former employer.

Court documents show that DiCugno — who left a career as a high school teacher and coach in 2005 to, in his words, “run after wealth” — found himself at the heart of two federal investigations.

Charged alongside Ashmore in a mortgage fraud scheme, DiCugno, 38, is also assisting authorities investigating activities at Pierce Commercial Bank, according to statements to the court from his own attorney.

Writing the court, defense attorney Stewart Riley said his client had provided information used by the government to seize a bag containing $102,000 in cash from Shawn Portmann, a former executive with Pierce Commercial Bank who as a loan officer originated nearly $1 billion in mortgage loans in less than three years.

Riley went on to claim that the government may indict others involved in Pierce Commercial Bank as early as the end of this year.

Portmann was a college friend of DiCugno’s, Riley told the court, and brought him into Pierce Commercial Bank even though DiCugno had no experience in finances.

In a letter to the court, DiCugno said the promise of easy money prompted him to give up a fulfilling career.

“I regret ever leaving my teaching and coaching job to run after wealth,” DiCugno said. “I was a good teacher and coach and I was impactful in the lives of the students I taught.

“I should have been content with this career. I am faced with the stark reality that I will never be a public school teacher again.”

While with the bank, DiCugno worked with Ashmore to secure loans “straw buyers” who sold their names to Ashmore for money. DiCugno was charged alongside Ashmore and two others following an investigation into a wide-ranging mortgage fraud scheme that saw 40 properties sold to straw buyers.

Federal prosecutors contended Ashmore and others recruited “straw buyers” — individuals willing to lend their identities to obtain mortgage loans — with promises of payment up to $10,000. The buyers then obtained overly large loans to purchase homes, prosecutors contended, passing the leftover money to those running the scam.

The properties were often “flipped” to another straw buyer, at an even higher price, with the excess amount going to Ashmore.

One Bellevue home bought by a straw buyer at Ashmore’s behest for $655,000 was sold to a co-defendant for $830,000 then resold to a straw buyer for $1.1 million, netting the conspirators $445,000, prosecutors contended. Two other homes noted in the complaint were resold for profits in excess of $100,000.

In the end, the straw buyers would fail to make payments on the loans and properties would go into foreclosure, causing the financial institutions and mortgage lenders to suffer substantial losses. While his attorney disagrees, prosecutors contend DiCugno’s actions during five real estate transactions cost banks about $1.1 million.

Asking that his client be sentenced to home detention and community service, Riley told the court DiCugno’s superiors — Portmann and two other men — “set the tone” for loan officers at the bank. DiCugno, the attorney said, was “naïve.”

DiCugno resigned after the bank was served with a grand jury subpoena related to the investigation into Ashmore’s activities.

Pierce Commercial Bank — which had loaned a significant amount of money to those involved in the Ashmore scheme — ultimately shutdown its home loan business and came under increased scrutiny from state and federal regulators because of the badly damaged loan portfolio. State regulators closed the bank Nov. 5.

“Like many institutions, Pierce Commercial Bank has experienced large losses associated with construction and land development loans,” Brad Williamson, Banks Division director for the Department of Financial Institutions, said at the time. “Unfortunately, the bank also suffered from poor mortgage lending practices that further impacted the bank’s earnings and capital.”

Prosecutors have asked that DiCugno be sentenced to 18 months in federal prison.

Such a sentence, which would fall 15 months short of the standard minimum, is warranted in large part because of DiCugno’s cooperation with authorities investigating Ashmore and Pierce Commercial Bank, Assistant U.S. Attorney Nicholas Brown told the court.

Brown noted, though, that DiCugno, as a bank employee, had a heightened responsibility to not to engage in fraud.

“While there appears to have been numerous others at Pierce bank involved in similar fraud, (DiCugno) was a large part of the overall problem,” Brown said in a statement to the court.

“As the defense notes, he was clearly intelligent enough to have known better. … Instead, to pursue his own greed, he joined the conspiracy perpetrated by Mr. Ashmore and others with hopes to gain financially.”

Having pleaded guilty to a single count of wire fraud, DiCugno is scheduled to be sentenced Thursday morning by U.S. District Court Judge Richard Jones.

Jones is also scheduled to sentence one of DiCugno’s co-defendants, Hiep Nguyen, on similar charges. A third co-defendant, Luke Reimer, was sentenced to 15 months in prison Tuesday.

Convicted of wire fraud following a jury trial in which DiCugno testified for the prosecution, Ashmore, 42, is scheduled to be sentenced Dec. 17.

Levi Pulkkinen can be reached at 206-448-8348 or levipulkkinen@seattlepi.com. Follow Levi on Twitter at twitter.com/levipulk.

 

Citigroup, Ally Sued for Racketeering Over Database, by Margaret Cronin Fisk and Thom Weidlich, Bloomberg.com


Map of USA with Kentucky highlighted

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Citigroup Inc. and Ally Financial Inc. units were sued by homeowners in Kentucky for allegedly conspiring with Mortgage Electronic Registration Systems Inc. to falsely foreclose on loans.

The lawsuit, filed as a civil-racketeering class action on behalf of all Kentucky homeowners facing foreclosure, also names as a defendant Reston, Virginia-based MERS, the company that handles mortgage transfers among member banks. The suit claims that through MERS the banks are foreclosing on homes even when they don’t hold titles to the properties.

“Defendants have filed foreclosures throughout the state of Kentucky and the United States of America knowing that they were not the ‘owners’ or beneficiaries of the loan they filed foreclosure upon,” the homeowners wrote in their complaint filed Sept. 28 in federal court in Louisville, Kentucky.

The homeowners claim the defendants filed or caused to be filed mortgages with forged signatures, filed foreclosure actions months before they acquired any legal interest in the properties and falsely claimed to own notes executed with mortgages.

The lawsuit is one of multiple cases against MERS and banks alleging that the process allows wrongful foreclosures. Several of these cases, combined in a multidistrict litigation in Phoenix, were dismissed Sept. 30, with the judge allowing the plaintiffs to re-file their complaints.

‘Inflammatory’

“The allegation is inflammatory and without merit and we intend to defend our position fully in a court of law,” Gina Proia, a spokeswoman for Ally, said in an e-mailed statement.

Mark Rodgers, a spokesman for Citigroup, declined to comment. Karmela Lejarde, a spokeswoman for MERS, didn’t have an immediate comment.

The Kentucky suit claims MERS and the banks violated the Racketeer Influenced and Corrupt Organizations Act, a law originally passed to pursue organized crime.

“RICO comes in because the fraud didn’t just happen piecemeal,” Heather Boone McKeever, a Lexington, Kentucky-based lawyer for the homeowners, said in a phone interview today. “This is organized crime by people in suits, but it is still organized crime. They created a very thorough plan.”

The suit, which includes claims of fraud, also names as defendants other banks, real-estate law firms and document- processing companies.

In the Phoenix litigation, U.S. District Judge James A. Teilborg found that the mortgage banks properly named MERS as the nominee for the original lenders and that the plaintiffs didn’t include enough detail in their allegations that the banks formed MERS to conspire to deprive homeowners of their property.

‘Straw Man’

Last year, the Kansas Supreme Court found that MERS’s relationship to the lenders is “akin to that of a straw man” and that it didn’t have rights over the mortgage at issue.

“Having a single front man, or nominee, for various financial institutions makes it difficult for mortgagors and other institutions to determine the identity of their lenders and mortgagees,” the Kansas court said.

The case is Foster v. Mortgage Electronic Registration Systems Inc., 10-cv-611, U.S. District Court, Western District of Kentucky (Louisville).

To contact the reporters on this story: Margaret Cronin Fisk in Southfield, Michigan, atmcfisk@bloomberg.netThom Weidlich in Brooklyn, New York, federal court attweidlich@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.