An Elizabeth woman was among nine people indicted this month by a grand jury on multiple felony charges related to operating a fraudulent “foreclosure rescue” business.
The 67-count indictment, unsealed Nov. 17, accuses Elizabeth resident Sheila J. Gaston and eight other Denver-area residents of violating the Colorado Organized Crime Control Act (COCCA) by intentionally defrauding distressed homeowners and more than a dozen financial institutions.
According to details in the indictment, the group's alleged criminal activities took place between January 2008 and October 2013.
An arrest warrant was issued on Nov. 7 for Gaston and the eight other individuals.
A judge set Gaston's bond at $50,000.
Attempts to contact Gaston by telephone at her Elizabeth residence were unsuccessful.
In addition to violating COCCA, Gaston and the others are charged with multiple counts of theft, forgery and money laundering.
The charges stem from an investigation by the state Attorney General's Office and Colorado Division of Real Estate into what is described as “foreclosure rescue scheme targeting distressed homeowners.”
According to Colorado Attorney General John Suthers, the group targeted distressed Front Range homeowners in pre-foreclosure.
“Once a property was zeroed in on by members of this scheme,” said Suthers, “the goal was to obtain control and ownership of the property through a series of deceptive tactics.”
These tactics, Suthers explained, included manipulating the homeowners into signing over ownership of their property.
“At the same time, the enterprise would file forged paperwork with the lenders misrepresenting that the original homeowners still owned the house,” said Suthers.
According to the 95-page indictment: “The Enterprise often used a related family member or business associate, with a different last name, as straw purchasers who were fraudulently represented to the lender as being pre-qualified to buy homes.”
Aurora Loan Services, Aurora Bank FSB, Lehman Brothers Holdings, JP Morgan Chase, Wells Fargo and Freddie Mac were among the financial institutions allegedly defrauded by the group.
Another illegal tactic used by the group, according to the indictment, was “flopping” or reverse staging, which involves misrepresenting the condition of a property to lenders in order to get the lender to agree to a lower price on a short sale.
Flopping includes submission to the lender of a fraudulent “broker's opinion” stating that the property in question is in substandard condition and needs considerable repairs.
A short sale occurs when a lender on a property agrees to sell the property for less than is owed by the borrower.
The indictment accuses the group of manipulating banks, through forged documents, into agreeing to lower-than-market condition short sales while, at the same time, misrepresenting the same properties to prospective buyers in order to receive the highest possible prices on subsequent sales.
“It is unconscionable that this group would target financially distressed and vulnerable homeowners by fraudulently taking control of and selling their properties, with the ultimate goal of defrauding the homeowner's financial institution and then subsequent buyers,” said Suthers. “This group took advantage of multiple homeowners, using deception and forged documents, to create illegal profits.”
Representatives from the Colorado Bureau of Investigation, the U.S. Department of Housing and Urban Development and the Colorado Division of Real Estate participated in the investigation.
If convicted under the COCCA statutes, Gaston and the other defendants could be sentenced to up to 24 years in prison.
“As part of the Department of Regulatory Agencies, the Colorado Division of Real Estate is dedicated to preserving the integrity of the marketplace and is committed to promoting a fair and competitive business environment in Colorado,” said Colorado Division of Real Estate Director Marcia Waters.