Monday, September 24, 2012

Ober Sentencing Offers Plenty of Northside Connections

Post and photo by the Hawthorne Hawkman.

Last week, Hennepin County Prosecutors sent two more mortgage fraudsters to prison for ten years.  James and Wendy Ober brokered approximately $23 million in loans, according to the Federal Housing Administration, much of which was facilitated by forgeries, identity theft, and other fraudulent and predatory practices.  Three northside properties were listed in the sentencing document - 4247 Sheridan Ave N (pictured above), 625 Morgan Ave N, and 1811 Upton Ave N.

Many of the business journals and other media that covered this story called the Obers' actions the "next wave of mortgage fraud."  A few years back, I met with several investigative authorities who asked me this very question.  They knew what the mortgage fraud of 2005-2007 looked like, but the housing crash and recession forced legal and institutional changes on the mortgage industry that made previous fraud difficult to replicate.  So what investigators wanted to hear from me and other housing professionals was what we were seeing as the new fraud.

What I described to them was almost identical to what the Obers were doing.  Namely...

...fraud involving foreclosures and fake second mortgages.  Let's say you were in foreclosure and I contacted you saying I could get your house sold to keep a foreclosure off of your credit record.  Already flailing in a sea of financial confusion, you take me up on the offer.  You owe $100,000 to your lender, but your house is worth $150,000.  Well if I'm Jim or Wendy Ober, I sure as heck don't want you to get the proceeds that are rightfully yours.

So the Obers created shell companies like Eagle River Financial, and then created sham second mortgages and then forged the borrower's signatures on them and then backdated the mortgages (everything so far is HIGHLY illegal) so that it would look like they were originated prior to the sheriff's sale, and THEN record the heaping pile of fraud at the County.  At the closing table, the sham second mortgage gets paid off.  The Obers, of course, collected fees and commissions too, but skimmed equity that should have gone to the seller.

Did I mention that the Obers stole identities of the buyers of these properties?  Because they did that too.  The sentencing documents don't explicitly state that the Obers like to club baby seals, kick puppies, and cheer at the part of the movie where Bambi's mother dies.  But that's heavily implied in the footnotes.

Speaking of those footnotes, we get plenty of northside mortgage fraud Easter eggs hidden in both the main sentencing document and the footnotes.  Judge Regina Chu, who presided over the Larry Maxwell trial, is quoted.
“Racketeering is the most serious of all economic crimes. A racketeering conviction should result in a sentence considerably more severe than that applicable to the underlying predicate crimes – and rightly so.”
Because of the severity of a racketeering crime, judges have the leeway to go beyond sentencing guidelines, and that's what Judge Joseph Klein is doing here.  He also references the 120-month prison sentence for Marlon Pratt.  The Minnesota Supreme Court upheld that sentence, although a new trial has been ordered on a technicality.

Joseph Gustafson of the Beat Down Boys gets a shout-out too.  The "pattern of criminal activity" is paralleled in both the Gustafson and Ober convictions.


The sentencing document does give specifics on the Obers' actions, which were highly sophisticated, very costly, and encompassed almost every aspect of the mortgage process.  In fourteen months James Ober, through the company Mortgage Planners Inc., originated thirty-seven separate loans that had confirmed fraud, and the total dollar amount of that fraud was $5,437688.  Wendy originated thirty-six loans for $5,330,016.  They also successfully funded three fraudulent loans through Quicken and attempted two others.

The Court notes that in spite of the new restrictions on potentially fraudulent activity,

“The evidence demonstrated, however, that Defendants were undeterred by this new market environment.  In fact, they deftly adapted to it by methodically creating an intricate tapestry of lies, forgeries, and counterfeit documents.  The Court heard many times how Defendants created fake companies to ‘employ’ the borrowers in whose name Defendants’ (apostrophe error in original) obtained mortgage loans.  Defendants operated phone lines of the fake employers, fabricated pay stubs, and forged bank statements, all for the purpose of creating a paper trail to substantiate and promote the complete fiction of the borrowers’ employment.  Defendants also lied about borrowers’ educational backgrounds and went so far as to forge transcripts from local and national educational institutions. It was this type of conduct that led veteran mortgage lending experts like Kimberly Peacher and Wolfgang VonMueller to testify that this case was one of—if not the most—egregious case of fraud they had ever seen.”

Ms. Peacher even said of the case, "almost every single document within the loan file was found to be fraudulent or altered in some manner."  (emphasis in original statement)

Identity theft at 625 Morgan Avenue North

The Obers stole the identity of someone only named as R.V. and used that identity to forge signatures, create fake employment information, falsify bank statements and counterfeit a divorce decree.  A phone was set up in the victim's name, and a cell phone with that number was found in the Obers' home.  Someone spoke with Quicken Loans and impersonated the victim. 

At the same time, that number was used as a point of contact for both the buyer and seller of 4247 Sheridan Avenue North.  How Quicken missed the fact that the buyer and seller had the same phone number is beyond me, but apparently they did.

Wendy Ober continued to set up fake documents in R.V.'s name, including gift donor letters, employment information, and the aforementioned divorce decree.  James Ober admitted to knowing this kind of fraudulent manipulation was occurring.  R.V.'s mail was transferred to the defendants' home, and they manipulated the credit of the victim by paying certain bills for a while.  They even made fake ID cards with R.V.'s information.

When the loan at 625 Morgan closed, almost $40,000 was paid out to a phony second mortgage through Eagle River Financial.  Those funds were deposited into a bank account in the name of "Julio Herrera," who, incidentally had the same phone number as R.V. and the buyer and seller of 4247 Sheridan.  "Julio" transferred the funds to an account belonging to OFC Properties, of which James Ober was the sole signatory.  Keys to 625 Morgan were found in the Obers' home.


In spite of the exhaustive and overwhelming evidence, the Obers insisted throughout the trial that they did nothing wrong in the case of R.V.  Klein was sure to remember that in handing down the 10-year sentence.

This is just one example of the depths of Obers' actions.  In light of the fact that they committed as many as seventy-seven similar acts, perhaps ten years isn't long enough.

5 comments:

  1. So what ever happened to the properties? Have they all been resold or what?

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    1. I'll be looking into that very question in future blog posts.

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  2. Jeff, I know you put it on your Twitter Feed but it would be great to have a convenient link to the court documents (complaint doc, sentencing doc) along with this blog post.

    Here's my Google doc version of the complaint document.

    https://docs.google.com/open?id=13zh3VF1ZwsMEemLKCmIY6_7qsKCzNLWxjkWUVYbrUq_TrxkC_xhOzzbJRBhA

    Word is Defendant Pliego got 49 months because he cooperated with the prosecution.

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    1. Jeff, keep this your blog. Not a clone of JNS. Have some respect for yourself and others.

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    2. To the extent that the JNS blog gained notoriety in its exposure of mortgage fraudsters and their cascading effects on the northside (TJ Waconia excluded), that was due to my writing. Not taking anything away from John, but the continuation of what I did in the past is not a "clone of JNS."

      For instance, I used to post criminal records even on this blog. I stopped doing so because I felt that wasn't part of what I wanted to carve out as an identity of North By Northside. But intricate details of mortgage fraud will always be one of my priorities to write about.

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