by Bill Singer
Did shady characters scam lenders out of millions?
On July 25, 2011, a federal Indictment was unsealed in the Southern District of New York against:
Those Defendants were charged in connection with a fraudulent credit-repair scheme, in which they falsely reported to credit bureaus inflated credit histories for thousands of individuals, enabling those individuals to get millions of dollars in loans from financial institutions and other lenders.
NOTE: The charges and allegations contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law
SIDE BAR: Consumer Reporting Agencies ( “Credit Bureaus” ): provide reports to third parties about the credit-worthiness of consumers.
Furnishers: Among the sources of information utilized by Credit Bureaus are entities that provide consumers with credit, e.g., credit card companies, automobile lenders, and department stores.
Allegations
The Indictment alleges that in September and October 2007, and July 2008, respectively, the following businesses became Furnishers:
Allegedly, from 2007 through 2009, through Brooklyn-based Highway Furniture and, later, Hempstead-based New York Funding, and Defendants Jacquet, Mansour, Romeo, and Hudson engaged in a scheme to falsely and fraudulently improve the credit histories and credit scores of thousands of individuals. In furtherance of this fraud, the two entities and four Defendants falsely represented that the individuals were customers of Highway Furniture and New York Funding.
In exchange for thousands of dollars in fees, the Defendants allegedly provided credit bureaus with fictitious information showing that Highway Furniture and New York Funding had extended credit to the purported customers, and that those loans had been (or were being) repaid.
The defendants were charged with having falsely and fraudulently improved the credit histories and credit scores of some of the purported customers by deleting accurate, but negative, credit information maintained by the credit bureaus by allegedly exploiting loopholes in a software tool called e-OSCAR that the credit bureaus made available to Highway Furniture for the purpose of resolving credit history disputes. Prosecutors allege that the defendants fraudulently deleted or modified over 4,400 legitimate debts from the credit files of hundreds of people and added nearly 3,000 fake lines of credit to the credit history of hundreds of New York Funding and Highway Furniture's purported customers.
As a result of defendants' alleged fraud, lenders extended over $47.8 million in loans to the purported customers, including mortgages, car loans, student loans, and credit card loans. The losses sustained by the lenders from loans that were not repaid exceeded $9.3 million.
Arrests and Charges
Each defendant was charged with one count of
Count One: a maximum sentence of 30 years in prison and a maximum fine of $1 million, or twice the gross gain or loss from the offense.
Count Two: a maximum sentence of 10 years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense.
One Down
On March 21, 2012, Jacquet, who prosecutors deemed the leader of the fraudulent credit repair scheme, pled guilty in Manhattan federal court to one count of conspiracy to commit bank fraud. As part of his plea agreement, Jacquet agreed to make restitution of over $9 million to the victims of his offense. He faced a maximum sentence of 30 years in prison, a maximum term of five years of supervised release, and a fine of the greatest of $250,000, or twice the gross pecuniary gain derived from the offense or twice the gross pecuniary loss to the victims.
Two More Down
In October 2012, Mansour and Hudson each pled guilty to one count of conspiracy to commit bank fraud and Hudson also pled guilty to one count of conspiracy to cause damage to a protected computer.
In early March 2013, Hudson was sentenced to 30 months in prison and two years of supervised release, and ordered to pay more than $9.3 million in restitutuion.
On March 20, 2013, Mansour was sentenced in Manhattan federal court to 51 months in prison and two years of supervised release, and ordered to pay with Hudson more than $9.3 million in restitution for the losses caused by the scheme.
In sentencing Mansour, Judge Buchwald commented on the defendant’s submission of a fraudulent claim for disaster assistance after Hurricane Sandy, and said: “What is ultimately so staggering is that he has been absolutely disrespectful of the legal system since his arrest.”