Las Vegas Sun

April 20, 2024

Trial delayed a year for couple accused in mortgage scam

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A year-long delay has been granted for the trial of a couple accused of orchestrating a massive residential real estate and mortgage scam in Las Vegas.

Eve Mazzarella and her husband, Steven Grimm, were indicted along with other defendants in March 2008 in what the U.S. attorney's office called a scheme in which housing values were inflated and straw purchasers were used to defraud banks and funnel money to the defendants. Additional conspiracy and fraud counts were added later in a superseding indictment.

Mazzarella and Grimm pleaded not guilty and with the permission of the federal court have moved to the San Diego area while they await trial. The trial was to begin Monday, but has been moved to September 2010.

The delay will give attorneys time to sort through nearly a quarter-million pages of electronic images scanned from paper real estate documents obtained by federal agents as part of the investigation, court records show.

Court records also show attorneys for Mazzarella and Grimm are trying to obtain records from lenders, appraisers, accountants and attorneys who advised them about their deals for use in their defense.

The couple, in the meantime, faces 31 lawsuits filed in Clark County District Court since this summer naming one or both as defendants. Individuals say in the suits they were induced into investing in properties with Grimm, Mazzarella or both. The suits also name as defendants numerous mortgage, title and appraisal companies.

In its indictment, the U.S. Justice Department said the couple operated companies such as Distinctive Real Estate & Investments and Pro Design and that the scheme operated from 2003 through early 2008.

Mazzarella and Grimm recruited individuals to be straw buyers to make offers to purchase homes in the Las Vegas area at substantially above the seller's asking price, the government alleged.

Once the purchase was negotiated, the straw buyers applied for mortgages from financial institutions. False information regarding the straw buyers' employment, income and assets were included in the mortgage loan applications to ensure that the straw buyers could qualify for the loans, the government said.

The defendants required the straw buyers to transfer title to the property to a designated limited liability company controlled by the defendants and then paid fees to the straw buyers, prosecutors said.

After the mortgage loans were funded, the defendants caused title and escrow companies to disperse a portion of each loan to one of their limited liability companies. Once the defendants obtained control over a property, they would again sell the same property to another straw buyer at an inflated price, the government alleges.

The indictment said the scheme cost banks more than $17 million as 143 of the properties at issue were sold in foreclosure. In all, there were 432 straw-buyer transactions involving 227 properties purchased for $107 million, the indictment says.

Similar allegations are raised in the civil lawsuits.

Robert Fagin, for instance, claims in one of the lawsuits he entered an "investment venture" in 2007 with Grimm and Mazzarella in which they would purchase an interest in real estate on his behalf. The property would be rented, with the profits after the mortgage payment and other expenses going to Fagin, his lawsuit says.

Grimm, Mazzarella and others used his credit and identification to buy the property and used false statements about his employment and income in the process, his lawsuit says.

Unknown to him, the deal involved loans inappropriate for him including a second mortgage -- and transfer of the property to a limited liability company that was created without his knowledge and referring to him, RFagin LLC, the suit said.

The subprime loans eventually went into default and Fagin claims the defendants -- including lenders and other professionals in the deal -- engaged in fraud and misrepresentations and breached their duties and obligations.

Lenders in the deal "knew or reasonably should have known, through commercially reasonable means, that loans nos. 1 and 2 were fraudulent and/or one or more material facts about plaintiff were erroneous and/or omitted," the suit charged.

None of the defendants have responded to the allegations in that suit, which was filed Aug. 24.

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