A casino-style telemarketing operation run by nine men out of a Canoga-Park, Calif. boiler room is charged with stealing $2.3 million from desperate homeowners seeking home loan modifications to prevent foreclosure.
Four of nine men being accused of running the illegal business are in custody, while police are seeking another five.
Consumers calling one of two businesses, Mason Capital Group, LLC or Gretchen Fox and Associates, hoping for a home loan modification, were instead bilked of their money, and received neither loan modifications or help of any kind, the California Attorney General's office said.
The operation was set in a Vegas-style boiler room with a roulette wheel that telemarketers spun for cash bonuses, a conference room with a poker table, slot machines and craps and black jack tables that served as workstations.
More than 1,500 homeowners throughout the U.S. were defrauded by this group of men, two of whom had served time in federal prison for previous fraud convictions. Homeowners were illegally charged up-front fees ranging from between $1,000 to $5,000, and in almost no case were any loans modified.
"This company was just a boiler room, long on promises and upfront fees but short on foreclosure relief," California District Attorney Edmund Brown Jr. said in a statement. "Its operators cruelly defrauded citizens trying valiantly to hang on to their homes."
Gregg Scott Quinn, 37, of Camarillo, and Juan Pierre Washington, 40, of Winnetka, worked as sales managers and supervisors and were arrested Tuesday and Wednesday evening. They are being held at Los Angeles County Jail.
Telemarketers Gary Arnold Eisenberg, 71, of Westwood, and Ira Itskowitz, 58, sales manager, both spent more than 5 years in federal prison for previous fraud convictions. They are held in federal custody for violating federal parole and their involvement in the scam.
The main owners of the business, Niv Iskin, 30, of Reseda, Reviv Karpman, 38, of Tarzana, Tomer Kogman, 29, of Reseda, and Avraham Yechizkia, 34, of Encino; and sales manager, Barel Iskin, 23, of Woodland Hills are still being pursued by the Los Angeles County law enforcement.
In March 2009, the California Attorney General's Office found that the telemarketing venture focused on homeowners who faced mortgage increases and foreclosure. To create more sales, the companies boasted expertise legal counsel, financial experts and loan negotiators who could handle interest rate reductions, monthly payments and principal balances. The telemarketers told consumers their loan had a 90% to 100% success rate through the company.
After briefing the customer, telemarketers then asked for financial information to determine whether or not the consumer "met standards and qualifications" for a loan modification.
Homeowners then received follow-up calls that they had been approved and their case was being reviewed. They were also told that they would recieve a refund if they were not given the promised results. This promise was never honored.
Exacerbating trouble for homeowners: They were instructed not to contact or pay their lender while their case was being evaluated, lest their "case" be voided, said Evan Westrup, Deputy Press Secretary for the California Attorney General's office, in an interview with Consumer Ally. This forced many into foreclosure.
"It was set up for high volume sales, not for loan modifications and foreclosure relief, which is what they promised," Westrup said. "Ultimately that's what led us to this case. Over 1,500 homeowners across the county were affected. It's a big case."
The telemarketers targeted strapped homeowners via online advertising or e-mail, Westrup said. The money earned from the operation was used to pay for private school tuition, entertainment, travel, shopping and other personal expenditures. The arrest warrant notes that the money was also used to pay off credit cards.
Brown's office will seek restitution for victims of this scam.
All individuals and businesses that offer mortgage foreclosure consulting, loan refunds and legal advice about foreclosures must register with the attorney general's office and post a $100,000 bond. It is illegal to charge customers up-front fees.
It is not yet confirmed if this operation is in connection with the same Canoga Park phone number pretending to be the California Consumer Affairs Office demanding U.S. consumers make payday loan repayment.
If you are a homeowner who has been scammed, contact Brown's office at 1-800-952-5225 or file a complaint online at: www.ag.ca.gov/consumers/general.php.
Home loan modification telemarketers charged with stealing $2.3 million from desperate homeowners