White Collar: New York Attorney Indicted for Mortgage Fraud and Money Laundering

A federal grand jury in the Southern District of New York has returned an indictment against Louis Cherico, an attorney practicing in New York City and its suburbs. The indictment charges Cherico with operating a scheme to obtain control of luxury properties by filing false information with banks in obtaining mortgages. Specifically, the indictment alleges that in filings to lenders Cherico valued the properties in excess of 100% of their true market value.

According to the indictment, between July and December 2002, Cherico and his co-conspirators allegedly accomplished the fraud by filing false and misleading information with the lenders. Among the false documents allegedly filed were the following: loan applications, contracts for sale, deeds, and title reports. The false and misleading information in these and other documents included the following: income, assets, debts and credit worthiness of the purported lender; the chain of title; price; and the purported borrower's intent to reside in the premises. Through the scheme the co-conspirators were able to gain control of millions of dollars worth of property that they would otherwise have been unable to afford.

The indictment also charges Cherico with money laundering and obstruction of justice. These charges revolve around Cherico's relationship with Dominick DeVito. The government alleges that Cherico deposited the proceeds of the fraud into a bank account that he controlled and then transferred funds to an account controlled by DeVito, a co-conspirator. The government contends that the purpose of the transfer to DeVito's account was to conceal the fraudulent source of the funds. The obstruction charge stems from DeVito's 2003 conviction for racketeering and mortgage fraud. It is alleged that Cherico helped DeVito hide profits from a similar mortgage fraud and filed a false affidavit with the U.S Probation Office on DeVito's behalf.

For more about the case please see American Chronicle, "New York Lawyer Indicted on Mortgage Fraud, Money Laundering, Other Charges," February 19, 2010, www.americanchronicle.com/articles/view/142436.

White Collar: Former Owner of Food Company Charge with Fraud and Racketeering

A federal grand jury in Sacramento, California, has indicted the former owner of SK Foods on charges of conspiracy, racketeering, wire fraud, and obstruction of justice. The indictment stems from a decade long scheme to bribe company employees of tomato sellers and artificially inflate the prices of tomato products.

The indictment alleges that Frederick Scott Salyer, a former owner and chief executive of SK Foods led a 10 year conspiracy to pay more than $330,000 in bribes to sell his company's products and to subvert the sales efforts of SK's competitors. The scheme involved deals to sell SK's tomato paste, peppers, and other foods. Some of the companies involved in purchasing these SK products were Kraft Foods, Frito-Lay North America, Gerber Products, and Safeway.

In addition to the bribes the indictment alleges that Salyer and others at SK tricked customers into buying lower quality tomato paste at inflated prices. The government claims that SK mislabeled its products to make them appear to be of higher quality. Ultimately, SK was able to sell its tomato paste at a markup of at least 30%. SK Foods and three other California firms process almost 95% of all tomatoes grown in the United States.

The indictment charges Salyer with obstruction of justice for altering the minutes of the board of directors to hide a connection between the company and a director who had pleaded guilty to racketeering and money laundering charges in connection with the investigation.

The government first broke the case in late 2008. Since December of that year, 10 people have pleaded guilty. Six worked for SK and four worked for customers of the company. After the case broke, SK's financial situation declined, and it went into bankruptcy. Last year a Singapore company purchased SK out of bankruptcy.

Salyer's family is one of the largest land owners in California's history. His grandfather built an agricultural empire of more than 65,000 acres.

Salyer will be arraigned in federal court in Sacramento next week.

For more about the charges please see The Los Angeles Times, "Ex-Owner of SK Foods Indicted in Tomato Scandal," February 19, 2010, http://www.latimes.com/business/la-fi-tomato-scandal19-2010feb19,0,3396464.story.

White Collar: Property Owners Sue Credit Suisse for Fraud

Owners of property at four luxury ski and/or golf resorts have sued Credit Suisse for $24 billion. The class action civil suit alleges that Credit Suisse engaged in conspiracy, wire and mail fraud, racketeering, and money laundering. The complaint alleges that Credit Suisse engaged in a predatory loan scheme designed to load the developments with so much debt that it could foreclose on the assets.

The lawsuit involves property at the following four resorts: Ginn Sur Mer in the Bahamas, Lake Las Vegas in Nevada, Tamarack Resort in Idaho, and Yellowstone Club in Montana. The complaint alleges that Credit Suisse concocted a scheme to artificially inflate the resorts' values to make large loans and charge exorbitant loan fees. Moreover, the plaintiffs allege that the bank knew that the resorts would not be able to perform under the loans. Thus, the complaint alleges that the entire plan amounted to nothing more than an elaborate scheme to bleed money from buyers through loans and then foreclose on those buyers when they became unable to keep up with the loan payments.

The civil case may have developed from the bankruptcy proceeding of the Yellowstone resort. In that case U.S. Bankruptcy Judge Ralph Kirscher said that Credit Suisse had devised a "predatory" loan scheme.

Credit Suisse in the last several years has become very active in financing upscale resorts, which have fallen into bankruptcy. The only property named in the class action suit not in bankruptcy is Ginn Sur Mer.

The plaintiffs filed the action in the United States District Court for the District of Idaho.

For more information about the suit, please see The Wall Street Journal, January 4, 2010, http://online.wsj.com/article/SB10001424052748703580904574638052691063912.html.