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A Southern California couple was arrested this week on charges of filing phony paperwork and asserting bogus claims of ownership for dozens of homes that were converted to rental properties.

Monterey Park, Calif., residents Jesus Duran Aguayo, 52, a licensed real estate broker, and Sofia Aguayo, 52, face 20-year prison sentences if convicted of all charges, which include one count of felony grand theft, two counts of residential burglary, two counts of forgery, two counts of vandalism, four counts of trespassing, seven counts of filing false documents, two counts of elder abuse and one count of conspiracy.

“Given the approximately 100 times this scheme has been perpetrated it is estimated that the loss exceeds $5 million,” according to court documents.

According to an announcement by state Attorney General Bill Lockyer, the Aguayos allegedly “would troll Los Angeles County looking for homes for which back taxes were owed. They then conducted surveillance on such homes to find out if they were occupied. If they determined the homes were unoccupied, they paid the delinquent taxes. They then filed fraudulent quitclaim deeds that purported to transfer the property between themselves — without the legal owner’s knowledge or consent.”

The Aguayos then allegedly erected fences around each home, “made repairs, then rented the house and kept the money. When confronted by the rightful owners or their family members, the Aguayos in some cases lied or forged documents in an attempt to keep possession of the homes,” according to the announcement. Court documents state that other individuals may have also participated in the alleged “squatting” scam.

Court documents filed by state Attorney General’s Office allege that the Aguayos were involved in the “complex real estate fraud scheme” for more than five years. They were booked at Los Angeles County Jail on Wednesday with bail set at $1.4 million apiece. The Attorney General’s Office announced that it will seek to force the Aguayos to pay restitution to victims.

Sofia Aguayo reportedly applied for a real estate salesperson license on Aug. 19, 1986. In a license renewal application dated Aug. 17, 1990, Aguayo listed her employer broker as Jesus Aguayo, who reportedly had filed for a salesperson license on Dec. 5, 1979, and applied for a broker’s license on June 25, 1984. Jesus Aguayo also reportedly was issued a contractor’s license through the California Contractor’s State License Board.

The state initiated an investigation based on a neighbor’s complaint to the Los Angeles City Attorney’s Office about a couple who placed a fence around a property and began to toss its contents into a garbage bin, according to court documents.

A neighbor to Richard Dee, 78, who was in a hospital at the time, reported that a chain link fence was placed around Dee’s home in June 2005 and “every piece of Dee’s ‘life'” was tossed into a garbage bin. The neighbor, Jose Figueroa, reportedly was told by Jesus Aguayo “that Dee was dead and he had purchased Dee’s house,” court documents state. Furniture and personal belongings, including family photos, his mother’s painting and a 1967 red Ford Mustang, were among the items that were reportedly removed from Dee’s home, according to the Attorney General’s Office.

Figueroa later discovered that Dee “was still alive, had been in the hospital and was unaware the ownership of his house had been transferred and belonged to the Aguayos,” the documents state. Court documents also state that Dee said he “used to work for Century 21 and also at a real estate and title company … and was well versed on property transfers. He said he would never transfer his home to the Aguayos or anyone else.”

An investigator charged in court documents that the Aguayos filed fraudulent quitclaim deeds on homes in an effort to deed the properties to themselves without notifying the legal owners of the homes.

“After the false deeds were filed, the Aguayos took possession of the properties, entered without permission, placed fences around the properties, changed the locks, rehabilitated and rented the properties to their tenants and attempted to preclude some of the true owners from regaining possession,” the legal documents state.

An investigator reportedly confronted the Aguayos while they were working at one property site, according to court documents. They reported to the investigator that they “are in possession of the property under the adverse ‘squatters rights’ law. Mr. Aguayo explained that when a property is abandoned by its owner, anyone can occupy that property and if no one presents a claim to the property within five years the occupant can file a ‘quiet title’ and become the legal owner of that property,” according to court records.

“Mr. Aguayo further stated that he knows about these laws because of his real estate background from Security Pacific Bank. (He) added that he was not the only one doing this and that other people who know about this law are also obtaining property.”

According to licensing information posted by the California Department of Real Estate, the Aguayos listed a mailing address at 10744 Woodruff Ave. in Downey, Calif. Another real estate licensee, Jesse Aguayo, also shares that mailing address. Jesse Aguayo, a Realtor at Century 21 Powerhouse in Huntington Park, Calif., could not be reached for comment today. State records show that Jesse Aguayo has been licensed since October 1997.

The Attorney General’s Office reported that agents from the state Department of Justice executed search warrants this week at two houses where the Aguayos resided or worked — one in Downey and the other in Monterey Park. Search warrants also were executed at the couple’s bank in downtown Los Angeles and a post office box in Downey that was registered in their names, according to the announcement.

The Los Angeles County Department of Consumer Affairs, Los Angeles City Attorney’s Office, the Southgate Police Department and the Los Angeles County Assessor’s Office assisted with the investigation.

The Attorney General’s Office announced that consumers who believe they may have been victimized by a real estate scheme can visit the Web at http://ag.ca.gov/contact/complaint_form.php?cmplt=CL, or send mail to: Public Inquiry Unit, Office of the Attorney General, P.O. Box 944255, Sacramento, CA 94244-2550.