Kurt F. Johnson, a San Francisco Bay Area man who faces felony charges in Utah for his role in an alleged mortgage-elimination scheme that targeted homeowners across the country, was arrested by police in Hayward, Calif., on Thursday night after dodging arrest for several weeks.
Doug LeDoux, a fraud investigator for the Utah Insurance Department, said today that Johnson faces extradition to Utah. An extradition process is also under way for Dale Scott Heineman, 45, who allegedly was a partner with Johnson in a scheme that purported to erase home mortgages through a convoluted paperwork process.
Johnson, 42, is no stranger to law enforcement authorities. He earlier served a prison sentence for a securities fraud conviction, and he faces communications fraud, racketeering, theft, false or fraudulent insurance act and conspiracy charges in Utah – a total of 10 counts. Heineman is facing 13 counts, including communications fraud, racketeering, unlawful dealing of property by a fiduciary, theft, fraudulent handling of recordable writings and conspiracy.
Utah authorities have alleged that Heineman and Johnson sought to profit from a scheme in which they would collect refinancing money from homeowners who participated in a so-called mortgage-elimination process. Homeowners were asked to pay an up-front fee of about $3,000 to participate in the program, and Web sites promoting the scheme outlined a plan through which homeowners would refinance their homes and hand over most of the refinancing money to Heineman and Johnson and their affiliates.
Also, the U.S. Attorney’s Office for the Northern District of California this month filed a complaint that seeks to permanently block an alleged “fraudulent mortgage elimination scheme” carried out by Heineman and Johnson through The Dorean Group, Oxford Trust and Universal Trust. The complaint alleges that the Dorean Group’s operators “are continuously alienating or disposing of funds they have obtained as a result of the fraudulent practices described (here).”
And there are reports that $2.8 million was deposited into one Dorean Group bank account over the course of a year, with at least $230,000 wired to a bank account in Latvia. The U.S. Attorney’s Office complaint alleges that the Dorean Group’s operators “are continuously alienating or disposing of funds they have obtained as a result of the fraudulent practices described (here).”
Dorean Group promoters have used Internet discussion groups, Craigslist.org, e-mail, conference calls, conventions and dozens of Web sites to advertise the mortgage-elimination scheme. Among the names associated with The Dorean Group: Capital Creation Resource and DTE Financial.
Some of the Web sites have incorporated conspiracy theories in describing flaws in the federal banking and monetary system. And at least one of the promotional sites appears to be associated with a man who resides in Kenya. Some critics of the Dorean Group process have said they suspect other international links as well.
As a part of the Dorean Group process, hundreds of official-looking documents claiming to wipe out home mortgages have been filed with county recorders’ offices in dozens of states. Real estate lawyers have said that homeowners who participate in so-called mortgage-elimination process could face foreclosure, criminal charges or the challenge of clearing up a clouded title to their property.
Johnson and Heineman, meanwhile, have said that they are simply exploiting a loophole that they discovered in the mortgage system.
Inman News in February confirmed that the FBI, in conjunction with state and local law enforcement agencies, raided a Union City, Calif., office used by Heineman and Johnson. Agents seized documents and bank accounts connected with the office, sources said.
And yesterday, law enforcement agencies conducted a search at another Bay Area office associated with The Dorean Group.
Union City Police Detective Travis Souza confirmed today that a police investigations unit, assisted by local FBI agents, served a search warrant on the Dorean Group at an office in Newark, Calif., at about 10:30 a.m. Thursday. “We were investigating (alleged) real estate fraud, and we were looking for documents during the search warrant process,” Souza said. “We did confiscate items,” he added, including some documentation.”
No arrests were made at that time, he added. “It’s an ongoing investigation.”
After Heineman’s arrest on May 28, a Web log sprang up at http://www.doreanblog.com/ that Johnson has purportedly authored. The blog states, “I have taken on the role of a whistleblower in the American mortgage industry because of my prior experience with being prosecuted by the government for securities fraud.” The blog contains several postings that attack the banking industry, judges and law enforcement agencies, among others.
One of the latest posts states, “First message from the Graybar Hotel,” and notes that Johnson was arrested. “I shall continue, however to update the blog by proxy. Contingency plans have been implemented, and you are still very well protected. The time has come for me to face the giant head on. I shall continue to keep you well informed.”
The Dorean Group is under fire in other states, too. North Carolina Attorney General Roy Cooper in March filed a lawsuit against Johnson and Heineman to bar them from operating a mortgage-elimination scheme in that state.
Other groups have promoted mortgage-elimination programs that claim to offer freedom from mortgage payments in exchange for up-front money. Redwood Trust, a mortgage-elimination and debt-elimination promoter in New Jersey, is also the subject of a federal investigation. And such schemes are not limited to home mortgages – there are promoters who claim to offer processes through which consumers can quickly erase car loans and credit debt, among other financial problems.
FBI and Better Business Bureau officials have urged consumers to beware of any financial offer that appears too good to be true, and to report suspicious businesses to local law enforcement agencies or consumer groups.
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