A grand jury in California has issued a 68-count indictment against the creators of a mortgage-elimination scheme and several affiliates, on charges related to mail fraud, wire fraud, bank fraud, contempt of court and forfeiture, according to court documents.
This latest indictment, called a superseding indictment, adds a list of charges and individuals to the U.S. government’s ongoing criminal case. In September, a grand jury issued a 46-count indictment against the group’s founders.
No-bail arrest warrants have been issued for William Julian, Farrel J. LeCompte Jr., Sara J. Magoon and Charles Dewey Tobias, the court documents state. Dale Scott Heineman and Kurt F. Johnson — the leaders of the mortgage-elimination scheme — are already in custody. Johnson had dodged arrest for several weeks prior to his arrest in July and has earlier served a prison sentence for a securities fraud conviction.
The individuals were all allegedly involved in the Dorean Group, a national scheme based in the San Francisco Bay Area that purported to erase homeowners’ mortgage debts through a paperwork process that involved the filing of various official-looking documents with county offices and lenders.
To participate in this scheme, homeowners were asked to pay a fee — typically several thousand dollars, to enter a mortgage into the paperwork process. In this process Dorean creators in several cases would set up family trusts using clients’ addresses, and add themselves as trustees for those properties.
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, DTE Financial, Oxford Trust, Baylor Trust and Universal Trust Services. The Dorean Group operated primarily out of offices in Union City, Calif., and Newark, Calif., and the FBI raided the group’s offices on more than one occasion.
Some of the Web sites associated with the Dorean Group have incorporated elaborate conspiracy theories that describe supposed flaws in the federal banking and monetary system. Proponents of the Dorean Group have also cited biblical passages in defending the group’s operations.
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 were exploiting a loophole that they discovered in the nation’s mortgage system.
Several licensed real estate professionals, including mortgage brokers, have actively promoted the Dorean Group process.
According to the grand jury indictment, Heineman, Johnson and the Dorean Group “knowingly devised and intended to devise a scheme and artifice to defraud financial institutions and lenders that issued loans secured by real property as to a material matter and to obtain money by means of materially false and fraudulent pretenses, representations and promises.”
This scheme began operating around November 2002, the indictment states, and continued through July 2005.
Court documents also stated that Heineman and Johnson “said that they will not hire their own attorneys and will not stipulate for the court to appoint counsel to represent them.” Both of the men pose “a serious flight risk and they will obstruct justice by intimidating potential witnesses in this case,” court documents state.
The Northern California U.S. District Court’s Criminal Division is handling the case against the Dorean Group and its affiliates.
Julian, LeCompte, Magoon and Tobias were allegedly “brokers” of the Dorean Group process. “As Dorean Group brokers, each of them agreed to promote the Dorean Group’s debt elimination program and not any other program,” according to the indictment. Julian, based in South Carolina, allegedly conducted business through an entity called Julian Professional Services. LeCompte, based in Texas, allegedly conducted business under the DTE Financial Group LLC entity.
Magoon, based in Montana, allegedly conducted Dorean Group-affiliated business under an entity called Credence; and Tobias, based in Florida, allegedly conducted Dorean-related business through an entity called Aquila Holdings LLC.
“After recruiting borrowers as clients and collecting fees from them with the assistance of the Dorean Group ‘brokers,’ Heineman, Johnson and the Dorean Group transferred property interests of clients into corresponding ‘family trusts,'” according to the indictment, issued Feb. 16. “Heineman and Johnson were trustees of these trusts. As such, and purportedly on behalf of the clients, Heineman, Johnson and the Dorean Group caused mailings to be sent to lenders demanding the lenders prove the validity of their loans to the unilateral satisfaction of the Dorean Group within 10 days.
Heineman, Johnson and the Dorean Group would then file property documents with county offices that alleged that they were representing homeowners’ lenders and were transferring the lenders’ secured property interests to the family trusts, according to the court documents.
They “then caused the borrower to seek a new loan from a separate lender … keeping a majority of the loan proceeds obtained from the subsequent loan for themselves. The remaining proceeds of the subsequent loan were divided between the borrower and the Dorean Group broker who recruited the borrower,” the indictment states.
The federal government seeks to recover all property derived from the profits or proceeds of the alleged criminal scheme, as well as any and all other property held by the individuals charged in the indictment.
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