Archive for category: emptywheel

I’m still trying to sort through what it might mean that, after signing an unlikely plea agreement with the government, Duke Cunningham briber Tommy K has continued to engage in mortgage fraud, at the expense of the company most deeply buried in the shitpile, Washington Mutual (WaMu).

But let’s start with the description John Michael’s lawyers gave of Tommy K’s method.

Kontogiannis would have a loan application prepared in the name of a putative home purchaser, sometimes with the knowledge of the person (who might be paid a fee) and sometimes without the person’s knowledge, for a property that Kontogiannis either had developed or had planned to develop. Fraudulent paperwork would be prepared related to, for example, income, assets, or appraisal. (Kontogiannis presumably would pay a kickback to the individual preparing these documents.) Applications would then otherwise be submitted for approval to various financial institutions in accordance with normal industry practices. At closing, all title documentation (such as the mortgage and note, the uniform settlement statement (HUD-1 form), title-insurance paperwork, and affidavits pertaining to the purchaser’s identity and intent of occupancy) would be fraudulently executed by a loan officer controlled by Kontogiannis. The settlement agent, using money that had been forwarded by the lender and placed in escrow, would issue checks to cover mortgage taxes, transfer taxes, recording fees, title insurance, and lender fees, as well as the net proceeds (the balance of the loan money), all of which (with the exception, sometimes, of lender fees) would go to Kontogiannis-controlled entities, including companies ostensibly owned by one of Kontogiannis’s daughters and controlled by Kontogiannis. The mortgage and note, however, would never be recorded, the taxes never paid, and title insurance never purchased. Instead, the funds that had been disbursed for these purposes would eventually be steered to another company ostensibly owned by one of Kontogiannis’s daughters but controlled by Kontogiannis.

These fraudulent loans would ultimately be sold into the secondary-mortgage market to a lender who would be led to believe, based on the loan documentation provided by Kontogiannis’s agent, that the loan had been sent for recording and that all taxes and recording fees had been paid. A Kontogiannis controlled financial-services company, typically Parkview Financial, Inc. (“Parkview”), would assume responsibility for making monthly payments on the loan. So long as timely payments were made, the loan would be viewed by the new owner as performing and, consequently, never questioned.

Kontogiannis’s greed, however, did not stop there. He would then market the property to an end-user, whose financing was often out of Kontogiannis’s control. Upon closing with the end-user, Kontogiannis would take a second bite from the mortgage-fraud apple: iin light of the fact that the first mortgage on the property had never been recorded, the settlement
agent would release the net proceeds of the second loan directly to a Kontogiannis-controlled company without paying off the existing loan because the latter had never been recorded. For
its part, the lender who had purchased the first mortgage would not know that the property had been sold again and that, consequently, its position in the chain of title had been compromised. [my emphasis

So basically, Tommy K would double dip on mortgages on houses that no one (except for at least one corrupt Congressman) was really buying. Here’s where we get into WaMu’s role in this. The "one company alone" in the following paragraph must be WaMu, given the government’s assertion that WaMu had purchased $50 million in Tommy K’s fraudulent loans.

The volume of Kontogiannis’s fraudulent loans as of June 1995 is shown by one of Parkview’s bank-account statements. See Exhibits 12 and 13. The statement reveals mortgage payments on 140 different properties. One company alone had purchased over 100 of the loans in the secondary market, with an average loan amount of approximately $500,000. That publicly traded and federally chartered bank thus had approximately $50,000,000 in loans that were potentially worthless because, as a result of Kontogiannis’s scams, none of the mortgages were recorded in primary position as the bank had assumed. That, in turn, meant that if any of the loans defaulted, the bank would not be able to foreclose on any real property and thereby recoup any of the losses. Needless to say, the impact of such losses would be profound both on the individual bank and on the shareholders of the company. Even scarier, that bank may have since purchased many more such loans from Kontogiannis. [my emphasis]

Note, Michael’s lawyers are citing how many bad mortgages WaMu had bought in 1995, not how many they bought by 2007. And, as they helpfully point out, Tommy K may well have continued this fraud after he signed his plea deal in February. That’s certainly the implication of this passage from yesterday’s filing.

…as a direct result of being contacted by Michael’s defensecounsel, Washington Mutual contacted the government with informationregarding Mr. Kontogiannis’s continued illegal activity.  [my emphasis]

Michael’s filing was in August, which would leave several months after Tommy K’s plea deal for him to continue to sell Greek shitpile to WaMu. And of course, the government didn’t bother to tell anyone that Tommy K had been selling Greek shitpile until June, which appears to have allowed WaMu to continue to buy up Tommy K’s fraudulent loans. Five or seven months of Greek shitpile, depending on how you’re counting–that might be a significant amount of shitpile.

Now, I might feel bad for WaMu. Except for the fact that they’re pretty damned corrupt themselves, and seem to have been in the business of making sure they didn’t know if they bought shitpile. Here’s what Andrew Cuomo alleges them to have done.

Read more →

Tommy K says he shouldn’t go to jail because he has a bad ticker (h/t chrisc). But it sounds like going to jail in the first place may be the least of his worries. According to a filing submitted yesterday, it appears that John Michael’s earlier allegations were correct, and that Tommy K violated his plea agreement by continuing his bank fraud after the plea deal.

(4) During the pre-trial proceedings of coconspirators Brent Wilkes and John Michael, the government first received information suggesting that defendant Kontogiannis was, in fact, still committing federal criminal offenses, including, but not limited to bank fraud in violation of Title 18, United States Code, Section 1344.

(5) As part of these proceedings, defense counsel for John Michael obtained various financial documents indicating that Mr. Kontogiannis was–unbenknownst to the government–still continuing his illegal mortgage fraud scheme. In addition, Michael’s defense counsel contacted Washington Mutual to obtain information regarding the fraudulent mortgages that they had purchased from Mr. Kontogiannis.

[snip]

…as a direct result of being contracted by Michael’s defense counsel, Washington Mutual contacted the government with information regarding Mr. Kontogiannis’s continued illegal activity.

(8) Within the past two weeks, we obtained clearer indications that Mr. Kontogiannis was engaged in post-plea illegal activity.

About this, a couple points.

First, this filing suggests that "the government" had no clue that Kontogiannis continued to Read more →

Perhaps it was just a confluence of events that convinced Trent now was the time to quit.

After Senate Minority Whip Trent Lott (R-MS) announced his resignation this week, it was widely speculatedthat Lott was quitting in order to dodge Senate ethics standards thattake effect next year. The new rules require senators to wait two yearsbefore entering “the lucrative world” of lobbying Congress. Lott deniedthe rumor at a press conference, saying the new law “didn’t have a big role” in his decision.

Atthe same press conference, Lott was also asked about Senate ethicsrules regarding “negotiating with a future employer,” to which hereplied that he’s “not really involved in negotiation,” but that “thereare some opportunities out there” that he wants “to be able toconsider”:

QUESTION: Senator, I understand there’s arule in the Senate that if you’re negotiating with a future employer,that you must register with the Ethics Committee. Have you been down tothat committee yet?

LOTT: Well, I have not yet, but I’mnot really involved in negotiation. I’ve tried to stay away from that.There are some opportunities out there that I want to be able toconsider, but I have nothing that we’ve agreed to or lined up.

One of the “opportunities” that Lott is considering, according to his son, Chester Lott — who is also a lobbyist — is “a partnership” with former Sen. John Breaux Read more →

McConnell doesn’t want you to know, no doubt fearing there will be the same kind of firestorm when we learn who has been schmoozing him as there was when we learned who was schmoozing Jello Jay Rockefeller. Thankfully, a Federal Judge thinks we ought to know this information before Congress passes its amendment to FISA (h/t Mad Dog for the heads up).

The Director of National Intelligence must quickly release documentsrelating to 2007 meetings with telecoms concerning proposed amnestybills for companies that helped government’s secret domestic spyingprogram, a federal judge ruled Wednesday. The Northern CaliforniaDistrict Court judge ruled that the government must produce thedocuments by December 10 so that the public can be informed about theextent of telecom lobbying before Congress votes on immunity.

The Electronic Frontier Foundation, which is leading a lawsuitagainst AT&T for the telco giant’s alleged cooperation withinternet monitoring and call record data-mining, asked for thedocuments in September via a government sunshine request.

The group asked for documents detailing meetings between telecomsand the nation’s top spy office, as well as meetings between the spiesand legislators. The government agreed to the civil liberties requestto ‘fast-track’ the request.

But months later the DNI still hadn’t released any of the 250unclassified pages of documents or the 65 pages of classified material,prompting the EFF to ask for a judge to force a document dump Read more →