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Is Winston Lum a criminal mastermind or a patsy? 

Wednesday, Aug 4 2010

Page 3 of 4

"They said, 'Hey, why don't you take out a bigger loan?'" Lum recalls the Santa Barbara guys saying. "I was there, twiddling my thumbs, talking fast Chinese. They're doing all this banking talk, and I was just enjoying the hotel lobby, drinking a $12 bottle of water."

To put into perspective the apparently sloppy due diligence undertaken by de Witte, after Lum's name showed up in San Francisco County deed records as owning three condos, he was deluged with dozens of credit card offers. Lum said he applied for every one. But his credit was so bad that he was turned down each time.

"Why would these guys give me a $2.2 million loan when I can't even get a credit card?" he says.

Niroula's scams are essentially what hackers like to call "social engineering" — the expert psychological manipulation of unknowing marks. But the Rincon Hill deal involved more than fancy talk. It required recruiting a room's worth of real estate professionals to aid in what turned out to be a fraud.

According to the district attorney's public version of the case, Lum, Niroula, Shah, Shah's attorney, and a notary he recruited were the parties wise to the scheme. It seemed that such a complicated bank fraud would have involved more players.

I called Newsom, who became famous 20 years ago as the banking examiner who testified before Congress about the crooked savings and loan dealings he discovered at the heart of the 1980s banking crisis. In February 2009, his retirement sleuthing exposed yet another national scandal in which federal regulators neglected to do their jobs overseeing a failed Southern California bank.

Newsom advised me to take a closer look at the escrow agent, the professional in charge of divvying out money to the various parties, who must be remunerated once a property sale is final. "Typically ... they would leave nothing to chance that somebody could blow the whistle. The con guy essentially needs to control everything," Newsom says, adding that frauds he had investigated sometimes involved numerous real estate professionals in on the deal.

I went to interview Lum in jail a second time.

On March 6, 2009, escrow cleared on the $2.2 million fraudulent Rincon Hill loan. At about the same time, Lum stopped hearing from Niroula. He figured either cancer had got the better of him, or Hwang had managed to get him deported.

However, Niroula had been in jail in Palm Springs on murder charges. He had allegedly set up a scheme to fraudulently transfer the home of retired art dealer Clifford Lambert. Niroula was arrested and charged with hiring two men to stab Lambert to death; he is still awaiting trial.

A few days later, Lum got a phone call from a number he didn't recognize.

"I pick up the phone and he says, 'Hey, it's me. It's Jay. I'm mailing you a check for $225,000. I will give you instructions on what to do with the money,'" Lum recalls. "I asked, 'Is this check coming from you?' He said, 'No, It will be coming from one of my people.'"

The name on the check was Tran's Escrow. A state records search shows that the firm was owned by Nga Ho Tran, a former title company employee from Morgan Hill.

"Nothing came up that looked unsavory or out of the ordinary in that case as far as Tran's Escrow company went," San Francisco police inspector Gregory Ovanessian says. Tran "has been very co-operative, and very forthcoming. I do know that Jay Shah has opened many escrows through her office, for a variety of properties. But that in and of itself doesn't mean anything's wrong."

While Tran's firm raised no red flags for Ovanessian, she is charged in a separate case with felony fraud, forgery, embezzlement, and money laundering in Alameda County, where she allegedly schemed to help an Oakland man take possession of his 93-year-old grandmother's house. The house was then used as collateral for allegedly fraudulent loans. Tran is one of six criminal defendants linked with those alleged frauds.

As in the Rincon Hill case, after the Oakland property was fraudulently transferred, a straw buyer took out a bank loan, the proceeds of which were divided among alleged coconspirators.

It turns out that deal was only one of many transactions involving Tran that have become the target of fraud allegations.

Last November, she and her husband, Quan Le, filed for bankruptcy in San Jose federal court. In January and February, several banks including JP Morgan Chase, Wells Fargo, and Wachovia Mortgage filed complaints in bankruptcy proceedings, alleging that she helped steal millions of dollars through mortgage fraud.

They accused her of organizing a series of so-called double-escrow frauds, in which buyers took out home mortgages on the same property nearly simultaneously, without either bank knowing that the property was burdened with nearly double its value in loans.

According to allegations made by Countrywide Bank in a Jan. 22 filing, Tran "aided and abetted a far-reaching mortgage loan fraud conspiracy in which buyers, sellers, and other co-conspirators, acting in concert, fraudulently obtained loans and other benefits from federally insured depository institutions."

According to other similar bank complaints, Tran helped orchestrate frauds worth at least $35 million. The complaints describe transactions conducted in 2006, when California's no-questions-asked mortgage-lending frenzy was nearing its peak.

Attorneys for the banks did not return calls requesting comment. Calls to Tran's home, her business and her husband's businesses, and to an attorney who until recently had been representing her were not returned.

One curious aspect of the district attorney's characterization of the Rincon Hill fraud is that there appears to be no obvious victim. Hwang endured some panicked months when she discovered her property was mysteriously in someone else's name. But her attorney eventually had the fraudulent deed expunged from city records, and Hwang was again officially the rightful owner.

So was this a victimless crime? Hardly. Somebody has to end up holding the bag on the fraudulent loan.

About The Author

Matt Smith


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