The Strike Force That Never Struck 

Despite pledging to crack down on foreclosure scam artists three years ago, Attorney General Kamala Harris has allowed an industry of fraud to flourish.

Page 5 of 6

Like mushrooms, they just keep popping up.

Since taking office in January 2011, Attorney General Kamala Harris has met repeatedly with homeowners facing foreclosure — and her office even features photos of these meetings on its website. But it's unclear what steps she has taken to follow through on the substantiation letters sent in 2009 by her predecessor. Representatives of Harris' office did not respond to multiple phone calls and emails requesting comment for this report.

It's also unclear why Harris' Office has filed so few lawsuits against foreclosure consultants in recent years. Despite establishing the Mortgage Fraud Strike Force and setting a high-profile agenda to crack down on foreclosure consultant fraud, Harris has filed fewer lawsuits than the attorneys general of smaller states with fewer victims and far fewer operations based in their jurisdictions. Harris has also filed fewer lawsuits against foreclosure consultants than many county district attorneys offices, despite the fact that there have been many large, sophisticated scam operations whose fraudulent crimes have crossed jurisdictional boundaries — cases that were ripe for the state's top prosecutor.

The Mortgage Fraud Strike Force within the DOJ has managed to file only ten lawsuits against foreclosure consultant scams since it was established three years ago, despite its seeming wealth of resources compared to county district attorneys' offices. When Harris launched the Mortgage Fraud Strike Force, Michael Troncoso, a senior attorney in the DOJ, told the Bay Citizen news organization that it "will bring overwhelming focus and priority to [mortgage fraud] cases."

The DOJ's Mortgage Fraud Strike Force's employee roster, obtained via the California Public Records Act, currently lists 8 investigators and 18 attorneys among its total of 28 staff members. Attorneys on the DOJ's Mortgage Fraud Strike Force actually outnumber the combined attorneys in California's four largest district attorneys' offices who focus on real estate fraud: Los Angeles, San Diego, Orange, and Riverside counties.

The ten lawsuits filed against foreclosure consultants by Harris' strike force targeted foreclosure consultants operating in six counties. The largest amount of restitution a foreclosure consultant was ordered to pay was $475,000 by Joana Sosa, a Los Angeles grifter who extracted $950 up-front fees from numerous homeowners for whom she promised to obtain loan modifications. That was followed by Rudy Calderon, a Fresno area scam artist who defrauded multiple homeowners with a similar scam while even convincing a few to deed their property over to him. Calderon was ordered to pay $300,000 and was sentenced to four years and eight months in prison.

Some of the cases for which Harris's office has claimed credit, however, were actually spearheaded by other law enforcement agencies. For example, in response to a public records request, the AG's office listed defendant Alan David Tikal as being among the cases brought by the Mortgage Fraud Strike Force. Tikal, who called himself a "private, registered banker," ran a multi-state foreclosure rescue scam through an entity called the "Kicking Ass and Taking Names," KATN Trust, according to court documents. Tikal victimized more than 1,000 homeowners, mostly in California, stealing $3.1 million.

When Tikal was arrested in 2012, Harris said, "I am thankful for the fine work of the California Mortgage Fraud Strike Force and of our US Department of Justice colleagues in cracking this case." But Harris's office did not lead the investigation against Tikal and his associates; rather, the probe was led by the Special Inspector General for the federal government's Troubled Asset Relief Program and the US Attorney General, and they filed their case in federal court. The California DOJ's involvement was minimal.

Moreover, the biggest case of foreclosure rescue fraud investigated and prosecuted by the California Attorney General's office predates Harris' administration. Brown initiated an investigation of nine Los Angeles men who were running a loan modification scam out of "a Southern California boiler room, tricked out in high-roller style with a roulette wheel and other casino equipment," according to a press release from May 2010. Working through companies called Mason Capital Group, LLC and Gretchen Fox and Associates, the men stole approximately $2.3 million from hundreds of victims in a sophisticated telemarketing operation. The investigation, arrests, and lawsuit filed by the AG's office predated Harris' Mortgage Fraud Strike Force.

Yet despite the lack of prosecutions by Harris' team of eighteen lawyers and eight investigators, complaints against foreclosure consultants continue to pour into her office. The Attorney General's office received 85 complaints alleging foreclosure rescue scams in September 2013, 92 more complaints in October, and 58 in November, records show. In January, Californians reported another 67 complaints about foreclosure rescue scams to the Attorney General's Office.

In fact, the volume and complexity of California's foreclosure rescue scams have become an immense and persistent problem for other states as well. And attorneys general in those states have been far more aggressive in prosecuting foreclosure scammers than Harris and her strike force — including targeting fraudsters in her jurisdiction.

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