A 38-year-old Danville man described as the manager of Discovery Sales has been arrested in Concord and charged with 17 counts of bank fraud and conspiracy to bank fraud, United States Attorney Melinda Haag and FBI Special Agent in Charge David Johnson announced Monday.
The accusations are the result of an investigation into the use of undisclosed incentives paid to home buyers at Leona Quarry, a Discovery Builders development in Oakland. That probe, which began in 2009, led to an FBI and Secret Service raid Feb. 18, 2010, of two Concord offices of Discovery Sales and its affiliates.
Indictments were unsealed Monday against Ayman Shahid, who “masterminded a scheme to cause banks to approve mortgage loans for unqualified buyers at the height of the financial crisis,” the U.S. Attorney’s Office said in a prepared statement.
If he is found guilty of all charges, Shahid could be sentenced to a maximum 30 years in prison and a fine of $1 million, authorities said.
In addition, they said, Shahid could be required to pay restitution for each of the 18 violations alleged in the indictment.
Shahid managed Discovery Sales, the sales arm of the affiliated residential construction companies Discovery Home Builders and Albert D. Seeno Construction Co., authorities said.
The Seeno family owns 527 acres of undeveloped land on Benicia’s north side that at one time was the site of a proposed business park.
Founded in 1938 by the late Albert Seeno and represented now by his sons, Tommy and Albert Jr., and his grandson, Albert III, the Seeno development and construction companies have specialized in building subdivisions of affordable homes.
Seeno Homes and Discovery Builders, both part of Albert Seeno Construction, are associated with building multiple subdivisions. Many are in the East Bay, but some have been built in Chico and Sacramento, as well.
According to the U.S. Attorney’s Office statement, “Shahid devised and managed a scheme to provide undisclosed incentives to unqualified home buyers, which allowed Discovery to continue selling houses during the financial crisis.”
The statement continues, “Shahid intentionally hid the scheme from appraisers and bank underwriters so that loans to unqualified buyers would be approved.”
The combined sale prices of the homes identified as part of the scheme was nearly $230 million, authorities said.
In addition, they said, loans valued at a total of $150 million went into either foreclosure or short-sale proceedings.
Nine people who have been charged as a result of the investigation were described by the statement as having played various roles in the conspiracy. Of these, seven have pleaded guilty, including Carey Hendrickson, of Martinez, who in March 2013 pleaded guilty to a single case of wire fraud in exchange for testifying against her employer.
Two months later, Jason Sterlino also pleaded guilty in federal court to bribing a mortgage broker to secure loans for home purchasers. He, too, agreed to cooperate with the FBI’s investigation.
Both were Shahid’s subordinates. Another, Jennifer Xiao, who also is known by the name Guo Xiu Xiao, was described Monday as a fugitive. She was arrested in 2012 and charged with one count of bank fraud.
The 2010 searches were made by FBI agents, agents of the Internal Revenue Service Criminal Investigations Division and Secret Service agents, who executed sealed warrants. At the time, the agencies declined to comment on the focus of the raids.
The developers’ offices were shuttered and sealed, but employees were allowed to return to work the next day.
Patti Hansen, public affairs specialist for the FBI, said Feb. 19, 2010 that the searches had wrapped up after about 90 minutes, but at the time would not say what evidence was being sought.
“We’ll examine what we took, and see what we have,” she said. No arrests were made during the searches, Hansen said, but she added, “The search warrants are justified, with probable cause.”
Because the volume of items taken from the two offices was so large, Hansen said, “it could take a long, long time” before the FBI decided its next steps. However, the bureau had no deadline for filing charges.
The case, one of those that have resulted after the November 2009 creation of the Financial Fraud Enforcement Task Force, is being prosecuted through the Assistant United States Attorneys in the Special Prosecutions Unit in San Francisco and Oakland, with the help of the FBI, the IRS Criminal Investigative Division and the Federal Housing Finance Agency’s Office of Inspector General.
The financial fraud task force is a partnership of 20 federal agencies, 94 U.S. attorneys’ offices, and state and local agencies.
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This just goes to confirm the gut feeling that most folks already had about the Seeno organization. In all likelihood, Ayman Shahid is probably just a whipping boy.
From what I read, the logic for inflating home values was because Albert Seeno & co. owed Wells Fargo about 2 billion in loans. With home prices falling who had the most to lose?
How would Mr Shahid benefit?
It seems the gains from “builder’s bail out” would go to the company. Has the ‘teflon Don’ found a patsy?
From the piece:That probe, which began in 2009, led to an FBI and Secret Service raid Feb. 18, 2010
This was four and half years ago and one person has been charged? Glad to see that the investigation proved to be very fruitful.
And: “Shahid devised and managed a scheme to provide undisclosed incentives to unqualified home buyers
I wonder if Shahid learned these tricks from Fannie Mae and Freddie Mac, as that is exactly what they were doing: encouraging loans to unqualified home buyers.
Correction: Nine people who have been charged as a result of the investigation were described by the statement as having played various roles in the conspiracy.
I see that it was actually nine people total have been arrested, so I will stand correct on the comment about “one”.
I will stand behind the statement, regarding the government actions regarding the encouragement of loans to unqualified people.
Beyond the fiction of Freddie and Fannie—
From the above post; “I wonder if Shahid learned these tricks from Fannie Mae and Freddie Mac, as that is exactly what they were doing: encouraging loans to unqualified home buyers.”
From the article below more truth-telling about the financial meltdown for the community to consider…
“As the FCIC staff reports demonstrate fairly conclusively, it was the shadow banking system’s unregulated private securitization of mortgages that caused the financial crisis, not affordable housing policies. The FCIC staff has done an excellent job of compiling the facts, and we encourage you to check out the FCIC’s comprehensive reports to date. In our view, below are their most persuasive arguments,”
(see graph)
Fannie and Freddie accounted for a fraction of the demand for private mortgage-backed securities issued between 1998 and 2007.
http://www.americanprogress.org/issues/economy/news/2010/12/21/8832/politics-most-blatant/
Even Barney Frank admitted it Will, why can’t you?
Barney Frank, admitted in 2010 that “it was a great mistake to push lower-income people into housing they couldn’t afford and couldn’t really handle once they had it.”
Your numbers are wrong and that hit piece is not accurate. The Congressional record shows it in the minority report that investigated the crisis.
Nice picture of OJ’s buddy, Bob Kardashian, TW.
This case bears no resemblance to the easy money loans of the early 2000’s. This case involves a much more serious mortgage fraud, commonly referred to as a “Builder Bailout” You can easily search the various articles in several publications for the details.
Thanks Guy.
I am sure that you are correct in that methodologies used differed from the Seeno people vs.. those used by the government and others which led to the market collapse. What drew my attention was the phrase: “unqualified home buyers”. That is problem number one.
DDL I think you got it. Did any lender. real estate rep or a broker take advantage of what was going on? Yes they did and woul;d not have had a criminal offence brought against them.. Guy did you in all your transaction tell the consumer that the value MAY GO DOWN and it will be A PROBLEM?. You may HAVE BUT YOU WOULD HAVE BEEN ALL ALONG ON THIS ISSUE. It has been promoted over and over again. Truth in lending in reallty is not a A NEW THING.. Do you think anyone in their right mind would have bought into what BARNEY was promoting. Did tou? . That was the problem andfthe real estate industry claimed no responsibility. Just how many transaction did you or your company do? That is the real question. Guy I am not questioning you integrety, but I am asking were you a part of it or did you just sit it out? That is something that I would like to hear from you. Another words Guy you can fully explain to the local residents that you were not part of that bubble.. Not in any way rersponsible for fiolks loosing their home, mortage company going out of business wigh a loss of jobs, bankruptcy, homeless fiolks all in an effert to be part of the American dream.. Guy I do not believe you were , but at the same time it would be nice if you explained your position and actions in this hey day.
Bob and DDL – You guys have veered off the subject of this report. The Seeno case is about concealing significant incentives and certain company officials buying multiple properties within the development at inflated values in order to defraud their lenders. This is not about liar loans.
As to whether I sat out the bubble – of course not, but I can honestly say that the company that I was involved with at the time did re-position in order to avoid the mess – My business model was and is about helping people make wise decisions about real estate finance.
I am thinking of buying a “Verona” home from Discovery/Seeno. I went to see their models, and they are almost 5,ooosqf for approx. $750K. Is that reasonable for this area of Brentwood? I have excellent credit, a clean record and can certainly afford this house. I want to remain clean and without worry, however!!
What is the status of the Seeno investigation? Have they gone legit now?
Thank you.