A federal grand jury in San Jose indicted Muhammad Safadi, Scott Safadi, and Raquel Ramirez with bank fraud, conspiracy to commit bank fraud and making false statements to financial institutions, United States Attorney Melinda Haag announced this week.
The three were indicted June 13 and the indictments were unsealed Tuesday following the arrest of Muhammad Safadi and Scott Safadi.
The indictment alleges that the three solicited primarily low-income home buyers to purchase single-family residences in the Rancho Amistoso subdivision that were priced in excess of $650,000.
According to the indictment, Muhammad Safadi, of Los Gatos, constructed 14 single-family residences in the Rancho Amistoso LLC subdivision in Salinas.
Safadi built Rancho Amistoso through his construction company, Focus Construction, Inc.
Scott Safadi, 31, Muhammad Safadi’s nephew, of Saratoga, was a partner in Focus Construction and oversaw the sales and marketing of the Rancho Amistoso homes.
Ramirez, 45, of Fremont, acted as the broker of record for the Rancho Amistoso properties on behalf of the prospective buyers, according to Haag. She was the owner of the realty company Mission Homes Realty, and was a licensed California real estate and mortgage broker.
The defendants knew that, for 12 of the Rancho Amistoso properties, the borrowers they solicited had insufficient incomes and assets to qualify for the mortgages needed to purchase the properties, Haag said in a press release.
They're also alleged to have falsified the loan documents submitted to the financial institutions to obtain the financing for the Rancho Amistoso properties. All of the loan borrowers later defaulted on their payments and the properties subsequently went into foreclosure proceedings, the release added.
On July 31, 2008, the first of the Rancho Amistoso properties in default status was sold through the foreclosure process. The 2006 sale price of the property was $725,000; the re-sale price of the property was $288,000. On Aug. 28, 2009, the 12th of the Rancho Amistoso properties in default status was sold through the foreclosure process. The 2006 sale price of that property was $725,000; the re-sale price was $212,000.
According to the indictment, the Safadis and Ramirez caused a post-foreclosure loss amount to the financial institutions of approximately $5.5 million.
The indictment also alleges that the Safadis obtained proceeds from the scheme to defraud in an amount of $4.5 million and Ramirez obtained proceeds from the scheme to defraud in an amount of $230,029.75.
Muhammad Safadi and Scott Safadi were arrested Tuesday morning and made their initial appearances in federal court in San Jose.
Bail was set at $250,000 for Muhammad Safadi, and $150,000 for Scott Safadi. Both men were placed on house arrest with a curfew. The defendants’ next scheduled court appearance is 9:30 a.m., July 10, before Judge Paul S. Grewal for further bail proceedings. Ramirez is currently out of custody.
The maximum statutory penalty for each count of bank fraud, and conspiracy to commit bank fraud, is 30 years in prison and a fine of $1 million plus restitution. The maximum statutory penalty for each count of making a false statement to a financial institution, is also 30 years in prison and a fine of $1 million plus restitution.
Assistant U.S. Attorney Daniel Kaleba is prosecuting the case with the assistance of Kamille Singh. The prosecution is the result of an Internal Revenue Service investigation that began several years ago.