Seven people accused of being involved in a massive real estate fraud scheme that bilked victims - including some in Tucson - out of $140 million were charged Thursday with numerous felonies in Riverside County, Calif.
District Attorney Rod Pacheco said six defendants were in a county jail Thursday afternoon. John Hall, a spokesman for the district attorney, said the seventh was arrested Thursday evening at a fast-food restaurant in Torrance.
Pacheco said the investigation was conducted with the U.S. attorney, FBI, IRS and U.S. Postal Service. He said the defendants carried out similar schemes in Arizona and Northern California using several company names.
In Tucson, a scheme was peddled by at least three men who were charged in the California case. They used seminars shaded with Christian references, getting the pastor of one Tucson church to extol the virtues of investing with a company named Pacific Wealth LLC, according to a federal civil complaint.
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Charges of grand theft, securities fraud, elder abuse and identity theft were filed against the seven in Riverside County Superior Court.
Charged were James Benjamin Duncan, 38, of La Cresta, 249 counts; Hendrix Moreno Montecastro, 37, of Murrieta, 249 counts; Helen Moreno Pedrino, 57, of Yucaipa, 207 counts; Maurice McLeod, 37, of Murrieta, 249 counts; Charlie Sung Muk Choi, 34, of San Diego, 249 counts; Cindi Gayle Kelly, 33, of San Diego, 236 counts; and Thuan Nhan Du, 33, of San Diego, 211 counts.
In February 2008, Securities and Exchange Commission officials charged Duncan, Montecastro and McLeod with orchestrating a massive scheme that bilked hundreds of people, including Davis-Monthan Air Force Base personnel and other Tucsonans. The SEC complaint alleged the three sold the promise of riches to military personnel and church members through real estate deals.
More than 125 Tucsonans invested in Pacific Wealth, with some saying they lost more than $400,000, according to a separate lawsuit filed in California.
SEC officials said last year the business operation in Tucson was nothing more than a Ponzi scheme.
The investors included about a dozen D-M airmen and several members of the Christian Faith Center, 4108 E. North St.
In a telephone interview Thursday, one of the alleged California victims expressed delight that charges were finally filed.
"Yes, yes," said Anna Richter, who moved to Houston after being coaxed into buying three Murrieta homes and later losing them. "That's where they should have been for the last three years. I can't even describe how happy I am to finally see some movement."
Murrieta attorney Rich Ackerman, who represents 85 people who lost homes and money, including Richter, said, "It's good to see that these ravenous animals are being caged."
But Ackerman said his clients weren't likely to be paid back all the money they lost.
Even so, Pacheco vowed to pursue restitution for the victims, who are concentrated in the county's southwest corner.
"We're going to be very aggressive in looking for that," he said.
Also in connection with the case, plea agreements on federal charges were filed in U.S. District Court in Los Angeles, said U.S. Attorney George S. Cardona.
Cardona said Christopher J. Oetting, 47, of Palm Desert, pleaded guilty to money laundering and four counts of filing false tax returns. Linda Brooks 54, of Murrieta and Steven Kayden, 51, of Cathedral City, each pleaded guilty to a single count of conspiracy to commit mortgage fraud.
Pacheco said losses associated with the elaborate scheme totaled $124.5 million from mortgage fraud and $17 million from the sale of fraudulent securities.
The defendants are alleged to have collected millions of dollars by persuading people to refinance homes, investing the equity they were realizing from the housing boom into the purchase of new homes and securities.
They would say, 'You know what? We're going to make your payments for you,' " Pacheco said, after the news conference.
Pacheco said the defendants enticed victims to give money by working through circles of friends among churches, nurses and members of the military.
In southwest Riverside County, the scheme was particularly prevalent in churches, Ackerman said..
In a prepared statement, Keith Bolcar, acting assistant director in charge of the FBI field office in Los Angeles, said, "The defendants in this case convinced investors to refinance their homes and hand over the equity in order to purchase new homes, using the same investors as straw buyers by fabricating assets to inflate the victims' credit profile."
As a result, Pacheco said, families who already had homes agreed to buy a total of 249 other homes throughout the county.
Pacheco said 201 homes eventually fell into foreclosure, after the defendants abruptly stopped making house payments on behalf of the eventual victims in summer 2006, which triggered a series of lawsuits in early 2007.
"They damaged neighborhoods and contributed significantly to the collapse of our real estate market," he said, noting that in some areas as many as five homes on the same block were foreclosed upon.
In setting the stage for the avalanche of foreclosures, Pacheco said the defendants created several false companies such as Stonewood Investments and Pacific Wealth Management, advertising a quick return of up to 19 percent on investments.
The scheme was orchestrated, he said, by Duncan, who billed himself "James the Cash King" in Internet videos. Accused of preying on older people elsewhere, Duncan previously had been ordered to stop selling securities in three states. "He has been kicked out of Iowa, Washington and Wisconsin," Pacheco said.
Cardona said Duncan was able to take advantage of people because home values were exploding and people thought they would continue to climb.
