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In re Search of 32900 Five Mile Road
United States District Court, E.D. Michigan, Southern Division
June 15, 2015
In re Search of 32900 Five Mile Road, Livonia, MI 48154, and In re Search of 102 E. Grand River Avenue, Brighton, MI 48116 In re Real Properties 36695 Clarita, Livonia, MI, 17225 Lennane, Redford, MI, 9977 Hillcrest, Livonia, MI, 1188 Peavy Road, Howell, MI, 40760 Deer Pines Drive, Canton, MI, and 3937 Orchard Drive, Highland, MI
OPINION AND ORDER DENYING MOVANT'S MOTION FOR RETURN OF PROPERTY; GRANTING GOVERNMENT'S MOTION TO DISMISS; AND GRANTING GOVERNMENT'S MOTION FOR A RESTRAINING ORDER
NANCY G. EDMUNDS, District Judge.
This matter comes before the Court on three motions: (1) Movants William Elias, Vicky Elias, Michigan Property Ventures LLC, and Michigan Real Estate Ventures LLC's motion for return of property under Federal Rule of Criminal Procedure 41(g); the Government's motion to dismiss Movant's Rule 41(g) motion; and (3) the Government's motion for a restraining order. The Court held a hearing on these motions on June 10, 2015. For the reasons stated below, the Court DENIES Movant's motion for return of property, GRANTS the Government's motion to dismiss, and GRANTS the Government's motion for a restraining order. The restraining order will issue in a separate document.
All three of the motions in this case arise out of the same factual circumstances. In January 2012, the FBI opened an investigation into Movant William Elias and others in connection with a scheme to defraud federally insured financial institutions through a short sale fraud scheme, also known as a "buy and bail." According to the Government:
The scheme involved short sale transactions of real property which included a payment to a purported law firm by the name of Moody, Keegan, Nelson and Associates (sometimes referred to herein as "MKNA"); however, no such law firm was involved in the transaction and the payments to MKNA were obtained by fraud. The scheme can be summarized as follows:
1) Elias advertised to homeowners whose mortgages were underwater that Elias "has the ability [to] sell homes that no other real estate company can." In response to these advertisements, the homeowners would come into one of Elias's office locations seeking short sale assistance. Most homeowners included in the scheme were not delinquent in their existing mortgages at the time they contacted Elias for short sale assistance.
2) During the homeowners' visit to Elias Realty, Elias or one of his employees would advise the homeowners to purchase a new home prior to completing the short sale transaction. Elias or one of his employees would then direct the homeowners to apply for a residential loan to buy a new house through Gold Star Mortgage Financial Group, which was housed in the same building as Elias Realty and was affiliated with Elias Financial Group. The homeowners had to have satisfactory income and credit history to be eligible for approval for the Federal Housing Administration ("FHA") insured home loan.
3) The FHA mortgage insurance program is administered by the U.S. Department of Housing and Urban Development ("HUD"). FHA insured loans are more accessible to borrowers because they require smaller down payments than conventional loans. The debt-to-loan ratio requirement of the FHA-insured loan is also less strict than required by conventional lenders. These factors allowed the homeowners to qualify for the FHA-insured home loans while having an existing mortgage
4) On the paperwork to buy these second houses, Elias and his employees would intentionally make two false representations: (a) that the existing homes were worth substantially more than their actual market value; and (b) that the homeowners intended to keep their existing homes and rent them out. In reality, the homes were worth significantly less than stated, and the homeowners had no intention of renting their homes; rather, they intended to sell them via short sale.
5) The purchase of the second home with the FHA-insured mortgage would be completed prior to the short sale because the homeowners' credit would be adversely affected by the intended short sale, which would inhibit them from being approved for a new home loan.
6) After securing the FHA-insured loans and purchasing the new homes, the homeowners were in a position where they owed two mortgage payments, thus creating a financial strain on the homeowners. At this point, Elias would assist the homeowners with unloading the original houses in short sales, hence the phrase, "buy and bail" scheme.
Elias and his companies received the following compensation as a result of the above scheme: an upfront fee, real estate commission for both the purchase and sale of the homeowner's properties, and a fee to the purported law firm of Moody, Keegan, Nelson and Associates.
(Gov.'s Mot. to Dismiss at 1-3.). On February 26, 2013, Magistrate Judge Whalen issued a search warrant for two of Movant William Elias's business locations for evidence showing violations of the federal mail fraud, wire fraud, and bank fraud statutes (18 U.S.C. §§ 1341, 1343, 1344). Through its investigation, the Government learned that proceeds from the scheme were eventually used to purchase six real properties. Pursuant to Mich. Comp. Laws § 565.451a, the Government recorded Affidavits of Interest ("Affidavits") on the properties, indicating that it had knowledge of facts that supported their potential forfeiture. As an example, the text of the Affidavit for the "Peavy Property" reads as follows:
AFFIDAVIT RELATING TO MATTER AFFECTING TITLE TO REALTY
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NOW COMES GJON JUNCAJ, an Assistant United States Attorney, for the Eastern District of Michigan, who being duly ...