Feds Charge 400 in Mortgage Fraud Operation, 2 Hedge Fund Managers Indicted

The Justice Department and the FBI announced Thursday what is called a “national takedown” of mortgage fraud schemes resulting from an investigation that lasted more than three months. More than 400 people were charged with crimes and 60 arrests were made Wednesday, according to the Feds. The arrests included two former Bear Stearns hedge fund managers.

The U.S. Department of Justice and the Federal Bureau of investigation said in a joint press release that their joint Operation Malicious Mortgage began in early March and “resulted in 144 mortgage fraud cases in which 406 defendants were charged.” The FBI estimates that approximately $1 billion in losses were inflicted by the mortgage fraud schemes employed in these cases.

Inter-departmental cooperation was the theme of the investigation, as the Feds said Operation Malicious Mortgage was a joint collaborative effort of the FBI, U.S. Postal Inspection Service, IRS-Criminal Investigation Division, U.S. Immigration and Customs Enforcement, U.S. Secret Service, U.S. Trustee Program, Department of Housing and Urban Development Office of the Inspector General, Department of Veterans Affairs Office of the Inspector General, and Federal Deposit Insurance Corporation Office of the Inspector General.

The Justice Department also announced that it had indicted two former Bear Stearns hedge-fund managers on criminal charges related to securities sales in the subprime-mortgage market. The fund managers, Ralph Cioffi and Mathew Tannin, were charged in a nine-count indictment Thursday alleging wire fraud, conspiracy and securities fraud.

"Mortgage fraud and related securities fraud pose a significant threat to our economy, to the stability of our nation’s housing market and to the peace of mind of millions of American homeowners," said Deputy Attorney General Mark R. Filip in a press release. "Operation Malicious Mortgage and our other mortgage-related enforcement actions demonstrate the Justice Department’s commitment and determination to combat these criminal schemes, hold their perpetrators accountable and help restore stability and confidence in our housing and credit markets."