Mike Heine/The Week
(Published Oct. 1, 2007, 3:44 p.m.)
A third suspect in Walworth County's largest mortgage fraud investigation admitted swindling six mortgage lending companies of more than $2.9 million by participating in 13 bogus sales of 12 local properties.
Martin Valadez, 31, of Delavan, signed a federal plea agreement Sept. 11, admitting he secured straw buyers and the false identities they used to purchase homes at inflated values that they had no intention of living in.
He was charged with a single count of wire fraud and will have a plea hearing Oct. 12. The maximum penalty is up to 20 years in prison and fines up to $250,000.
Valadez participated in the scheme with his father, Jose Valadez, 53, of Delavan and James Lytle, 33, of Lake Geneva, both of whom have signed plea agreements to wire fraud charges. Others may have participated in the scheme and further charges are possible, Assistant United States Attorney Carol Kraft said.
"He was a major player in the fraud scheme," Kraft said of Martin Valadez, who was recently released from prison for a second cocaine delivery conviction.
Martin Valadez was in custody for violating his probation because of his admitted involvement in the scam. He admitted last year to using fraudulent information in four mortgage acquisitions, according to circuit court documents.
Martin Valadez has been cooperative with the investigation, Kraft said.
His attorney, Robert C. Howard, declined to comment.
With the straw buyers by his side and false identities in hand, Martin sometimes attended the property closings with Lytle. He also posed as a translator for straw buyers who pretended not to speak English, according to his plea.
Martin Valadez and Lytle, who once worked together at a Lake Geneva brokerage company, were paid by the property sellers, some of whom also took part in the scheme. Valadez and Lytle, in turn, compensated the straw buyers and others for their participation, according to court documents.
As the mortgage broker, Lytle made between $3,000 and $20,000 per sale, which was shared with other scheme participants, according to his plea. Martin's plea did not say what he made from the scheme, but the two were essentially the leading partners, Kraft said.
The lending companies lost out because most of the properties went into foreclosure and were sold at a loss shortly thereafter, according to the plea.
Lytle allegedly orchestrated a half-dozen more fraudulent home sales without Martin Valadez, bringing total losses in the scheme to more than $4 million for eight lending companies, according to his plea.
Jose Valadez played a minor role by posing as a named buyer during a home sale. His business, Valadez Furniture in Delavan, also allegedly provided employment and account history of several homebuyers, whose names were used in fraudulent real estate transactions, according to a federal search warrant affidavit.
The scheme also used falsified credit and employment histories, appraisal documents and loan documents, according to court documents.
Of the homes Martin Valadez participated in selling, six were in Delavan, four were in Lake Geneva, with others in Williams Bay and Whitewater. One home was sold twice, according to court documents. Sale prices ranged from $122,900 to $330,000.
Some of the properties appeared to be flipped. One property, purchased in August 2004 for $209,000, was sold in the scheme three months later for $330,000. It went into foreclosure in January 2006, according to documents filed with the Walworth County Register of Deeds.
Another, bought in June 2004 for $159,500, sold in the scheme on Dec. 6, 2004, for $242,000. That property also went into foreclosure in January 2006.
The case has been ongoing for more than a year.
On Feb. 9, 2006, the FBI and Walworth County sheriff's deputies searched seven locations looking for evidence tied to the scheme, including:
--- Lytle's home at W3645 Lortin Place, Lake Geneva.
--- The then-home of Martin Valadez, 905 Phoenix St., Delavan.
--- Lakeview Financial Services, 728 Wisconsin St., Lake Geneva.
--- Titan Real Estate, 400 Broad St., Lake Geneva.
--- The home office of James Begg III, an appraiser for Alexander and Associates, at 723 Aweogon Road, Fontana.
--- The home office of Tamara Knutson, an appraiser for Knutson Appraisal Service, at 2933 Elm. St., East Troy.
--- Valadez Furniture, 123 Park Place, Delavan.
The investigation is ongoing, but at this point the government doesn't have any plans to bring charges against Begg or Knutson, Kraft said.
James Lytle's scheduled plea hearing is set for Oct. 2. Jose Valadez has a status conference on Oct. 12, when a plea hearing will likely be scheduled.
If all plead guilty, as expected with the signed pleas, sentencing hearings would be scheduled months down the road.
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