TAMPA — Sang-Min Kim, a tattoo parlor owner who made a fortune flipping homes at the height of the real estate boom, was indicted by federal officials on Wednesday and charged with money laundering and conspiracy to commit wire, mail and bank fraud.
A six-page indictment by the U.S. Attorney's Office accused Kim of operating a far-reaching scam that involved numerous buyers, sellers, lawyers, banks and real estate professionals. The multimillion dollar scam was first revealed by the St. Petersburg Times in 2008 as an example of how mortgage fraud contributed to the Tampa Bay area's housing collapse.
The indictment said Kim flipped about 100 homes between January 2005 and October 2008. Of those transactions, 80 involved fraud that cost lenders about $6.4 million, the indictment stated.
"It's one of the biggest and one of the more significant mortgage fraud cases we've done in the last year," said Steve Cole, a spokesman for the U.S. attorney for the Middle District of Florida. "There's a conspiracy there, so we're not done."
Kim, 36, who goes by the nickname "Sonny," agreed to plead guilty to both counts at a hearing that's scheduled for June 29 before U.S. Magistrate Judge Elizabeth A. Jenkins. Though he faces a maximum sentence of 50 years in prison and fines of $750,000, Kim will most likely be given a lighter sentence, in part because of his guilty plea and his cooperation in helping authorities investigate and prosecute others — against whom he might testify.
Kim is out on release until the hearing and couldn't be reached. His attorney, Richard Escobar, declined comment.
"It's too early in the process," Escobar said.
It was the second major mortgage fraud case announced this week by the U.S. attorney for the Middle District, which covers a region that includes Tampa, Orlando, Jacksonville and Fort Myers. On Monday, federal officials arrested Joseph Daniele on charges that he participated in a mortgage fraud scam between 2004 and 2008.
"When we started learning the extent of the fraud, federal prosecutors weren't ready for it," said Richard Hagar, a property fraud expert in Seattle who reviewed the Kim indictment for the Times. "This is another indication that's not the case anymore. They are now reacting to it."
Mortgage fraud cases typically take two years to investigate, so more prosecutions should be expected in the coming months, Hagar said.
"The states and FBI are starting to train a lot of people for this crime," he said. "You are going to see an acceleration in the number of mortgage cases filed."
In his agreement with federal officials, Kim admitted to a long list of infractions that relied on the cooperation of real estate insiders and professionals.
Kim bribed a banker to seal deals. He had a real estate agent create false W-2 forms to inflate a prospective borrower's income to qualify for a loan. Mortgage brokers falsified loan applications for buyers whom he then paid off.
Kim paid title agents extra commissions for recommending files for closing. He hired appraisers he knew would "come in higher on home values," thereby fetching higher loan amounts that were never paid back.
As the Times story explained in 2008, that scam left a trail of foreclosures through some of Tampa's most impoverished neighborhoods. The deals were financed by the bad mortgages approved or assigned by Wachovia, Washington Mutual Bank, Bank of America, National City Bank, Lehman Bros., Fannie Mae, Freddie Mac and Wells Fargo — the same banks that either went bust or were salvaged only by merging with other banks or by receiving billions in a taxpayer bailout.
The indictment and plea agreement state that Kim was able to do it all by following a tried and true scam that's commonly called "the straw buyer." It goes like this:
• Kim bought a house that had been identified by a co-conspirator as being easy to purchase for a cheap price. Often these homes were in disrepair.
• Frequently, the co-conspirator who found the house for Kim to purchase would then buy the house from Kim. At closing, this buyer would use money Kim loaned to him or her to make the down payment. The down payment would give the lender the impression the buyer had the means to pay back the loan, which they didn't. The lender never knew that Kim and the co-conspirator were in cahoots.
• After receiving the bank loan, Kim would pay the buyer a small sum for their cooperation in the scam. "(Kim) knew it was wrong to provide funds to the buyers for down payments and to provide the buyers with a financial incentive to purchase the property in the first place," the plea agreement states.
• The people who bought from Kim falsified claims on loan documents and never intended to live in the house or pay off the loans. The homes would then get foreclosed on, but Kim and the buyer had already been paid.
The scam corrodes the entire premise of buying a home. The straw buyers paid off by Kim — and enabled by a raft of real estate insiders — borrowed millions not because they wanted to live in the homes they were buying. Instead, they were "motivated by the fact that they were actually being paid to assume the role of 'purchaser,' " the plea agreement states.
Hagar said Kim represents a promising lead for investigators. He said even though the indictment doesn't name other individuals, it explicitly describes those who played roles in the wider scheme.
"The $6 million they mention in the indictment is chump change to what this network represents," Hagar said. "This is the way (federal officials) work a case. They'll get the cooperation of someone like Kim and work their way up. This is going to be much larger."
Michael Van Sickler can be reached at (727) 893-8037 or firstname.lastname@example.org.