A Newport Coast man was resentenced Tuesday to five years behind bars and ordered to pay about $535,000 in restitution for a scheme to fraudulently obtain mortgage loans that went into default, causing more than $2.7 million in losses to the federal government and commercial lenders.
Lorenzo Espinoza, 46, pleaded guilty in 2006 in U.S. District Court in downtown Los Angeles to conspiracy to defraud the U.S. Department of Housing and Urban Development, bankruptcy fraud, money laundering and tax evasion. He was sentenced in 2010 to five years in federal prison.
Espinoza appealed, and the appellate panel ordered a new sentence after finding procedural error in U.S. District Judge Stephen V. Wilson's calculations, which were not tied to specific facts in the case and relied on the defendant's "extreme greed" to justify the prison term, the court determined.
At today's hearing, Wilson said his previous analysis had been "incomplete," and tied the new five-year sentence to Espinoza's position as an "organizer or supervisor" of the scheme, the length of the fraud and the financial loss to the government.
"Whether he was the top guy or second to the top, he organized and directed others," the judge said, adding that Espinoza "got the lion's share of the profits."
Espinoza, who has been in federal custody for three years, could be released in 16 months based on good behavior credit, officials said.
According to prosecutors, Espinoza admitted that from 1995 to 2001 he orchestrated a scheme to defraud HUD and several commercial lenders.
Espinoza had previously said that he was in the business of helping people buy homes. He told Wilson today that he had received letters from "happy homeowners."
Wilson responded that he found Espinoza to be "totally incredible and a total fraud," whose victims include his two small sons who sat with their heads bowed in the front row of the courtroom.
"You have earned your sentence," the judge said.
Court papers show Espinoza and his associate would purchase homes, then sell them to "straw buyers" who purported to be the actual buyers of the properties but did not provide down-payments or have the means to obtain a mortgage.
Espinoza admitted he supplied the down-payments for straw buyers and obtained bogus tax forms and paycheck stubs that were submitted with the loan applications, prosecutors said.
After the straw buyers bought the homes, they defaulted on the mortgages, leaving the lenders, including the Federal Housing Administration, with properties worth much less than the amount funded in the mortgages, according to the U.S. Attorney's Office.
In addition, Espinoza admitted in his plea agreement that he filed bankruptcy and failed to tell the United States Trustee that he owned a Rolex Daytona watch, 1990 and 1995 Ferraris and a 1989 Lamborghini. He also admitted that in late 2002, he laundered the proceeds of his bankruptcy fraud when he sold the Ferraris for $127,500, according to prosecutors.
Espinoza also pleaded guilty to willfully failing to pay income tax, admitting that he did not pay $199,053 due for the 1996 tax year.
Along with the prison term and restitution payable to HUD, Wilson ordered Espinoza to serve three years of supervised release after he leaves prison.
—City News Service.