Assistant U.S. Attorneys Emily W. Allen (619) 546-9738 and Valerie Chu (619) 546-6750
NEWS RELEASE SUMMARY– February 8, 2016
SAN DIEGO – San Diego businessman Michael Nazarinia was sentenced today to 9 months in custody for his role in a fraudulent mortgage loan modification business that duped hundreds of struggling homeowners.
The business, known as “Haffar & Associates,” owned by figurehead attorney Mohamed Haffar, recruited new customers using telemarketers who lied to clients in order to induce more than 1,000 people to sign up to pay more than $3.5 million in total.
Haffar & Associates Scheme
Nazarinia’s co-conspirator Charles Rose managed a call center staffed with as many as 30 telemarketers, whose job was to recruit new clients. Rose trained the telemarketers, wrote telemarketing scripts for use on calls with potential clients, wrote form letters for the salespeople to send to potential clients, and recorded his own sales calls for telemarketers to emulate. Rose pleaded guilty in July, admitting that he and his business partners, including Nazarinia, trained telemarketers to make statements to potential clients that were false, such as the following:
- “Haffar & Associates has a 98% success rate.”
- “Haffar & Associates has never lost a home to foreclosure.”
- “We have had no complaints with the California state bar.”
- “When you sign up with Haffar & Associates you will be represented by a law firm, and an attorney will negotiate on your behalf.”
- “Once you sign up, you will be protected by the power of the law firm and the bank cannot foreclose on your home.”
- “You definitely qualify for a loan modification.”
- “Our team has settled countless loans with just about every lender, and we have built up connections with the banks and deal directly with many bank’s legal departments.”
- “We have direct phone numbers at banks to help you get your loan modification. We can go through the ‘back door’ at the bank to get your loan modified.”
- “We have had great success with your mortgage lender.”
- “Your lender will not deal with you because you don’t know how to deal with them.”
- “We conduct a forensic audit of the original loan documents in order to discover whether the lender . . . violated one of many predatory lending laws . . . . [Then] our lawyers can use these violations to either sue or threaten to sue the banks, therefore leveraging the lender into providing our client with a work out solution.”
- “We have a 100% money back guarantee.”
- “You will be paid a refund of your fee if Haffar & Associates is unsuccessful at obtaining a loan modification on your behalf, but no one has ever asked for a refund.”
In reality, Haffar & Associates did not have anything close to a 98% success rate in obtaining loan modifications for their clients. Similarly, Haffar & Associates did not have any special connections with banks or the legal departments of banks. The business also did not have sufficient numbers of staff or staff experienced enough to successfully complete loan modifications. And many dissatisfied customers never received refunds they requested. Although existing clients were not getting loan modifications, the telemarketers were encouraged to keep selling.
For his part, Nazarinia generated a fraudulent lease agreement, which was used to fraudulently delay eviction after Haffar & Associates failed to negotiate a modification for a client. Nazarinia also admitted to filing a false 2010 income tax return, omitting almost $100,000 in illegal income from Haffar & Associates. Among other things, Nazarinia supervised Haffar & Associates “case managers,” who submitted loan modification applications and negotiated with the banks on behalf of clients. Despite the representations made to clients, attorney Haffar did not directly supervise Nazarinia’s case managers, and instead, Nazarinia and the case managers provided legal services to clients without Haffar’s input or direction. Haffar rarely reviewed the clients’ files and almost never provided direction to the case managers. According to Rose’s plea agreement, Haffar, Nazarinia, and Rose all understood that Haffar’s fees were his compensation for the risk he took in allowing Nazarinia and Rose to use his name, bar license, and law firm, and not for any actual work Haffar did on loan modification cases.
After Haffar & Associates stopped doing new business, Rose and Nazarinia started a new company, called “REST Report Matters,” selling a product they claimed would facilitate mortgage lenders’ review of homeowners applications for loan modifications. Rose admitted as part of his guilty plea that he made false representations to potential clients in order to induce them to sign up and pay their fees. They told homeowners that the product was the only available tool that could definitely tell homeowners the modification terms their lenders would provide.
Federal Law Enforcement Condemns Loan Modification Schemers
United States Attorney Laura E. Duffy reiterated her belief that, “The real tragedy of this case is that the defendants chose to profit from the suffering of others. In difficult economic times, they exploited a particularly vulnerable segment of our population, homeowners who were desperately trying to make ends meet and stay in their homes.”
“Fraudulent mortgage fraud schemes affect consumers at the most basic level, jeopardizing their ability to retain ownership of their homes,” said Robert Wemyss, Inspector in Charge of the U.S. Postal Inspection Service – Los Angeles Division. "The U.S. Postal Inspection Service will continue to investigate these crimes to protect consumers and our nation's mail system from being used for illegal or dangerous purposes.”
“Using the guise of a law office and a legal team, the defendants preyed upon financially desperate homeowners struggling to keep a roof over their head,” stated Erick Martinez, Special Agent in Charge of IRS Criminal. “As today’s sentencing shows, those who find ways to profit by taking advantage of distressed homeowners and fail to report the income will be brought to justice.”
“Michael Nazarinia preyed on others’ misfortune to line his own pockets,” said Federal Housing Finance Agency – Office of Inspector General Special Agent in Charge Leslie DeMarco. “The sentence he received today provides justice and will hopefully act as a deterrent to anyone else who might be tempted to engage in similar conduct.”
Rose is scheduled to be sentenced on April 11, 2016, also by Judge Houston. Attorney Haffar has also pleaded guilty to tax charges relating to the venture, and admitted that he had no existing knowledge or experience in loan modifications when he started the business in 2008. Haffar stipulated to his disbarment in November 2011 for his conduct. He was formally disbarred in June 2012, and obligated to pay over $192,000 to reimburse former Haffar & Associates clients. Haffar pleaded guilty to the federal criminal charge in August 2014, and was sentenced to three months in prison in January 2015.
Another participant who worked for Rose’s telemarketing company, Stacy Tuers, pled guilty on tax charges in May 2015. As part of Tuers’s guilty plea, he admitted that he knew the telemarketers were making false statements to potential clients, but continued to sell Haffar & Associates loan modification services. Tuers is scheduled to be sentenced on the tax offense on March 10, 2016.
DEFENDANT
Michael Nazarinia, 15CR2718-JAH Age: 41 San Diego, CA
CHARGES
Mail fraud, in violation of 18 U.S.C. § 1341
Maximum Penalties: 20 years’ imprisonment, $250,000 fine or twice the pecuniary loss or gain, $100 special assessment, restitution.
Subscribing to a false tax return, in violation of 26 U.S.C. § 7206(1)
Maximum Penalties: 3 years’ imprisonment, $250,000 fine, $100 special assessment, restitution.
DEFENDANTS PREVIOUSLY CHARGED:
Charles Rose, 15CR1786-JAH Age: 32 San Diego, CA
Mohamed Haffar, 14CR2251-JAH Age: 36 San Diego, CA
Stacy Tuers, 15CR1342-JAH Age: 54 San Diego, CA
AGENCIES
United States Postal Inspection Service
Internal Revenue Service – Criminal Investigation
Federal Housing Finance Agency – Office of Inspector General