larKobay Financial Corp., Nationwide Home Lending and Emerald City Escrowgest mortgage-fraud conspiracy in state history

Federal agents say they have dismantled the largest mortgage-fraud conspiracy in state history by indicting seven people on charges they bilked banks and other financial institutions out of $48 million, pocketing more than $9 million to fund lavish lifestyles that included matching Lamborghini sports cars.A grand jury issued a 40-count indictment naming two Bellevue mortgage brokers, an Eastside escrow company and an Issaquah real-estate agent in a scheme involving the repeated purchase and resale of Eastside and Seattle-area homes using a succession of paid "straw buyers" or other unqualified borrowers to obtain ever-larger loans they could never pay back, then siphoning money off escrow.In one instance, according to U.S. Attorney Jeff Sullivan, a house cleaner who made no more than $20,000 a year qualified for a $1.2 million loan for a house in Medina because her application said she made $45,000 a month — which was news to her when asked by federal agents, according to court documents.Sullivan said the case was complex and ongoing, and that the amount of the loss will likely grow, and possibly the number of defendants.As the indictments were unsealed Thursday, more than 50 federal agents executed search warrants at the offices of Kobay Financial Corp., Nationwide Home Lending and Emerald City Escrow, which has been at the heart of the yearlong investigation, according to Inspector Robert Bethel, who runs the Seattle Division of the U.S. Postal Inspection Service. Agents also searched the homes of the defendants and several safe-deposit boxes.
Those charged, The seven people charged include Vladislav Baydovskiy, 31, and Victor Kobzar, 32, the co-founders of Kobay; Alla Sobol, 28, the owner of Nationwide Home Lending, and her husband, David Sobol, 40, an Issaquah real-estate agent and co-founder of Emerald City Escrow; and Donata Baydovskiy, 28, of Bellevue, Vladislav's wife and David Sobol's partner at Emerald City.

Two others indicted are Camie Byron, 32, a Federal Way mortgage broker and former employee of Kobay and Nationwide; and Sandra Thorpe, 55, a Shoreline accountant.

Thirty-four of the charges, including conspiracy, mail fraud, wire fraud and filing false loan documents, each carry a penalty of up to 30 years in prison and a fine of up to $1 million. The other six financial-transaction charges carry penalties of up to 20 years and fines of up to $500,000.Kobzar, the Sobols and Byron appeared Thursday afternoon before U.S. Magistrate Judge Brian Tsuchida in Seattle. Tsuchida released Byron on her own recognizance and ordered the others detained pending hearings.The Sobols and Byron pleaded not guilty to the charges. Kobzar postponed his plea until he could review the indictment.
Thorpe is named in a single count and is cooperating with authorities, court documents show. She is accused of falsifying income statements and employee-verification letters for loan applicants.Sullivan, flanked by officials from the Seattle FBI, Internal Revenue Service and Postal Inspection Service, said the scheme was sophisticated and that prosecutors were forced to move after one of the victim lenders, ING Bank, filed a civil lawsuit against several of the defendants last month.

In its suit, ING Bank, the nation's second-largest thrift, alleged Nationwide Home Lending, Emerald City Escrow and 10 couples conducted a criminal conspiracy to defraud the bank of at least $6 million through falsified mortgages. (Nationwide Home Lending is not affiliated with Nationwide Lending Corp. or Nationwide Mutual Insurance, large out-of-state corporations.)"

We were concerned they might start moving assets and making things harder," Sullivan said."This is the tip of the iceberg when it comes to potential mortgage-fraud investigations in Seattle," said David Gomez, the assistant special agent in charge of the Seattle FBI office.How it worked,The search warrants say federal agents looked at 78 loans submitted to banks by Nationwide and Kobay and found 69 contained some fraudulent information. In all, 13 banks and lending institutions issued loans based on fraudulent applications, according to a sworn affidavit by Postal Inspection investigator Joseph Stephenson.
The indictment said Kobay and Nationwide would set up a succession of sales and purchases of the same properties using either "straw buyers" — people who did not intend to live in the homes but allowed their identities and credit to be used for a fee — and sometimes unwitting applicants convinced they could make a buck by buying a home then immediately reselling it."The defendants ... caused the loan application for the straw buyers and otherwise unqualified buyers to be prepared based upon fraudulent representations related to gross income, employment status, assets and liabilities, and whether the property would be used as a primary residence," the indictment says.It alleges they would then "divert a significant portion of the loan proceeds from escrow accounts for their personal benefits." Other loan proceeds were used to make mortgage payments on some properties, according to the indictment.In one instance, David Sobol purchased a home in Newcastle in August 2007 for $669,950. A month later, Sobol "flipped" the property, selling it to Byron for $1 million. Using falsified loan applications that misrepresented her income and assets, Byron obtained two loans on the property totaling about $900,000.Byron then "flipped" the property again to another straw buyer in November 2007 for a purchase price of $1.4 million. According to the application, the buyer claimed earnings of more than $324,000 in 2005 and $385,000 in 2006. In fact, the buyer reported income to the IRS of $13,245 in 2005 and $16,600 in 2006.The indictment also seeks forfeiture of items purchased with money allegedly obtained through the fraud, including two 2004 Lamborghini Gallardo sports cars registered to Kobzar and Vladislav Baydovskiy, who also stands to lose a pair of BMWs, a 31-foot Bayliner and more than $2.4 million in cash.Unspecified amounts of cash are also being sought from David and Alla Sobol, according to court documents.According to the search warrant, the office of Bellevue lawyer Jacob Korn, the owner of Emerald City and a defendant in the ING civil lawsuit, was searched Thursday. Assistant U.S. Attorney James Oesterle would not discuss his status.