Mortgage

Scandal: Former staffer at National Community Stabilization Trust among 7 indicted for foreclosure profiteering

Accused of taking bribes to funnel foreclosures to certain nonprofits

The former director of community development at the National Community Stabilization Trust, a national nonprofit that works to stabilize communities affected by the foreclosure crisis, is among seven people indicted last month for allegedly participating in a conspiracy to profiteer off of foreclosures.

According to the U.S. Attorney’s Office for the District of Nevada, Sergio Barajas allegedly accepted bribes from a number of individuals with other nonprofit organizations and used his role as director of community development at the NCST to funnel foreclosures to those companies through NCST’s First Look program.

The nonprofits and individuals in question then turned around and sold those foreclosures for a significant profit, according to the indictment, which was unsealed last week.

Through the First Look program, which started in 2010 as a partnership between the Department of Housing and Urban Development and the NCST, financial institutions like Bank of America, Citibank, Chase Bank and others made their foreclosures available to NCST-approved nonprofits on a “First Look” basis.

The nonprofits then had the opportunity to buy the properties at a discounted price before they were made available to owner-occupiers or investors.

In his role as NCST’s director of community development, Barajas was involved in approving which nonprofits took part in the First Look program, and was also involved in determining which nonprofit was awarded the foreclosed property.

The indictment alleges that several individuals paid Barajas under the table to get preferential treatment in the program.

When contacted by HousingWire, Rob Grossinger, the president of the NCST, noted that Barajas left the company in September 2015 and said the company was not aware of any of the alleged conduct until it was contacted last year by the Office of the Inspector General of the Department of Housing and Urban Development in the course of its investigation.

“We’re really disappointed to learn about all of this. All of this financial activity alleged occurred outside of NCST,” Grossinger told HousingWire. “We didn’t learn about it until the HUD-OIG contacted us. We’ve been cooperating with the authorities since they first contacted us in July of 2016.”

After leaving the NCST, Barajas went to work for Freddie Mac, where he currently serves as manager of housing outreach, within the company’s single family affordable lending and access to credit division.

When contacted by HousingWire about Barajas’ indictment, a Freddie Mac spokesperson said that the company placed Barajas on administrative leave in the wake of the indictment becoming public.

“We very recently learned of an indictment against a current employee based on actions he allegedly took prior to joining Freddie Mac,” the company said in a statement. “The employee named in the indictment has been put on administrative leave. Since this is an active case, we are unable to comment further.”

The indictment also charges several individuals with making the alleged payments to Barajas and provides details on their alleged conduct.

According to the U.S. Attorney’s Office, Barajas, Alan Cassell, Elena Millner, Benjamin Stuelke, Michelle Acosta, Art Acosta, and Ernesto Garcia, were all charged with conspiracy to commit bribery concerning programs receiving federal funds and bribery concerning programs receiving federal funds.

Stuelke and Garcia are also charged with bank fraud.

The indictment alleges that Cassell, Millner, Stuelke, Michelle and Art Acosta, and Garcia all bribed Barajas in exchange for his influence at the NCST in the First Look approval process, access to NCST homes, and oversight over the resale of NCST homes.

According to the indictment, from December 2011 through October 2012, Cassell, doing business as Heartland Coalition and Ignition Ventures, allegedly paid Barajas approximately $185,025 in exchange for receiving approximately 626 NCST foreclosures, and made approximately $2.8 million from the resale of those homes.

Back in 2013, Reuters reported that HUD-OIG was “probing” Heartland Coalition’s involvement in the First Look program. The article states that NCST suspended Heartland Coalition from participating in the First Look program in August 2012 for “spending too little on renovations and for not allowing local families enough time to buy the homes, especially in Las Vegas.”

HousingWire attempted to contact Heartland Coalition about the allegations into Cassell’s actions. This article will be updated should the nonprofit respond.

The indictment also states that from November 2011 through May 2014, Millner and Art Acosta, doing business as Positive Housing Equations and Alliance for Revitalized Communities, allegedly paid Barajas approximately $149,828 in exchange for receiving approximately 167 NCST homes, and then made approximately $1.3 million from the resale of those homes.

When contacted by HousingWire, Alliance for Revitalized Communities provided the following statement:

"The principals and employees of Alliance for Revitalized Communities LLC had no involvement or knowledge of the activities described until we were contacted by the US Office of Housing and Urban Development last year. We are disappointed by the actions of others and have been cooperating with the authorities since they first contacted us over a year ago. ARC principals, employees and affiliates are proud of the hard work we have done to stabilize neighborhoods affected by the mortgage meltdown and  make available affordable housing in the communities we serve. We are committed to continuing this work with the highest ethical standards. As the investigation is active we cannot comment further."

Additionally, the indictment alleges that Stuelke, the chief of financial officer of HomeStrong USA, wrote checks in the total amount of $34,800 to Barajas.

Stuelke also allegedly wrote three checks totaling $193,763.13 to Garcia, doing business as Fine Line Investments, who served as the supposed real estate agent on three NCST home sale transactions.

Garcia then allegedly wrote checks to Art and Michelle Acosta, doing businesses as 33 LLC, who then turned around and allegedly wrote checks to Barajas “all in an effort to conceal payment to Barajas for three NCST properties awarded to HomeStrong USA.”

The indictment also alleges that Stuelke and Garcia provided false information to certain lenders who funded the purchase of NCST homes resold by HomeStrong USA.

HousingWire attempted to contact HomeStrong USA about the allegations into Stuelke’s actions. This article will be updated should the company respond.

HouisingWire also attempted to contact Barajas, and this article will be updated should he (or his legal representation) respond.

The maximum statutory penalty is 10 years in prison and a $250,000 fine for the charges of conspiracy to commit bribery concerning programs receiving Federal funds and 30 years in prison and a $1,000,000 fine for the charges of bank fraud.

Additionally, each of the indicted faces a criminal forfeiture money judgment: Barajas in the amount of $422,969; Cassell in the amount of $1.2 million; Millner in the amount of $3 million; Stuelke in the amount of $6 million; Michelle Acosta in the amount of $250,000; Art Acosta in the amount of $1.15 million; and Garcia in the amount of $193,000.

[Update: The headline of this article has been updated to accurately reflect Sergio Barajas' employment at NCST and the nature of the alleged actions.]

[Update 2: This article is updated with a statement from Alliance for Revitalized Communities.]

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