Two Southland men face charges of operating a $1.3 million real estate fraud scheme that targeted Latino investors, many of whom were elderly, authorities said today.

Edwin Salazar, 34, of Downey and 41-year-old Michael Zuniga of Fullerton are charged with multiple counts of grand theft, elder abuse, burglary and conspiracy in connection with 18 victims, according to state Attorney General Kamala Harris.

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“The defendants defrauded investors with promises of guaranteed returns and even convinced some victims to refinance their own homes in order to participate the scheme,” Harris said in a statement.

“What victims thought was a resourceful real estate investment only brought them losses and heartbreak.”

Prosecutors allege that between January 2007 and December 2008, Salazar and Zuniga offered “risk-free” investments to victims based on what they promised was the strong track record of their company — Omega Investment Group.

Victims were guaranteed returns of 15 percent and were often convinced to refinance their homes so they could invest in Omega’s real estate plans, officials allege.

But in classic Ponzi fashion, new investments were used to pay off previous investors, and almost $700,000 of victim funds were diverted to the defendants’ personal use, Harris said.

Salazar and Zuniga both apparently worked as insurance agents, officials said.

“These agents conspired to rip-off trusting members of their own community,” Insurance Commissioner Dave Jones said. “Preying on senior citizens for financial gain is deplorable and it will not go unpunished.”

CHICAGO—A Chicago man who operated an investment trading pool allegedly fraudulently obtained approximately $1.4 million and caused some 15 individual investors to lose about $600,000, federal law enforcement officials announced today. The defendant, Christopher Varlesi, was charged with six counts of mail and wire fraud in an indictment returned yesterday by a federal grand jury. Varlesi allegedly misappropriated a substantial portion of investor funds for his own benefit, including misusing $99,750 in May 2010 to pay for a year’s rent for an apartment in the Trump International Hotel and Tower in Chicago and to make Ponzi-type payments to other investors.

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Varlesi, 53, of Chicago, will be arraigned at a later date in U.S. District Court. He was the sole proprietor of Gold Coast Futures & Forex, which purported to buy and sell securities and commodities and operate a pool of investor money for trading purposes but was not actually registered or licensed to do so. The indictment seeks forfeiture of approximately $600,000.

The charges were announced by Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, and Robert D. Grant, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation. The Illinois Securities Department assisted in the investigation, as did the Commodity Futures Trading Commission, which filed a civil enforcement lawsuit against Varlesi in March of this year.

According to the indictment, between July 2008 and January 2012, Varlesi made false representations to clients about using their money to trade gold, commodity futures, and foreign currency, the expected return on their investments, and the security of their money. He fraudulently retained investors’ funds and concealed the scheme by creating and distributing false account statements and making Ponzi-type payments to investors, the charges allege. Varlesi also allegedly told clients that their investments were guaranteed to be profitable, with no risk of losing principal. As part of the scheme, the charges allege that he provided promissory notes to certain investors, falsely promising to return the entire principal amount of their investment, as well as guaranteed interest ranging between five to 7.5 percent per month.

The government is being represented by Assistant U.S. Attorney Sarah E. Streicker.

Each count of wire and mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. The court may also impose a fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater. If convicted, the court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

The investigation falls under the umbrella of the Financial Fraud Enforcement Task Force, which includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit: www.stopfraud.gov.

An indictment contains only charges and is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Preet Bharara, the United States Attorney for the Southern District of New York, announced that attorneys JACQUELYN TODARO, NEAL SULTZER, and KEVIN HYMES, as well as former attorney, MICHAEL SCHLUSSEL, pled guilty to conspiring to commit wire fraud and bank fraud in connection with a $66 million mortgage fraud scheme, involving over 100 home mortgage loans for residential properties in the New York City area, Westchester County, Dutchess County, and Long Island. SULTZER, SCHLUSSEL, and HYMES pled guilty today and TODARO pled guilty yesterday before U.S. District Judge Robert P. Patterson.

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Manhattan U.S. Attorney Preet Bharara said: “In helping to perpetrate this massive mortgage fraud scheme, these individuals exploited their trusted positions as attorneys. And Michael Schlussel went a step further, representing himself as an attorney in good standing, when in fact, he was not. With their guilty pleas, they now stand convicted for the roles they played in undermining the integrity of the mortgage industry and the legal profession.”
According to the Indictment previously filed in Manhattan federal court, as well as statements made in public proceedings:

First Class Equities (“FCE”), a/k/a Thunder Funding, a/k/a TAT Mutual Capital, was a mortgage brokerage firm with offices located in Oceanside and Old Westbury, New York. In August 2011, 14 individuals were charged in connection with their roles in a massive mortgage fraud scheme, including FCE’s owner and president, loan officers, attorneys, and one disbarred lawyer. As part of the scheme, FCE arranged home sales between “straw buyers” – people who posed as home buyers, but who had no intention of living in, or paying for, the mortgaged properties – and homeowners who were often people in financial distress and willing to sell their homes. Loan officers at FCE recruited straw buyers – many of whom were paid – and obtained mortgage loans on their behalf by submitting fraudulent applications to banks and lenders that made false representations about the straw buyers’ net worth, employment, income, and plans to live in the properties.

After approving the loans, the lenders sent the mortgage proceeds to attorneys who were involved in these transactions, including TODARO, SULTZER, HYMES, and another attorney. TODARO, SULTZER, HYMES, and SCHLUSSEL, acting on behalf of the fourth attorney involved in the scheme, would then appear at real estate closings and distribute the loan proceeds. SCHLUSSEL held himself out as an attorney, but in fact, he had previously been disbarred and was not licensed to practice law. He and the other attorneys submitted false statements to the lenders about how they were distributing the loan proceeds, and made illicit payments, typically totalling tens of thousands of dollars or more per transaction, from the loan proceeds to themselves and to other members of the conspiracy.

In addition, TODARO and SCHLUSSEL caused false documents to be provided to lenders in order to obtain home equity lines of credit, or second mortgages, on properties purchased through straw buyers the same day, the proceeds of which TODARO distributed among certain members of the conspiracy.

TODARO, 42, of Westbury, New York, pled guilty to one count of conspiracy to commit wire fraud and bank fraud, and faces a maximum sentence of 30 years in prison. In connection with her plea, TODARO agreed to forfeit $6,554,842. She will be sentenced by Judge Patterson on September 13, 2012 at 4:00 p.m.

SULTZER, 61, of Plainview, New York, pled guilty to one count of conspiracy to commit wire fraud and bank fraud, and faces a maximum sentence of 30 years in prison. In connection with his plea, SULTZER agreed to forfeit $10,689,500. He will be sentenced by Judge Patterson on October 1, 2012 at 4:00 p.m.

SCHLUSSEL, 50, of Merrick, New York, pled guilty to one count of conspiracy to commit wire fraud and bank fraud, and faces a maximum sentence of 30 years in prison. In connection with his plea, SCHLUSSEL agreed to forfeit $5,878,442. He will be sentenced by Judge Patterson on September 24, 2012 at 4:00 p.m.

HYMES, 39, of Armonk, New York, pled guilty to one count of conspiracy to commit wire fraud and bank fraud, and faces a maximum sentence of 30 years in prison. In connection with his plea, HYMES agreed to forfeit $7,606,500. He will be sentenced by Judge Patterson on September 27, 2012 at 4:00 p.m.

In addition to TODARO, SULTZER, SCHLUSSEL, and HYMES, five other defendants charged in the scheme – Canino, Pandora Bacon, Michael Charles, James Vignola, and Henry Richards – have also pled guilty and are awaiting sentencing.

Charges are still pending against the remaining five defendants – Ian Katz, Omar Guzman, Robert Thornton, Michael Raphan, and Ralph Delgiorno – who are presumed innocent unless and until proven guilty. The trial for any remaining defendants is scheduled to begin on July 2, 2012.

Mr. Bharara praised the FBI for its outstanding work in the investigation.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

This matter is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Nicole Friedlander, Andrew Goldstein and Niketh Velamoor are in charge of the criminal case.