Chicago Title Insurance Company, individually and as subrogee of AmTrust Bank, Wells Fargo Bank, N.A., Bank of America, N.A. and Minnesota Lending Company; Plaintiff,
Sportsmens Contracting, Inc.; Lincoln Homes, Inc.; Pentagon Real Estate Group, Inc.; Premier Real Estate Services, LLC; Cushman Realty, Inc.; Wells Title, LLC; Trend Title, LLC; Thinh Tran a/k/a Tim Tran; Vince Long Nguyen; Truang Quang Tran a/k/a Trung Calvin Tran; Katie Thi Tran; Lua Nguyen; Vera Solodovnikova; Lien Phuong Thi Tran, Susanne E. Mathis; and David L. Germain, Jr.; Derrick A. Johnson; Daniel S. Rollings; Guarantee Trust & Title Corporation; Rachael Brabant; Perfection Lending, Inc.; Invescorp, Inc.; Todd Cushman; Defendants.
FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER FOR JUDGMENT
SUSAN RICHARD NELSON, District Judge.
The following Motion for Entry of Default Judgment pursuant to Fed.R.Civ.P. 55(b)(2) (Doc. No. 114) came before the Court on May 14, 2013, at 10:00 a.m., at the United States District Courthouse, 774 Federal Building 316 N. Robert Street St. Paul, MN 55101. Tim A. Staum, Esq., appeared on behalf of Plaintiff. Defendants made no appearances. These Findings of Fact, Conclusions of Law and Order for Judgment are based upon all of the pleadings, files, records, affidavits, papers and proceedings herein, and upon the motion of Plaintiff herein:
FINDINGS OF FACT
1. This case arises out of a straw buyer mortgage fraud scheme that directly and proximately damaged CTIC in the amount of $782, 379.46 as of December 31, 2012. Plaintiff Chicago Title Insurance Company, individually and as subrogee of AmTrust Bank, Wells Fargo Bank, NA, Bank of America, NA, and Minnesota Lending Company ("CTIC"), seeks to be made whole for the direct and proximate injuries occasioned by the mortgage fraud.
2. CTIC has moved for default judgment against the following Defendants: David L. Germain, Jr., Guarantee Trust & Title Corporation, Invescorp, Inc., Derrick A. Johnson, Lincoln Homes, Inc., Lua Nguyen, Perfection Lending, Inc., Sportsmens Contracting, Inc., Katie Thi Tran, Thinh Tran a/k/a Tim Tran, Truang Quang Tran a/k/a Trung Calvin Tran, Pentagon Real Estate Group, Inc., and Wells Title, LLC (collectively, the "Defaulting Defendants").
3. The District Court has entered default against each of the Defaulting Defendants, finding that each had been properly served with the Plaintiff's Summons and Complaint, Amended Summons and Complaint and/or Second Amended Summons and Complaint, and had failed to answer or otherwise defend within the time provided by law, or was otherwise in default.
4. Each of the Defaulting Defendants, with the exception of David L. Germain, Jr. participated in, furthered and profited from the mortgage fraud scheme that damaged Plaintiff.
5. In 2007, Andy Stoner, an owner of Defendant Sportsmens Contracting, Inc. ("Sportsmens") was introduced to Defendant Trung Calvin Tran ("Calvin Tran") through Defendant Derrick Johnson ("Johnson") and other mutual acquaintances.
6. The same year, Calvin Tran and his business, Defendant Invescorp, Inc. ("Invescorp"), entered into an agreement with Sportsmens whereby Calvin Tran would provide straw buyers to purchase Sportsmens' newly-constructed homes. The scheme was designed so that, after the purchase, the buyers would not actually occupy the homes, but instead, the homes would be managed and rented out by Invescorp until such time as they could be sold by Invescorp at a profit. In exchange for providing and qualifying straw buyers, Sportsmens promised Calvin Tran and Invescorp to pay a commission equal to 25-30% of the total sale price of each new home.
7. In 2007, the mortgage fraud scheme targeted the seven properties at issue in this case. In order to obtain construction loan financing to acquire the Seven Parcels and construct new homes on each of them, Sportsmens, Calvin Tran, Perfection Lending, Inc., and other scheme participants prepared fraudulent purchase agreements, mortgage pre-approvals and earnest money checks and submitted them to the construction lender for the purpose of fraudulently inducing construction loans for each of the Seven Parcels. Calvin Tran acknowledged in his deposition that these documents were an outright fraud, referring to them as "dummy" documents which were prepared solely for the purpose of misleading the lender into believing that legitimate buyers had been secured for the properties.
8. The phony purchase agreements submitted to the construction lender identified the buyers for the Seven Parcels as either Calvin Tran or his former girlfriend, Keili Mac. Each of the earnest money checks made to look as though they were paid by Keili Mac were actually funded by Calvin Tran and Invescorp. Many of the earnest money checks were created merely for show, with no earnest money actually changing hands. In addition to the phony purchase agreements, the scheme participants prepared and submitted to the construction lender sham mortgage pre-approvals, which identified the buyer of each of the Seven Parcels as "Long Nguyen, " Calvin Tran's father.
9. After the construction loan financing was approved, Sportsmens constructed new homes on each of the Seven Parcels. While the new homes were under construction, Calvin Tran and Invescorp worked to secure straw buyers. In order to recruit straw buyers to participate in the scheme, Calvin Tran promised straw buyers up to $10, 000 per transaction, plus a share of the profits once the homes were eventually re-sold.
10. Ultimately, Calvin Tran and Invescorp convinced Vera Solodovnikova and Lien Tran to join the scheme as straw buyers of Parcels 3, 4, 5 and 6 in exchange for compensation from Invescorp. Calvin Tran referred to the process as the "sale" of the straw buyer's credit to Invescorp. Tran also acknowledged that the straw buyers had no knowledge of the real estate transaction or anything actually related to the properties, but merely agreed to sell their credit to Invescorp in exchange for payment.
11. Defendants Tim Tran and his business, Lincoln Homes, Inc. ("Lincoln Homes") were later introduced to Sportsmens through Johnson and Daniel Rollings ("Rollings"), another Pentagon agent. While the homes on the Seven Parcels were being constructed, Tim Tran and Lincoln Homes were substituted as the suppliers of straw buyers for Parcels 1, 2 and 7 because they offered to do so for a smaller commission. This agreement was negotiated between Johnson and Tim Tran.
12. Tim Tran was responsible for bringing straw buyers Katie Tran and Lua Nguyen into the scheme for the purpose of purchasing Parcels 1, 2 and 7.
13. After securing straw buyers for each of the Seven Parcels, Calvin Tran, Tim Tran and other scheme participants prepared and submitted fraudulent mortgage loan applications on behalf of the straw buyers. The fraudulent loan applications overstated the straw buyers' assets, misrepresented their employment history and history of real estate ownership, understated their liabilities, falsely represented that the purpose of the mortgage loan financing was to purchase a primary residence for each buyer, and misrepresented the source of the straw buyers' down payment funds. Calvin Tran and Invescorp also submitted doctored bank statements in support of the loan applications which deliberately misrepresented the straw buyers' assets. Each of the straw buyers signed and initialed the fraudulent purchase agreements at closing.
14. Based upon the scheme participants' fraudulent misrepresentations and omissions in loan applications and closing documentation, and without knowledge of their fraudulent nature at the time, CTIC underwrote loan policies of title insurance guaranteeing ...