Kansas Real Estate Agent Gets 12+ Years in Federal Mortgage Fraud Case

Here is yet another example of a mortgage fraud scheme.

On January 10, 2009, David Kostelec, a Kansas real estate agent, was sentenced to 154 months (that's 12.8 years) in federal prison and ordered to pay $1.3 million in restitution for leading a scheme to fraudulently acquire $12 million in home loans.

Mr. Kostelec plead guilty in October 2008, to one count of conspiracy to commit wire fraud and money laundering, one count of wire fraud, one count of providing false information to lenders and one count of aggravated identity theft.

In his plea, Mr. Kostelec admitted that, from 2002 through 2005, he and others conspired to defraud lenders by submitting fraudulent loan applications and false real estate appraisals and attempted to conceal the crimes by laundering the money through accounts at various banks.

Mr. Kostelec submitted false and fraudulent appraisal reports to lenders containing inflated property values and forged signatures of licensed appraisers. Conspirators stole the identities of licensed appraisers by searching the Internet for information including the appraisers’ state license numbers.

After closing, the conspirators used straw entities including Alexandra Enterprises and Hyde Park Development to receive the money from escrow companies. Then they moved the money to personal accounts.

As part of his plea agreement, Mr. Kostelec admitted the following:

• In July 2002, he submitted a fraudulent appraisal inflating the value of a house in the 1800 block of Timber Valley Drive in Linn Valley, Kansas.

• In April 2003, he submitted a false loan application in his son’s name claiming his son was the owner of a house in the 1600 block of N. 24th Street in Kansas City, Kansas. In fact, Andrew Kostelec lived with David Kostelec at another address.

• In July 2004, he fraudulently caused a lender to deposit $57,101 into an escrow account in Kansas for the purchase of a house in the 2000 block of Cypress in Kansas City, Kansas.

• In October 2005, he submitted a loan application falsely stating that the borrower had an income $15,221 a month. In fact, the borrower made significantly less and lived mainly on Social Security retirement benefits.

• In January 2008 he falsely stated he had power of attorney to obtain a loan in his son’s name for $575,000 for the purchase of real estate properties in Kansas City, Missouri, and Miami, Florida.