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7 accused of investment fraud in Inland Empire

Prosecutors say they sold false real estate investments in a scheme that bilked clients of $17 million.

November 20, 2009|By David Kelly

Three Riverside County businessmen and four associates were criminally charged Thursday after prosecutors said they sold false investments and committed grand theft in a scheme that bilked clients of $17 million and left many broke.

"The schemes . . . collected tens of millions of dollars and victimized both individual investors and financial institutions," U.S. Atty. George S. Cardona said at a news conference in Riverside.

"Using storefronts across the Inland Empire and numerous phone lines assigned to their shell companies, the schemers misled banks into believing that prospective borrowers had significant assets, when in fact the schemers were engaging in a mortgage fraud shell game built on lies to both their investors and the banks."

Prosecutors said James B. Duncan, 38, Hendrix Montecastro, 37, and Maurice McLeod, 37, along with the other suspects, sold investors securities and contracts and spent most of the money on themselves. The fraud resulted in a $124.5-million loss throughout Riverside County, prosecutors said. Duncan and Montecastro were charged with 249 criminal counts.

Prosecutors allege the ringleader was Duncan, a former broker, who began operating out of Riverside County in 2004 where he and associates raised more than $1.9 million from 20 investors. In online videos he dubbed himself "James the Cash King" and promised a high return on investments. He had done similar scams in Iowa, Wisconsin and Washington, and those states issued cease-and-desist orders, Riverside County Dist. Atty. Rod Pacheco said.

"This was not one kind of fraud; this was any scheme and every scheme," he said. "You had greed and a lack of ethics, and you put it into an environment with little or no control and it's the perfect storm -- the worst combination you can have."

One of the companies Duncan created, Total Return Fund, falsely told clients their funds would be invested in real estate or government-backed accounts, officials allege.

Prosecutors said that from 2004 to 2006, Duncan and his associates persuaded 75 investors to buy $17 million worth of contracts and purchase $118 million worth of homes, mostly in Murrieta.

The suspects allegedly told investors they would continue to make mortgage payments but instead allowed the homes to slide into foreclosure. None of the securities were registered with the Securities and Exchange Commission or qualified with the California Department of Corporations, prosecutors said.

The other defendants in the case are Helen Moreno Pedrino, 57; Charlie Sung Muk Choi, 34; Cindi Gayle Kelly, 33; and Thuan Nhan Du, 33. Pacheco said all had been taken into custody.

The U.S. attorney's office is expected to file a mortgage fraud charge in the case.

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