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Real estate couple gets jail time for massive $50M fraud scheme

(Business News) When a well known Realtor and his loan officer wife get rich off of $50 million in falsified loans and wash profits through shell companies, judges aren’t very sympathetic.

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Judge finds couple guilty of fraud

After a long investigation, the U.S. Attorney General’s office filed charges against Eric Elegado and Charmagne Elegado for perpetrating a $50 million fraud scheme, even targeting Charmagne’s parents who lost over $75,000 to the scheme.

Charmagne masterminded the scam, according to prosecutors, and Eric was the frontman and marketing mind, parking their Bentleys, Rolls Royces, and Ferraris outside of his seminars, teaching others how to get rich like them.

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U.S. District Judge Anthony Battaglia sentenced the couple to three years and five months in prison each for their role, and sentencing for others involved will take place later this year.

“You were living the American dream until greed entered into the picture,” Judge Battaglia said at sentencing.

How their scheme worked

The operation falsified loan applications for underqualified buyers’ subprime loans, obtained mortgages higher than the sales price of the homes, and funneled profits through dummy corporations, leading to millions in profits. According to the FBI investigation, Charmagne was a loan officer who directed fellow loan officers, as well as agents at her husband’s brokerage, E Real Estate and Loans, to falsify income and employment on loan applications, sometimes scribbling down names of friends’ companies.

Investigators say the scheme wasn’t directed at the general public, the couple took advantage of friends and family as part of the money making scandal.

The couple says they were just trying to help people get homes, prosecutors said it was a money grab in a tight-knit community where they took advantage of the trust they had earned.

Eric’s real estate company made roughly $3.5 million on 104 fraudulent deals, and the FBI says that the loss to lenders is roughly $10.5 million.

The couple apologized in court

The Elegado’s lawyers said that the couple’s criminal conduct was brief, only between December 2005 and February 2007, and was completely uncharacteristic of the two, and that Charmagne was pressured by the culture at New Century Mortgage, where no-document loans were common, and say Charmagne can’t be singled out for an entire subprime industry which “foster[ed] this type of behavior.”

Prosecutors called this argument a distraction and pointed out that the Elegados went to great lengths to corrupt the system for years.

Both expressed to the judge that they were sorry, and Eric offered to do all of the jail time so his wife could stay at home with their young son. The plea was rejected by the judge for this crime which left many homeowners in a bad credit position, many even having to move out of the state as a result. Dozens of their family and friends present cried when Judge Battaglia sentenced both to prison.

What now for the Elegados?

Eric continues to work as a real estate agent, despite his poor reputation, and Charmagne is earning a living as an independent contractor and a part time child care worker at her church.

They live with family in Escondido and are reportedly broke. There is no word as to their ability to pay the penalties. At a restitution hearing on May 27, prosecutors plan to ask the couple to repay the $10.5 million loss the lenders saw.

Four other employees charged in the case are set to be sentenced today, and others will be sentenced later this year.

Photo courtesy of U.S. Attorney General’s office has been modified.

Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

Business News

Hobby Lobby increases minimum wage, but how much is just to save face?

(BUSINESS NEWS) Are their efforts to raise their minimum wage to $17/hour sincere, or more about saving face after bungling pandemic concerns?

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Hobby Lobby storefront

The arts-and-crafts chain Hobby Lobby announced this week that they will be raising their minimum full-time wage to $17/hour starting October 1st. This decision makes them the latest big retailer to raise wages during the pandemic (Target raised their minimum wage to $15/hour about three months ago, and Walmart and Amazon have temporarily raised wages). The current minimum wage for Hobby Lobby employees is $15/hour, which was implemented in 2014.

While a $17 minimum wage is a big statement for the company (even a $15 minimum wage cannot be agreed upon on the federal level) – and it is no doubt a coveted wage for the majority of the working class – it’s difficult to not see this move as an attempt to regain public support of the company.

When the pandemic first began, Hobby Lobby – with more than 900 stores and 43,000 employees nationwide – refused to close their stores despite being deemed a nonessential business (subsequently, a Dallas judge accused the company of endangering public health).

In April, Hobby Lobby furloughed almost all store employees and the majority of corporate and distribution employees without notice. They also ended emergency leave pay and suspended the use of company-provided paid time off benefits for employees during the furloughs – a decision that was widely criticized by the public, although the company claims the reason for this was so that employees would be able to take full advantage of government handouts during their furlough.

However, the furloughs are not Hobby Lobby’s first moment under fire. The Oklahoma-based Christian company won a 2014 Supreme Court case – the same year they initially raised their minimum wage – that granted them the right to deny their female employees insurance coverage for contraceptives.

Also, Hobby Lobby settled a federal complaint in 2017 that accused them of purchasing upwards of 5,000 looted ancient Iraqi artifacts, smuggled through the United Arab Emirates and Israel – which is simultaneously strange, exploitative, and highly controversial.

Why does this all matter? While raising their minimum wage to $17 should be regarded as a step in the right direction regarding the overall treatment of employees (and, hopefully, $17 becomes the new standard), Hobby Lobby is not without reason to seek favorable public opinion, especially during a pandemic. Yes, we should be quick to condone the action of increasing minimum wage, but perhaps be a little skeptical when deeming a company “good” or “bad”.

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RIP office culture: How work from home is destroying the economy

(BUSINESS NEWS) It’s not just your empty office left behind: Work from home is drastically changing cities’ economies in more ways than you think.

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An empty meeting room, unfilled by work from home employees.

It’s been almost six months since the U.S. went into lockdown due to COVID-19 and the CDC’s subsequent safety guidelines were issued – it’s safe to say that it is not business as usual. Everyone from restaurant waitstaff to start-up executives have been affected by the shift to work-from-home. Even as restrictions slowly begin to lift, it seems as though the office workspace – regarded as the vital venue for the U.S. economy – will never truly be the same.

Though economists have been focusing largely on small businesses and start-ups, we are only just beginning to understand the impact that not going back into the white-collar office will have on the economy.

The industries that support white-collar office culture in major cities have become increasingly emaciated. The coffee shops, food trucks, and food delivery companies that catered to the white-collar workforce before, during, and after their workday, are no longer in high demand (Starbucks reported a loss of $2 billion this year, which they attribute to Zoomification). Airlines have also been affected as business travel typically accounts for 60%-70% of all air travel.

Also included are high-end hotels, which accommodate the traveling business class. Pharmacies, florists, and gyms located in business districts have become ghost towns. Office supplies companies, such as Xerox, have suffered. Workwear brands such as J. Crew and Brooks Brothers have filed for bankruptcy, as there is no longer a need to dress for the office.

In Manhattan – arguably the country’s most notorious white-collar business mecca – at least 1,200 restaurants have been permanently lost. It is also is predicted that the one-third of all small businesses will close.

Additionally, the borough is facing twice as many apartment vacancies as this time last year, due to the flight of workers no longer tied to midtown offices. Workers have realized their freedom to seek more affordable and spacious residence outside the city. As companies decentralize from cities and rent prices drop, it isn’t all bad news. There is promise that particular urban white-collar neighborhoods will start to become accessible to the working class once again.

Some companies, like Pinterest and REI, are reporting that their shift to work from home is in fact permanent. The long-term effects of deserted office buildings are yet to make themselves evident. What we do know is that the decline of the white-collar office will force us to reimagine the great American cities – with so much lost due to the coronavirus, what can now be gained?

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Business News

2020 Black Friday shopping may break the mold

(BUSINESS NEWS) Home Depot states their new plan for deals and discounts over two months, in place of a 1-day Black Friday event.

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Men shopping in an empty aisle, Black Friday to come?

Humans change and adapt – that’s just in our nature. Retail stores have struggled to maintain their sales goals for years as more and more people move to ordering online. Online prices still seem to be within customer expectations and often come with free shipping. Additionally, people that may have preferred to shop in an actual brick-and-mortar store have changed their shopping habits dramatically in 2020; it’s hard to social distance and be safe in crowded stores or in small aisles. Black Friday may be next to change.

Amazon and other big box store’s online ordering platforms have simplified getting what you need delivered right to your front door. According to Statista, “Amazon was responsible for 45% of US e-commerce spending in 2019 – a figure which is expected to rise to 47% in 2020.”

Retailers count on the holiday season, specifically Black Friday deals (the day after Thanksgiving), to bring in up to 20% of their annual revenue. It’s hard to just remove that option completely. But considering the times of social distancing, wearing masks in public, and especially avoiding large crowds, the tradition of Black Friday will need to look different this year.

It will also be interesting to see what supply chain disruptions from early 2020 will have the most effect this shopping season. We saw predictions in March that said the United States would see the biggest disruptions in about six months. Black Friday falls right on that timeline.

Home Depot has announced their plans to go ahead and give the deals over a two month span, starting in early November through December (both online and in stores with the possibility of adding some special deals around the actual Black Friday date) to help encourage a more steady stream of shoppers versus so many packing in on the same day.

The home improvement chain has actually seen a great sales year. This is likely due to people working from home and being interested in doing more home projects (and possibly having a bit more time to do them as well). As of May 2020, “The Home Depot®, the world’s largest home improvement retailer, today reported sales of $28.3 billion for the first quarter of fiscal 2020, a 7.1 percent increase from the first quarter of fiscal 2019. Comparable sales for the first quarter of fiscal 2020 were positive 6.4 percent, and comparable sales in the U.S. were positive 7.5 percent.”

Home Depot, along with many other retailers like Walmart, Target, and Best Buy have confirmed that they will be closed on Thanksgiving Day, which may not be new for all of them but has always signaled the kickoff of the holiday shopping season.

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