Monterey men indicted on fraud

The United States Attorney’s Office and the Monterey County District Attorneys Office has indicted to men on thirty one counts of fraud stemming from mortgage back securities. The indictments come after a sixteen month investigation involving the joint cooperation of the United States Postal Inspection Service; the Federal Bureau of Investigation; the Monterey County District Attorney’s Office and the United States Attorney’s Office.

David Arthur Nilsen, 58 was indicted on September 8th for his role in the scheme to defraud investors. He voluntarily yielded to San Jose authorizes today. Nilsen is scheduled to appear in federal court on September 28th at which time counsel for the defendant will be identified and his bail will be reviewed. Nilsen will appear before the Honorable Judge Howard R. Lloyd. Nilsen is currently been release from jail on a co-signed bond in the amount of one million dollars.

Manoel Antonio Errico, 55, was also indicted on September 8th for his role in the scheme to defraud investors. Errico is currently a fugitive and a warrant is out for his arrest.

The indictment alleges that Nilsen and Errico using Cedar Funding based in Monterey bought, sold and enticed investors to purchase mortgage loans and to invest in a portfolio regarding the mortgage loans. The total number of investors is over one thousand and the losses incurred by them are in the range of over one hundred million dollars.

Nilsen and Errico are charged with defrauding investors by limited interest in the loans that were secured by property mortgages loans and in the so called fund Cedar Funding Mortgage Fund, LLC. Nilsen and Errico made false claims about the fund and failed to disclosure significant facts about the fund. They created an illusion that the fund was secure and save to invest in and thus were deceptive and misleading in regard to the fund.

Nilsen and Errico provided documents such as advertisements; interest payment statements and verbal communications to the investors that lead the investors to believe that the fund was sound in nature. Investors believed that the fund was secured by sound real estate loans which offered elevated returns with an assurance that the principal invested was save. The portfolio in 2004 however progressively began to not perform and the investor’s principal was not secure. The borrowers of the mortgage loans began to increasingly fail to pay off the loans involved in the portfolio.

Nilsen and Errcio faced with the failing portfolio began to extend the maturity dates on the loans and advance more investor funds to the portfolio without informing the investors of their activities. Their actions caused the loan balances to swell way beyond the original loan amounts and lowered the investors’ principal interest in those loans. The principal interest having been lowered resulted in the probability that some investors’ would loss all if not part of their original investment.

The indictment further alleges that Nilsen and Errcio without the knowledge of the investors used Cedar Funding accounts from new investors’ to pay existing investors rather than from the portfolio of loans in the fund.

The indictment against Nilsen and Errcio are as follows:

One count of conspiracy which has a maximum sentence of twenty years in federal prison; a fine of two hundred fifty thousand dollars; special assessment of one hundred dollars and three years supervised release.

Eleven counts of mail fraud which has a maximum sentence of twenty years in federal prison; a fine of two hundred fifty thousand dollars; special assessment of one hundred dollars and three years supervised release.

Eight counts of wire fraud which has a maximum sentence of twenty years in federal prison; a fine of two hundred fifty thousand dollars; special assessment of one hundred dollars and three years supervised release.

Eleven counts of securities fraud and aiding and abetting which has a maximum sentence of twenty years in federal prison; a fine maximum of five million dollars; special assessment of one hundred dollars and three years supervised release.

The court also has the right to order the defendants to pay restitution.

Assistant United States Attorney, Thomas E. Stevens will be handing the prosecution along with Special Assistant United States Attorney Annie Michaels of Monterey County District Attorney’s Office and Legal Assistant Elizabeth Garcia.