People v. Caraga

2018 IL App (1st) 170123

138 N.E.3d 725

435 Ill.Dec. 111

The PEOPLE of the State of Illinois, Plaintiff-Appellee,

v.Michael CARAGA, Defendant-Appellant.

No. 1-17-0123

Appellate Court of Illinois, First District, SECOND DIVISION.

December 4, 2018

Omar Jaleel, of Oak Brook, and Hal Garfinkel, of Chicago, for appellant.

Kimberly M. Foxx, State’s Attorney, of Chicago (Alan J. Spellberg, Janet C. Mahoney, and Brian A. Levitsky, Assistant State’s Attorneys, of counsel), for the People.

PRESIDING JUSTICE MASON delivered the judgment of the court, with opinion.

¶ 1 Defendant Michael Caraga—along with co-defendants Bogdan Bozic, Nicholas Prittis, Jimmy Pililimis, and Artan Kollcaku¹ —participated in an organized scheme to commit mortgage fraud. In this scheme, a straw buyer would obtain a mortgage to buy property sold by Pililimis; the loan proceeds would be split primarily among the straw buyer, Prittis, and Bozic; and the buyer would later default on the loan. As part of the scheme, Caraga prepared the loan application for the straw buyer, using fraudulent income documentation provided by the straw buyer and Bozic. Unbeknownst to Caraga, Bozic, Prittis, and Kollcaku, the straw buyer in the transaction involved in this case was an undercover federal agent, and this transaction was part of a sting operation in which Pililimis was a cooperating witness in the federal investigation.

¶ 2 Following a bench trial, the trial court found Caraga guilty of (i) loan fraud ( 720 ILCS 5/17-10.6(d) (West 2012) ), (ii) financial institution fraud (id. § 17-10.6(c)(2) ), (iii) attempted theft (id. §§ 8-4(a), 16-1(a)(1) ), (iv) wire fraud (id. § 17-24(b)(2) ), and (v) forgery (id. § 173(a)(2) ). The trial court merged all other counts into the loan fraud count and sentenced Caraga to two years probation and 200 hours of community service. Caraga appeals his convictions asserting that (i) his co-conspirators' statements should have been inadmissible as hearsay because the State failed to prove that he agreed to participate in the conspiracy, (ii) the evidence was insufficient to establish his participation in the conspiracy, and (iii) evidence of other crimes should have been excluded. Finding no error, we affirm.

¶ 3 I. BACKGROUND

¶ 4 The Department of Housing and Urban Development (HUD) Office of Inspector General (OIG) is responsible for investigating fraud and abuse in connection with HUD programs, including mortgage fraud involving Federal Housing Authority (FHA) loans. An FHA loan is a mortgage loan guaranteed by HUD. To receive an FHA insured loan, the borrower must (i) reside in the property as a primary residence, (ii) provide a 3.5% down payment, and (iii) obtain homeowner's hazard insurance. An FHA loan may only be obtained for an individual's primary residence and not for investment properties, such as a vacation home or a second home.

¶ 5 Mortgage fraud occurs when an individual intentionally provides false documentation or materially misrepresents information on a loan application in order to obtain a loan. Mortgage fraud may involve a straw buyer, i.e. , an individual with good credit who allows another to use his or her name and personal details (income, employment history, credit) to buy property and obtain a mortgage, but who does not intend to live in the property. Documents may also be falsified for straw buyers, such as creating employment history and exaggerating employment income, to obtain a larger loan. Mortgage fraud schemes involving straw buyers are illegal.

¶ 6 Here, the mortgage fraud scheme involved the following key players: Pililimis (seller—cooperating witness), Bozic (recruiter/orchestrator), Caraga (loan originator), Prittis (buyer's attorney), and Jim Breen (seller's attorney). Assistant Special Agent (ASA) Manuel Colin from HUD OIG acted as the undercover straw buyer, using the assumed name of "Manny Rodriquez." Guadelupe Chavez was the HUD OIG Special Agent In Charge (SA) of the mortgage fraud sting.

¶ 7 Pililimis bought, sold, and managed properties on the south side of Chicago. Pililimis was arrested on March 11, 2010, for mortgage fraud, following a state criminal investigation relating to a different mortgage fraud sting. After his arrest, Pililimis agreed to work as an informant on the fraud investigation in this case. Pililimis worked with investigators for about two years, developing a plan of action, which called for Pililimis to sell one of his properties to a straw buyer with the help of a loan officer, accountant, and recruiter. According to the plan, Pililimis would sell a four-unit rental building he owned at 5800 South Bishop in Chicago to Rodriguez acting as the straw buyer, who would apply for a mortgage on the property using falsified documents.

¶ 8 On November 2, 2010, the trial court granted a consensual overhear, allowing Pililimis to record his conversations during the mortgage sting. The consensual overhear was eventually extended to also include ASA Colin's undercover conversations. The consensual overhears spanned about two years and ended on the day of the straw buyer's closing—July 2, 2012. The recorded conversations initially involved Pililimis, Prittis, and Mike Rogers, a loan officer. From those recorded conversations, the following individuals were added to the consensual overhears: Bozic, Kollcaku (provided gift funds), Kim Goldsby (replacement loan officer), and Adrienne Crawford (replacement loan officer). Caraga was not part of the investigation in the beginning and was added to the consensual overhear about a year and half into the investigation—in early 2012—when he became involved in the transaction.

¶ 9 In late December 2010 or early 2011, Pililimis approached Prittis about a potential residential real estate transaction. Pililimis wanted to make money to pay off his debts, including $110,000 he owed Prittis. Pililimis had experience putting real estate transactions together and would recruit straw buyers. Pililimis told Prittis that he had a straw buyer named "Manny Rodriguez," who was a contractor with very good credit. One of the first steps of this transaction was to secure a mortgage for Rodriguez to buy the property.

¶ 10 A loan originator, usually either on the telephone or during a face-to-face meeting, will discuss with a borrower the types of loans available and the various forms that are part of the loan application. A loan originator will also assist the buyer in completing the application. Prittis referred Pililimis to various loan originators to help Rodriguez obtain a loan. Before Caraga, Prittis referred Pililimis to a number of loan originators who, for various reasons, were unable to complete the transaction. Two of the loan originators had been involved in previous transactions with straw buyers.

¶ 11 Prittis eventually referred Pililimis to co-defendant Bozic, who had successfully completed transactions involving straw purchasers in the past. Prittis had known Bozic for about 12 years after meeting him during a real estate construction deal. In September 2011, Pililimis involved Bozic in the transaction, and from then on, Bozic controlled everything—every communication and every aspect of the deal.

¶ 12 In March 2012, Bozic began providing Rodriguez with fraudulent information to use in connection with the loan application. First, Bozic went to Chase Bank with Rodriquez to open a bank account, which Rodriguez opened using $50 provided by Bozic. Bozic also gave Rodriguez (i) a fabricated profit and loss statement for a trucking business that Rodriguez allegedly operated as an independent contractor and (ii) a fabricated employment history, which included working at Mid-City Management and Stavros Foods, where, as Bozic knew, Rodriguez had never worked. Around that same time, Bozic informed Rodriguez that the loan would be transferred to his friends at a different bank, who were people Pililimis did not know, and that Pililimis would be paid for originating the deal, but cut out of the deal going forward.

¶ 13 Bozic brought Caraga, a loan officer working at Vista Financial Bancorp, Inc., into the transaction. Prittis had closed three or four prior transactions with Caraga during late 2011 and into 2012. Bozic was also part of those transactions, and straw buyers were used to purchase the properties. Each of the three or four earlier transactions also involved a joint venture agreement between Bozic and the seller side of the transaction, detailing how the parties would disburse the proceeds from the closing among themselves. Caraga was not involved in the joint venture agreements in any of the prior transactions in which he was involved nor was he present during any of the joint venture agreement discussions for this transaction. There was no evidence that Caraga knew the earlier transactions were fraudulent, and the State did not offer evidence establishing how Caraga was compensated in connection with the prior transactions.

¶ 14 Because an FHA loan requires a 3.5% down payment, Bozic arranged for Rodriguez to receive funds for the down payment as a gift. An individual may receive funds as a gift for a down payment, but the gift must be from either a blood relative or a fiancé, and the donor cannot expect repayment of the gift. On June 6, 2012, Rodriguez received money for the down payment from Kollcaku, purportedly as his cousin, but they were not related. The money was deposited into Rodriguez's Chase account. Rodriguez had completed an application for a $270,019 FHA loan, and the purchase price was $275,000.²

¶ 15 On May 15, 2012, Rodriguez met Caraga for the first time at Vista Financial. The meeting was recorded as part of the consensual overhears, and Bozic was also present. Before this meeting, Bozic instructed Rodriguez to make sure he was familiar with his fabricated employment history and earnings. Bozic told Rodriguez that the information he gives must match the supporting documentation. During the face-to-face meeting between Caraga, Bozic,...