Seven people indicted in Seattle-area mortgage fraud scheme

A Seattle grand jury has indicted seven people, including owners of two Bellevue mortgage loan companies and an escrow company, in a 40-count indictment alleging conspiracy to commit mortgage, bank and wire fraud totaling more than $47 million.

The indictments allege the seven conspired to fraudulently purchase dozens of Seattle and Eastside homes at inflated prices. The charges allege they would obtain loans using "straw buyers" — people who had no intention of living in the home but allowed their identities and credit to be used for a fee — and sometimes using unwitting applicants convinced they could make a buck by buying a home and then immediately reselling it.

"The defendants ... caused the loan application for the straw buyers and otherwise unqualified buyers to be prepared based upon fraudulent representations related to gross income, employment status, assets and liabilities, and whether the property would be used as a primary residence," the indictment says.

The indictment alleges they would "divert a significant portion of the loan proceeds from escrow accounts for their personal benefits."

Other loan moneys were spent to make mortgage payments on some properties, "to delay defaulting on the obligation and facilitate further fraud ... "

The indictment lists 12 "representative" loans, totaling more than $6 million.

In one instance, one property in Medina was sold to a recruited buyer for $775,000 and within six months was sold again to a second recruited buyer for $1.2 million, according to the U.S. Attorney's Office.

The falsified loan application submitted by the defendants on behalf of the second buyer reported a monthly income of $45,000 with assets of more than $800,000, the U.S. Attorney's Office said. However, the buyer was actually a house cleaner making between $18,000 and $20,000 a year.

Named in the 29-page indictment are:

• Vladislav Baydovskiy, 31, of Bellevue, and Victor Kobzar, 32, of Federal Way, the co-founders of Kobay Financial Corp. in Bellevue;

• Alla Sobol, 28, of Renton, also known as Alla Pyatetskay, the owner of Nationwide Home Lending;

• David Sobol, 40, of Issaquah, and Donata Baydovskiy, 28, of Bellevue, the founders of Emerald City Escrow;

• Camie Byron, 28, of Renton, an employee at Kobay and Nationwide;

• Sandra Thorpe, 55, of Shoreline, a bookkeeper and founder of SMT Enterprises, who is named in a single count.

The indictment also seeks forfeiture of items purchased with money allegedly obtained through the fraud. These include two 2004 Lamborghini Gallardo sports cars registered to Kobzar and Vladislav Baydovskiy, who also stands to lose a pair of BMWs; a 31-foot Bayliner boat; a 2008 Range Rover and 2007 Lexus registered to the Sobols; and more than $2.4 million in cash.

Unspecified amounts of cash are also being sought from David and Alla Sobol, according to court documents.

During a news conference this afternoon, Jeffrey Sullivan, the U.S. attorney for the Western District of Washington, said this was the largest mortgage fraud case his office has prosecuted.

The charges come just weeks after ING Bank, one of the alleged victims, filed an unusual civil racketeering lawsuit against Nationwide and Emerald City.

ING Bank, the nation's second largest thrift, alleges that Nationwide and Emerald City recruited borrowers — all Eastern European immigrants — to defraud the bank through at least nine loans totaling some $6.2 million between November 2007 and June 2008. The bank also alleged that David and Alla Sobol formed a family limited partnership to keep fraudulently gained fees out of creditors' reach.

Kobay Financial Corp., Emerald City and David Sobol are also defendants in civil lawsuits brought by Eastern European immigrants in King and Snohomish counties. Attorneys for the immigrants say they're victims.

"There's no doubt in my mind that Russian-speaking immigrants are not knowledgeable enough about what goes on and so they trust people who speak their primary language," said Ed Mueller, a Bellevue attorney who is representing some of the borrowers in the ING Bank case.

Meantime, the state Department of Financial Services last year began an action to deny Vladislav Baydovskiy a license as a loan originator because he had lied about regulatory actions taken against Kobay in California in 2005, where his license was revoked for fraud.

Agents moved to arrest the seven today, and some are expected to appear in U.S. District Court this afternoon, said Emily Langlie, the spokeswoman for the U.S. Attorney's Office in Seattle.

Mike Carter: 206-464-3706 or mcarter@seattletimes.com

Seattle Times staff reporter Sanjay Bhatt contributed to this report