Kirkland Couple Gets Prison Terms for Florida Mortgage Fraud Scheme

A Kirkland couple and a former police officer have been sentenced to federal prison terms for their roles in a years-long mortgage fraud scheme in the Sarasota, Fla., area that came apart in 2008 with the collapse of the real estate market.

George Cavallo, 47, and his wife Paula Hornberger, 41, were sentenced to 10 years in federal prison, and 12 months and one day, respectively, according to a press release from the U.S. Attorney's office for the Middle District of Florida. They were also ordered to pay $13,228,861.74 in restitution. Prosecutors say the Kirkland couple collectively took out more than $8.3 million in fraudulent loans.

A spokesman for the U.S. Attorney's Office said Cavallo is a native of the Sarasota area, and that he and Hornberger moved to Kirkland in 2007.

Joel Streinz of Nokomis, Fla., 54, -- who took out more than $6.2 million in fraudulent loans -- was sentenced to five years in federal prison. He was also ordered to pay $1,072,676.31 in restitution.

The three individuals were convicted earlier this year following a three-month jury trial and were sentenced last Friday in U.S. District Court in Tampa.

According to a press release from the U.S. Attorney’s Office for the Middle District of Florida, the scam involved several other people as well and was designed to fraudulently obtain the maximum loan possible on properties, and then to sell the property within a few years after it had appreciated without risking much of their own money. The conspiracy began in the late 1990s and grew with the drastic increase in real estate prices in Sarasota, but fell apart when the real estate market collapsed in 2008.

The Florida newspaper the Herald Republic covered the trial from beginning to end. Click here for its account of the Kirkland couple’s role.

Here is the full press release from the U.S. Attorneys Office in Tampa, Fla.:

TAMPA, FL—U.S. District Court Judge Elizabeth A. Kovachevich sentenced George Cavallo (47, Kirkland, Washington), his wife, Paula Hornberger (41, Kirkland, Washington), and Joel Streinz (54, Nokomis), a former police officer, to federal prison terms for their roles in a Sarasota-area mortgage fraud scheme.

Judge Kovachevich sentenced Cavallo, Hornberger, and Streinz, on Friday, October 26, 2012, for their participation in a large-scale conspiracy to commit wire fraud and to make false statements on loan applications that were submitted to FDIC-insured financial institutions and mortgage lenders. The three individuals were convicted earlier this year following a three-month jury trial.

Streinz, who took out more than $6.2 million in fraudulent loans, was sentenced to five years in federal prison. He was also ordered to pay $1,072,676.31 in restitution.

Cavallo and Hornberger, who collectively took out more than $8.3 million in fraudulent loans, were sentenced to 10 years in federal prison, and 12 months and one day, respectively. They were ordered to pay $13,228,861.74 in restitution.

Evidence presented at trial revealed that Cavallo, Hornberger and Streinz conspired with each other and with numerous other individuals to purchase residential property in the Sarasota area by making false statements on loan applications submitted to various FDIC-insured banks and mortgage lenders. The false statements made and caused to be made pertained to, among other things, the property’s actual purchase/sale price; the purchaser/borrower’s intended use of the property; the purchaser/borrower’s employment, income, assets, and liabilities; and the amount and source of the equity contributed to the purchase by the purchaser/borrower.

The idea behind the scam was to fraudulently obtain the maximum loan possible on each property and then to sell that property within a few years after it had appreciated without risking much, if any, of their own money. The conspiracy began in the late 1990s and then grew slowly until 2004, when it exploded with the drastic increase in real estate prices in Sarasota. The conspiracy ended, when the real estate market collapsed in 2008.

This case was investigated by the Federal Bureau of Investigation, the FDIC’s Office of Inspector General, and the Sarasota County Sheriff’s Office. It was prosecuted by Assistant United States Attorneys Christopher Tuite and Cherie Krigsman.