Relatives of two accused of fraud face own charges

Nov 10, 2008 (The Press-Enterprise - McClatchy-Tribune Information Services via COMTEX) -- JPM | Quote | Chart | News | PowerRating -- The father and mother-in-law of two leaders of an alleged Riverside County-based investment group that bilked scores of homeowners in multiple states were charged this week with federal crimes that could lead to prison terms.

The charges brought by the U.S. attorney against Dow Duncan and Joetta Zimmer, however, do not mention the investment scheme. Duncan and Zimmer were arrested Thursday on charges of making false statements to lenders on mortgage applications to purchase homes for themselves.

Duncan is the father of James B. Duncan, and Zimmer is the mother-in-law of Hendrix Montecastro, two of three leaders of a network of companies, chief among them Murrieta-based Pacific Wealth Management and Stonewood Consulting Inc., whom the Securities and Exchange Commission has accused of defrauding at least 95 investors of more than $11 million and forcing many of them into foreclosure.

A third man, Maurice E. McLeod, recently accepted a court settlement of the lawsuit filed against the group that could require him to return ill-gotten gains. However, to date none face criminal charges.

In the federal securities litigation and in a civil lawsuit filed by distressed investors, Pacific Wealth and its affiliates are accused of having falsified loan documents to enable investors to buy multiple properties for which they were not financially qualified and which ultimately went to foreclosure.

The financial advisers allegedly profited by having the houses appraised for more than market value and pocketing the difference in excessive fees.

Court documents that the U.S. attorney filed this week in the U.S. Central District Court in Riverside say that Zimmer and Duncan on separate occasions inflated their income and assets and falsified their employment history on mortgage applications with Washington Mutual Bank to purchase houses in the La Cresta neighborhood of Murrieta in which they falsely stated they intended to live.

A grand jury indictment said that in July 2007, Zimmer obtained from Washington Mutual a $1.46 million first mortgage and a $292,300 second mortgage by reporting her gross monthly income as $60,000, that she held more than $3 million in assets and that she intended for the house she was buying to become her primary residence. All these statements were false, the indictment said.

Separately, the U.S. attorney submitted a complaint asking for the indictment of Duncan for making false statements in order to qualify for two mortgages totaling $1.8 million from Washington Mutual to buy a house to live in.

According to the complaint, Duncan, the owner of a construction company, said on his mortgage application that he had monthly income of $60,000 when his federal tax return showed it was less than $3,400 in 2006 and less than $2,600 in 2007.

Duncan listed on his loan application that his primary employment was Coast Wealth Management, and Zimmer said she was employed as a chief financial officer for Oceanridge Equity.

Coast Wealth Management and Oceanridge Equity were part of the allegedly illegal investment network, said Richard Ackerman, the Temecula lawyer who has filed investor lawsuits for damages in Riverside County Superior Court

Zimmer's lawyer, H. Dean Steward, said Friday he had no comment on the indictment. He said if convicted on the charges in the indictment, Zimmer could face up to 20 years in prison. On Friday, Zimmer posted $250,000 bail and was ordered detained at her home. The court set a Dec. 22 trial date.

Duncan was released Thursday after posting a $350,000 bail bond, pending a possible indictment on the charges against him.

Ackerman said Duncan and Zimmer were relatively minor players in the alleged investment scheme and he expects more indictments will be coming.

"It is a shot over the bow," Ackerman said. "Mr. Duncan and Mr. Montecastro ought to see from this that if the U.S. attorney's office is aiming at people this low in the totem pole, the people at the top are in really big trouble."

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