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SAN JUAN, Puerto Rico - A developer and nine other people, including a former salsa singer, have been charged in an alleged $14 million mortgage fraud in Puerto Rico, federal officials said Tuesday.
The suspects are accused of a scheme in which buyers allegedly took out loans using fake documents overstating the value of a dozen Spanish-style mansions in the ritzy Palmas del Mar coastal resort community in Humacao, in southeastern Puerto Rico.
A federal indictment charges developer Joseph McCloskey Diaz split the difference with the buyers, the loans went unpaid and the properties passed into foreclosure.
"Now the banks are stuck with these houses" that are not worth as much as the mortgages, FBI spokesman Harry Rodriguez said.
A federal grand jury indicted the group Friday on 33 counts including bank fraud, money laundering and submitting false statements to a financial institution.
Nine people were arrested Tuesday morning, and McCloskey flew in from South Florida and turned himself in, according to the U.S. attorney's office.
A phone call to McCloskey's attorney was not answered.
All 10 pleaded not guilty, said Lymarie Llovet, spokeswoman for the U.S. attorney's office. They would face up to 30 years in prison and $1 million in fines if convicted.
The suspects include former salsa singer Miguel A. Matta Ponce de Leon — better known as Aldo Matta — who allegedly submitted false information to obtain loans to buy three properties worth $4.2 million from McCloskey, according to the indictment.
Matta's attorney could not be immediately reached for comment.
Authorities said the alleged scheme ran from 2004 to 2006 and involved properties ranging in value from $700,000 to $3.2 million.
Most of the homes involved are now in foreclosure proceedings.
"Mortgage fraud isn't a victimless crime," said Gilbert Garza, special agent in charge of Miami's Internal Revenue Service office. "It threatens the financial health of our communities and leaves lenders burdened with bad loans and neighborhoods with abandoned and deteriorating property."
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