Operation Unreliable Rehab

November 15, 2006
Maybe Terry Faulkner should have settled for an old Honda.

Instead, he cruised the Far South Side in a $165,000 Bentley Continental last spring, catching the eye of cops staking out a Gangster Disciples drug operation, authorities say.

The cops dug into Faulkner's business dealings -- while his neighbors in south suburban Tinley Park tried to tune out the foul-mouthed basketball games on the driveway of his home, which was valued at about $600,000.

On Tuesday, his neighbors sighed with relief as Faulkner, 40, was led away in handcuffs, accused of ripping off people in mortgage-fraud schemes. Rodrigo Navascues, 32, a mortgage broker with Hammer Financial, also was arrested, police said.

 
Both were charged with organizing a continuing financial crimes enterprise, which carries a prison sentence of up to 30 years. Cook County prosecutors said they also plan to charge the men with money laundering, and Faulkner with tax evasion. Other arrests are expected.

Police drove off with Faulkner's Bentley, a luxury Maybach sedan, a BMW 645 convertible and a Chevy conversion van and will move to seize his home, too. Police seized two of Navascues' properties in Chicago.

"They can't hide what they drive, where they live and what they spend," Chicago Police Sgt. Kenneth Boudreau said.

Tax evasion alleged
Cops also raided the offices of URB Inc. in Lincolnwood and Paul A. Demos & Co. appraisers in Palos Heights. The companies could not be reached for comment.

The investigation found Faulkner raked in $2.5 million over the last 2½ years but did not file income tax returns in 2004 and 2005, Boudreau said.

So far, police and Cook County prosecutors have identified five victims duped in a dozen fraudulent property deals, Boudreau said. Police plan to sort through hundreds of other deals after seizing boxes of financial records Tuesday, he said.

Faulkner and Navascues were the first suspects arrested in a new police strategy to hammer white-collar criminals with state tax evasion and money-laundering laws. "We're going to do one of these a month," Boudreau said.

Surveillance captured Faulkner meeting with members of the Gangster Disciples in May during a drug investigation in the Roseland and West Pullman neighborhoods on the Far South Side, police said.

Police learned Faulkner frequently advertised as an agent with URB, a real estate company. In one newspaper ad bearing his photo, Faulkner says, "In the past two years I've worked on 20 URB buildings and have made $20,000 to $50,000 on each one."

"He became a success story for URB," Boudreau said. "He used his high-line cars and address to show he was a successful businessman."

Six months ago, police launched Operation Unreliable Rehab, a play on the name of Faulkner's business, Reliable Rehab, which Police Supt. Phil Cline described as a "bogus construction company."

Faulkner and Navascues preyed on gullible buyers interested in becoming investors with no down payments, Cline said. They inflated their victims' incomes and savings to obtain loans for the properties, whose values they inflated, Cline said.

Then they arranged for a fake lawyer to handle the closings, Cline said. They would allegedly skim the excess value of the property for themselves, leaving the buyers with overpriced homes. The buyers usually lost the homes in foreclosure.

Neighbors relieved at arrest
"The mortgage company loses hundreds of thousands of dollars, the buyer's credit is destroyed and the schemers all profit," Cline said.

Neighbors of Faulkner were happy to see him go.

Arthur Harris, a retired Chicago Police detective, said Faulkner's cars were far more valuable than what other residents keep in their garages. "He didn't fit in," Harris said.

Jim DeMarie, a volunteer firefighter and insurance agent, said Faulkner was always friendly. DeMarie said he helped his neighbor with his sprinkler system and other mechanical problems.

But "his buddies would play basketball and there was a lot of vulgarity," DeMarie said. "You'd think you were in the city."

He said Faulkner once offered to buy DeMarie's prized Orange County Choppers custom motorcycle and his Corvette, but DeMarie declined. DeMarie said his son, a college student, is interested in real estate and was impressed by Faulkner's high-priced toys. "I told my son it's not that easy," said DeMarie's wife, Noreen. "It turned out I was right."

2 men are charged in home loan scheme

Investigators raid homes, businesses; cars, TVs are seized

Chicago Tribune
Published November 15, 2006

A member of the Gangster Disciples and a North Side mortgage broker ran a mortgage fraud scheme for at least two years that ripped off "unsophisticated" home buyers for hundreds of thousands of dollars, authorities charged Tuesday.

 
The money that unwitting victims lost in the real estate schemes allegedly lined gang member Terry Faulkner's pockets and filled his three-car garage in Tinley Park with expensive cars, including Bentley and Maybach sedans that each cost more than $150,000, prosecutors alleged.

Faulkner, 41, and Rodrigo Navascues, of the 1900 block of North Wood Street were both arrested Tuesday and charged with one count of being the organizer of a continuing financial crime enterprise, a Class X felony, prosecutors said. A Class X felony carries a sentence of up to 30 years in jail.

Investigators also searched the offices of URB Inc., a Lincolnwood-based real estate buyer, on Tuesday. A search warrant application filed in court by investigators claimed that the owners of URB were involved in the scheme, providing cheaply bought houses to Faulkner, who in turn sold them at inflated prices to victims.

No URB officials have been charged in the case.

The investigation into mortgage fraud began in May, growing out of an ongoing gang intelligence probe of Gangster Disciples drug dealing on the South Side, said Police Supt. Philip Cline.

More than a dozen Chicago police and suburban officers descended on Faulkner's half-million-dollar house in the 7800 block of Joliet Drive North at 7 a.m. Tuesday morning, taking with them five luxury cars, including a Maybach worth more than $150,000 and a Bentley prosecutors valued at $193,000.

According to the search warrant application, this is how Faulkner's schemes worked:

Real estate dealer Brian Urbanowski, who runs URB and another firm, XEZ Inc., bought numerous distressed South Side properties for low prices, many of them acquired at tax auctions.

(Urbanowski has not been charged with any crime, and he could not be reached for comment Tuesday evening. He is described in the search warrant application as a Faulkner "confederate" who profits from Faulkner's allegedly fraudulent transactions.)

Faulkner would locate victims with an unsophisticated understanding of real estate transactions and entice them into becoming a real estate "investor," promising they would reap a windfall profit with no up-front money, according to the search warrant application. Faulkner would then select an URB or XEZ property and offer it for sale to the "investor."

Faulkner would bring the victim to Navascues, a mortgage broker, who would create a mortgage application that inflated the would-be investor's income, assets and savings, making the applicant appear credit-worthy when in fact he or she was not, according to the search warrant application.

Then an appraiser in Palos Heights would assess the property at a "wildly inflated price," the search warrant application said. The appraiser has not been charged with any crime. Police searched that Palos Heights office Tuesday.

The victim would obtain a mortgage loan and buy the home at the inflated price. At the closing, the loan proceeds were wired to Urbanowski, or URB, according to the search warrant application. Urbanowski or his company "reaps a huge profit, usually amounting to 200 percent of investment," the application said.

The victim, meanwhile, is left with a dilapidated building and a mortgage he or she cannot repay.

Faulkner declined to comment as he was led out of his Tinley Park house in handcuffs late Tuesday morning, using a beige suede jacket to cover his face.

Police said they conducted similar raids at other locations, including the appraiser's office, URB's headquarters, homes owned by Navascues in Bucktown and Wicker Park, the Northwest Side office of his firm, Hammer Financial, and another house in Country Club Hills.

Authorities say they've seized all of Faulkner's assets, from the cars and flat-screen televisions to the pants he was wearing at the time of his arrest. He has two young children, including a young boy who was present at the time of his father's arrest.

Neighbors said they had noticed Faulkner's extravagant lifestyle, especially the cars.

"He told me he was in the rehab business," said James DeMarie, who has lived on the block for 12 years. "They didn't seem to be home a lot."

DeMarie said the suspect moved to the neighborhood in July. DeMarie said that when the suspect was married last summer, a chartered bus carried his relatives to the neighborhood to celebrate; unfortunate timing for DeMarie, who was supposed to show his house to prospective buyers and worried about the ruckus.

Still, he described his neighbor as a friendly man who once offered cash to buy an expensive motorcycle from DeMarie.

Faulkner took pains to look legitimate, handing out a business card saying he worked for a company called Reliable Rehab, based in Chicago's South Side. The card also noted he was an "URB agent."

Art Hannus, a former Chicago police detective who lives behind the suspect, said he had long suspected something was awry.

Although the subdivision is one of the most stately in Tinley Park, no one else in town is driving a Bentley, he said.