DOB: Joseph E. Ventura, Findings of Fact, Conclusions of Law and Order

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IN THE MATTER OF:

JOSEPH E. VENTURA

    ("Respondent")

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FINDINGS OF FACT,
CONCLUSIONS OF LAW
AND ORDER 


I.  FINDINGS OF FACT

1. The Banking Commissioner (“Commissioner”) is charged with the administration of Part I of Chapter 668, Sections 36a-485 to 36a-534a, inclusive, of the Connecticut General Statutes, “Lenders, Brokers and Originators” (“Mortgage Act”).
2. On May 7, 2007, the Commissioner issued a Notice of Intent to Issue Order to Cease and Desist (“Order”), Notice of Intent to Impose Civil Penalty (“Civil Penalty Notice”) and Notice of Right to Hearing (collectively “Notice”) against Respondent.  (Ex. DOB 1.)
3. On May 7, 2007, the Notice was sent by registered mail, return receipt requested, to Joseph E. Ventura, 6 Coventry Lane, Oxford, Connecticut 06478, registered mail no. RB028033967US.  (Ex. DOB 1.)
4.
The Notice asserted that:
a. From December 20, 2002 to December 20, 2004, Respondent was employed with Fairfield Financial Mortgage Group, Inc. (“FFMG”), a corporation that was licensed as a first mortgage lender/broker and a secondary mortgage lender/broker under Part I of Chapter 668 of the Connecticut General Statutes.
b. Respondent was registered with the State of Connecticut Department of Banking (“Department”) as an originator with FFMG from June 3, 2003 to December 20, 2004.
c. On July 3, 2003, Respondent purchased a property in Oxford, Connecticut (“Oxford Property”), as his primary residence for $422,000.  Respondent obtained a first mortgage loan from BNC Mortgage Inc. (“BNC”), a corporation that was licensed as a first mortgage lender/broker and a secondary mortgage lender/broker under Part I of Chapter 668 of the Connecticut General Statutes, in the amount of $358,700 for the purchase, leaving a balance of $67,354.85, including closing costs, to be paid by Respondent at the closing.  The $67,354.85 was received by the settlement agent by wire transfer on the day of the closing.  FFMG acted as a first mortgage broker in obtaining such loan.
d. Also on July 3, 2003, Respondent obtained a secondary mortgage loan from FFMG in the amount of $63,417.85.
e. Respondent had sold his previous home in New Milford, Connecticut, on May 23, 2003.  At the closing, Respondent was required to pay $34,863.41 to pay off various obligations.  In response to BNC’s request for verification that Respondent had the requisite $67,354.85 to close the transaction, Respondent provided a HUD-1 settlement statement that purportedly was for the financing of the purchase of the New Milford home by the buyers (“HUD-1”).  The HUD-1 was dated June 20, 2003, and reflected that Respondent received a credit of $73,563.72 at the closing, whereas he actually had to pay $34,863.41.
f. In connection with the processing of the loan from BNC, Respondent provided an Escrow Letter dated June 27, 2003, that purported to be from Superior Closing Services, LLC (“SCS”), and was signed by Attorney George T. Holler.  The Escrow Letter stated that SCS was holding the sum of $73,563.72 from Joseph and Tina Ventura as a deposit on the purchase of the Oxford Property.  According to Attorney Holler, he did not recognize or sign the Escrow Letter, nor did he receive $73,563.72 as deposit monies from Respondent on or before June 27, 2003.
g. BNC’s underwriting guidelines required that a loan made to an employee of a mortgage broker be fully documented with respect to the borrower’s income, and stated that BNC takes additional steps to ensure that the loan is an arm’s length transaction.
h.
The loan application completed by Respondent for the loan on Respondent’s Oxford Property (“Application”) omitted to mention the debt of $63,417.85 owed to FFMG for the second mortgage on the Oxford Property, and that Respondent was employed by FFMG.  The loan was submitted as a “Stated Income” loan that does not require verification of income instead of a fully documented loan, which BNC requires for employees of mortgage brokers.
i.
The Application falsely stated that:
 
(1)  As the owner of Bravent Industries LLC, Respondent had been self-employed for four years and earned $10,000 per month from the company.
(2) Respondent owned, with family, a property in Watertown, Connecticut (“Watertown Property”), valued at $385,000.
(3) Respondent had $97,000 in an account at Union Savings Bank, when the highest balance in the account prior to the closing was only $19,465.65, after deposit of a payroll check from Respondent for $18,347.41.
(Ex. DOB 1.)
5.
The Notice asserted that the statements in the HUD-1, Escrow Letter and Application provided by Respondent constitute violations of Section 36a-56 of the Connecticut General Statutes, which form the basis for the issuance of an order to cease and desist pursuant to Section 36a-52(a) of the Connecticut General Statutes, and an order imposing civil penalty pursuant to Section 36a-50(a) of the Connecticut General Statutes, in that they were false statements made with intent to defraud and for the purpose of influencing the action of a mortgage lender licensee in making loans and upon which the lender relied in making the loan.  (Ex. DOB 1.)
6.
The Notice asserted that the statements in the HUD-1, Escrow Letter and Application provided by Respondent form the basis under Sections 36a-494(b) and 36a-517(b) of the Connecticut General Statutes for the issuance of an order to cease and desist pursuant to Section 36a-52(a) of the Connecticut General Statutes, and an order imposing civil penalty pursuant to Section 36a-50(a) of the Connecticut General Statutes, in that Respondent committed a fraud, misrepresented, concealed, suppressed, intentionally omitted or otherwise intentionally failed to disclose material particulars of a mortgage loan transaction to a lender entitled to such information. (Ex. DOB 1.)
7. The Notice asserted that the statements in the HUD-1, Escrow Letter and Application provided by Respondent constitute violations of Section 36a-53b of the Connecticut General Statutes, which form the basis for the issuance of an order to cease and desist pursuant to Section 36a-52(a) of the Connecticut General Statutes, and an order imposing civil penalty pursuant to Section 36a-50(a) of the Connecticut General Statutes, in that Respondent, in connection with the activity for which he was registered, employed a device, scheme or artifice to defraud, made untrue statements of material facts or engaged in acts, practices or a course of business which operated as a fraud or deceit upon lenders.  (Ex. DOB 1.)
8. The Notice stated that the Commissioner intends to issue an order requiring Respondent to cease and desist from violating Sections 36a-53b and 36a-56 of the Connecticut General Statutes and that the Commissioner intends to impose a civil penalty upon Respondent not to exceed One Hundred Thousand Dollars ($100,000), subject to his right to a hearing on the allegations set forth above.  (Ex. DOB 1.)
9. The Notice stated that a hearing would be granted to Respondent concerning the allegations set forth in the Notice if a written request for a hearing was received by the Department within fourteen (14) days following his receipt of the Notice.  (Ex. DOB 1.)
10. The Notice stated that if Respondent did not request a hearing within the prescribed time period, the Commissioner will issue an Order that Respondent cease and desist from violating Sections 36a-53b and 36a-56 of the Connecticut General Statutes and may order that a civil penalty of One Hundred Thousand Dollars ($100,000) be imposed on Respondent.  (Ex. DOB 1.)
11. On May 29, 2007, Respondent filed an Appearance and Request for Hearing dated May 22, 2007, on behalf of himself.  (Ex. DOB 1.)
12. On June 6, 2007, the Commissioner issued a Notification of Hearing and Designation of Hearing Officer.  (Ex. DOB 1.)
13. Pursuant to the Notification of Hearing and Designation of Hearing Officer, Attorney Paul A. Bobruff, was appointed Hearing Officer.  (Ex. DOB 1.)
14. By letter dated July 10, 2007, Hearing Officer Bobruff rescheduled the hearing to August 6, 2007.  (Ex. DOB 2.)
15. By letter dated August 6, 2007, Hearing Officer Bobruff rescheduled the hearing to August 15, 2007.  (Ex. DOB 3.)
16. By letter dated August 13, 2007, Hearing Officer Bobruff rescheduled the hearing to November 15, 2007.  (Ex. DOB 4.)
17. The hearing was held on November 15, 2007, at the Department.  (Tr. November 15, 2007 (“Tr. 1”); Tr. November 15, 2007, Executive Session (“Tr. 2”).)
18. Respondent appeared at the hearing on his own behalf.  (Tr. 1 at 2; Ex. DOB 1.)
19. Attorneys Nirja Savill and Stacey Serrano Sarlo appeared at the hearing on behalf of the Department.  (Tr. 1 at 5; Ex. DOB 1.)
20. FFMG hired Respondent as a loan originator on December 20, 2002.  (Tr. 1 at 53 and Tr. 2 at 76; Ex. DOB 9.)
21. FFMG is a corporation that was licensed in Connecticut as a first mortgage lender/broker and a secondary mortgage lender/broker under Part I of Chapter 668 of the Connecticut General Statutes.  (Tr. 1 at 112 and Tr. 2 at 64-65.)
22. Respondent became registered with the Department as an originator with FFMG on June 3, 2003, and renewed his registration with FFMG on October 1, 2004.  (Tr. 1 at 53 and Tr. 2 at 76; Exs. DOB 9 and 10.)
23. Respondent’s employment with FFMG as a loan originator terminated as of December 20, 2004.  (Tr. 1 at 52 and 73-74; Ex. DOB 8.)
24. While employed as an originator by FFMG, Respondent signed the Application which was dated July 3, 2003, to obtain a residential mortgage loan to purchase the Oxford Property.  Respondent certified that the information in the Application was true and accurate as of July 3, 2003.  (Tr. 2 at 28-29, 60, 77-78 and 118; Ex. E-2.)
25. BNC is a corporation that was licensed as a first mortgage lender/broker and a secondary mortgage lender/broker under Part I of Chapter 668 of the Connecticut General Statutes.  (Tr. 1 at 112 and Tr. 2 at 65.)
26. The Application was originally submitted to BNC to obtain a loan for 80% of the purchase price of the Oxford Property.  However, on July 3, 2003, Respondent obtained a first mortgage loan from BNC for 85% of the purchase price of the Oxford Property.  (Tr. 2 at 28-29, 32, 81, 102-03, 114, 118 and 121; Exs. E-2, E-4 and E-6.)
27. On July 3, 2003, Respondent purchased the Oxford Property as his primary residence.  (Tr. 2 at 32; Ex. E-4.)
28. FFMG acted as a first mortgage broker for the first mortgage loan from BNC for the purchase of the Oxford Property.  (Tr. 2 at 65 and 81.)
29. BNC’s underwriting guidelines required that a loan made to an employee of a mortgage lender/broker that is an originating entity be fully documented with respect to the borrower’s income.  In addition, BNC’s policy required that BNC takes additional steps to ensure that a loan to an employee of an originating entity is an arm’s length transaction.  (Tr. 2 at 33-36; Ex. E-5.)
30. Respondent was aware that a loan had to meet BNC’s underwriting guidelines.  (Tr. 2 at 81.)
31. The Application stated that Respondent was to pay cash for the balance of the purchase price of the Oxford Property after the loan from BNC, including closing costs, at the closing.  (Tr. 2 at 32-34 and 121; Exs. E-2 and E-4.)
32. The Application required that Respondent disclose the “Source of Down Payment Settlement Charges and/or Subordinate Financing (explain)”.  Respondent answered this question by replying “Checking/Savings.”  (Ex. E-2.)
33. The Application had a place for listing Respondent’s checking and savings accounts.  Respondent listed one checking account identified by account number and stated a specific balance in the checking account that was more than 20% of the purchase price of the Oxford Property.  (Tr. 2 at 29 and 40; Ex. E-2.)
34. During the relevant period, the balance in Respondent’s checking account was significantly less than the balance stated in the Application.  The highest balance in Respondent’s checking account during the relevant period was less than 25% of the amount listed in the Application, and this balance was only achieved after a large deposit on July 3, 2003.  (Tr. 2 at 40; Ex. E-2.)
35. Respondent knew that his checking account did not contain sufficient funds to pay 15% of the purchase price of the Oxford Property.  (Tr. 2 at 40 and 119; Ex. E-2.)
36. Respondent obtained the funds for 15% of the purchase price of the Oxford Property from a loan from FFMG that was secured by a second mortgage on the Oxford Property dated July 3, 2003.  (Tr. 2 at 29-31 and 120; Ex. E-3.)
37. The Application failed to disclose that Respondent was obtaining a loan from FFMG to pay 15% of the purchase price for the Oxford Property.  (Tr. 2 at 29 and 32; Exs. E-2 and E-4.)
38. The Application did not indicate that any part of the payment for the purchase of the Oxford Property in excess of the amount of the loan from BNC was borrowed.  (Tr. 2 at 29-30 and 136; Ex. E-2.)
39. The documents submitted to BNC indicated that there was no subordinated financing for the purchase of the Oxford Property and BNC was not aware of and did not approve secondary financing for the purchase of the Oxford Property.  (Tr. 2 at 32, 34 and 37-38; Exs. E-2, E-4, E-5 and E-6.)
40. The settlement statement for the purchase of the Oxford Property indicates that 15% of the purchase price of the Oxford Property was cash from Respondent.  The settlement statement did not indicate that Respondent was obtaining these funds from a loan or a second mortgage.  (Tr. 2 at 32 and 121; Ex. E-4.)
41. BNC did not have knowledge of the second mortgage dated July 3, 2003, or any additional financing for the purchase of the Oxford Property.  (Tr. 2 at 32-33 and 37-38; Exs. E-4 and E-6.)
42. BNC’s underwriting guidelines required that BNC needed to approve additional financing for the purchase of the Oxford Property in writing.  Respondent’s loan from FFMG was not approved by BNC.  (Tr. 2 at 38; Ex. E-5.)
43. Respondent’s failure to disclose to BNC the existence of a loan given by FFMG to Respondent, the proceeds of which were used to pay 15% of the purchase price of the Oxford Property, violated BNC’s underwriting guidelines.  (Tr. 2 at 34; Ex. E-5.)
44. Respondent was aware that he was obtaining 100% financing for the purchase of the Oxford Property when he signed the Application.  Respondent received 85% of the purchase price from a loan from BNC, and 15% of the purchase price from a loan from FFMG.  (Tr. 2 at 104-05 and 118-19; Exs. E-4 and E-5.)
45. The loan from FFMG was not listed as a liability in the Application, and was not listed as additional financing.  (Tr. 2 at 136 and 139; Ex. E-2.)
46. Respondent admits that he did not disclose the loan from FFMG in the Application.  Respondent contends that he was not required to disclose the loan from FFMG because it was a personal loan.  (Tr. 2 at 135.)
47.
The Application did not exempt personal loans or mortgage loans from disclosure.  The Application and BNC required that Respondent disclose all outstanding debts including loans or other financing.  (Exs. E-2 and E-5.)
48. The Application failed to disclose that Respondent was employed by FFMG.  (Tr. 2 at 35, 139 and 141; Exs. E-2 and E-5.)
49.
The Application was submitted as a stated income loan for BNC’s stated income loan program, which does not require verification of income, instead of a fully documented loan, which BNC requires for employees of mortgage companies.  (Tr. 2 at 36 and 103; Exs. E-2, E-5 and E-6.)
50. The Application stated that Respondent had been self-employed for four years, listed the name of the business with a business phone number, listed the position/title/type of business as manufacturing consultant, and listed his monthly income.  (Tr. 2 at 35; Exs. E-2 and E-5.)
51. Respondent was not self-employed at the time he signed the Application, and he did not earn the monthly income listed in the Application from self-employment.  Respondent did not disclose to BNC that he was an employee of FFMG at the time he submitted the Application to BNC.  (Tr. 2 at 35, 87, 124 and 127; Exs. E-2, E-5 and E-12.)
52.
The employment history listed on Respondent’s resume that was submitted to the Department in 2005 was inconsistent with the employment information in the Application.  Respondent’s resume accurately listed his employer from October 2002 to December 2004 as FFMG, and indicated that his self employment had ended in September 2002.  (Tr. 1 at 54-56; Exs. DOB 11 and E-2.)
53. Loans to a mortgage broker or a mortgage broker’s employees are required by BNC to be a fully documented loan with respect to the borrower’s information and additional steps are taken to ensure the loan is an arm’s length transaction.  (Tr. 2 at 34-35; Ex. E-5.)
54. If Respondent’s status as an employee of FFMG had been disclosed, BNC would have required the Application to be fully documented; and Respondent would have been required to establish his income with W-2’s and 1099’s or other documentation showing his true income.  (Tr. 2 at 34 and 36; Ex. E-5.)
55. A representative of FFMG contacted Respondent regarding the statement in the Application that Respondent was self-employed, and Respondent stated “yes” that he was self-employed.  (Tr. 2 at 89 and 124.)
56. Respondent admits that he was partially responsible for failing to inform BNC that he was employed by FFMG and for the false statement that he was self-employed.  (Tr. 2 at 139.)
57. The Application listed the Watertown Property as being owned by Respondent and other members of his family, and listed a present market value in excess of the mortgage lien on the Watertown Property.  (Tr. 2 at 40-41; Ex. E-2.)
58. Respondent did not own the Watertown Property that was listed in the Application.  (Tr. 1 at 43-44 and Tr. 2 at 40-41; Ex. DOB 6.)
59.
Respondent acknowledges that the Application contains false statements that were put in the Application in an effort to secure a mortgage for Respondent, and that the false statements “are consistent with what was needed in order for that application to be approved.”  Respondent admits that he signed the Application that contained false information.  (Tr. 2 at 77-79, 107-08 and 127.)
60. In May 2003 a property in New Milford, Connecticut (“New Milford Property”) was sold.  The transaction was documented in a HUD-1 settlement statement dated May 23, 2003, which documents that the seller did not receive any funds at the closing from the sale and had to pay off various obligations.  (Tr. 1 at 50-51 and Tr. 2 at 45-49 and 121-23; Ex. E-8.)
61. BNC was provided a false HUD-1 settlement statement dated June 20, 2003, that purported to be for the sale of the New Milford Property that differed from the actual HUD-1 settlement statement dated May 23, 2003.  The falsified HUD-1 settlement statement listed Respondent as a seller of the New Milford Property, inflated the sales price for the property and indicated that Respondent received money from the sale of the property when in actuality the seller owed money to pay off various obligations.  BNC did not receive the HUD-1 settlement statement dated May 23, 2003, from the May 2003 closing.  (Tr. 2 at 45-49 and 122-23; Ex. E-9.)
62.
The Oxford Property went into foreclosure due to Respondent’s failure to make mortgage payments.  (Tr. 2 at 107; Ex. E-13.)
 

II.  CONCLUSIONS OF LAW

The Commissioner is charged with the administration of the Mortgage Act.  The Commissioner’s broad regulatory authority includes the power to impose civil penalties pursuant to Section 36a-50(a) of the Connecticut General Statutes; and issue orders to cease and desist pursuant to Section 36a-52 of the Connecticut General Statutes.

Section 36a-50(a) of the Connecticut General Statutes provides, in pertinent part, that:

(1) Whenever the commissioner finds as the result of an investigation that any person has violated any provision of the general statutes within the jurisdiction of the commissioner, . . . the commissioner may send a notice to such person by registered . . . mail, return receipt requested . . . .  The notice shall be deemed received by the person on the earlier of the date of actual receipt or seven days after mailing or sending.  Any such notice shall include:  (A) A statement of the time, place, and nature of the hearing; (B) a statement of the legal authority and jurisdiction under which the hearing is to be held; (C) a reference to the particular sections of the general statutes . . . alleged to have been violated; (D) a short and plain statement of the matters asserted; (E) the maximum penalty that may be imposed for such violation; and (F) a statement indicating that such person may file a written request for a hearing on the matters asserted within fourteen days of receipt of the notice.

(2)  If a hearing is requested within the time specified in the notice, the commissioner shall hold a hearing upon the matters asserted in the notice unless such person fails to appear at the hearing.  After the hearing, if the commissioner finds that the person has violated any such provision, . . . the commissioner may, in the commissioner’s discretion and in addition to any other remedy authorized by law, order that a civil penalty not exceeding one hundred thousand dollars per violation be imposed upon such person. . . .

(3)  Each action undertaken by the commissioner under this subsection shall be in accordance with the provisions of chapter 54.

Section 36a-52(a) of the Connecticut General Statutes provides, in pertinent part, that:

Whenever it appears to the commissioner that any person has violated, is violating or is about to violate any provision of the general statutes within the jurisdiction of the commissioner, . . . the commissioner may send a notice to such person by registered . . . mail, return receipt requested . . . .  The notice shall be deemed received by the person on the earlier of the date of actual receipt, or seven days after mailing or sending.  Any such notice shall include:  (1) A statement of the time, place, and nature of the hearing; (2) a statement of the legal authority and jurisdiction under which the hearing is to be held; (3) a reference to the particular sections of the general statutes . . . alleged to have been violated; (4) a short and plain statement of the matters asserted; and (5) a statement indicating that such person may file a written request for a hearing on the matters asserted within fourteen days of receipt of the notice.  If a hearing is requested within the time specified in the notice, the commissioner shall hold a hearing upon the matters asserted in the notice, unless the person fails to appear at the hearing.  After the hearing, the commissioner shall determine whether an order to cease and desist should be issued against the person named in the notice. . . .  No such order shall be issued except in accordance with the provisions of chapter 54.


A.  Violation of Section 36a-56 of the Connecticut General Statutes
 
The Department has alleged that statements in the HUD-1, Escrow Letter and Application provided by Respondent to BNC in connection with the loan to purchase the Oxford Property constitute violations of 36a-56 of the Connecticut General Statutes in that they were false statements made with intent to defraud and for the purpose of influencing the action of a mortgage lender licensee in making loans and upon which the lender relied in making the loan.  The Department contends that these violations form the basis of an order to cease and desist pursuant to Section 36a-52(a) of the Connecticut General Statutes, and an order imposing civil penalty pursuant to Section 36a-50(a) of the Connecticut General Statutes.

Section 36a-56 of the Connecticut General Statutes provides, in pertinent part, that:

Any person who knowingly makes any false statement . . . with intent to defraud and for the purpose of influencing in any way the action of . . . any first or secondary mortgage lender or broker licensee, upon any application, advance, commitment, loan or extension of credit, or any . . . refinancing thereof, . . . and upon which such . . . licensee relies in taking such action, shall be fined not more than five hundred dollars or imprisoned not more than one year, or both.  A finding by the commissioner as a result of an investigation of any such making . . . shall be considered a violation of this section for purposes of the administrative enforcement of sections 36a-50 to 36a-53, inclusive.

The record reveals that Respondent obtained a loan funded by BNC for 85% of the purchase price of the Oxford Property by providing documents to BNC, including the Application signed by Respondent, which contained false statements.  Respondent acknowledges that the Application contains false statements that were put in the Application in an effort to secure a mortgage for Respondent, and that the statements are consistent with the information needed in order for the Application to be approved.  The Application listed the source of Respondent’s funds to pay the balance of the purchase price of the Oxford Property as Respondent’s checking/savings account, and listed a balance in his checking account that was more than sufficient to make this payment.  The record reveals that the Application contained false information overstating the amount of cash in Respondent’s checking account.  Respondent acknowledges that he knew that he did not have sufficient funds to pay the remaining balance of the purchase price in his checking or savings account, and that he was getting a loan for the remaining 15% of the purchase price.  The actual source of the funds for the remaining 15% balance of the purchase price of the Oxford Property was from a loan that Respondent obtained from FFMG, which was secured by a second mortgage dated July 3, 2003.  However, the Application signed by Respondent failed to disclose the loan from FFMG, and did not indicate that any part of the payment to be paid by Respondent at the closing in excess of the amount of the loan from BNC was borrowed.

Regarding Respondent’s failure to disclose the loan from FFMG in the Application, Respondent’s contends that he did not have to disclose the loan because it was a personal loan and, therefore, he was not required to disclose the promissory note.  However, the Application specifically required that Respondent disclose the “Source of Down Payment Settlement Charges and/or Subordinate Financing”.  Not only did Respondent fail to disclose the loan from FFMG to BNC, which was the source of 15% of the funds to purchase the Oxford Property, but Respondent falsely listed his checking account as the source of the funds for the balance of the purchase price.  In addition, the Application listed a balance in Respondent’s checking account that was inflated and more than sufficient to pay balance of the purchase price of the Oxford Property remaining after BNC’s loan.

The record reveals that BNC did not have any knowledge that Respondent was obtaining additional financing to complete the transaction.  BNC required that any secondary financing for the purchase of the Oxford Property be approved in writing.  As a result of Respondent’s failure to disclose that he was obtaining additional financing to complete the transaction, Respondent’s secondary financing for 15% of the purchase price of the Oxford Property was not considered or approved by BNC.  Respondent was aware that his loan had to meet BNC’s underwriting criteria and that the existence of a loan given by FFMG to Respondent, the proceeds of which were used to pay the remaining 15% purchase price of the Oxford Property, may have made a difference in BNC’s underwriting decision.

In addition, the Application stated that Respondent was self-employed for the past four years and earned $10,000 per month from this self-employment.  In fact, Respondent’s company was inactive and Respondent was actually employed by FFMG when he signed the Application and certified that the information in the Application was true and accurate as of July 3, 2003.  When Respondent was contacted by telephone by a representative of FFMG to confirm the information he provided regarding his employment, Respondent reaffirmed his status as self-employed.  The record reveals that BNC did not have any knowledge that Respondent was employed by FFMG.  If Respondent had disclosed his status as an employee of FFMG, Respondent would have been required to submit the Application as a fully documented loan with proof of his income.  BNC relied on Respondent’s false statements in making the loan to Respondent.  Respondent admits that he signed the Application that contained false information, and that he was partially responsible for the statement that he was self-employed and for the failure to disclose that he was employed FFMG.  Respondent also blames FFMG for the false statements because he claims that they also submitted false information to BNC in order to get him the loan.

The record also reveals that the Application listed the Watertown Property as being owned by Respondent with other members of his family, which was valued in excess of the mortgage lien on the Watertown Property.  In fact, Respondent did not own the Watertown Property.  In addition to the Application that contained false statements, the record reveals that BNC was provided a falsified HUD-1 settlement statement that inflated the sales price of the New Milford Property and decreased the amount owed, resulting in the settlement statement falsely indicating that Respondent received money from the sale of the New Milford Property when in actuality the seller owed money to pay off various obligations.

The record establishes that Respondent’s false statements regarding his assets, liabilities, income and employment in the documents submitted to BNC to obtain a loan to purchase the Oxford Property were made with the intent to defraud BNC.  Respondent’s false statements were made for the purpose of influencing BNC’s decision regarding whether to make the loan to Respondent.  The record establishes that Respondent signed the Application with falsified and omitted information with the intent to deceive BNC.  Respondent accepts partial responsibility for the false statements and omissions in the documents submitted to BNC.  Respondent contends that FFMG filled out the Application and submitted other documents to BNC.  The record also establishes that Respondent knowingly made false statements when he signed the Application thereby certifying that the information in the Application was true and accurate when he knew the Application contained false information.  Respondent asserts that the fact that his residence was being foreclosed on and his family was living apart are reasons that support his contention that he signed the Application without paying attention and that he was not responsible for putting the false information in the Application.  However, Respondent knew that he was obtaining 100% financing for the purchase of the Oxford Property and that he was employed by FFMG and not self-employed, which was not disclosed to BNC.  Not only was this information not disclosed to BNC, but when Respondent was questioned regarding his employment by a representative of FFMG, he confirmed that he was self-employed, notwithstanding the fact that none of the income that he reported in the Application came from self-employment.  Respondent was aware that his business was inactive, and that he did not disclose that the source of his income was his employment with FFMG.  Respondent claims that it was permissible to state that he was self-employed and to omit the source of his income and current employer from the Application because his inactive business had not been legally dissolved.  Respondent also claims that he was not aware that his employment with FFMG would have affected BNC’s underwriting decision.  Respondent’s claims are not credible.

The false information submitted by Respondent was for the purpose of influencing BNC’s decision whether to make the first mortgage loan, and BNC relied on Respondent’s false statements in the determination whether to make the loan.  Therefore, the record establishes that Respondent made false statements with intent to defraud and for the purpose of influencing in any way the action of a first mortgage lender or broker licensee, upon any application, or loan which the licensee relied in taking such action.  Accordingly, Respondents false statements are a violation of Section 36a-56 for purposes of the administrative enforcement of Sections 36a-50(a) and 36a-52(a) of the Connecticut General Statutes.


B.  Sections 36a-494(b) and 36a-517(b) of the Connecticut General Statutes
 
The Department has alleged that statements in the HUD-1, Escrow Letter and Application provided by Respondent to BNC in connection with the loan to purchase the Oxford Property form the basis under Sections 36a-494(b) and 36a-517(b) of the Connecticut General Statutes for the issuance of an order to cease and desist pursuant to Section 36a-52(a) of the Connecticut General Statutes, and an order imposing civil penalty pursuant to Section 36a-50(a) of the Connecticut General Statutes, in that Respondent committed a fraud, misrepresented, concealed, suppressed, intentionally omitted or otherwise intentionally failed to disclose material particulars of a mortgage loan transaction to a lender entitled to such information.

Section 36a-494(b) of the Connecticut General Statutes provides, in pertinent part, that:

Whenever it appears to the commissioner that any person has violated, is violating or is about to violate any of the provisions of sections 36a-485 to 36a-498a, inclusive, . . . or any . . . registrant has . . . committed any fraud . . . or misrepresented, concealed, suppressed, intentionally omitted or otherwise intentionally failed to disclose any of the material particulars of any mortgage loan transaction . . . to anyone entitled to such information, the commissioner may take action against such person . . . or registrant in accordance with sections 36a-50 and 36a-52.

Section 36a-517(b) of the Connecticut General Statutes provides, in pertinent part, that:

Whenever it appears to the commissioner that any person has violated, is violating or is about to violate any of the provisions of sections 36a-510 to 36a-524, inclusive, or any . . . registrant has . . . committed any fraud . . . or misrepresented, concealed, suppressed, intentionally omitted or otherwise intentionally failed to disclose any of the material particulars of any mortgage loan transaction . . . to anyone entitled to such information, the commissioner may take action against such person . . . or registrant in accordance with sections 36a-50 and 36a-52.

The record reveals that Respondent was registered with the Department as an originator with FFMG from June 3, 2003 to December 20, 2004.  The record further reveals that while Respondent was registered with the Department he made false statements that he knew to be false and intentionally omitted information regarding the amount of his assets, his employment and his income in the Application that was submitted to BNC.  BNC was entitled to receive complete and accurate information in the Application regarding the material particulars of the mortgage loan transaction.  However, the information in the Application submitted to obtain Respondent’s loan overvalued Respondent’s assets, misstated the amount and source of his income and failed to disclose that he was employed as an originator by FFMG which was not only involved in Respondent’s obtaining the first mortgage loan, but was providing Respondent with a loan for the 15% of the purchase price that BNC was not financing.  BNC did not have any knowledge that Respondent was obtaining additional financing to complete the transaction, that he was employed by FFMG or that his income and assets had been misstated and overvalued.  These false statements and omissions were relied on by BNC when underwriting Respondent’s first mortgage loan.

Connecticut courts have not addressed the standard for establishing fraud pursuant to Sections 36a-494(b) and 36a-517(b) of the Connecticut General Statutes.  However, it is well established under common law that the elements of fraud are (1) a false representation was made as a statement of fact; (2) it was untrue and known to be untrue by the party making it; (3) it was made to induce the other party to act upon it; and (4) the other party did act upon that false representation to his injury.  Leonard v. Commissioner of Revenue Servs., 264 Conn. 286, 296 (2003); see also, Suffield Dev. Assocs. Ltd. Partnership v. National Loan Investors, L.P., 260 Conn. 766, 777 (2002).  The record establishes the existence of all of these elements and that Respondent committed fraud.  Respondent made false representations as statements of fact that were untrue and known to be untrue by Respondent.  Respondent made these statements to induce BNC to approve a loan.  BNC relied on Respondents false representations that:  the source of Respondent’s funds to pay 15% of the purchase price of the Oxford Property was Respondent’s checking account; overvalued Respondent’s assets; and misstated the amount and source of his income.  In addition, Respondent failed to disclose that he was employed as an originator by FFMG.  FFMG was not only involved in Respondent’s first mortgage loan transaction with BNC, but FFMG was also providing Respondent with additional financing for the purchase of the Oxford Property.  BNC relied on Respondent’s false representations when it made the loan to Respondent that did not meet its underwriting criteria, and which resulted in injury to BNC when Respondent defaulted upon the loan and the Oxford Property went into foreclosure.

The record also establishes that Repondent misrepresented, concealed, suppressed, intentionally omitted or otherwise intentionally failed to disclose particulars of the mortgage loan transaction to BNC.  Respondent places much of the blame on his employer FFMG for the false information provided to BNC.  Respondent contends that FFMG, which brokered the first mortgage loan made by BNC and made the second mortgage loan, provided the information in the Application.  However, FFMG’s involvement in the transaction does not relieve Respondent of his responsibility for his statements and ommissions made to obtain the first mortgage loan from BNC.  Respondent acknowledges that he signed the Application which contained false information.  Respondent knew the Application contained false statements and omissions at the time he signed the Application.  Respondent is clearly responsible for making the false statements, which he certified were true and accurate, regarding his income, employment, assets, and source of funds for the down payment made in the Application.  Respondent is also responsible for failing to disclose his employment with FFMG, and the loan he obtained from FFMG.

The record reveals that Respondent signed the Application with falsified and omitted information with the intent to deceive and influence BNC in an effort to obtain a first mortgage loan from BNC.  The false statements which overvalued Respondent’s assets and misstated the amount and source of his income were part of BNC’s decision to underwrite the loan.  The Application gave a false and misleading representation of Respondent’s financial situation.  The information submitted and omitted by Respondent was central to BNC’s decision whether to make the first mortgage loan.  Respondent signed the Application which contained false information regarding his assets, liabilities, income and employment with the intent to deceive BNC and to influence BNC’s decision whether to make the loan.  Accordingly, the record establishes that Respondent misrepresented, concealed, suppressed, intentionally omitted or otherwise intentionally failed to disclose the particulars of a first mortgage loan transaction when he submitted the false statements and omissions to BNC.

The next question is whether Respondents false statements and omissions constitute a failure to disclose any of the material particulars of first mortgage loan transactions to any person entitled to such information within the meaning of Sections 36a-494(b) and 36a-517(b) of the Connecticut General Statutes.  The term “material” is not defined in Sections 36a-494(b) or 36a-517(b) or elsewhere in the Mortgage Act and there are no cases construing the meaning of the term as used in these sections.  Since the term “material” is not defined in the Mortgage Act, Section 1-1(a) of the Connecticut General Statutes requires that we construe the term “in accordance with the commonly approved usage of the language . . . .”  Pasquariello v. Stop & Shop Cos., 281 Conn. 656, 665 (2007) (internal quotation marks omitted).  “If a statute or regulation does not sufficiently define a term, it is appropriate to look to the common understanding of the term as expressed in a dictionary.”  Jim’s Auto Body v. Commissioner of Motor Vehicles, 285 Conn. 794, 808 (2008) (internal quotation marks omitted) (citation omitted).

A representation is “material” if it is “[o]f such a nature that knowledge of the item would affect a person’s decision-making”.  Black’s Law Dictionary 998 (8th ed. 2004).  Applying this standard, the aforementioned misstatements and omissions by Respondent were clearly “material”.  Respondent’s assets, liabilities, income and employment are material to a lender’s decision whether or not to approve the loan because it may affect the lenders’ decision as to whether Respondent met the lenders’ underwriting criteria and whether to extend the funds.  BNC was entitled to know these material particulars of the mortgage loan transaction before approving Respondent’s loan.  The record establishes that the information which Respondent misappropriated, concealed, suppressed, intentionally omitted or otherwise intentionally failed to disclose to BNC were material particulars of the mortgage loan transaction.

Accordingly, the record establishes that Respondent, a registrant of the Department, committed fraud and misrepresented, concealed, suppressed, intentionally omitted or otherwise intentionally failed to disclose material particulars of the mortgage loan transaction to BNC, a lender entitled to such information, which form the basis under Sections 36a-494(b) and 36a-517(b) of the Connecticut General Statutes for the issuance of a cease and desist order pursuant to Section 36a-52(a) of the Connecticut General Statutes and an order imposing civil penalty pursuant to Section 36a-50(a) of the Connecticut General Statutes.


C.  Violation of Section 36a-53b of the Connecticut General Statutes

The Department has alleged that statements in the HUD-1, Escrow Letter and Application provided by Respondent to BNC in connection with the loan to purchase the Oxford Property constitute violations of 36a-53b of the Connecticut General Statutes, which form the basis of an order to cease and desist pursuant to Section 36a-52(a) of the Connecticut General Statutes, and an order imposing civil penalty pursuant to Section 36a-50(a) of the Connecticut General Statutes in that Respondent, in connection with the activity for which he was registered, employed a device, scheme or artifice to defraud, made untrue statements of material facts or engaged in acts, practices or a course of business which operated as a fraud or deceit upon lenders.

Section 36a-53b of the Connecticut General Statutes provides, in pertinent part, that:

No . . . registrant shall, in connection with the activity for which such person is . . . registered:  (1) Employ any device, scheme or artifice to defraud; (2) make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading; or (3) engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.

The record reveals that while Respondent was registered with the Department he made untrue statements and omitted to state facts necessary in order to make the statements made in the light of the circumstances made not misleading regarding the amount of his assets, his employment and his income that were submitted to BNC to obtain a first mortgage loan.  The information submitted by Respondent to BNC overvalued Respondent’s assets, misstated the amount and source of his income and failed to disclose that he was employed as an originator by FFMG.  FFMG was not only involved in Respondent’s first mortgage loan transaction with BNC, but was also providing Respondent with a loan for the remainder of the purchase price of the Oxford Property that BNC was not financing.  As noted earlier, these facts were material because they were part of the information upon which BNC relied on when it made its decision to approve the Application and make the first mortgage loan to Respondent.  Respondent would not have been permitted to submit a stated income loan application if Respondent had disclosed that he was employed by FFMG and not self-employed.  In addition, BNC would have had to approve the secondary financing by FFMG for Respondent’s purchase of the Oxford Property.  As noted earlier, Respondent’s actions operated as a fraud or deceit upon BNC.  Therefore, Respondent made an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading; and engaged in an act, practice, or course of business which operated as a fraud or deceit upon BNC.  Respondent’s statements and omissions of material facts occurred while Respondent was registered with the Department as an originator with FFMG, and his actions were in connection with the activity for which he was registered.  Accordingly, Respondent in connection with the activity for which he was registered made untrue statements of material fact or omitted to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading or engaged in any act, practice, or course of business which operated as a fraud or deceit upon any person in violation of Section 36a-53b of the Connecticut General Statutes.  Respondent’s violation of Section 36a-53b of the Connecticut General Statutes forms the basis for the issuance of a cease and desist order pursuant to Section 36a-52(a) of the Connecticut General Statutes and an order imposing civil penalty pursuant to Section 36a-50(a) of the Connecticut General Statutes.


D.  Civil Penalty

The Notice provided Respondent with the opportunity for a hearing and stated that the Commissioner intends to impose a civil penalty upon Respondent not to exceed One Hundred Thousand Dollars ($100,000).  The record establishes that Respondent has violated Sections 36a-53b and 36a-56 of the Connecticut General Statutes, which violations constitute sufficient grounds to issue an order to cease and desist against Respondent pursuant to Section 36a-52(a) of the Connecticut General Statutes, and an order imposing civil penalty against Respondent for each violation pursuant to Section 36a-50(a) of the Connecticut General Statutes.  The record also establishes that Respondent has committed certain acts, which under Sections 36a-494(b) and 36a-517(b) of the Connecticut General Statutes constitute sufficient grounds to issue an order to cease and desist against Respondent pursuant to Section 36a-52(a) of the Connecticut General Statutes, and an order imposing civil penalty against Respondent pursuant to Section 36a-50(a) of the Connecticut General Statutes.

The Connecticut Supreme Court has stated that “[t]he assessment of civil penalties is a fact-specific and broadly discretionary determination.”  Rocque v. Light Sources, Inc., 275 Conn. 420, 450 (2005).  The record establishes that Respondent while registered with the Department, made false statements that he knew to be false regarding the amount of his assets, his employment and his income that were submitted to BNC, a lender, to obtain a first mortgage loan.  As noted earlier, Respondent’s contention that he did not have to disclose the loan from FFMG because it was a personal loan is inconsistent with the Application which required that Respondent disclose the “Source of Down Payment Settlement Charges and/or Subordinate Financing”.  Not only did Respondent not disclose the loan from FFMG, which was the source of additional funds to purchase the Oxford Property, but Respondent listed his checking and savings accounts as the source of the funds and listed a specific checking account with an inflated balance amount.  Regardless of FFMG’s involvement in the Application and other documents submitted to BNC, the record establishes that Respondent knowingly made false statements when he signed the Application which contained falsified information and which omitted material information with the intent to deceive BNC in order to qualify for a loan to purchase the Oxford Property.  Respondent’s claim that he believed his statements regarding his being self-employed and failure to disclose his employment with FFMG were permissible based on his inactive business not having been legally dissolved and that this information would not have affected BNC’s underwriting criteria is not credible.  When questioned to verify his employment, Respondent confirmed that he was self-employed, even though he knew that this was false since his business was inactive and he was employed by FFMG.  Respondent’s personal circumstances at the time of the purchase of the Oxford Property do not relieve Respondent of the responsibility for signing the Application with false information or for his failure to fully disclose material information in the Application.  As noted previously, Respondent knew that he was obtaining 100% financing for the purchase of the Oxford Property, and that he was employed by FFMG and not self-employed, which was not disclosed to BNC.  Respondent’s false statements regarding his assets, liabilities, income and employment were made with the intent to defraud BNC by submitting false information to meet BNC’s underwriting criteria and for the purpose of influencing BNC’s decision to make the loan.  The information submitted and omitted by Respondent were central to the decision of BNC whether to make the first mortgage loan and BNC relied on Respondent’s false statements to approve and make the loan.  Accordingly, Respondent’s violations of Sections 36a-56 and 36a-53b of the Connecticut General Statutes and Respondent’s actions under under Sections 36a-494(b) and 36a-517(b) of the Connecticut General Statutes form the basis for the Commissioner to impose a civil penalty in the amount of One Hundred Thousand Dollars ($100,000), the maximum requested by the Department.

The Commissioner finds that the Notice was given in compliance with Sections 36a-52(a), 36a-50(a)(1) and 4-177 of the Connecticut General Statutes.


IV.  ORDER

Having read the record, I hereby ORDER, pursuant to Sections 36a-52(a), 36a-50(a), 36a-494(b) and 36a-517(b) of the Connecticut General Statutes, that:

1. Joseph E. Ventura CEASE AND DESIST from violating Sections 36a-53b and 36a-56 of the Connecticut General Statutes, committing any fraud and misrepresenting, concealing, suppressing, intentionally omitting or otherwise intentionally failing to disclose any of the material particulars of any mortgage loan transaction to anyone entitled to such information;
2. Joseph E. Ventura pay a CIVIL PENALTY in the amount of One Hundred Thousand Dollars ($100,000).  The civil penalty shall be paid by cashier’s check, certified check or money order payable to “Treasurer, State of Connecticut”, no later than forty-five (45) days from the date the Order is mailed; and
3. This Order shall become effective when mailed.



Dated at Hartford, Connecticut
this 1st day of August 2008.               ________/s/_________
                                                     Howard F. Pitkin
                                                     Banking Commissioner



This Order was mailed by certified mail,
return receipt requested, to Respondent
on August 4, 2008.


Joseph E. Ventura               Certified Mail No. 7007 2680 0001 3136 7061
151 Iron Ore Hill Road
Bridgewater, CT 06752


Administrative Orders and Settlements