Business partner of suspended North Miami Mayor Lucie Tondreau pleads guilty to mortgage fraud
07/16/2014 2:51 PM
07/16/2014 9:30 PM
A former business partner of Lucie Tondreau, the suspended North Miami mayor, has turned against her in a federal mortgage-fraud case that threatens to send her to jail and end her political career.
Karl Oreste pleaded guilty in federal court Wednesday to organizing an $11 million mortgage-fraud scheme that he now says he once ran with Tondreau.
Oreste admitted in Miami federal court that he went on Haitian-American radio programs with Tondreau to lure listeners into their alleged conspiracy against eight lenders, including major banks such as Wachovia.
According to his plea agreement, they recruited “straw” buyers to obtain fraudulent loans to purchase more than 20 homes during the real estate boom, then lined their own pockets with much of the proceeds.
Oreste, 56, of Miramar, who was charged in May along with Tondreau, 54, and two other defendants, agreed to cooperate with federal prosecutors in the hope of gaining a more lenient sentence.
“Mayor Tondreau is surprised by this development,” said her defense attorney, Ben Kuehne. “But she is confident that, as long as Mr. Oreste testifies to the truth, it will be evidence of her vindication.”
Oreste faces up to 30 years in prison on his wire-fraud conspiracy conviction. His sentencing is scheduled for Nov. 14 before U.S. District Judge Robert Scola.
Because Oreste has agreed to assist the U.S. attorney’s office against Tondreau and the other defendants, he is likely to be treated more leniently, with a sentence in the three- to five-year range. The prosecutor’s office indicated in the plea agreement that it would recommend a sentence reduction if he provided “substantial assistance.”
“He’s accepted responsibility, and he’s sorry for what he got into,” said Oreste’s defense attorney, Frank Rubino. “He’s going to provide information on all of the people who were involved.”
North Miami City Council member Scott Galvin said he was not surprised that Oreste took the plea deal, and thinks Tondreau’s chances of beating the charges have moved from “dim” to “bleak.”
“When you’re dealing with a group of people, it logically makes sense that somebody is going to turn on the others,” Galvin told the Miami Herald. “Now she’s fighting the FBI and one of her own co-defendants.”
Former council member Jacques Despinosse said he would be “waiting and watching” to see what happens now that Oreste has taken the plea deal.
“As far as I’m concerned, she’s innocent until proven guilty,” Despinosse said. “But it’s going to be very hard for her to clear herself.”
According to an indictment, Tondreau and Oreste co-hosted Creole-language radio talks shows that advertised loan services through his brokerage business, KMC Mortgage Corp. They reeled in the straw borrowers who filed bogus loan applications to buy the South Florida homes from 2005 to 2008, the indictment said.
The future mayor and her business partner paid off the straw buyers, another recruiter and a title company attorney, but kept most of the loan proceeds to enrich themselves and keep the mortgage-fraud scheme alive, according to the indictment filed by prosecutor Lois Foster-Steers.
A factual statement filed with Oreste’s plea agreement said that some listeners of the radio shows allowed their credit information to be used to obtain loans in their names. Oreste picked out the properties that they purportedly bought, but never lived in.
“Oreste and Tondreau also recruited family members, employees and other individuals who knew them to be political activists in the Haitian-American community to act as straw buyers,” the statement said. “Straw buyers were usually paid for allowing their credit information to be used.”
Charged along with Tondreau and Oreste were two other defendants, Okechukwu Josiah Odunna, 49, a disbarred Lauderdale Lakes lawyer now considered a fugitive, and Kelly Augustin, 57, a former North Miami recruiter for Oreste’s mortgage firm.
The defendants were accused of using Tondreau’s business, Tondreau and Associates, and Augustin’s company, Henriette Home Health Care, as the supposed employers of several of the straw buyers.
The borrowers’ loan applications included “misrepresentations” of their income, assets, employers and that they would use the purchased properties as their primary residences, according to the statement in Oreste’s plea agreement.
Oreste and Tondreau also “vastly inflated” home sales prices to obtain fraudulently higher loans from lenders, the statement said. Tondreau is accused of using the funds deposited into a “shell” company, LTO Investment Corp., to make mortgage payments, pay straw borrowers and to spend on herself, according to the statement. She also collected and deposited rental payments from the acquired properties.
In May, FBI agents tried to arrest Tondreau at her North Miami home, but she was attending a convention in Las Vegas at the time. Tondreau flew back to Miami the next day to plead not guilty to mortgage-fraud conspiracy and other charges — then emerged from the federal courthouse to declare her innocence.
Confronted by a throng of media, Tondreau pledged to her constituents that she would beat the charges, but she ducked questions about Gov. Rick Scott’s order suspending her from office.
“I’m innocent, and I’m sure my attorneys and my community will be with me,” she said. “All I have to say is, North Miami, stand tall.”
The federal charges were just the latest legal troubles for Tondreau, who in June 2013 became the city’s first Haitian-American female mayor. She handily defeated Kevin Burns, a white candidate, in an election fraught with racial tensions because of the changing demographics of one of Miami-Dade’s largest cities.
But her campaign quickly faced state scrutiny. Last year, state prosecutors linked online absentee-ballot requests made in bulk to her campaign office. Florida law prohibits ballot requests to come from anyone other than voters themselves or their family members.
Tondreau has not been charged in that inquiry, and has denied any wrongdoing.
Miami Herald Staff Writer Lance Dixon contributed to this report.
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