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Suspended North Miami mayor faces federal mortgage fraud trial

Suspended City of North Miami Mayor Lucy Tondreau talks with the media outside the United States Federal Courthouse in downtown Miami, May 20, 2014. The mayor was charged with mortgage fraud by the U.S. Attorney and posted bond.
Suspended City of North Miami Mayor Lucy Tondreau talks with the media outside the United States Federal Courthouse in downtown Miami, May 20, 2014. The mayor was charged with mortgage fraud by the U.S. Attorney and posted bond. MIAMI HERALD FILE

Lucie Tondreau came to Miami as a young immigrant who soon thrived on politics, establishing herself as an “activist” who grew into a “pillar of the Haitian community,” her defense attorney told federal jurors Tuesday.

Her popularity soared so high that last year she became the first Haitian-American woman elected as mayor of North Miami.

But well before she reached that pinnacle, Tondreau was a con woman who plotted with her business partner, Karl Oreste, to dupe banks into lending them a total of $11 million during the region’s real estate boom, a federal prosecutor told those same jurors.

Tondreau, 55, who was suspended from office after her arrest in May, faces trial in Miami federal court on charges of conspiring to commit wire fraud with Oreste and others. If convicted, Tondreau would permanently lose her mayoral seat and be subject to a potential prison sentence of up 30 years.

Tondreau and Oreste, who pleaded guilty before trial and is expected to testify for the prosecution, were not only business partners but once engaged to be married. The couple co-hosted Creole-language radio talks shows that advertised loan services through his brokerage business, KMC Mortgage Corp.

And that’s how they reeled in “straw” borrowers to file bogus loan applications to buy more than 20 South Florida homes from 2005 to 2008, Assistant U.S. Attorney Lois Foster-Steers said during opening statements.

“The radio is an important form of communication in the Haitian community,” Foster-Steers told the 12-person jury. “She brought with her a sense of credibility, a sense of trust. ... That’s one way Lucie Tondreau used her reputation to bring in straw buyers.”

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, the prosecutor said.

But the suspended mayor’s defense attorney, Michael Davis, said the prosecutor twisted things around, claiming that Tondreau was Oreste’s victim who knew nothing about his fraudulent scheme.

“Because she was an activist, she had a following,” Davis told the jury. “And that’s why Karl Oreste targeted her” to carry out his scheme.

“Karl Oreste is a liar,” said Davis, who is representing Tondreau with prominent defense attorney Ben Kuehne.

“He lied to the community, he lied to the buyers, he lied to the sellers, and he even lied to the government,” Davis declared. “They will not be able to prove beyond a reasonable doubt that she knew what he was doing. ... Once she learned this man was a liar and a fraud, she ended it with him.”

In July, Oreste, 57, of Miramar, pleaded guilty to a single count of wire-fraud conspiracy. As a cooperating witness, he will be key to the government’s case against the suspended mayor.

As part of his plea, 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.

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.”

During opening statements, Foster-Steers, the prosecutor, said Tondreau paid one female buyer a kickback of $5,000. She said the buyer reported Tondreau to state regulators in 2007.

Charged along with Tondreau and Oreste were two other defendants, Okechukwu Josiah Odunna, 49, a disbarred Lauderdale Lakes lawyer, and Kelly Augustin, 57, a former North Miami recruiter for Oreste's mortgage firm. But both are not standing trial because they are fugitives.

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.

“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.”

On Tuesday, about 15 supporters filled the federal courtroom to hear opening statements at her mortgage-fraud trial before U.S. District Judge Robert Scola.

Tondreau is the fifth Miami-Dade mayor to face criminal charges during the past year and a half.

Suspended Miami Lakes Mayor Michael Pizzi, charged with bribery, and former Hialeah Mayor Julio Robaina, accused of tax evasion, were acquitted at federal trials. Former Homestead Mayor Steve Bateman was convicted at a state trial of receiving unlawful compensation, and former Sweetwater Mayor Manuel Maroño pleaded guilty in federal court to accepting bribes.

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