OAKLAND — A major Northern California home developer on Thursday pleaded guilty to bank fraud on behalf of his home sales company and was ordered to pay $11 million for a “builder bailout” scam that he contends he knew nothing about.
“Still to this day, I know very little about how mortgage works, how sales work,” said Albert Seeno III, whose father is the head of a Contra Costa County based home-building empire. Seeno III made the admission in an attempt to assure U.S. District Judge Yvonne Gonzalez Rogers that he did not know that his former employees at Discovery Sales, Inc. were obtaining mortgages for buyers of Seeno-built homes through illegal means in 2006-2008. The fraud happened during the housing downturn so the Seenos could maintain large lines of credit.
Seeno III, who is the president of Discovery Sales, said he trusted his staff to run Discovery Sales while he focused his attentions on the building development side of his business, which includes A.D. Seeno Construction Co. — started by his father Albert Seeno Jr., and Seeno Homes and Discovery Homes.
“What has always concerned me about this case and what continues to concern me is that as Mr. Seeno has admitted, he is the sole owner of the corporation,” Gonzalez Rogers said. “And his employees have been indicted as individuals and he has not. So where is the personal responsibility?”
The FBI investigation into the Seeno family companies started six years ago and led to indictments for former employees, but the family members themselves escaped prosecution for the scheme. Seeno III said Thursday the company has an entirely new staff, and now has more oversight.
“I take responsibility. This won’t happen again. It won’t,” Seeno III said during an apology to the judge. His voice sounded full of emotion at times during the hour-long hearing. His attorney William Keane occasionally comforted him with pats on the back.
Two of three former Seeno employees who cooperated with FBI investigators have yet to be sentenced for their guilty pleas as part of this scheme. Jason Sterlino was sentenced in February to six months in prison for what Assistant U.S. Attorney John Hemann called “minor fraud” conducted to further the scheme. Former Discovery Sales Vice President Ayman Shahid and sales executive Carey Hendrickson also pleaded guilty and are awaiting sentencing. Shahid told investigators that Seeno III knew about the criminal activity.
Hemann told the judge Thursday that the FBI did a thorough investigation into Shahid’s claim, but could not find evidence to prove Seeno III’s involvement to a jury.
An investigation by this newspaper showed that during a 16-month period from 2006 to 2008, Seeno companies opened at least $1.24 billion in construction lines of credit. More than 325 Seeno and Discovery homes, exceeding $200 million in sales, were used in the scheme, resulting in an estimated $75 million loss to Wells Fargo and JP Morgan Chase banks.
Discovery Sales was prosecuted as a company. In a plea deal accepted by the judge on Thursday, Seeno III agreed to pay $3 million in restitution to Fannie Mae and Freddie Mac, two taxpayer-sponsored financial services companies, within 120 days. He agreed to pay a $8 million fine, with interest, over five years. It is the third largest fine ever ordered within the criminal division of the U.S. District Court’s Northern District of California, according to Hemann, the prosecutor.
Because Discovery Sales holds no assets as the sales arm of the Seeno company, the millions will be paid by Seeno personally and through his other business interests, attorneys said.
The company was also placed on probation for five years, which gives the federal government another way to ensure payments are made, Hemann said.
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