Five people have been indicted on federal charges in a scheme in which they allegedly profited from home mortgage loans that were obtained by falsifying applications, court documents show.

An indictment handed down May 15 and unsealed the next day alleges that John Gilbert Mendoza, Antonio Alcantara Jr., Ira Altwegg, Albert A. Alimoot Jr. and Evan M. Koizumi illegally obtained more than $400,000 from lenders after securing mortgage loans under false pretenses.

They have been charged with conspiracy to commit mail fraud, wire fraud and making false statements on loan applications.

As detailed in the indictment, the scheme allegedly involved home buyers, home sellers, loan officers and others all working together to defraud lending institutions between April 5, 2004, and July 13, 2006.

According to the indictment, buyers applied for loans they never intended to pay back, loan officers handled applications they knew were false and sellers knew proceeds from the sale would be obtained by fraud.

Officials with the Honolulu FBI office said the indictments are the first they expect to secure as other mortgage fraud investigations continue.

"Schemes of this nature were rampant in Hawai'i over the past few years. Last week's arrests are just the beginning of our efforts to bring those responsible for committing mortgage fraud to justice," said FBI Special Agent Brandon Simpson. "There are dozens more straw buyers, loan officers and mortgage brokers who we are currently targeting for arrest and prosecution."

Simpson would not discuss details of the ongoing investigations but advised that people who contact the FBI with their information will be viewed "more favorably" for their candor. The FBI would not say how this scheme came to its attention.

Assistant U.S. Attorney Clare E. Connors, who is prosecuting the case for the government, would not comment. Assistant U.S. attorney Wes R. Porter also would not comment.

Attempts to reach the men listed on the indictment were unsuccessful yesterday. They are being represented by the federal public defender's office, authorities said. A phone message left with the office yesterday seeking comment was not returned.

Mendoza was arrested on May 20, Alcantara on May 21 and Altwegg on May 16 as he got off a flight from California at Honolulu International Airport, the FBI said. Mendoza remains in federal custody and Altwegg and Alcantara are out on bond.

Alimoot and Koizumi are arranging to surrender to federal authorities, the FBI said.

If convicted, the men face up to 20 years in prison on each charge.

'THAT'S A BIG SHOCK'

The men named in the indictment were employed by Mortgage Ability LLC, Mortgage Alliance LLC, and the Grace International Corp., which the indictment said is a "shell entity" incorporated in Nevada that maintained bank accounts here.

Mendoza is identified in the indictment as the president and director of Grace International.

John M. Dimitrion, president and chief executive of Mortgage Alliance on Alakea Street, employed Altwegg and had dealings with Mendoza.

Dimitrion said he was "shocked" by the allegations against Altwegg and has not been approached by the FBI.

"Ira? We haven't seen him for a month now, so I assumed he wasn't with us. That's a big shock," Dimitrion said. "We terminated a loan with Mr. Mendoza because it seemed fishy and we discontinued working with him.

"Ira was a pretty self-sufficient loan officer and was in the business for a very long time. We don't tolerate any of that in our company. I've fired several people after catching them in fraudulent activity but with so many transactions going through, you kind of have to trust our loan officers."

According to the indictment, Mendoza portrayed himself as a "middle man" for sellers and buyers of properties during their interactions with mortgage brokers and lenders and the sole signatory for all Grace International bank accounts.

According to Celia Suzuki, a state Department of Commerce and Consumer Affairs official who oversees licensing of mortgage brokers and solicitors, Mendoza's mortgage solicitor's license expired Dec. 31, 1997, and was never renewed.

Alcantara, also known as "Celes," was the owner of Mortgage Ability and also acted as a loan processor, the indictment said.

Altwegg was a loan processor for Mortgage Alliance and Alimoot and Koizumi acted as "straw purchasers for sham real estate transactions," according to the indictment.

FALSE PROMISES

The group allegedly concocted and executed a scheme to defraud lenders by making false promises, claims and representations and by forging documents.

The group would obtain loans with which to buy properties and keep the difference between the new loan and whatever was originally owed on the property. Authorities yesterday would not provide the total amount of fraudulent loans taken out on the homes.

The schemes began when Mendoza and unidentified co-conspirators found homeowners in financial trouble facing possible foreclosure, the indictment said.

According to the indictment, the defendants pitched the distressed homeowners a plan that would allow them to stay in their home while making money in exchange for "the owner's acquiescence in a sham real estate sale."

The owners agreed to transfer the deed of the properties to the defendants.

Separately, Mendoza allegedly recruited "straw buyers" of the properties, promising them cash if they would agree to fill out fraudulent mortgage applications. The indictment defines straw buyers as "a third party who is willing to purchase a property without any intent to occupy the property."

Alimoot and Koizumi agreed to act as straw buyers and lied on loan applications by misrepresenting their income, the indictment said.

On April 5, 2004, Mendoza asked Alimoot to act as a straw buyer of a home at 1309 Mokapu Blvd. in Kailua, the indictment said. The indictment does not identify the homeowners.

Alcantara and Alimoot allegedly lied on a loan application related to the Mokapu Street house to inflate Alimoot's credit-worthiness and receive a larger loan.

On Aug. 6, 2004, Alimoot received a check from First American Title for $36,558.20 and Mendoza told him to deposit it in an account for Grace International, the shell company that Mendoza created and controlled.

Yesterday, the dilapidated house at 1309 Mokapu Blvd. sat unoccupied. A blue sticker taped to a sliding glass window said the home was the property of Fremont Investment and Loan, the lending institution that approved the loan for the purchase.

In another incident, Alcantara and Koizumi on March 29, 2005, signed a loan application for another property, at 1434 16th Ave. in Kaimuki, and misrepresented Koizumi's income and credit-worthiness, the indictment said.

Yesterday, the house on 16th Avenue was unoccupied and a contractor digging up the backyard said he did not know the owner. Attempts to reach the homeowners listed in public property records for the 16th Avenue residence were unsuccessful yesterday.

On May 31, 2005, Mendoza opened an escrow account for the sham sale of the Kaimuki property by depositing a cashiers check in Koizumi's name in the amount of $10,854.90, according to the indictment.

On Dec. 19, 2005, Mendoza drove a straw buyer to Mortgage Alliance's Alakea Street office to meet with Altwegg to set up another fake loan, according to the indictment. Altwegg signed the application related to the Kaimuki house and processed the loan.

On May 9, 2006, Mendoza paid the straw buyer $5,000 for the use of her name and credit score, according to the indictment. The indictment does not state the amount of the proceeds from the sale.

'SEVERAL' ISLE PROBES

The indictment is the first of others the FBI's Honolulu office hopes to get in the coming months.

In a February visit to Hawai'i, FBI Director Robert S. Mueller III said the bureau had opened "several" mortgage fraud investigations in Hawai'i as a result of the fallout from the nation's subprime mortgage crisis.

Agency officials did not identify the companies under investigation but said the wide-ranging probe, which began in spring 2007, involves companies across the industry, from mortgage lenders to financial firms that bundle home loans into securities sold to investors.

The FBI is working in conjunction with the Securities and Exchange Commission.

Carl Cunningham, who sits on the board of directors of the Mortgage Bankers Association of Hawai'i, said the association hopes that those who would manipulate best practices and regulations governing home sales in Hawai'i would be caught.

"The major concern is that the fact that people are fraudulently putting people in homes. It has created an issue in the market where there is a lack of confidence in the documentation and it has put the industry in a situation where good programs, good products and opportunities are being abused," Cunningham said. "If you're honest, it's not a problem. The rules have always been there but it became very easy for those who chose to abuse the system to abuse the system."

The local indictments come as federal authorities nationwide are looking into the practices of so-called subprime lenders, as well as potential accounting fraud committed by financial firms that hold these loans on their books or sell them to other investors.

Staff writer Andrew Gomes contributed to this report.