Houses of illusion: FBI details Section 8 scam in Sacramento

An FBI investigation that involved Section 8 fraud in Sacramento ended with a Bay Area man en route to federal prison.

Last month, 55-year-old Mahendra Prasad pleaded guilty to his role in illegal real estate purchases, misleading mortgage lenders and improperly renting out Section 8 housing. Similar to an unrelated case that ended this summer (Read “White collar catch,” News, July 6, 2017), Prasad’s crimes began on the eve of the financial collapse.

According to the U.S. Attorney’s Office, in 2006 Prasad and three co-defendants submitted falsified loan applications to banks in order to buy 25 different properties between Sacramento and Modesto. Specifically, prosecutors allege the ring manipulated a federal “short sale” program meant to help distressed homeowners.

FBI officials said Prasad then used some of those properties to get federal dollars by renting units out as Section 8 housing, including at his property in Sacramento. That move eventually drew the attention of the Federal Housing Finance Agency Office of Inspector General. Further investigation revealed Prasad conspired to sell his Sacramento properties to an acquaintance, who he pretended not to know, in a short sale that cost his lender $328,000. The U.S. attorney’s office has said that, in total, the efforts of Prasad and his co-defendants cost banks more than $3 million in losses.

Prasad was federally indicted for mail fraud, along with Jyoteshna Karan, Praveen Singh, Sunita Singh and Nani Isaac. Prasad pleaded guilty on August 14 and was sentenced to 15 months in federal prison. Charges are still pending against his co-defendants.

A 2015 analysis from the security firm Interthinx FraudGuard reported that California has the second highest risk level for mortgage application fraud in the nation.