Defendants in the lawsuit include the brokerage's president, Hendrix Montecastro; his mother, Helen Montecastro; two notaries; and four other Southern California companies that are allegedly connected to Stonewood and victims through a baffling web of wire transfers.
The alleged scam worked like this, Temecula attorney Richard Ackerman wrote in the lawsuit:
Reiss and other investors with good credit would qualify for multiple homes ---- typically two to five for individuals and as many as 10 for couples ---- in and around Murrieta. Property managers affiliated with Stonewood would then rent out the homes for $1,000 to $2,000 a month. Stonewood and related parties promised to cover the remaining portion of the monthly mortgage payments, but Reiss and several other investors said these promises weren't documented in contracts, and so they had no recourse when the brokerage stopped making those payments last fall, the suit alleges.
"When you have a hot real estate market, when you have an underperforming Wall Street, which was the case (in 2004), you have what we call a perfect fraud storm," said Barry Minkow, a former white-collar convict who runs the Fraud Discovery Institute in San Diego and is advising Ackerman in the lawsuit.
Reiss said she didn't expect the dealings to get into seven figures, but that she quickly got in over her head. When the loan documents for the Falkirk house arrived for her signature, she suddenly found herself applying not only for that mortgage, but also for one on a $600,000 house in the Copper Canyon development in western Murrieta. Later in 2005, the suit alleges, she was duped into taking out loans to buy two other houses near the golf course and another in Copper Canyon.