CONCORD -- A top sales executive in the Seeno family's home building empire was arrested Monday on suspicion of masterminding a scheme to defraud banks of $150 million and keep the companies afloat during the last housing downturn.
Ayman Shahid, 38, of Danville, was arrested in Concord around 8:45 a.m. and by noon he had pleaded not guilty in an Oakland federal courtroom with family and at least one Seeno attorney looking on. Shahid, the president of Discovery Sales, was charged with conspiracy to commit bank fraud and 17 individual bank fraud counts. He could face 30 years in prison if convicted. Judge Donna Ryu set bail at $500,000 and ordered Shahid to surrender his passport and limit travel. He posted bail and was released Monday afternoon. Shahid is the highest ranking Seeno executive to be indicted. Six other Seeno company employees or associates already have been charged with crimes related to mortgage, bank or wire fraud. In 2010, FBI and IRS agents raided the powerful East Bay family's Port Chicago Highway headquarters, carting off dozens of boxes of evidence in their efforts to unravel complicated real estate transactions that stretched from new single family homes in Pittsburg to Oakland condos.
Discovery Sales is the sales arm of Discovery Homes and Seeno Homes, which have active developments in Contra Costa, Alameda, Solano, Butte and Yolo counties. Seeno family members, who have constructed homes across the Bay Area for generations and donated to countless political campaigns, have been heavily fined for environmental improprieties, but have never been charged with criminal wrongdoing in this or other probes.
"This is a very old, very weak case that will be defended vigorously," said attorney Jim Brosnahan who is representing Shahid. "The case never should have been brought. And when we get to court, the evidence will prove it."
Attempts to contact the Seeno family were not successful Monday.
Shahid devised and managed a scheme to give secret monetary incentives to unqualified homebuyers, allowing the sales of Seeno homes to continue to be sold during the financial crisis starting in 2007, according to the indictment unsealed Monday.
Prosecutors allege Shahid hid the incentives from appraisers and bank underwriters so the buyers would be approved for loans totaling almost $230 million. Many of those buyers could not afford the mortgages, and more than $154 million worth of loans went into foreclosure or short sales proceedings, according to the indictment.
The scam is referred to as a "builder's bailout," where struggling builders resort to such methods to quickly move inventory at inflated prices to maintain large lines of credit, according to Freddie Mac.
Before the housing downturn, Discovery Builders and Seeno Construction opened large lines of credit where they could draw money to finance construction projects. The credit line was dependent, in part, on the sales prices of completed homes, according to the indictment.
During a 16-month period in 2008 and 2009, various Seeno companies opened at least $1.24 billion in construction lines of credit, according to an investigation by this newspaper and Contra Costa deed of trust notes.
Shahid devised a way to continue selling homes at inflated prices after the bottom fell out of the real estate market, according to the indictment.
Prosecutors allege Shahid:
In one September 2007 email sent by a Discovery Sales employee at Shahid's direction, according to the indictment, it alerted sales employees to keep incentives quiet to appraisers. "In some cases telling the appraiser that we are giving huge incentives have killed our deals," the email said, according to prosecutors.
Another Discovery Sales employee -- Carey Hendrickson, who worked under Shahid -- pleaded guilty to one count of wire fraud last year in exchange for her testimony against her employer. She has not been sentenced.
A Discovery Sales manager in Oakland also took a deal last year and agreed to work with prosecutors. He has not been sentenced either.
In December 2012, four Southern California men were charged with wire fraud for their dealings with Discovery Homes associates.
Shahid will appear May 30 in San Francisco federal court.
Staff writer Rick Hurd contributed to this report. Contact Matthias Gafni at 925-952-5026. Follow him at Twitter.com/mgafni.