08:47 PM PST on Wednesday, December 21, 2005

By SUSANNAH FRAME / KING 5 News

[Editor’s Note: Because of our investigation, the FBI and the state launched major investigations of their own. Both Kebede and Almoussa were arrested and indicted in October on federal charges of fraud and conspiracy to commit fraud. Their trial is set for March 20.]

SEATTLE - Ekram Almussa and Josh Kebede are successful real estate investors. Perhaps too successful.

After a seven-month investigation, the KING 5 Investigators uncovered a home selling scheme that Almussa and Kebede are at the center of.

They made hundreds of thousands of dollars, sometimes in a matter of hours, in a scheme that may only have added to already soaring property values in Western Washington.

Almussa and Kebede bought and sold homes in Seattle and on the Eastside for unbelievable profits.

In 2003 realtor Tracy Setzer sold them a home in Kirkland for $240,000. They re-sold it the next day for $280,000, pocketing a quick $40,000.

We showed Setzer what happened.

"I'm boggled! I can't believe that it is just sitting here in front of me. I was so shocked when you called me, how do you do that?! … He had to have someone working with him," she said.

In fact, the KING 5 Investigators found 15 of their deals in the last year, where the money kept getting better.

KING

Ekram Almussa and Josh Kebede made hundreds of thousands of dollars, sometimes in a matter of hours, in a scheme that may only have added to already soaring property values in Western Washington.

The pair bought another home in Kenmore for $383,000. They immediately re-sold it for $483,000, a $100,000 profit in one day.

And after snapping a home on 83rd Place Northeast in Kirkland, they re-sold it the same day for $182,500 more.

What's their secret? How do you make that kind of money so fast?

The KING 5 Investigators found lies, payoffs, and falsified documents helped get them to the top.

Here's how the scheme works:

Almussa or Kebede buy a home like one they bought in Bellevue for $315,000.

They hire an appraiser -- the same person in nearly every case -- who suspiciously finds the property is worth much more, $415,000.

To keep their names off the deed, Almussa and Kebede need a buyer, but not just anyone, a person known as a "straw buyer" who's paid to pretend to be the new owner.

The manipulated information is sent to the bank, where they sign off.

The difference between the purchase and sale price, in this case $100,000, goes right from the bank into the pockets of the two that started it all.

On paper, the homes all belong to the straw buyers, but they're at the mercy of Kebede and Almussa, who promise to pay the mortgage.

We've found many payments are coming in late, hurting the credit of these straw buyers. And two of them are being threatened with foreclosure.

Dan Nelson spent weeks fixing up a home in Central Seattle, in a neighborhood in need of improvement.

"We put all new copper plumbing in it.The kitchen drain didn't even hook up to plumbing, it just went into the ground underneath," Nelson said. "It was just a mess."

A buyer who called himself Alex, who was actually Ekram Almussa, offered $154,000.

Nelson thought it was a fair price.

"He was really kind of secretive about it and said, 'hey, don't tell anyone what we paid for it'," he remembers.

Why the need for secrecy? Almussa re-sold that property seven days later to a straw buyer for $305,000, nearly double what he'd paid.

We hired respected home appraiser Jim Irish to give us an accurate value.

Could the appraiser hired by Almussa possibly have been right? After all, the appraisal report says the property is worth more than $305,000.

After weeks of research, Irish concluded the property is worth no more than $190,000.

A separate market analysis done for us by Windermere Real Estate came up with the exact same figure.

That means the bank that lent the money, New Century Mortgage in Bellevue, invested far too much in the house. And it happened to them over and over.

New Century is the lender on nearly every deal we investigated.

Every application submitted to get all that money was packed with lies to make sure the loans went through.

Each loan application indicated the home would be the buyer's primary residence, a promise that gets you a better interest rate.

We went to all 15 properties. None was owner occupied.

An underwriter at New Century has since been fired for allegedly being in on the deal.

We showed our findings to officials at the Department of Financial Institutions, the state agency that investigates mortgage and bank fraud.

"This looks like a very serious case to me," said lead investigator Chuck Cross.

Cross said it looks like a well-orchestrated scheme that may break state and federal laws.

"It's this type of … activity that overall drives up the prices that we pay for mortgage loans. It drives up the rates and the fees because there's greater risk for the lenders."

By our calculations, Ekram Almussa and Josh Kebede made nearly $1.7 million in a matter of months.

And it took us months to track them down. When we did, we asked Almussa how he was able to buy so many properties in the last year for cheap and then sell in the same day for so much money.

"I don't want to talk about this, I didn't, I don't know what you're talking about," he said.

When we asked Kebede whether he'd been lying to banks to buy properties to flip them, he had no response.

Since we started asking questions, Ekram Almussa's been fired from his job. The Department of Financial Institutions is planning to launch an investigation based on our findings. The FBI is also asking us about our information.

In the meantime, Dan Nelson, the man who sold Almussa that house in Seattle's Central District, said he's disgusted as a seller, and a consumer.

"It does bother me, of course, any fraud in the system is going to increase the costs for the rest of the people who are using the system, just like other systems...shoplifting drives up everyone else's costs."

If you have information on a potential property flipping scheme..you can call the Washington State Department of Financial Institutions at 877-RING-DFI (877-746-4334) or go to their website www.dfi.wa.gov.