SAN FRANCISCO, Calif- A federal grand jury indicted David Arthur Nilsen and Manoel Antonio Errico, of Monterey with conspiracy to commit mail fraud, wire fraud, and securities fraud.
The indictment accuses Nilsen and Errico of defrauding investors in Cedar Funding, a Monterey-based "hard money" lender. According to the court document, Cedar Funding had more than 1,000 investors and the loss to those investors could exceed $100 million.
The indictment alleges in part that,Nilsen and Errico created the false and misleading appearance that the funds were invested in sound, secured real estate loans, which offered high returns and safety of principal. In truth, by in or about 2004 and increasingly thereafter, most of the loans were not performing, and the investors' funds were not secure.
As borrowers increasingly failed to pay off loans, Nilsen and Errico, without the investors' prior knowledge or consent, extended the loan maturity dates and advanced more investor funds, which caused the loan balances to balloon beyond the initial loan amounts, diluted the investors' fractional interests in the loans and increased the likelihood that they would lose some or all of their principal.
The indictment also alleges that, unknown to investors, the source of a substantial part of the interest that Nilsen and Errico caused Cedar Funding to pay to existing investors came from new investors' funds rather than from performing borrowers.
Nilsen made his initial appearance in federal court in San Jose tThurday, and has been released on a $1 million bail.
Errico is still a fugitive.
