SAN FRANCISCO—Michael Ohayon and David Papera were sentenced yesterday to 60 and 70 months in prison, respectively, and ordered to pay more than $10.5 million in restitution for conspiracy to commit bank fraud and money laundering, United States Attorney Melinda Haag announced.

Ohayon pleaded guilty to conspiracy to commit bank fraud, bank fraud, and money laundering on May 24, 2010. Papera pleaded guilty to conspiracy to commit bank fraud and money laundering on April 19, 2012.

Ohayon and Papera formed a company called Sage Creek Ranch LLC for the purpose of developing multiple parcels of property in California’s Napa County.

According to the plea agreements, they admitted to obtaining millions in loans from Washington Mutual Bank by submitting fraudulent loan applications in the names of “straw buyers”—i.e., individuals with good credit scores who would each obtain a residential loan to purchase a parcel from Sage Creek Ranch LLC, but who would in reality make neither down payments nor mortgage payments on the property.

Ohayon and Papera admitted that they knew that the straw buyers’ loan applications included materially false information about the buyers’ income.

They further admitted that they used more than $1.25 million of the loan proceeds to pay down one of Papera’s loans on a separately owned property.

Ohayon, 44, of San Francisco, and Papera, 50, of San Rafael, California, were indicted by a federal grand jury on February 11, 2010. They were charged with conspiracy to commit bank fraud, bank fraud, and money laundering.

In addition to Ohayon and Papera, six of the straw buyers were charged with and pleaded guilty to tax felonies for failure to report as income approximately $50,000 they each received from Ohayon and Papera for allowing their names and credit to be used in the bank fraud scheme.

The sentence was handed down by U.S. District Court Judge Charles R. Breyer following Ohayon’s guilty plea to conspiracy to commit bank fraud, in violation of 18 U.S.C. § 1349; bank fraud, in violation of § 1344; and money laundering, in violation of 18 U.S.C. § 1957; and Papera’s guilty plea to conspiracy to commit bank fraud, in violation of 18 U.S.C. § 1349; and money laundering, in violation of 18 U.S.C. § 1957. Judge Breyer also sentenced the Defendants to a five-year period of supervised release and ordered them to make restitution to Chase Home Finance (Washington Mutual’s successor) in the amount of $10,586,079.73. Ohayon is scheduled to begin serving his sentence on January 4, 2013. Papera is scheduled to begin serving his sentence on November 2, 2012.

Tracie L. Brown and Denise M. Barton are the Assistant U.S. Attorneys who prosecuted the case with the assistance of Rayneisha Booth, Elizabeth Garcia, and Maryam Beros. The prosecution is the result of a lengthy investigation by Internal Revenue Service-Criminal Investigation and the Federal Bureau of Investigation.