The following examples of real estate and mortgage fraud investigations are written from public record documents on file with the courts in the judicial district in which the cases were prosecuted.
Real Estate Investor Sentenced For $5 Million Mortgage Fraud Conspiracy
On September 11, 2008, in Kansas City, Mo., Eric Kendall Taylor, of Lee’s Summit, was sentenced to 63 months in prison and ordered to pay $1.4 million in restitution for his role in a $5 million mortgage fraud conspiracy. Taylor pleaded guilty to conspiracy and money laundering in Aug. 2006. Taylor invested in residential properties using the business name, C and K Co., to create false second mortgages on properties and to obtain loan proceeds. He also used other fictitious business names to create false employment and income information, documentation, and verification. Taylor admitted to defrauding mortgage lenders and to transferring money taken by fraud across state lines. He bought residential properties after foreclosure and at reduced prices, then recruited straw buyers to purchase that real estate and obtained mortgage loans for the properties. He prepared false and fraudulent loan applications and supporting documentation for submission to mortgage lenders in the names of the straw borrowers, caused inflated appraisals to be prepared, and submitted false and fraudulent loan applications, appraisals, and documentation to mortgage lenders. Taylor also purchased a false Social Security number and false payroll stubs to document the false information he planned to submit on loan applications. He admitted to creating false payroll stubs and false W-2 forms, falsely showing he was employed by a fictitious company at a fictitious salary. In 2001, Taylor had a business telephone line installed at the home of a relative to list on loan applications as the telephone number of his employer. When a mortgage lender called the business telephone number, the relative confirmed the information or took a message and notified Taylor.
Two Women Sentenced in Connection with Mortgage Fraud Scheme
On August 19, 2008, in Minneapolis, Minn., Molly L. Heise was sentenced to 70 months in prison and three years of supervised release in connection with a money laundering scheme involving the theft of more than $2.5 million from the clients of her real estate closing company, Profile Title and Escrow Corp. (Profile). On July 14, 2008, Christine A. Hein was sentenced to two years probation. Heise was also ordered to pay more than $3.9 million in restitution and ordered to pay more than $134,000 in restitution. According to Heise’s plea agreement, she was the sole shareholder and president of Profile, a corporation that closed real estate transactions during 2002 and 2003. Profile, which had offices in Bloomington and New Hope, accepted hundreds of millions of dollars in wire transfers and check deposits from buyers and lenders to be held in an escrow account for the purpose of closing residential real estate transactions. Court documents state that Heise caused $370 million of borrowed funds to be deposited into a secret escrow account which she then used to pay personal expenses. According to Hein’s plea agreement, she was Profile’s chief financial officer during 2002 and 2003. She was responsible for accounting for and reconciling monies held in trust by the company to close real estate transactions. She knew about the secret escrow account and knew that borrowed funds were being deposited into the account. On August 18, 2003, Hein wrote a check from the undisclosed account in the amount of $134,965 and used it to purchase a home in Buffalo.
Ohio Man Sentenced to 54 Months for Mortgage Fraud Scheme
On August 13, 2008, in Columbus, Ohio, Jason McCord was sentenced to 54 months in prison, to be followed by five years of supervised release, and ordered to pay $756,800 in restitution to LaSalle Bank. McCord pleaded guilty to two counts of bank fraud and one count of money laundering on August 30, 2007. According to court documents, McCord devised a scheme in which he defrauded two banks on a total of 55 mortgage refinancing applications between January 2002 and June 2002. McCord operated two businesses in Central Ohio, J.R. Lending and Q3 Mortgage. Through these businesses, he prepared and submitted false and fraudulent loan applications on behalf of his clients, thereby earning over $358,000 in transaction fees that would not have been otherwise generated.
Organizer in Mortgage Fraud Scheme Sentenced to Another 10 Years in Federal Prison; Defendant Continued Mortgage Fraud from Jail Phone While Awaiting Sentencing
On August 7, 2008, in Atlanta, Ga., Riley Graham, aka Riley Williams, of Detroit, Michigan, was sentenced to 120 months in prison, to be followed by three years of supervised release and ordered to pay $670,000 in restitution. Graham was convicted on charges of conspiracy, mail fraud, wire fraud and money laundering on February 13, 2008. According to court evidence, Graham, aided by his partner Marcus Alcindor, fraudulently obtained a $1.3 million loan in the name of the “Alcindor-Williams Group LLC” for the purchase of residential lots owned by Phillip Hill located in the 4001 Cascade subdivision in Atlanta. In addition, Graham and Alcindor assisted Phillip Hill in the sale of houses in the 4001 Cascade subdivision. Each of these houses was sold at an inflated price to a “straw purchaser” who applied for a mortgage loan based upon the inflated price. Such a fraudulent transaction is called a mortgage “flip.” The straw purchasers who participated in these mortgage flips were paid a kick-back out of the excess loan proceeds for the use of their name and credit. The victim lenders granted the loans based upon numerous false representations and documents regarding the credit qualifications of the straw purchaser, as well as false representations that the straw purchaser had paid a down payment, would reside in the home, and would be responsible for the loan payment. In addition, the lenders were induced to make the loans based on fraudulently inflated appraisals. The court also heard evidence that while Graham was in jail awaiting sentencing in the present case, he continued to contact his associates in an effort to obtain more fraudulent loans.
Oregon Man Sentenced in Mortgage Fraud Scheme
On July 21, 2008, in Portland, Ore., Clifford J. Brigham was sentenced to 120 months in prison and ordered to pay $279,564 in restitution for wire fraud, mail fraud, money laundering, and social security fraud. According to the indictment, Brigham operated Nationwide Investments and Leasing, Global Mortgage and Investments and No Credit Check Home Loans. He used false pretenses to get about $5 million worth of home loans and then diverted loan proceeds to himself. Brigham paid “straw buyers” with good credit ratings to apply for home loans and told them that they did not have to repay the loans. He also falsified loan applications by inflating reported income earned and assets owned by the loan applicants; declaring the loan applicants’ intent to occupy the property; and declaring that the loan applicants would contribute to the down payment for the loan.
Dentist Sentenced to 120 Months in Prison for Multi-Million Dollar Mortgage Fraud
On July 21, 2008, in Trenton, N.J., Terrance D. Stradford, aka Wayne Sellers, was sentenced to 120 months in prison and ordered to pay $592,000 in restitution. On September 26, 2007, a jury convicted Stradford on 24 federal charges including tax evasion, wire fraud and money laundering. During the trial, the jury heard how Stradford, a former Staten Island, N.Y., dentist, operated a scheme in which he fraudulently obtained approximately $2.76 million in mortgage loans, and spent the proceeds on luxury items including the purchase of a 46-foot yacht and a North Carolina residence. Stradford and others used fraudulent documents, made false statements, and established fictitious companies and opened bank accounts in various company names to fraudulently obtain mortgages secured by a property at Commerce Lane in Berlin Township. At the trial, evidence showed that in October 1999, Stradford formed a limited liability company called 412-414 Commerce Lane, LLC (412-414 LLC). In December 1999, Stradford, acting through 412-414 LLC, purchased the Commerce Lane property for $337,500 with a first mortgage in the amount of $310,000 held by American Business Credit Inc. In September 2002, Stradford encumbered the Commerce Lane property with a second mortgage in the amount of $244,756. The evidence presented to the jury showed that in June 2004, Stradford used the Commerce Lane property as collateral for a $500,000 mortgage loan from Quantum Corporate Funding, Ltd. In obtaining the loan, Stradford provided fraudulent documents to Quantum, including income tax returns containing a fake social security number and a commitment for title insurance which falsely indicated that there were no current mortgages on the Commerce Lane property. In August 2004, Stradford used the Commerce Lane property as collateral for a $585,000 mortgage loan from Eastern Savings Bank. In September 2004, the defendants repeated the scheme to obtain a $275,000 mortgage loan. In addition to the $1.36 million in loans at issue in the Superseding Indictment, at sentencing, the judge held the defendant responsible for an additional $1.4 million in fraudulently obtained loans. These included a $595,000 loan that Stradford fraudulently obtained from GE Capital, which Stradford had represented would be used to purchase medical equipment for his dental practice, as well as two mortgages obtained from Countywide Home Loans, in which Stradford fraudulently represented that he had sold certain properties to his father. The judge also entered a $720,000 criminal forfeiture judgment against the Stradford, which the government sought as proceeds derived from the scheme.
California Man Sentenced for Identity Theft and Money Laundering in Connection with Mortgage Loan
On July 18, 2008, in San Diego, Calif., Micah Bachman, also known as Tyler Jefferies, of Lake Forest, California, was sentenced to 61 months and ordered to pay $255,928 in restitution to the financial institutions who were victims of his scheme. Bachman pleaded guilty in April 2008 to money laundering, aggravated identity theft, bank fraud, and false use of a social security account number in connection with a mortgage loan he obtained. According to the U.S. Attorney, Southern District of California, evidence presented at trial showed that Bachman admitted to creating an alter ego of “Tyler Jefferies” and built a credit profile for that identity based on a social security number stolen from a child in Kentucky. Using the Jefferies identity, Bachman obtained credit cards and loans and made enough payments, by moving money between and among these accounts and other accounts, to manufacture a credit history and good credit rating for Jefferies. Bachman then obtained a primary mortgage loan and an equity line of credit in the total amount of $960,000 from Chase Bank and Flagstar Bank to buy a residence in Lake Forest, California, through a mortgage broker in San Diego. All of the loans used to create the Jefferies identity and the mortgage loans are in default.
Former Attorney Sentenced to Nine Years in Prison on Fraud and Tax Charges
On July 15, 2008, in Boston, Mass., Alan Mason, of Princeton, Mass., was sentenced to 108 months in prison, to be followed by three years of supervised release, and ordered to pay $6,628,119 in restitution. Mason, dba Alan Mason Legal Services, Inc. was an attorney whose law practice was centered on providing legal services in connection with real estate closings. According to court documents, Mason from at least June 2001 through June 2006, engaged in a fraudulent scheme in which he took funds he received from banks for the purpose of paying off prior liens on properties for closings he was handling, and converted those funds for his own personal and business purposes. Mason prepared documents, including checks and HUD-1 forms, which made it appear that he had in fact paid off the prior liens. Instead, Mason made monthly mortgage payments to the prior lienholders in order to prevent the loans from going into default and thus alerting the buyers, sellers and new lenders that the prior lien had not been paid off. His scheme defrauded more than ten lenders, including several federally insured financial institutions and Stewart Title, of more than $6.6 million. Mason also evaded the payment of more than $3 million in taxes by, among other things, setting up and controlling multiple real estate trusts and bank accounts using the names of employees and relatives but which did not identify Mason's interest in writing to prevent the tax authorities from attaching those assets.
Arizona Man Sentenced to Prison Term and Ordered to Pay $1 Million for Loan Scam
On June 16, 2008, in Tucson, Ariz., Frank L. Padilla was sentenced to 24 months in prison and ordered to pay more than $1.1 million in restitution to his victims in a mortgage fraud scheme. Padilla pleaded guilty in September 2006 to conspiracy to commit wire fraud and engaging in illegal monetary transactions greater than $10,000. According to court documents, Padilla and his co-defendant, Carlos (“Charlie”) Bent told property owners that their unsold homes were worth more than the listed price. They claimed that they could sell the houses for more than the price the owners were seeking and arranged with the property owners to pocket the difference if they sold the property. The two men found “straw buyers” and paid them to pose as buyers. The “buyers” were able to get 23 mortgage loans totaling more than $13 million by using false information, including false employment verifications, mortgage loan applications, bank statements and contractor’s licenses in order to qualify the “straw buyers” for the loans. According to the indictment, Padilla and Bent made minimal, if any, mortgage payments on the properties, causing the properties to go into default and foreclosure. Padilla cashed 32 title company checks, each totaling more than $10,000. Defendant Bent also negotiated one check with Padilla. The total amount of the 33 checks negotiated for currency was $1.3 million.
Pennsylvania Man Sentenced to Prison for Mortgage Fraud Scheme and Failure to File Tax Returns
On May 22, 2008, in Pittsburgh, Pa., Scott Winovich, a resident of Mars, Pennsylvania, was sentenced to 41 months in prison and three years of supervised release on his conviction of bank fraud and tax evasion charges. According to information presented in court, Winovich was involved, through various businesses, with acquiring rental properties in the Pittsburgh area. Between 1994 and 2003, Winovich purchased hundreds of rental units and other property using loans exceeding $14 million that he received from a variety of financial institutions. Winovich obtained the loans fraudulently by submitting appraisals that overstated the values of the properties, income verification documents including tax returns that overstated his actual income, and fake leases that misrepresented the rental income and occupancy level of the properties. He also falsely represented that improvements had been made on the properties when he knew that was not true. As the loans obtained by the defendant began to fall into default, the defendant began transferring properties to companies controlled by himself or his wife, or to other close associates in an attempt to avoid creditors and the Internal Revenue Service. The financial institutions that lent money to Winovich ended up losing in excess of $3 million. Winovich also failed to report nearly $800,000 of capital gains that he earned through the sales of properties in 2003 and 2004, as well as failed to file individual income tax returns for those same years.
Mortgage Broker Sentenced to 15 Months in Prison
On May 12, 2008, in Cincinnati, Ohio, Jay Michael Sullivan, a mortgage broker, was sentenced to 15 months in prison, to be followed by three years of supervised release, and fined $7,500. In addition, Sullivan’s sentence also included restitution to victims in an amount to be determined at a hearing scheduled for June 27. According to court documents, Sullivan and Troy Clements, operating as American Funding, a private mortgage lender, developed a fraud scheme that allowed unqualified borrowers to obtain mortgage loans by creating and filing false documents with financial institutions. Sullivan and other company employees would contact potential borrowers and collect information from them regarding their financial condition. The borrowers were instructed to create documents which supported loan amounts sufficient to buy a more expensive house than which they would otherwise qualify. The company would arrange to find a house, buy it and sell it to the borrower at a higher cost, earning inflated fees of up to $5,000 for the transaction. Sullivan, who owned and operated Airline Union Mortgage Company between January 2001 and early 2004, pleaded guilty in February 2006 to one count of mail fraud and one count of money laundering for his role in the mortgage scheme. Clements pleaded guilty to conspiracy and money laundering and was sentenced on February 21, 2007 to 24 months in prison and fined $10,000. Clements also signed an agreed entry for restitution for $42,446 to ABN Amro and $35,435 to National City Bank.
Former Title Company Owners Sentenced in Mortgage and Tax Fraud Scheme
On May 6, 2008, in Albany, New York, Matthew J. Kupic and Francis Thomas Disonell were sentenced for their participation in a mortgage and tax fraud scheme. Both defendants were sentenced to 24 months in prison and ordered to pay $887,311 in restitution to the victim banks and to forfeit over $600,000 in the fraudulent mortgage proceeds. In May 2007, Kupic and Disonell pleaded guilty to bank fraud and tax evasion charges. In their plea ageements, Kupic and Disonell admitted that between March 2000 and August 2003, doing business as Team Title Abstractors and Real Estate Consultants, they defrauded banks and other mortgage lenders by arranging to secure excessive mortgages through the use of fraudulent loan applications and settlement statements. The defendants identified below-market real estate properties for sale by owner that were in need of substantial rehabilitation. They located buyers for the properties with promises of ownership of income-producing property and the promise of money back at closing for necessary repairs. Kupic and Disonell caused buyers to submit fraudulent loan applications to lenders which concealed the source of the buyers’ funds necessary for down payments and other associated closing costs. In some instances the defendants loaned buyers money to make the purchases and close. In other instances, they deposited money into the bank accounts of buyers to increase the likelihood that lenders would approve the loan applications, and then withdrew the funds after the loans were approved. For some real estate transactions, Kupic and Disonell created and utilized "Repair Rebate Agreements" which identified future upgrades to the subject properties that purportedly were going to be completed by the buyers with loan proceeds. Repair Rebate Agreements were merely a mechanism the defendants used to get loan funds to the buyer, themselves, and third parties without making any disclosure of the disbursements to the lenders. Kupic and Disonell also arranged for multiple purchases with the same buyer. The defendants caused fraudulent HUD-1 Settlement Statements that did not disclose the buyers' additional liabilities. In total, Kupic and Disonell obtained mortgages of at least $3,641,640, in at least 54 real estate transactions, and diverted a total of approximately $1,983,013 of mortgage proceeds to themselves and others. Most of these mortgages were subsequently placed in foreclosure, resulting in substantial losses to various financial institutions and other lenders. Kupic and Disonell each received over $600,000 in fraudulent proceeds which they failed to report as income on their federal income tax returns.
Top Executive of Global Power Global Wealth Enterprises, LLC. Sentenced on Federal Charge Involving Investment Pyramid Scheme
On May 5, 2008, in St. Louis, Mo., Andre Mitchell, former president & chief executive officer of Global Power Global Wealth Enterprises, was sentenced to 168 months in prison and ordered to pay $3 million in restitution for mail fraud and money laundering. Between July 2004 and December 2005, Mitchell and his co-defendant, Henry Allen, operated a pyramid scheme through their company, Global Power Global Wealth Enterprises (GPGW). They solicited investors through private offerings that falsely represented how investors' funds were going to be used and the security of those funds. Investors were routinely paid with funds from other investors, rather than from legitimate investments. This approach created a false appearance of a valid investment strategy, which lured investors to make additional investments in the scheme. Many of the people who “invested” in GPGW were never paid any return on their investment and were never repaid their principal investment. Mitchell and Allen claimed that their company was investing in real estate and were using investor funds to purchase real estate in and around the St. Louis area. In some cases, they falsely represented that GPGW was making large profits by buying, rehabilitating, and selling properties and they claimed that they would receive 600 percent return on their investments within six months. Often, investors were falsely advised that their principal investment was secure. Mitchell pleaded guilty to one count of mail fraud and one count of money laundering in February 2008. His co-defendant, Henry Allen, pleaded guilty to the same charges and was sentenced to a 60 prison term in 2007.
Unlicensed California Loan Officer Sentenced to Federal Prison
On April 29, 2008, Sacramento, Calif., Sennett H. Swift was sentenced to 15 months in prison and ordered to pay $38,843 in restitution for bank fraud and money laundering. Swift admitted that he defrauded two homeowners and lenders by fraudulently refinancing two homes in order to receive substantial loan broker commissions. To accomplish this fraud, Swift solicited two homeowners and falsely told them that they would receive loans with favorable terms, such as a low adjustable rate that would not increase above a certain rate cap. He also falsely led the homeowners to believe that their prepayment penalties on their existing mortgages would be rebated by the defendant. Actually, Swift knew there would be no rebates and that the rate caps were higher than promised. Additionally, in one of the cases, Swift submitted a forged loan application with forged documents to the lender without the knowledge or consent of the homeowner. In addition, the loan application contained false statements regarding the eligibility of the homeowner for the loan, such as wages inflated above her true wages. Federal agents seized approximately $30,000 from the defendant that was ordered forfeited. In addition, agents seized $27,441 just after the defendant’s arrest from the defendant’s two bank accounts. Upon release from prison, the defendant will be on supervised release for 3 years.
Mother of Alleged Drug Dealer Sentenced in Mortgage Fraud Scheme
On April 25, 2008, in Baltimore, Md., Yolanda Crawley was sentenced to 24 months in prison followed by five years of supervised release for her role in a mortgage fraud scheme. Crawley was also ordered to pay $200,000 in restitution. According to her guilty plea, from January 2005, continuing until December 2006, Crawley worked with David Lincoln, Rachel Donegan, and her son, Shawn Green, to submit mortgage applications containing false representations about her income and employment, allowing her to secure loans for properties in Florida valued between approximately $1,025,000 and $500,000. Specifically, Crawley signed loan documents dated June 20, 2005 which listed her income as $25,000 per month or $300,000 per year and listed Crawley’s employer as someone for whom she had never worked. In addition, Crawley signed two separate loan documents, both dated August 23, 2005 which listed her income as $20,000 per month or $240,000 per year on one application and $15,000 per month or $180,000 per year on another application. Crawley and the other participants knew the income and employment information in these applications was false. The loan documents were faxed from Maryland to financial institutions in other states. Lincoln and Donegan were sentenced to 15 months in prison and 18 months probation, respectively. Shawn Green is charged in a separate indictment with conspiracy to distribute cocaine from 1998 to 2007 and conspiracy to commit money laundering from 2004 to 2007. The indictment seeks forfeiture of $4 million and includes the properties in Baltimore and Florida involved in the fraud scheme. Green is currently a fugitive. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.
Wisconsin Businessman Sentenced for Tax Evasion and Money Laundering
On April 21, 2008, in Milwaukee, Wis., Ronald Miserendino was sentenced to 48 months in prison for tax evasion and conspiracy to commit money laundering. Miserendino owned Trace Corporation, a Wisconsin corporation primarily engaged in the business of renting and developing real estate. Miserendino’s wife filed for divorce and sought a division of the couple’s property, including the assets of his businesses. Miserendino’s took action to reduce his assets. He named his son the president and owner of Trace Corporation and gave him 49 percent of his company. He received $4.5 million in loans and a $500,000 line of credit from a bank purportedly for buying investment property. He liquidated $10 million in treasury bonds owned by Trace and sold real estate. Miserendino traveled to Australia where he opened accounts and leased safe deposit boxes at various banks. On these trips, Miserendino took proceeds from his activities and placed cash into safe deposit boxes. In 2001, Miserendino filed a tax return stating that his income was $4.3 million. On his federal tax return, he did not report all of the proceeds from various transactions in 2001. Failure to report the loans and revenue on his tax return was estimated to be between $400,000 and $1 million in additional income.
Oregon Resident and Corporation Sentenced in Securities Fraud Scheme
On April 15, 2008, in Eugene, Ore., Michael Marks Rich (also known as Richard Forbes Williams and Michael Richard Brown), former president and chief executive officer of Pac Equities, Inc., was sentenced to serve 20 years in prison and ordered to pay $10.4 million in restitution to his victims. Rich and Pac Equities were found guilty in December 2007 of securities fraud, wire fraud, mail fraud, bank fraud, attempted bank fraud, money laundering, obstruction of justice and tax fraud. Rich and Pac Equities solicited investors to invest in real estate development projects and loans promising annual returns of at least 10 percent. They claimed that the investments were secured by trust deeds and always had at least 30 percent in equity, with no more than 70 percent loan to value ratio. Rich and Pac Equities created the facade of a successful business by using investor principal to make monthly payments to investors. They claimed that the payments constituted interest earned from profitable investment and loan activity, then used this facade to recruit additional investors and retain existing investors, knowing that the only sources of income for Pac Equities were from a few projects and loans. These amounts were insufficient to meet monthly interest obligations which Pac Equities owed its investors. Rich misrepresented his educational background, his employment history, and the nature and security of the contracts, which caused over 300 people to invest more than $18 million with Pac Equities. The money laundering charges were based upon Rich’s use of investor money to pay personal expenses. The obstruction of justice charges were based on evidence Rich that hid from authorities. The tax fraud charges were based upon $139,500 Rich failed to report to the IRS in 2003 and $155,000 Rich failed to report to the IRS in 2004.
Mortgage Fraud Defendant Sentenced to 30 Months in Prison
On April 8, 2008, in Portland, Ore., Ryan Bonneau was sentenced to 30 months in prison, to be followed by five years of supervised release for his role in a mortgage fraud scheme involving two residential real estate transactions in 2004. Bonneau was indicted in 2006 along with Leann Booth, a Portland real estate loan broker, and Troy Martin, a Portland real estate sales agent, on charges including wire fraud, false statements to a Federally Insured Bank, money laundering, and engaging in prohibited financial transactions. In his guilty plea filed in November 2007, Bonneau admitted that he, along with Booth and Martin, devised a scheme to defraud the Union Federal Bank of Indianapolis by making false statements in mortgage loan applications in connection with transactions involving two properties, one co-owned by Booth and Martin and one in which Martin was part owner. In each transaction the sales price of the home was inflated so that Bonneau could apply for a larger mortgage and divert the extra cash to bank accounts he controlled. Bonneau also admitted to submitting a false appraisal on each property. At the closing of the property transactions, false closing statements were signed which concealed the fact that the extra cash was being diverted. The bank funded the mortgage loans in reliance on these statements. Leann Booth admitted that she participated in this scheme with respect to one of the properties. She is currently serving an 18 month period of Pretrial Diversion and has forfeited $38,187, her share of the profit from the property transaction to the government. She also must serve a period of 45 days house arrest, perform 200 hours of community service, prepare a written report and make presentations of one hour or more on the subject of detection and prevention of mortgage fraud to professional organizations. If she successfully completes the diversion program, she will not be prosecuted on any charges. Troy Martin also admitted to his participation in this scheme with respect to both properties. He is serving an 18 month period of Pretrial Diversion and has forfeited $63,187, his share of the profit from the property transactions to the government. He will also serve a period of 45 days house arrest, perform 200 hours of community service, prepare a written report and make presentations of one hour or more on the subject of detection and prevention of mortgage fraud to professional organizations. If he successfully completes the diversion program he will not be prosecuted on any charges.
Two Mississippi Mortgage Brokers Sentenced in Separate Mortgage Fraud Schemes
On April 4, 2008, in Jackson, Miss., David Kennedy and LaVonne Hamilton, two former mortgage brokers, were sentenced for their roles in separate mortgage fraud schemes. David Kennedy was sentenced to 24 months in prison followed by three years of supervised release. LaVonne Hamilton was sentenced to 16 months in prison followed by two years of supervised release. In November 2007, Kennedy and Hamilton each pleaded guilty to conspiracy to commit money laundering of the proceeds from their individual mortgage fraud schemes. According to court documents, Kennedy and Hamilton conspired with others to submit false information to mortgage lenders and secure fraudulent mortgage loans for others by using interstate wires. From these fraudulent proceeds, Hamilton and Kennedy and their co-conspirators received numerous fees, commissions and other profits to which they were not entitled. To promote the continuation of the mortgage fraud schemes, from the proceeds of these fraudulent loans Kennedy and Hamilton each received additional profit from the real estate transactions to which they were not entitled under the guise of payments to fictitious creditors which were actually alter ego companies associated with Hamilton or Kennedy. As a result of the fraudulent information submitted to the various mortgage lenders by Hamilton, Kennedy and their co-conspirators in each of these cases, fraudulent mortgage loans exceeding $835,000 were collectively disbursed.
Texas Real Estate Agent Sentenced for Bank Fraud
On April 4, 2008, in Houston, Texas, licensed Real Estate Agent John Turner Jr. was sentenced to 18 months in prison for bank fraud and engaging in monetary transactions with criminally derived property stemming from a mortgage fraud investigation. Turner arranged for a straw borrower to buy a house and he amended the purchase contract, instructing the title company to disburse $62,000 of the loan proceeds to a remodeling company of the buyer’s choice, ostensibly for repairs and upgrades to be made at the residence. At closing, Turner submitted a $62,000 false invoice in the name of First Class Construction Inc., for repairs and remodeling. The title company and the bank that provided the loan were unaware that First Class Construction, Inc., was owned by Turner. The companies were also unaware that repairs had not been made to the house. Turner took the check to a check cashing business where he cashed the check, receiving 51 money orders in denominations of $1,000 each, a money order in the amount of $365 and $9,992 in cash.
Leader of Money Laundering Conspiracy Sentenced to Ten Years for Mortgage Fraud Scheme
On March 26, 2008, in Dayton, Ohio, Randall Aaron Davidson was sentenced to 120 months in prison for his role in a conspiracy that defrauded real estate investors and banks of more than $20 million over a seven year period. At the conclusion of his prison term, Davidson must serve five years of supervised release and was ordered to pay a money judgment of $13.1 million. Davidson pleaded guilty on February 9, 2007, to one count of bankruptcy fraud and one count of conspiracy to commit money laundering, along with one count of income tax evasion charged in a separate Bill of Information. According to court documents, Davidson led a scheme that involved manipulating documents associated with real estate sales and closings in order to obtain excess mortgage loan proceeds generated from the property sales. Davidson recruited unsuspecting investors to purchase low income, dilapidated and depressed properties in the Dayton area at prices artificially inflated above legitimate fair-market values. The mortgages were financed with fraudulent loans facilitated, brokered and closed by Davidson and his conspirators. The conspirators provided the down payments on the properties, paid kick backs to the loan applicants, and opened bank accounts to disguise the true nature, location, source, ownership and control of the proceeds and profits from the transactions. Davidson also evaded payment of more than $359,000 in taxes on his $1 million earnings in 2002.
Colorado Man Sentenced to Serve over 12 Years in Prison for Mortgage Fraud
On March 26, 2008, in Denver, Colo., Torrence James, of Centennial, Colo., was sentenced to 151 months in prison for mortgage fraud. James was indicted by a federal grand jury on August 22, 2006 and pleaded guilty on January 10, 2007 to wire fraud and money laundering charges. According to his plea agreement, from August 10, 2004 through May 4, 2006, James, along with at least seven others, including co-defendant Ronald Fontenot, participated in a scheme to get loan money from lenders using false statements and representations to buy and sell real estate. As a result of the scheme, lenders lost approximately $3.7 million. For some properties, James assisted in arranging for the respective borrower to secure and use a stolen identity to buy the home. Ronald Fontenot was sentenced earlier to 72 months in federal prison.
Mortgage Fraud Defendant Sentenced to 76 Months in Prison
On March 13, 2008, in Erie, Pa., Robert L. Dodsworth was sentenced 76 months in prison, to be followed by three years of supervised release, and ordered to pay a $50,000 fine and over $57,000 in restitution on his conviction of conspiracy and money laundering. According to information presented to the court, Dodsworth and others conspired to falsify mortgage loan applications for home buyers who could not have otherwise obtained a mortgage. Dodsworth and others also accompanied prospective home buyers to the buyers' banks and deposited money into the buyers’ accounts to make it appear as if the buyers had higher account balances. In conjunction with his plea and sentencing, Dodsworth agreed that the amount of loss attributable to his conduct was more than $1 million. Dodsworth also admitted that he was a manager and supervisor of the conspiracy.
Second-in-Command in Massive Mortgage Fraud Scheme Sentenced to 7 Years in Prison; Ordered to Pay Over $40 Million in Restitution
On February 14, 2008, in Atlanta, Ga., Leslie Rector was sentenced to 84 months in prison to be followed by three years of supervised release, and ordered to pay $40.226 million in restitution. Rector was convicted by a trial jury on March 14, 2007 on charges of conspiracy, loan fraud, mail and wire fraud, and money laundering. According to the information presented in court, Rector was the right-hand man of co-conspirator, Phillip E. Hill, and assisted Hill in orchestrating a massive mortgage fraud scheme that targeted the Atlanta area from 2000 through 2003. The criminal activities related to mortgages obtained in the sale of over 50 homes and over 250 condominiums in eight Atlanta-area condominium complexes. Each property was sold at an inflated price to a “straw purchaser” who applied for a mortgage loan based upon the inflated price. Such a fraudulent transaction is called a mortgage “flip.” The straw purchasers who participated in these mortgage flips were paid a kickback out of the excess loan proceeds for the use of their name and credit. The victim lenders granted the loans based upon numerous false representations and documents regarding the credit qualifications of the straw purchaser as well as false representations that the straw purchaser had paid a down payment, would reside in the home, and would be responsible for the loan payment. In addition, the lenders were induced to make the loans based on fraudulently inflated appraisals. Some of the properties were “flipped” more than one time. Hill was sentenced in September 2007 to 28 years in prison. Also convicted at trial with Rector and Hill were eight other co-defendants. In addition, 11 other individuals pleaded guilty to mortgage fraud charges related to the same scheme before trial.
St. Louis City Man Sentenced to 44 Months in Prison on Mortgage Fraud and Money Laundering Charges
On January 16, 2008, in St. Louis, Mo., Dack Daugherty was sentenced to 44 months in prison and ordered to pay $576,390 to twenty-one different banks and mortgage companies on conspiracy and money laundering charges in connection with a mortgage fraud ring. According to court documents, Daugherty and a number of others, including real estate appraisers and loan officers, arranged for the fraudulent purchase of 52 properties. As part of the scheme, Daugherty convinced corrupt appraisers to inflate the values of properties he would arrange to buy. He then convinced corrupt loan officers to make up favorable information about the income and assets of the buyers that he had lined up. In all, Daugherty admitted to defrauding lenders of more than $500,000 and agreed to pay that money back. Daugherty also admitted laundering the proceeds of the scheme through a local credit union. In an unusual twist, Daugherty admitted to a second fraud scheme, which resulted in an increased sentence. In a rare post-plea filing, Daugherty admitted going on a "spending spree" as his criminal indictment for mortgage fraud loomed, borrowing hundreds and thousands of dollars for classic cars, a grand piano, motorcycles, commercial equipment and even a high-end Jacuzzi spa. Just as his borrowers did in the fraud scheme, Daugherty lied in his credit applications for these items and, after successfully deceiving the lenders, never made a payment on any of these purchases. Most of the items have been successfully repossessed.
First Defendant in LHS Mortgage Fraud Case Sentenced
On December 28, 2007, in Minneapolis, Minn., Mario Augustin Lewis was sentenced to 54 months in prison and ordered to pay $437,814 in restitution. Lewis pleaded guilty earlier this year to one count of wire fraud and one count of money laundering in connection with a mortgage fraud scheme and one count of maintaining a drug-involved premises in connection with a marijuana grow operation that was discovered in one of the residences that Lewis purchased as part of the scheme. Lewis, a former employee of mortgage broker LHS, Inc., admitted that between 2004 and 2006, he received more than $400,000 in concealed payments through fraudulent real estate transactions. Three other individuals, Ronald Joseph, an owner of LHS, Inc., Jillian Lehn, a closing agent, and Isadore Stewart, have pleaded guilty and are awaiting sentence. Between 2004 and 2006, the scheme involved approximately 40 separate real estate transactions in which lenders were provided with fraudulent loan applications on behalf of the proposed buyer. Among other things, the fraudulent loan applications misrepresented the terms of the proposed real estate transactions by overstating the actual property purchase price and concealing payments that were made from the loan proceeds to the buyers and other individuals. After a loan was approved based on the false documentation, loan proceeds were provided to a title company. The conspirators then worked with Lehn, the closing agent, to disburse some of those proceeds to the property buyer and other third parties, including Lewis and Joseph. The payments were concealed through false settlement statements. In total, these real estate transactions were worth approximately $18 million in loan proceeds and produced approximately $3 million in fraudulent, concealed payments.
Four Mortgage Fraud Defendants Sentenced to Prison
On November 20, 2007, in Atlanta, Ga., three defendants were sentenced for their roles in a mortgage fraud scheme. Eric Friedman, of Atlanta, Ga., was sentenced to 70 months in prison, to be followed by three years of supervised release, and ordered to pay $1,689,222 in restitution; Brianne Friedman, Tucker, Ga., was sentenced to 12 months and one day in prison, to be followed by six months of home confinement and then three years of supervised release, and ordered to pay $196,058 in restitution; and Timothy Bauer, of Braselton, Ga., was sentenced to 12 months probation and ordered to pay $545 in restitution. Co-defendant Michael Hipe, of Cumming, Ga., was sentenced on November 16, 2007, to 30 months in prison, to be followed by three years of supervised release, and ordered to pay $289,370 in restitution. According to the indictment and evidence in court, beginning in 2000, Eric Friedman and Michael Hipe became involved in a mortgage fraud scheme in order to finance “Hipe Motors,” an Atlanta-based used car business in which Hipe was an investor and Eric Friedman ran daily operations. They purchased and sold properties to finance Hipe Motors, drawing money out of each loan under false pretenses. Some of the lenders were part of the sub-prime mortgage industry. For each property, the defendants obtained a loan in their own names or in the names of family or friends using false financial information and tax returns to qualify for the loans. Also, between 1996 and 2002, Eric Friedman illegally evaded paying $659,739 in federal income taxes by concealing his income and assets from the Internal Revenue Service.
Arkansas Woman Sentenced for Mortgage Fraud and Filing a False Tax Return
On November 19, 2007, in Little Rock, Ark., Debby Cossitt was sentenced to 30 months in prison, followed by three years of supervised release, and ordered to pay $120,000 in restitution to victims of her fraud and $9,560 to the Internal Revenue Service. The Judge also barred Cossitt from working in the loan industry during her period of supervised release. In December 2006, Cossitt pleaded guilty to one count of conspiracy to commit mortgage loan fraud and one count of filing a false income tax return for 1998. Cossitt, owner/manager/operator of several manufactured home sales companies in Searcy, Batesville, Jonesboro, and Harrison, Arkansas, admitted to fraudulently submitting falsified mortgage loan applications and supporting document to lenders in order to increase sales. These misrepresentations included falsified customer bank statements with inflated balances, falsified cashier’s checks reflecting an inflated customer down payment, inflated W-2 forms, falsified pay stubs or wage and earning statements, and falsified customer loan applications. Additionally, Cossitt participated in “telephone audits” with mortgage lenders, impersonating customers and/or directing customers to make misrepresentations directly to lenders. These actions allowed higher credit risk customers to appear more qualified for mortgage loans. Additionally, Cossitt admitted to not reporting over $32,000 in income on her 1998 federal income tax return. This income was derived from cash sales for wheels and axles no longer needed once manufactured homes were delivered to customers. During Cossitt’s sentencing hearing, evidence was presented which revealed that even after her plea in December 2006, Cossitt continued to commit the similar fraudulent loan actions to which she pled guilty to as part of the scheme.
Defendant Sentenced for Role in Mortgage Fraud Scheme
On October 17, 2007, in Anchorage, Alaska, Azem Limani was sentenced to 18 months in prison for violations of wire fraud and engaging in monetary transactions in criminally derived property related to a mortgage fraud scheme. In addition to prison time, Limani was ordered to pay $190,000 in restitution to Countrywide Home Loans and FNMA. According to the information presented to the court, Limani engaged in a wide ranging mortgage fraud scheme using a number of others to obtain a series of nominee loans that hid the true borrower. Limani was aided in the scheme by his co-defendant, Kourosh Partow, who was a loan officer and branch manager of Countrywide Home Loans and arranged for fraudulent loans to be issued to the nominees by falsifying their income, assets and other matters on the loan applications. Partow was previously sentenced to a term of 25 months in prison.
Real Estate/Mortgage Fraud Facts, Figures, and Closed Cases
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