Examples of Financial Institution Fraud Investigations - Fiscal Year 2011
The following examples of financial institution fraud investigations are written from public record documents on file in the court records in the judicial district in which the cases were prosecuted.
Utah Man Sentenced for Role in Mortgage Fraud Scheme
On September 16, 2011, in Salt Lake City, Utah, James Merrill Roberts was sentenced to 37 months in prison, five years of supervised release and ordered to pay $609,991 in restitution. Roberts pleaded guilty to mail fraud and money laundering. According to the indictment, Roberts formed Amerifinance, a company that promoted residential real estate transactions in Utah. Although Amerifinance was originally formed to purchase foreclosed homes, repair them, and sell them at a profit, it soon became a framework for identifying residential properties, recruiting straw buyers and, through misrepresentations on loan applications and other documents in loan packages, falsely and deceptively inflating the apparent value of the properties to induce lenders to grant loans for amounts in excess of their fair market value. These transactions yielded hundreds of thousands of dollars in inflated loan proceeds, which were diverted to the defendants and their employees. Some of the loan proceeds were used to make a few loan payments on the homes to create the appearance the loans were performing well. However, the payments ceased and the loans charged in the indictment went into default.
Two Remaining Defendants Sentenced to Prison for $11.2 Million Conspiracy to Defraud Bank
On September 15, 2011, in Charlotte, N.C., Delmar Dove, of Mint Hill, North Carolina., and Robert Otto, of Fort Mill, South Carolina, were sentenced for their roles in a conspiracy that defrauded a bank of $11.2 million dollars. Dove was sentenced to 22 months in prison, three years of supervised release and ordered to pay $1,202,945 in restitution to the victim bank and $140,734 to the IRS. Otto was sentenced to 22 months in prison, three years of supervised release and ordered to pay $2,600,327 in restitution to the victim bank. Dove pleaded guilty in June 2010 to mail fraud conspiracy and filing a false income tax return. Otto pleaded guilty in July 2010 to mail fraud conspiracy. According to court documents and court proceedings, from at least 2000 through November 2008, Dove, who managed a business based out of Charlotte, and Otto, who owned and operated R.E. Otto and Sons, Inc. (REOS), a home renovation company also based in Charlotte, generated, at the direction of Terry Welch, false invoices to the bank for services that were never provided. At the time, Terry Welch served as the vice president in utility services at the bank’s distribution utility center. As vice president, Welch oversaw the payment of invoices submitted by outside vendors who purportedly provided goods and services to the bank. Welch used his position to lead the conspiracy by Dove, Otto and others to transmit bogus invoices totaling over $11 million through their respective businesses to the bank. Welch was previously sentenced to serve 70 months in prison and ordered to pay $11,221,462 in restitution to the victim bank and $1,713,083 to the IRS. Welch’s co-defendant, John P. Cousar, Jr., a retired Charlotte firefighter, was previously sentenced to 33 months in prison and was ordered to pay $5,901,593 in restitution to the victim bank and $1,124,448 to the IRS. Another co-defendant, Jerry Little, of Charlotte, was earlier sentenced to 15 months imprisonment and ordered to pay $1,504,594 in restitution to the bank.
California Mortgage Banker Sentenced in Multi-Million Dollar Property-Flipping Fraud Scheme
On September 12, 2011, in Los Angeles, Calif., Richard Maize, a mortgage banker from Beverly Hills, was sentenced to 18 months in prison for his role in a massive mortgage fraud scam that caused more than $18.5 million in losses to banks, including his former employer. In addition, Maize was ordered to pay $4 million in restitution, about $3.6 million of which has already been paid. According to court documents, Maize and others were involved in a conspiracy to defraud federally insured mortgage lenders out of tens of millions of dollars. As part of the scam, the conspirators obtained inflated mortgage loans on expensive homes in some of California’s most exclusive neighborhoods. Maize, was a co-founder of Americorp Funding, a mortgage banking company with offices in West Los Angeles and Pasadena that originated, brokered, funded and sold mortgage loans. Maize owned 45 percent of Americorp until about December 2000, when he and his partners sold Americorp to Prism Mortgage Company, which later changed its name to RBC Mortgage Company. Other defendants previously sentenced in this case include: Charles Elliott Fitzgerald sentenced to 168 months in prison; Mark Alan Abrams sentenced to 78 months; Jamieson Matykowski sentenced to 18 months; Lila Rizk sentenced to 36 months; and Kyle Grasso sentenced to 12 months in prison. According to court documents, Fitzgerald and Abrams purchased homes at their real market values and then re-sold the properties at double or triple the prices. Armed with inflated appraisals and other false documentation, the conspirators submitted false and inflated loan application packages. Abrams and his associates recruited “straw borrowers” to obtain loans for the inflated prices. The straw borrowers allowed the conspirators to use their names and credit to obtain mortgages as part of this “property-flipping” process. Maize had contacts and business relationships with the victim lenders, which he exploited to deceive them into approving and funding the inflated loans. He also defrauded his employer, Prism/RBC, by deceiving the company into funding the inflated loans. Maize received hundreds of thousands of dollars in kickbacks for his assistance in getting the loans approved. In 2001, he failed to report more than $175,000 worth of kickbacks on his federal tax return.
Investment Adviser Sentenced to Prison for $16.7 Million Fictitious Investment Program Scam
On September 8, 2011, in Trenton, N.J., Sandra Venetis, the owner of Branchburg, New Jersey-based investment adviser Systematic Financial Associates, Inc., was sentenced to 168 months in prison, three years of supervised release and ordered to pay $11,579,781 in restitution to the victims of her crime. Venetis, of Whitehouse Station, N.J., previously pleaded guilty to an Information charging her with one count of securities fraud and one count of transacting in criminal property. According to documents filed in this case and statements made in court, from 1997 through August 13, 2010, Venetis solicited clients of Systematic Financial Associates to invest in an alternative investment program she allegedly operated outside her registered investment advisory business. Venetis admitted that to induce victim investors, she falsely told them she would use their money to fund loans to doctors for their quarterly pension plans. At times, Venetis directed Systematic Financial Associates’ advisory clients to liquidate positions in securities to participate in the alternative investment program. As a result of her solicitations, approximately 114 investors sent approximately $16.7 million to Venetis. Venetis admitted that she did not operate any legitimate investment program outside of Systematic Financial Associates’ advisory business, and created a corporation called Systematic Financial Services, Inc., solely to operate her fraudulent scheme. Venetis never transferred any investment money to doctors, and concealed her fraudulent conduct by creating fictitious doctors or forging the names of real doctors on promissory notes that made it appear she was using investor funds as promised. Venetis also admitted to using investor funds to pay the operating expenses of Systematic Financial Associates and using new investor funds to make principal and interest payments to existing investors in Ponzi-scheme fashion as well as stealing money to fund her own lavish lifestyle.
Ohio Homebuilder Sentenced to 22 Years in Prison for Tax Fraud, Bank Fraud, Money Laundering and Obstruction of Justice Schemes
On August 29, 2011, in Columbus, Ohio, Thomas E. Parenteau of Hilliard, Ohio, was sentenced to 264 months in prison for conspiring with his wife, his mistress and their accountant, to commit tax fraud and money laundering and conspiring to obstruct justice and tamper with witnesses. In addition to his prison sentence, Parenteau was ordered to serve five years of supervised release, pay $1,100 in special assessments, and restitution to the IRS and to the defrauded banks in an amount to be determined later. Parenteau was further ordered by the court to forfeit to the United States an amount of nearly $15 million, consisting of his father’s life insurance policies and two money judgments. According to court records Parenteau and his co-conspirators defrauded the IRS out of nearly $1 million and defrauded banks into lending more than $40 million to Parenteau, his nominees and others. The evidence proved that Parenteau, who operated and controlled a number of Columbus, Ohio-area businesses, and Dennis G. Sartain, Parenteau’s accountant, prepared and filed with the IRS four false income tax returns for Parenteau’s mistress, Pamela McCarty. The false returns generated more than $850,000 in fraudulent refunds that she ultimately gave to Parenteau. In addition, Parenteau, his wife Marsha Parenteau, Sartain and McCarty engaged in a scheme designed to defraud banks out of millions of dollars by falsely inflating the purchase prices of the homes that Parenteau built and sold. Parenteau paid large concealed or disguised kickbacks to the buyers after their purchases. The Parenteaus, along with McCarty, also fraudulently obtained $18 million in loans against a 27,000-square-foot home, by falsely representing their income and submitting other false documents regarding the renovation to the home. Parenteau used these funds to make more than $6 million in premium payments on four life insurance policies worth $23 million on the life of Thomas Parenteau’s father, who passed away on April 4, 2009. Finally, after learning of the IRS investigation into the tax, bank fraud and money laundering schemes, Parenteau, McCarty, Sartain and others engaged in a scheme to obstruct justice by concealing computers, creating false documents, destroying or altering evidence, tampering with a witness, lying to federal and local investigators, and otherwise obstructing justice. Earlier this year, Sartain was sentenced to 131 months in prison for his conduct; Marsha Parenteau was sentenced to 33 months in prison; and McCarty was sentenced to up to 24 months in prison.
Connecticut Man Sentenced to 18 Months in Federal Prison for Structuring More Than $943,000 in Cash Transactions
On August 25, 2011, in Bridgeport, Conn., John A. Ortiz, was sentenced to 18 months in prison, followed by two years of supervised release for illegally structuring more than $943,000 in cash transactions. Ortiz was also ordered to forfeit approximately $388,540 to the government, and to pay a fine in the amount of $75,000. According to court documents and statements made in court, Ortiz maintained a money market savings account at a credit union, and also had a personal line of credit at a bank. Between May 2006 and October 2009, Ortiz made more than 70 large cash deposits into his savings account and more than 30 large cash payments to his personal line of credit account. The vast majority of the cash transactions were in the amount of $9,000, and none exceeded $10,000. In total, Ortiz structured approximately $943,000 in cash deposits and line of credit payments. Ortiz used the deposited funds to purchase, or to obtain credit in order to purchase, properties in Connecticut and Florida and also used more than $270,000 of the structured funds to settle a business dispute with his former partner. Ortiz owns and operates towing and auto repair businesses in Bridgeport and Stratford.
Jamaican Citizen Sentenced on Fraud and Money Laundering Charges
On August 11, 2011, in Orlando, Fla., David A. Smith, a Jamaican citizen, who was living in the Turks and Caicos Islands, was sentenced to 360 months in prison for wire fraud, conspiracy to commit money laundering and money laundering offenses. As part of his sentence, the court entered a money judgment of $128 million. According to court documents, for more than three years, Smith executed a scheme to defraud more than six thousand investors located in Florida and elsewhere out of more than $220 million. Smith led investors to believe that he was investing their money in foreign currency trading and earning, on average, 10 percent per month, when in fact he was not trading their funds. Smith also conspired with others to launder approximately $128 million of proceeds that were obtained from the wire fraud scheme.
Oregon Mortgage Broker Sentenced for Role in Mortgage Fraud Scheme
On August 2, 2011, in Eugene, Ore., Del Barber, Jr. was sentenced to 15 months in prison and ordered to pay over $200,000 in restitution to the victims of his frauds. Barber and 12 other individuals were indicted in November 2009 on a variety of bank and loan fraud charges arising out of the collapse of Desert Sun Development (DSD), a company previously headquartered in Bend, Oregon. According to the indictments, Barber, a licensed mortgage broker at the time, and the others charged in the indictments caused financial institutions to lose more than $19 million. Barber admitted to preparing and submitting a false loan application for a DSD employee trying to buy a DSD-built home. The bank foreclosed on the property because the borrowers were unqualified and failed to make payments.
North Carolina Man Sentenced in Rock Hill Mortgage Fraud Case
On July 18, 2011, in Columbia, S.C., Samuel Caleb Cowles, of Kannapolis, North Carolina, was sentenced to fifteen months in prison for participating in a conspiracy to commit money laundering. Cowles was a mortgage broker who owned and ran Prosperity Mortgage. He and a co-conspirator took pre-qualification documents from investors and used them to obtain loans for real estate purchases. Cowles falsified multiple loan applications by submitting to lenders that investment properties were going to be primary residences, which reduced the down payments. Cowles affected loan decisions by inflating incomes, omitting liabilities on loan applications, and making payments outside closing. He received mortgage fees as a return on his activities. He was paid by lenders when loans were executed. Cowles falsified approximately twenty loan applications, resulting in fraudulent loans totaling $2,160,650. During the sentencing hearing, Cowles stated he made approximately $60,000 in fees.
Florida Bank Executive Sentenced for Wire Fraud and Money Laundering
On July 6, 2011, in Tampa, Fla., Philip William Coon was sentenced to 18 months in prison, followed by three years of supervised release. Coon and a co-conspirator were jointly and severally held liable for a money judgment of $1,528,616 which represents the amount of proceeds obtained as a result of the conspiracy to commit wire fraud. Coon was the executive vice-president of the mortgage lending department of a bank. He used his position to request a co-conspirator to charge clients a mortgage brokerage fee that was one percent higher than usual. Coon’s co-conspirator agreed and then paid three-quarters of the excess fee to bank accounts in the name of Solutions Processing, Inc. Solutions Processing, Inc. was not engaged in any business activity. Rather, accounts in the name of Solutions were used to receive the excess fees and transmit the proceeds to Coon and other individuals and entities as designated by Coon. Coon was ordered to forfeit personal assets including investment funds, real property, jewelry and a piano. The net proceeds of the sale of the forfeited assets will be credited towards the total money judgment.
Montana Woman Sentenced for Embezzling Over $600,000 from Credit Union
On July 6, 2011, in Missoula, Mont., Kathleen Louise Sammons, of Charlo, was sentenced to 30 months in prison, followed by five years of supervised release, including 17 months of home confinement. In addition, Sammons was ordered to pay $676,872 in restitution. Sammons was employed by the Polson branch of a credit union. According to court documents, Sammons embezzled approximately $676,000 from the credit union. Sammons admitted that she would white-out numbers on the daily cash counts after they were witnessed by a teller. She would then place new numbers over the covered numbers that matched the general ledger balances. To hide her theft, Sammons sent copies to the accounting department via fax so the white-out would be hidden. In addition, Sammons withdrew cash from a high balance customer’s account by debiting the customer’s account and then crediting the vault cash account in the same amount. This was a paper transaction designed to lower the general ledger balance of the vault cash to cover up the cash taken by Sammons.
Texas Credit Union President Sentenced To Federal Prison
On June 24, 2011, in Beaumont, Texas, Sandra H. Cooper, of Orange, Texas, was sentenced to 63 months in prison and ordered to pay $1,178,340 in restitution for money laundering. Cooper pleaded guilty to money laundering on February 28, 2011. According to information presented in court, Cooper, the President and Treasurer of the Orange County Employees Federal Credit Union, embezzled approximately $1,164,340 of credit union funds over four and half years. The credit union, which had just two employees, was housed in the administration building adjacent to the Orange County courthouse. Credit union customers' deposits were insured by the National Credit Union Administration Board, a federal agency similar to the Federal Deposit Insurance Corporation, which determined in June 2010 that the credit union was insolvent and arranged a transfer of customer accounts to the Sabine Federal Credit Union.
Mississippi Broker and Co-Defendants Sentenced for Mortgage Loan Fraud Scheme
On June 9, 2011, in Jackson, Miss., Mark J. Calhoun was sentenced to 200 months in prison for his participation in a mortgage fraud scheme. Also sentenced in connection with the mortgage loan fraud scheme were co-defendants J. Larry Kennedy, who was sentenced to 60 months in prison, and Keith M. Kennedy, who was sentenced to 72 months in prison. The judge also ordered forfeiture in the amount of $10 million for each defendant. Calhoun and former loan closing agents J. Larry Kennedy and Keith M. Kennedy were convicted of conspiracy to commit mail and wire fraud, conspiracy to launder money, multiple counts of wire fraud, and multiple counts of money laundering in relation to their roles in a mortgage fraud conspiracy and scheme. Between September 2004 and at least through September 2006, while operating in the Jackson-metro area as Loan Closing & Title Services, Inc., the Kennedys and their co-conspirators provided fraudulent loan documents to various lenders. The Kennedys then disbursed proceeds from the fraudulent loans to Mark J. Calhoun and others, and their respective companies, as fictitious creditors. As part of the scheme, on some of the fraudulent loans, the Kennedys falsely notarized loan documents during the loan closing process that were relied upon by the lenders to demonstrate that the specific borrower personally appeared at the loan closing and signed the closing documents in the presence of the loan closing agent in order to retrieve the mortgage loan proceeds.
Dallas Businessman Sentenced To Prison for Orchestrating Multi-Million Dollar Mortgage Fraud Scheme
On June 2, 2011, in Dallas, Texas, Eric Rulack Farrington, of Irving, Texas, was sentenced to 132 months in prison and was ordered to pay approximately $2.5 million in restitution and forfeit approximately $1.2 million to the U.S. Farrington was convicted in April 2010 on various felony offenses including ten counts of money laundering and five counts of engaging in a monetary transaction with criminally derived property. Farrington was the president of Eric Farrington Seminars, Inc. and Prestige Capital Corporation, which did business as Farrington Mortgage Group. He was also a manager of EFC Investments, LLC, which did business as EFC Management Company. Farrington was the last of numerous defendants convicted and sentenced in this scheme. Farrington, a motivational speaker who was a book author and had an infomercial on making money in real estate, largely orchestrated the scheme that involved six other defendants. The defendants located single-family residences for sale in the Dallas area, including distressed and pre-foreclosure properties, and negotiated a sales price with the seller. They created surplus loan proceeds by inflating the sales price to an arbitrary amount substantially more than the fair market value of the residence, many times using inflated appraisals. They recruited individuals with high credit scores to act as borrowers and falsely represented to them that the property would be managed by the defendants and rented by a suitable tenant; that the mortgage, interest, taxes, insurance and property maintenance would be paid from the rental income; and the purchasers/borrowers would have no expenses. The borrowers had no intention to live in the property and did not have sufficient income to repay the loans. The defendants prepared and submitted fraudulent loan documents showing inflated incomes in the names of the borrowers and obtained loans in inflated amounts based on these fraudulent loan documents. Then they used the fraudulently obtained surplus loan proceeds to pay the sellers kickbacks, to conceal the fraud, and distributed the bulk of the proceeds among themselves. They would then allow the loan to go into foreclosure after a few payments were made on the loan.
Final Defendant Sentenced for Involvement in Large-Scale Mortgage Fraud Ring
On May 25, 2011, in Boston, Mass., Ralph Appolon was sentenced to 70 months in prison to be followed by two years of supervised release for his role in fraudulent property transactions that were part of a larger mortgage fraud conspiracy. In February 2011, Appolon was convicted of wire fraud and conspiring to commit wire fraud. Between May and September 2005, Appolon and others participated in a conspiracy to obtain $10.6 million in mortgage loan proceeds by fraud. The scheme involved the use of “straw” buyers, inflated purchase prices and documents containing numerous false representations, such as false information about purchase price, borrower income, employment, assets, or intent to reside in the properties. The conspiracy involved 21 property transactions in South Boston, Dorchester, Jamaica Plain, Quincy, Hyde Park and Cohasset. A total of 12 defendants were prosecuted in connection with the conspiracy. Together, the defendants defrauded 10 mortgage lenders of more than $10.6 million in loan proceeds. The mortgages on all of the properties were defaulted upon and nearly all went into foreclosure. Sentencing’s for the other 11 defendants ranged from three years probation to 144 months in prison. The court also entered a forfeiture order of $1.9 million, to be paid by Appolon and other defendants in this case.
Former Loan Officer Sentenced for Defrauding Local Bank
On May 24, 2011, in Sacramento, Calif., Melvin Rohs, of Nevada City, was sentenced to 33 months in prison, followed by five years of supervised release and ordered to pay $533,976 in restitution. Rohs pleaded guilty in December 2010, to three counts of theft, embezzlement or misapplication of bank officer or employee and two counts of making a false statement in connection with a loan application or renewal. According to court documents, Rohs was a senior loan officer at a regional bank headquartered in Nevada City until he was terminated in May 2009. In December 2008, February 2009, and March 2009, Rohs initiated three unauthorized fund transfers between bank customers totaling over $472,000. Also, according to court documents, in September 2008 and April 2009, Rohs falsified loan documents by making materially false statements concerning the credit worthiness of a bank customer and by making an unauthorized increase to a loan approved by the bank. The loss associated with Roh’s criminal conduct exceeds $2.1 million.
Ohio Man Sentenced to Prison for Mortgage Fraud Scheme
On May 19, 2011, in Dayton, Ohio, Gregory S. Chew, formerly of Waynesville, Ohio, was sentenced to 60 months in prison, followed by five years of supervised release as a result of his conviction on one count of money laundering, one count of conspiracy to launder money, and three counts each of mail fraud and wire fraud. Chew was convicted of conspiring with a co-defendant, Richard C. Confer Jr. of West Carrollton, in a scheme to fraudulently obtain more than $4.7 million in mortgage loans from more than 15 victimized mortgage lending institutions. They obtained more than $2.7 million for their personal use from the fraudulent transactions. Evidence was presented at trial indicating that Chew, a real estate facilitator, approached Confer, a mortgage broker, in January, 2003 and agreed to collaborate with him in extensive real estate investments. Further evidence revealed that the pair continued a business relationship for another six years, preparing numerous false, fictitious and forged mortgage loan applications and HUD-1 settlement statements to secure fraudulent loans. Chew deposited over $2.2 million of disbursement checks from various title agencies in his own personal accounts. Chew utilized these ill-gotten funds to pay his co-conspirators, fund fraudulent down-payment checks, and for his own personal use including the purchase of several vehicles.
Louisiana Woman Sentenced for Credit Union Fraud and Money Laundering
On May 12, 2011, in Baton Rouge, La., Linda S. Dunn, aka Linda S. Hinton, was sentenced to 97 months in prison followed by three years of supervised release. Dunn was also ordered to pay $150,883 in restitution. From at least 1999 until April 2003, Dunn was the loan officer and assistant manager of a Baton Rouge federal credit union. In May 2010, Dunn pleaded guilty to executing a scheme that fraudulently caused the credit union to issue loans in the names of various people and distribute the loan proceeds for Dunn’s benefit. Dunn provided names, social security numbers and other personal identifying information of the people, whose names were used for the loans, creating the appearance that others were the true beneficiaries of the loans, when in fact, Dunn was the beneficiary of the loans. The total balance of the loans resulting from the defendant’s fraudulent scheme at the time of the discovery of the fraud was $327,192.
Colorado Man Sentenced for Fraud, False Statements, and Money Laundering
On May 12, 2011, in Denver, Colo., Mark Yost, manager of Yost Partnership, L.P., based in Boulder, Colorado, was sentenced to 78 months in prison for fraud, followed by five years of supervised release, and ordered to pay $10,880,626 in restitution to the victims. Yost pleaded guilty in February 2011, to one count of wire fraud, four counts of false statements to a financial institution, one count of bank fraud and one count of money laundering. According to his plea agreement, Yost received investor funds to trade in securities and to make other investments. On February 4, 2005, and continuing to on or about July 6, 2010, Yost devised a scheme to defraud Yost Partnership and the limited partners by means of materially false and fraudulent pretenses. As part of the scheme, Yost, at the conclusion of each quarter of each year, beginning with the first quarter of 2005 and continuing through the second quarter of 2010, prepared account statements and caused them to be delivered to the limited partners, knowing each one of the statements to be false in that it overstated the value of the limited partner’s share of the assets of Yost Partnership. Yost failed to disclose to the limited partners that a certified public accountant had not completed an audit because the financial statements included inflated and improperly recorded values of the partnership’s interests in a privately held company and a publicly traded company. During the course of the scheme, Yost diverted money which he was not entitled to and converted those funds for his own use and benefit. He also made multiple false statements to banks and in reports in order to obtain lines of credit.
North Carolina Loan Officer Sentenced for Participation in “Flip” Mortgage Fraud Scheme
On May 6, 2011, in Charlotte, N.C., Michael Pahutski, of Gastonia, North Carolina, was sentenced to 228 months in prison, followed by five years of supervised release. Pahutski was also ordered to perform 200 hours of community service and pay $3,563,125 in restitution. According to court documents, Pahutski pleaded guilty to participating in a “flip” mortgage fraud scheme in which houses were purchased through fraudulent mortgage applications and use of other false documents. This sentence is a step in an ongoing investigation of mortgage fraud schemes carried out around the Charlotte area, which led to the charging of multiple individuals with mail, wire and bank fraud conspiracy, money laundering conspiracy, and related charges. Together, the defendants (including attorneys, a real estate appraiser, another mortgage broker, realtors, home builders and real estate investors) participated in a series of mortgage fraud schemes involving more than $20 million in mortgage loans and hundreds of houses in Charlotte-area neighborhoods.
Arizona Investor Sentenced for Role in $4 Million Mortgage Fraud Scheme
On May 2, 2011, in Phoenix, Ariz., Dustin Thompson was sentenced to 27 months in prison, to be followed by three years of supervised release, and ordered to pay $565,467 in restitution. According to court documents, from 2005 through June of 2007, Thompson conspired to commit mortgage fraud by submitting fraudulent mortgage loan applications on behalf of straw buyers, under false pretenses. He obtained and disbursed the proceeds of the fraudulently obtained loans, including directing $1.2 million of the proceeds to a bank account under his control. Thompson used the proceeds from the fraud for personal expenses and to finance other “get rich” schemes. The entire conspiracy resulted in a loss to lending institutions of approximately $4 million.
Pennsylvania Man Sentenced for Bank Fraud and Money Laundering
On March 22, 2011, in Pittsburgh, Pa., Nicholas DeRosa, of New Castle, Pa., was sentenced to 41 months in prison, followed by three years of supervised release, and ordered to pay more than $300,000 in restitution. According to information presented to the court, the Lawrence County Housing Authority, under the direction of then Lawrence County Treasurer Gary Felasco, either lent or made a grant of $200,000 to Affordable Housing of Lawrence County, a then newly formed not-for-profit entity. Affordable Housing's purported purpose was to purchase homes, fix them up, and then rent or sell them to the elderly or disabled. In 2004, Affordable Housing hired Robert Ratkovich, the president of New Castle City Council and a maintenance employee for the Lawrence County Housing Authority. Ratkovich, among other things, was to search for suitable homes for Affordable Housing to purchase as part of its purported mission. After Affordable Housing paid Ratkovich approximately $60,000 in consulting fees, Ratkovich recommended that Affordable Housing purchase seven properties. Four of the seven properties were owned or associated with DeRosa, former member of New Castle City Council, the now retired Assistant Superintendent of the New Castle Area School District. Two of the other properties were owned by DeRosa's cousin, and the seventh property was owned by one of DeRosa's longtime friends. Many of these homes were in dreadful condition, and Ratkovich recommended these homes despite the availability of homes in better condition and for less money. Affordable Housing lacked sufficient funds to purchase these homes, and therefore, through Ratkovich, it applied for a loan through First Commonwealth Bank. Anthony J. Staph, Jr., the son of one of DeRosa's friends, submitted fraudulent appraisals of the properties that drastically overstated the values of the homes. First Commonwealth financed the majority of the purchases through a $250,000 loan, and Affordable Housing contributed approximately $90,000 toward the purchases. By March 2006, Affordable Housing defaulted on the loan. In September 2006 Affordable Housing auctioned all but one of the properties. First Commonwealth received pennies on the dollar when Affordable Housing auctioned off the properties. As far as the money laundering conspiracy charge, DeRosa, Ratkovich and Felasco funneled some of the money from the housing schemes through a series of transactions to Felasco's attorney who did not know that the money was illegally obtained funds. Felasco was, at that time, facing state corruption charges. In summary, the co-conspirators arranged for cash from the transactions to be deposited into the account of an individual who ran a business that received cash receipts. That individual then forwarded money to Felasco's attorney. The idea of depositing the money into the account of this individual was to disguise the illegal nature of the funds and its connection to them, and try to make it look like legitimate money.
Former Credit Union Supervisor Sentenced on Tax Charges
On February 28, 2011, in San Diego, Calif., Erin D. Lovellette, a former credit union supervisor, was sentenced to 18 months in prison, followed by three years of supervised release, and ordered to pay $100,000 in restitution. According to court documents, Lovelette stole $100,000 from a federally insured credit union located at the Marine Corps Base, Camp Pendleton, California. The stolen $100,000 was in the form of a tightly wrapped “brick” of $100 bills, which Lovellette later deposited into multiple bank accounts at other financial institutions to avoid Currency Transaction Report filing requirements. She also was convicted of tax evasion.
Owner of North Attleboro Seafood Dealer Sentencing in $7 Million Bank Fraud
On February 23, 2011, in Boston, Mass., Robert Coutu, the owner of Ocean Fresh Seafood, Inc., was sentenced to 60 months in prison to be followed by three years supervised release. Coutu was also ordered to pay $6,582,165 to Wells Fargo and its successors as a result of his scheme to defraud Wells Fargo Business Credit, Inc., a division of Wells Fargo Bank NA. Beginning before August 1, 2005, Coutu orchestrated a complex scheme to defraud Wells Fargo, which, since 2002, extended a line of credit to Ocean Fresh. The Wells Fargo line of credit was secured by Ocean Fresh’s accounts receivable and inventory. Coutu, with the assistance of various Ocean Fresh employees, falsely inflated Ocean Fresh’s receivables and inventory balances to borrow millions of dollars more than the company’s actual business activity would have permitted. To accomplish their scheme, Coutu and others created false invoices and wired funds from Ocean Fresh’s bank account to accounts managed by affiliates and friends to create the appearance that Ocean Fresh was buying and selling much more product than it actually was. When Wells Fargo’s auditors conducted their quarterly reviews at Ocean Fresh, Coutu and his employees showed them the fabricated paperwork. Coutu also "prepared" for these quarterly reviews by stuffing the freezers with "borrowed" low value seafood from Coutu’s friends in the fish business and then directed his employees to mislabel it as high value seafood, such as lobster tails. Ocean Fresh’s former Controllers, Christopher Day and Cynthia LaRose have both pleaded guilty to conspiring with Coutu and others to defraud Wells Fargo. LaRose was sentenced to three months probation for her role in the fraud and Day is awaiting sentencing.
Florida Real Estate Investor Sentenced to Seven Years in Federal Prison for Mortgage Fraud
On February 11, 2011, in Tampa, Fla., Christopher Alan Stapleton, of Clearwater Beach, was sentenced to 84 months in prison for mortgage fraud-related offenses, including one count of conspiracy to commit wire fraud affecting a financial institution and three counts of making false statements to a federally-insured financial institution. As part of his sentence, the court also entered a money judgment of $3,412,460, the proceeds of the charged criminal conduct. Stapleton was found guilty by a jury on August 17, 2010. According to court documents and the testimony and evidence presented at trial, Stapleton submitted loan applications and other documents containing false and fraudulent information to various mortgage lenders. Specifically, Stapleton falsely inflated both the contract purchase prices of the properties he was buying and his own gross monthly income to get the lenders to approve the loans. Relying on Stapleton's fraudulent representations, the lenders approved the loans and disbursed loan proceeds in excess of the true contract purchase prices. Stapleton paid the sellers and, unbeknownst to the lenders, pocketed millions of dollars in excess loan proceeds. Two other individuals were charged in connection with this case. William Straub, Jr., a former mortgage broker in Pinellas County, and Warren Jay Knaust, an attorney in Pinellas County, who acted as title agent in the charged transactions, each pleaded guilty to conspiracy to commit wire fraud affecting a financial institution. Straub was sentenced to 21 months, and Knaust was sentenced to 30 months in federal prison.
Wisconsin Tax Preparer Sentenced for Mortgage Fraud and Tax Fraud
On January 27, 2011, in Madison, Wis., Gail Mendez was sentenced to 66 months in prison followed by three years of supervised release for mortgage fraud and tax fraud. According to court documents, Mendez was working as a tax preparer doing business as Mendez Connections in the Madison area and engaged in a mortgage fraud scheme and a separate tax fraud scheme. From February 2006 to October 2007, Gail Mendez and four co-defendants engaged in a scheme to defraud Park Bank. Park Bank had a mortgage loan program that allowed borrowers to apply for a loan using an Individual Taxpayer Identification Number (ITIN) instead of a Social Security Number. An ITIN is a nine-digit tax processing number issued by the IRS to aliens who are required to have a U. S. taxpayer identification number but are not eligible to obtain a social security number. Under Park Bank's ITIN mortgage program, a borrower applying for an ITIN loan was required to submit to the bank copies of the borrower's income tax returns for the prior two tax years. Under the program, the bank did not check with the IRS to verify the income stated on a borrower’s submitted federal tax returns. Gail Mendez and co-defendants fabricated false tax returns for approximately 50 ITIN loan applications to obtain loans totaling more than $8 million from Park Bank. The returns falsely inflated borrowers' income and had not been filed with the IRS. Mendez also engaged in a tax scheme by aiding and assisting taxpayers in filing U.S. Individual Income Tax Returns that falsely and fraudulently claimed dependents and child tax credits to which they were not entitled. The Court found that the scheme resulted in a tax loss of $925,000. In December 2007, Gail Mendez learned that the IRS was investigating the claiming of child tax credits on returns prepared at Mendez Connection. At her direction, employees of Mendez Connection removed files and destroyed any notes referring to the fraudulent child tax credits.
California Man Sentenced on Tax and Theft of Bank Funds Charges
On January 24, 2011, in Los Angeles, Calif., Zheng Wang was sentenced to 21 months in prison, followed by three years of supervised release, and ordered to pay restitution of $253,549 to East West Bank and $87,920 to Wells Fargo Bank. Wang pleaded guilty on January 28, 2010, to a two-count information charging him with willful failure to file a tax return and theft of bank funds. According to court documents, Wang took part in a scheme to defraud East West Bank and Wells Fargo bank through fraudulently obtained lines of credit. As part of the application process, Wang set up a fictitious business and created fraudulent tax documents, profit and loss statements, business address location, and invoices that materially misled the financial institutions into believing that Wang was operating a legitimate business. As part of the false documentation to obtain the loans, Wang worked with the “tax preparers” to create the false documents. He had two separate sets, one which was legitimately filed with the IRS and one set which was not. Wang also submitted his own personal tax returns which repeatedly inflated his own income. Wang also knew that the “fake” company on whose behalf the lines of credit were being applied for was not a real operational company and, therefore, all documentation relating to the company was a lie. As a result of the scheme, East West Bank suffered an actual loss of over $250,000 and Wells Fargo suffered an actual loss of over $50,000.
Maryland Man Sentenced to 10 Years in Prison for Mortgage Fraud Scheme
On January 19, 2011, in Greenbelt, Md., Robert Dewain Venson, of Fort Washington, Maryland, was sentenced to 120 months in prison, followed by three years of supervised release, and was ordered to pay $2,060,021 in restitution and to forfeit $892,368, his proceeds from a mortgage fraud scheme. According to evidence presented at his two week trial, from 2004 to 2007 Venson negotiated the purchase of at least a dozen residential properties in Maryland and the District of Columbia. Rather than purchase the properties in his own name, Venson paid straw buyers to appear at the settlements posing as the buyers. Witnesses at his trial testified that Venson typically would represent to the straw buyer that he would pay the loan obligation. Venson inflated the price listed on the sales documents to an amount substantially larger than the actual price, causing the mortgage lender to provide funds for the purchase substantially in excess of the actual price. Venson misrepresented and concealed the true purchase price, his arrangement with the straw buyer and other information from the mortgage lender. Venson also failed to file individual federal income tax returns for 2004, 2005 and 2006.
Defendant Sentenced to Five Years for His Role in Large-Scale Mortgage Fraud Ring
On January 14, 2011, in Boston, Mass., Andre Junior Lamerique, formerly of Sharon, was sentenced to 60 months in prison, to be followed by three years of supervised release. Lamerique pleaded guilty in March 2010 to conspiracy for his role in a mortgage fraud ring that involved 21 fraudulent property transactions in the Greater Boston area, which defrauded 10 mortgage lenders of more than $10.6 million in loan proceeds. A total of 11 defendants were indicted in May 2008. According to court documents, between May 2005 and June 2006, the scheme involved the use of “straw” buyers, inflated purchase prices and documents containing numerous false representations, including false information about the purchase price, borrower income, employment, and intent to reside in the property. The difference between actual purchase prices negotiated with sellers and the inflated purchase prices submitted to lenders ranged as high as $255,000 on some properties. These fraudulent "mark-ups" added up to over $1.9 million. From this $1.9 million, the defendants pocketed more than $1.7 million in illegal proceeds. The mortgages on all of the properties were defaulted upon and nearly all went into foreclosure. Lamerique participated in the scheme by recruiting straw buyers for the fraudulent loans, creating and sending bogus loan applications to mortgage lenders, and sharing in the illegal proceeds. Lamerique is the ninth defendant sentenced to date. In October and November 2010, the following defendants were sentenced: Daniel Appolon was sentenced to 42 months in prison; Samuel Jean-Louis received 22 months in prison; Ernst Appolon was sentenced to 120 months in prison; Jermaine Blake was ordered to serve 30 months in prison; Widner Lamarre received 60 months in prison; Latoya Haltiwanger was sentenced to 30 months; Jean Noriscat was sentenced to a prison term of 87 months; and J. Daniel Lindley was sentenced to 72 months in prison.
Ohio Family Members Sentenced For Roles in Mortgage Fraud
On January 6, 2011, in Columbus, Ohio, Scott M. Gaib and his wife, Erica S. Gaib, were sentenced to 18 months and 12 months and a day in prison, respectively, for their roles in a mortgage fraud scheme they used to obtain loans in connection with the purchase and refinancing of eight properties in central Ohio. Scott Gaib was also ordered to pay $1,697,080 in restitution to victim banks. Erica Gaib was ordered to pay $884,329 in restitution. Scott Gaib pleaded guilty to one count of conspiracy and one count of money laundering. Erica Gaib pleaded guilty to one count of attempted money laundering. According to a court documents, Scott Gaib combined with certain other persons to purchase residential properties in and around Central Ohio during 2005, 2006 and 2007. He provided prospective lending institutions with exaggerated and inflated appraisals of the properties. He and his co-conspirators then misrepresented his credit worthiness to lending institutions to help get the excessive mortgage loans approved. Finally, Scott Gaib and other conspirators received substantial monies directly and indirectly from the proceeds of the excessive mortgage loans, which were concealed from the lending financial institutions.
Three Men Sentenced In $82 Million Ponzi Case
On December 14, 2010, in Columbia, S.C., three men, who call themselves the Three Hebrew Boys – Tony Pough, Joseph Brunson, and Timothy McQueen – all of Columbia, South Carolina, were sentenced to prison. Brunson and McQueen each received 27 years imprisonment. Pough, because he had a prior conviction, received 30 years imprisonment. They were also ordered to pay $82 million in restitution to those they defrauded. According to court documents, the three were convicted in November 2009 for masterminding a dubious FOREX investment program that was nothing more than an $82 million Ponzi scheme. Evidence presented at the trial established that the Three Hebrew Boys promised massive returns based on investment in the foreign currency exchange market, or FOREX. For a contribution of a few thousand dollars, investors were supposed to have their homes, cars, college tuition, credit card bills, and other financial obligations paid off. Instead, the Three Hebrew Boys used some of the incoming money from new investors to pay their outstanding obligations. With the rest, they purchased a private jet, luxury suites at the Carolina Panthers and Atlanta Falcons stadiums, a fleet of cars – including two Mercedes roadsters each valued in excess of $100,000 – homes in Florida, condominiums in Atlanta, and a $900,000 party bus, among other things.
Four Sentenced in Mortgage Fraud Case
On December 14, 2010, in Greenville, N.C., Brain Keith Causey, of Wilmington, N.C., was sentenced to 18 months’ imprisonment followed by three years’ supervised release. Additionally, Causey forfeited $250,000. On December 13, 2010, three other defendants in the same mortgage fraud conspiracy were also sentenced. Horace Hance Mayo III, of Wrightsville Beach, North Carolina, received four months’ imprisonment and 120 days home detention with electronic monitoring followed by three years’ supervised release; Michael Paul Fluharty, of Little River, South Carolina, received six months’ imprisonment followed by five years’ supervised release and a fine of $2,000; and Tyrone Ford, also of Wilmington, North Carolina, received five months’ imprisonment followed by five years supervised release. Additionally, the Court ordered a $50,000 forfeiture against Mayo and his North Carolina mortgage broker license has been cancelled. On August 12, 2010, all four defendants pleaded guilty to one count of conspiring to commit wire and mail fraud. Co-defendant Daniel Adams Rooks owned property in Columbus County that he subdivided into parcels for mobile homes. Low-income purchasers, who did not qualify for any type of government-backed mortgage, were solicited as buyers. Causey, Mayo, Fluharty, and Ford prepared and submitted loan applications with falsified and fictitious information regarding employment history, income, and other assets, along with letters of credit. Causey, who worked for Wachovia, in Wilmington, North Carolina, was responsible for falsifying information and submitting false documents in support of loan documents. After Causey left Wachovia, he went into the mortgage loan business with Mayo. Fluharty, a former employee of Daniel Rooks’, assisted with falsifying documents regarding the down payments. Ford recruited straw buyers and provided false and fictitious loan applications to mortgage lenders. During the conspiracy, over 150 loans were submitted with false and fictitious information and over $6 million in loan disbursements. Only two of the loans were not foreclosed upon.
North Carolina Man Sentenced on Money Laundering Charges
On December 1, 2010, in Raleigh, N.C., Kimithi L. Davis, of Knightdale, North Carolina, was sentenced to 53 months in prison and ordered to pay $2,045,854 in restitution. According to a Criminal Information filed on April 1, 2010, Davis was charged with conspiracy to commit money laundering. Davis operated a business known as “Pro Bowl Brokerage” and “Pro Bowl Consulting, LLC” that purported to help people secure loans and real estate financing. Though neither Davis nor his business had any relevant brokerage license, they collected a fee from the proceeds of the loans in an amount misrepresented to the victim lenders. During the scheme, Davis and others secured financing for themselves and others based on materially false and fraudulent representations to lending institutions. Davis then engaged in financial transactions with these ill-gotten gains.
Owners of Guaranty Title Sentenced for $4.1 Million Fraud
On December 1, 2010, in Springfield, Mo., Richard Burton and Kathy Allen were sentenced to 78 months and 39 months in prison, respectively. They were also ordered to jointly and equally pay $4.15 million in restitution. According to court documents, Burton was the president and majority owner of Guaranty Title Company of Southwest Missouri; Guaranty Title Company, dba Guaranty Title and Closing Company; and Guaranty Properties, Inc. The companies, referred to collectively as Guaranty, provided real estate title and closing services. Allen, who had a 42 percent ownership interest in Guaranty, was the vice president during the time of the conspiracy. Burton and Allen each admitted that from May 2005 to June 2007 they defrauded mortgage companies and individual customers of escrow money which had been wired to Guaranty to pay real estate closing costs. When real estate buyers and sellers hired Guaranty to facilitate the closing of real estate contracts, Guaranty agreed to hold buyers’ money for closing costs in an escrow funds account separate from funds that Guaranty owned. Guaranty was prohibited from commingling that escrow money with the firm’s business operations money because it did not own the escrow money it received. Burton and Allen admitted that they took a portion of the escrow money that had been transferred into these escrow accounts. In violation of Guaranty’s promise not to do so, they caused $3,467,709 of stolen escrow funds to be diverted into the firm’s business operations account and used the money for the day to day business operations of Guaranty. To conceal the source of those deposits into the operations account, they instructed Guaranty’s in-house bookkeeper to record deposits of stolen escrow money into Guaranty’s business operations account as loans, including loans from a fictitious company called “K & S Investments.” By April 2007, deposits into Guaranty’s main escrow account no longer covered shortages caused by the theft of escrow funds. Allen and Burton concealed this shortage by writing and depositing checks between various accounts held by Guaranty at Great Southern Bank and Ozark Mountain Bank that did not contain sufficient funds to cover the checks. This check-kiting scheme continued until June 18, 2007, when Old Missouri Bank discovered the fraud and closed the bank account. As a result of this check kiting, they caused Ozark Mountain Bank to lose nearly $700,000.
Idaho Man Sentenced In Mortgage Fraud Investigation
On November 29, 2010, in Boise, Idaho, one of ten defendants charged in a mortgage fraud cases was sentenced. Stanley Ferguson, of Boise, was sentenced to 12 months and one day in prison, three years of supervised release, and ordered to pay restitution of $676,826. Previously, on November 1, 2010, Christopher Georgeson, formerly of Boise, Idaho, currently of Phoenix, Arizona, was sentenced to one month in prison, three years supervised release, 11 months of home detention, and $103,356 in restitution as part of the same scheme. Stanley Ferguson pleaded guilty to wire fraud in May 2010 and is one of ten defendants in an Idaho mortgage fraud scheme. According to his plea agreement, Ferguson applied for a residential construction loan in the approximate amount of $1,499,999, for a residence in Eagle, Idaho. On his loan application, Ferguson falsely stated he had a monthly base employment income of $23,500 when in fact he had no monthly base employment income. Ferguson also falsely stated he had gross rental income of $2,138 per month when in fact he had no rental income. He falsely stated that the property would be his primary residence. Based on these misrepresentations, the funding on the residential loan was authorized. At the loan closing, a sum of money was paid to Crestwood, Inc. The property was subsequently the subject of a foreclosure proceeding due to non-payment of the monthly mortgage by Ferguson. According to the Christopher Georgeson plea agreement, Georgeson applied for a residential construction loan in the approximate amount of $292,000. On his loan application, Georgeson falsely stated he had a monthly income of $41,666 when in fact he had monthly income of approximately $8,000. Georgeson also falsely stated he had gross rental income of $2,300 per month when in fact he had no rental income. Based on these misrepresentations, the funding on the residential loan was authorized. At the loan closing, $93,000 was paid to Crestwood, Inc. The property was subsequently the subject of a foreclosure proceeding due to non-payment of the monthly mortgage by Georgeson.
Ohio Real Estate Agent Sentenced for Mortgage and Tax Fraud
On November 10, 2010, in Columbus, Ohio, Todd M. Gongwer, a licensed real estate agent, was sentenced to 24 months in prison and ordered to forfeit $250,000. In addition, he was ordered to pay restitution to the Internal Revenue Service (IRS) and the financial institutions he defrauded in amounts to be determined by the court. Gongwer pleaded guilty in May 2009 to conspiracy to commit bank fraud and tax evasion charges. According to court documents, during 2005 through 2007, Gongwer and others negotiated and participated in five real estate deals in which Gongwer, a nominee or another buyer would purchase a luxury home for a falsely-inflated purchase price and receive a kick-back. In each transaction, the buyer, or Gongwer on the buyer’s behalf, would misrepresent his or her income and assets in to obtain financing for approximately 90 percent of the inflated purchase price. The inflated purchase prices were justified by creating false work-change orders and addenda that created the appearance that the inflated prices represented additional, substantial work to be completed on the homes. The object of each transaction was to use the loan proceeds in excess of the actual purchase price to fund hundreds of thousands of dollars in kick-back payments to the buyers. The buyers have been unable to maintain the mortgage payments on the luxury homes and have all defaulted on the loans. During tax year 2004, Gongwer worked for ReMax Affiliates Inc. and was paid approximately $158,333 in gross income. Gongwer deposited that income into nominee accounts to conceal his receipt of that income from the IRS. Gongwer failed to file income tax returns for tax years 2000 through 2005.
Tucson Man Sentenced for Mortgage Fraud and Tax Evasion
On November 10, 2010, in Tucson, Ariz., Chris Nero, of Tucson, was sentenced to 58 months in prison. Nero, also known as Christopher Sisneros, pleaded guilty to three counts of Felony Attempted Evasion of Income Taxes. Nero was originally indicted June 11, 2008, on charges related to his involvement in a mortgage fraud scheme. According to information presented in court, from 2003 through 2005, Nero and a co-defendant conspired to commit mortgage fraud in Tucson. Nero took part in a conspiracy to fraudulently submit mortgage applications on behalf of straw buyers under false pretenses. Nero then obtained and disbursed the proceeds of fraudulently obtained loans to bank accounts under his control or to others acting on his behalf. The conspiracy resulted in losses to institutions of over $2 million. In his plea agreement to the tax charges, Nero admitted he earned a total gross income of at least $2.7 million for the years 2001 through 2007. He also admitted he failed to file any income tax returns either personally or through his company, MIH Real Estate Investor's Inc., for tax years 2001 to 2008. Co-defendant, Roy Fife, a former real estate agent, is scheduled for guilty plea, sentencing and restitution hearing on December 12, 2010.
Mississippi Man Sentenced to 51 Months in Prison; Ordered to Pay Over $6 Million in Restitution
On November 4, 2010, in Oxford, Miss., James Clifton Green, Jr., of Belden, was sentenced to 51 months in prison, followed by five years of supervised release, and ordered to pay $6,150,000 in restitution. Green, former President and controlling stockholder of Peoploungers, Inc., pleaded guilty in April 2010 to a three-count Information, charging him with bank fraud, mail fraud and money laundering. According to his plea agreement, Green admitted to misrepresenting his financial position to a number of banks in the North Mississippi area by overvaluing his assets and under-reporting his liabilities for the purposes of obtaining loans.
Former Bank Vice President Sentenced for Embezzling More Than $1 Million and Filing False Returns
On October 26, 2010, in New Haven, Conn., Robert A. Nixon, of East Haven, was sentenced to 55 months in prison, followed by three years of supervised release, and ordered to pay approximately $1.2 million in restitution to Naugatuck Savings Bank and its insurer, which includes costs the bank incurred while investigating the fraud. Nixon was also ordered to pay full restitution to the Internal Revenue Service (IRS), plus applicable interest and penalties. On August 6, 2010, Nixon pleaded guilty to theft, embezzlement, or misapplication by a bank officer and income tax evasion. According to court documents, Nixon was employed as Vice President of Operations of Castle Bank and Trust, now Naugatuck Savings Bank. Between 2000 and 2008, Nixon made or caused other bank personnel to make computer entries that transferred funds from Castle’s general account into a friend’s personal savings and checking accounts at the bank. Nixon then withdrew cash from his friend’s account and directed his friend to withdraw cash. He also directed his friend to transfer funds by check from the Castle account to accounts held at other banks, and then withdrew cash from the accounts. The total amount of money embezzled through this scheme was over $1 million. In order to hide his theft, Nixon used his position to cause false entries to be made in Castle’s general account and “reprocess” official Castle bank checks that had already been cashed by the respective payees and debited by Castle, which caused an additional debit to appear in the general account. Nixon also failed to pay federal taxes on the funds that he embezzled which resulted in underpayment of $268,784 to the IRS for the 2002 through 2008 tax years.
Leader of Property-Flipping Scheme and Husband Sentenced; Defendants Concealed Millions of Dollars of Profits
On October 13, 2010, in Greenbelt, Md., Minh-Vu Hoang, and her husband, Thanh Hoang, of Bethesda, Maryland, were sentenced for their roles in a conspiracy to defraud the Internal Revenue Service (IRS) and the U.S. Bankruptcy Trustee in connection with a scheme to conceal millions in profits earned from the purchase and sale of hundreds of foreclosure properties. Minh-Vu Hoang was sentenced to 60 months in prison to be followed by three years of supervised release. Thanh Hoang was sentenced by 12 months and a day in prison to be followed by two years of supervised release. According to their plea agreements, the Hoangs and other family members purchased property at foreclosure auctions beginning in 1999 and resold some of the properties at a profit. The Hoangs and others deposited and withdrew money from an escrow account for the purchase and sale of properties. They transferred money from the escrow account to business entities they controlled in order to conceal their financial interests in the properties. From 2000 to 2005, the Hoangs and others purchased and sold hundreds of foreclosure properties using the names of their agents or business entities to conceal their involvement in the purchase and sale of the properties, and thereby avoid taxes. In addition, on May 10, 2005, Minh-Vu Hoang filed for bankruptcy in Maryland. She filed several false schedules and a false statement of financial affairs with the bankruptcy court in support of her bankruptcy petition in which she: reported a financial interest in only six properties, knowing that she had an interest in other properties; substantially under-reported the income she earned in 2003 and 2004; and failed to report her interest in various bank accounts. The court determined that the tax loss from the fraud was between $2.5 and $7 million. Because the bankruptcy proceedings are ongoing, the court made no separate determination of the bankruptcy loss.
Minnesota Man Sentenced for $800,000 Mortgage-Fraud Scheme
On October 6, 2010, in Minneapolis, Minn., Dale Dodge was sentenced to 34 months in prison for wire fraud and money laundering. According to court documents, Dodge admitted that from 2002 through 2005, he operated a title closing company under the names Premier Title & Abstract, Inc., and Verity Title & Abstract. As part of that operation, he maintained an escrow account, into which mortgage lenders regularly deposited loan proceeds for distribution at closings pursuant to the terms of the real estate agreements. He also contracted the services of a title insurer, who underwrote most of the real estate transactions closed through his company. Title insurers, often called underwriters, are liable to lenders, borrowers, and others if escrow and other transaction funds are improperly disbursed. Dodge executed a scheme to defraud mortgage lenders and others out of large sums of money by diverting loan proceeds from the escrow account at his title company. The money was used for his personal benefit as well as the benefit of his company and others involved in the scheme. Specifically, Dodge fraudulently removed the funds or caused the funds to be removed from the escrow account to pay his salary and the salaries of company employees in addition to other non-escrow business expenses. Frequently, those expenses were paid through wire transfers from the escrow account to other accounts under Dodge’s control. Furthermore, Dodge admitted concealing those actions from his title insurer and mortgage lenders as well as from property sellers and purchasers. Dodge’s fraud scheme caused losses of more than $800,000.
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