IRS Criminal Investigation (CI)
February 2009

Federal investigators have identified an increase in frauds and schemes in the real estate business.  These schemes victimize individuals and businesses, including  low-income families lured into home loans they cannot afford, legitimate lenders saddled with over-inflated mortgages and honest real estate investors fleeced out of their investment dollars.

Special agents with IRS Criminal Investigation are uniquely equipped to investigate these types of mortgage fraud and illegal real estate crimes because they are skilled financial investigators whose mission is to 'follow the money.'

Some of the common real estate fraud schemes include:

• Property Flipping — A buyer pays a low price for property, and then resells it quickly for a much higher price. While this may be legal, when it involves false statements to the lender, it is not.
• Two Sets of Settlement Statements — One settlement statement is prepared and provided to the seller accurately reflecting the true selling price of the property. A second fraudulent statement is given to the lender showing a highly inflated purported selling price. The lender provides a loan in excess of the property value, and after the loans are settled, the proceeds are divided among the conspirators.
• Fraudulent Qualifications — Real estate agents assist buyers who would not otherwise qualify by fabricating their employment history or credit record.

The income earned from these types of real estate fraud schemes is often laundered to hide the money from the government.  Money laundering is simply a process of trying to make illegally earned income appear to be legitimately earned.  IRS Criminal Investigation follows the money and collects evidence to prove applicable tax and/or money laundering violations.  Once they have obtained the evidence, IRS agents forward their investigation to the Department of Justice for criminal prosecution.

If a criminal investigation is not warranted, the IRS can also take civil action.  Each year the IRS audits thousands of tax returns involving individuals and entities associated with the real-estate business.

IRS Criminal Investigation
Real Estate Fraud Statistics

Case Summaries

The following case summaries are based on public record court documents on file in the judicial district in which the cases were prosecuted:

Metro Denver Real Estate Agent Sentenced To Federal Prison for Mortgage Fraud Scheme

On February 6, 2009, in Denver, Colo., real estate agent Linda Edwards, of Centennial, Colorado, was sentenced to 41 months in prison, ordered to pay $646,521 in restitution, and forfeit $139,854 for wire fraud, false statements, and false use of a social security number. Edwards was indicted in February 2005 and found guilty following a jury trial in July 2008. According to the indictment, Edwards, aided and abetted by others, devised a scheme to defraud and to obtain money and property by means of fraudulent representations and promises from mortgage companies that funded federally insured loans. As part of the scheme, Edwards, and others working with her, located buyers to buy residences, but were unable to qualify for a mortgage using the buyers’ accurate credit history, income and employment, and/or other financial information. The defendant, and others working with her, would assist the buyers who could not legitimately qualify for an FHA-insured mortgage by: (i) obtaining a false social security number (“SSN”) for the buyer, which would conceal the buyer’s unfavorable credit history; (ii) creating false W-2s or other income documents, which would inflate or wholly create income that would purportedly be available for the buyer to make mortgage payments; (iii) creating false verifications of rent (“VOR”) or employment (“VOE”) to support false information about the buyer; (iv) creating false alternate credit letters, which would create an appearance that the buyer had a history of paying debts timely; and (v) creating false “gift letters,” which falsely stated that the buyer had an appropriate source of funds for the down payment, and/or other false financial information.

Four Participants in Mortgage Fraud Scheme Sentenced to Prison

On February 4, 2009, in Columbus, Ohio, four people were sentenced for their roles in schemes that fraudulently secured more than $2.6 million in mortgage loans in 2003, 2004 and 2005. Donald F. Green was sentenced to 36 months in prison, followed by five years of supervised release, and ordered to pay $1,282,514 in restitution to Stillwater Capital Partners and 23 victim banks, jointly with his co-conspirators, and ordered to pay $230,376 in restitution to the Internal Revenue Service (IRS). Green pleaded guilty in April 2008 to one count each of conspiracy, income tax evasion, and bank fraud. George T. Jordan was sentenced to 12 months and one day in prison, followed by three years of supervised release, 416 hours of community service, and ordered to pay $1,182,691 in restitution to ABN Amro. Jordan pleaded guilty in April 2008 to one count of conspiracy and one count of money laundering. Aryeh M. Schottenstein was sentenced to 42 months imprisonment, followed by three years of supervised release, 416 hours of community service, and ordered to pay $3,740,173 in restitution to the victim financial institutions. Schottenstein pleaded guilty in May 2008 to one count each of conspiracy and money laundering. Jeffrey M. Lieberman was sentenced to 16 months in prison, followed by three years of supervised release, and ordered to pay $400,000 in restitution to Stillwater Capital Partners. Lieberman pleaded guilty in April 2008 to one count each of conspiracy and money laundering. Jordan is a real estate agent who generated a mortgage fraud scheme, selling houses at inflated prices and splitting the excess funds received from the mortgage lender with his co-conspirator, Griffin. Schottenstein and Lieberman solicited funds from private investors interested in renovating houses in distressed neighborhoods. A substantial amount of those funds was used to purchase houses from Green, who owned hundreds of houses in distressed areas of Columbus, at prices well in excess of their true values. Griffin helped locate “straw buyers” for those houses and also received funds for renovation purposes.

Green Bay, Wis. Man Sentenced to Six Years in Prison and Ordered to Pay $3.65 Million in Restitution for Tax Fraud and Wire Fraud

On January 14, 2009, in Green Bay, Wis., Daniel LaMarch was sentenced to 72 months in prison and ordered to pay restitution in the amount of $3.65 million for tax and wire fraud. LaMarch is the former owner of Title Services of Green Bay, a company that also maintained offices in Appleton, Shawano, Oconto, and Kewaunee. He pleaded guilty to carrying out a scheme to defraud in which he diverted money from his business escrow account, intended to be used to pay closing costs on real estate transactions handled by his business. From March 2002 through February 2008, LaMarch diverted more than $1.5 million from the escrow account to his own personal benefit and the operation of his business. LaMarch also pleaded guilty to failing to pay over to the IRS more than $500,000 in payroll taxes withheld from his employees, and under reporting his income by more than $118,000. At sentencing, the government emphasized the duration and magnitude of LaMarch’s fraud, as well as the fact that LaMarch continued his crime even after he was contacted by IRS agents.

Kansas Real Estate Agent Gets 12+ Years in Federal Mortgage Fraud Case

On January 10, 2009, in Kansas City, Kan., David Kostelec was sentenced to 154 months in prison and ordered to pay $1.3 million in restitution for leading a scheme to fraudulently acquire $12 million in home loans. Kostelec pleaded guilty in October 2008 to one count of conspiracy to commit wire fraud and money laundering, one count of wire fraud, one count of providing false information to lenders and one count of aggravated identity theft. In his plea, Kostelec admitted that from 2002 through 2005, he and others conspired to defraud lenders by submitting fraudulent loan applications and false real estate appraisals and attempted to conceal the crimes by laundering the money through accounts at various banks. Kostelec submitted false and fraudulent appraisal reports to lenders containing inflated property values and forged signatures of licensed appraisers. Conspirators stole the identities of licensed appraisers by searching the Internet for information including the appraisers’ state license numbers. After closing, the conspirators used straw entities including Alexandra Enterprises and Hyde Park Development to receive the money from escrow companies. Then they moved the money to personal accounts.

Brothers Sentenced in Million Dollar Mortgage Fraud Conspiracy

On December 5, 2008, in Alexandria, Va., Mohammed Rababeh, of Vienna, Va., and Ahmed Rababeh, of Haymarket, Va., were sentenced for their roles in a million dollar mortgage fraud conspiracy. Mohammed Rababeh was sentenced to 24 months in prison and Ahmed Rababeh received 18 months in prison. The two men had pleaded guilty on September 24, 2008, to conspiracy charges arising from a fraud scheme involving several real estate mortgage loans that they and their co-conspirators obtained between April 2004 and September 2006. According to court documents, the brothers conspired with Randolph Baltimore, 50, of Leesburg, Virginia, to submit fraudulent loan applications overstating Baltimore’s income and omitting his liabilities, so that Baltimore could purchase properties the Rababehs wanted to sell. The Rababehs agreed to pay Baltimore $27,500 to serve as the buyer on four such properties. Mohammed and Ahmed Rababeh engaged in similar fraud schemes to obtain loans to buy properties in their own names, according to court papers. Mohammad Rababeh obtained more than $2 million in such loans, and the losses to the lenders could be as much as $1 million. Baltimore pleaded guilty to the conspiracy on June 24, 2008, and was sentenced September 26, 2008, to 12 months in prison.

Ohio Man Sentenced in Mortgage Fraud Scheme

On December 4, 2008, in Cincinnati, Ohio, Eric Philpot was sentenced to 37 months in prison for a scheme he ran that defrauded mortgage lenders out of more than $200,000.  Philpot pleaded guilty on June 17, 2008, to one count of mail fraud and one count of conspiracy to commit money laundering. According to court documents, Philpot solicited people to buy residential properties and helped them secure financing by providing lenders with false information about the buyers’ income, source and scope of the down payments and other information. Additionally, Philpot failed to disclose to the lenders material information about the true nature of the real estate deals so that appropriate business decisions could be made by the lenders. Philpot admitted that, once the loans were approved, he maintained control both of the properties which were often deeded in the names of others and the loan proceeds. Philpot also fraudulently obtained financing for the sale of one property while he knew he was under federal investigation for mortgage fraud. The judge scheduled a hearing in February 2009 to determine the amount of restitution Philpot must pay.

Three Palm Beach County Residents Sentenced for Mortgage Fraud

On December 4, 2008, in Miami, Fla., three Palm Beach County residents were sentenced for their participation in a mortgage fraud scheme totaling more than $6.5 million. Defendant Lauren Jasky was sentenced to 36 months’ imprisonment, to be followed by 5 years of supervised release. On December 1, 2008, defendant Ralph Michel, a/k/a Ralph Duverneau, was sentenced to 30 months’ imprisonment, to be followed by 4 years of supervised release. On November 19, 2008, defendant Berry Louidort was sentenced to 37 months’ imprisonment, to be followed by 5 years of supervised release. All three defendants previously pled guilty to conspiracy to commit bank fraud and mail fraud. Defendants Michel and Louidort also pleaded guilty to a money laundering charge. According to court documents and court testimony, this investigation began with an audit conducted by the Florida Office of Financial Regulation into 24 sub-prime mortgage loans initiated by Compass Mortgage Service, Inc. (“Compass Mortgage”), of Boca Raton, FL. The initial audit revealed that the loans included excessively large fees paid to defendants Berry Louidort and Ralph Michel.  The fees, ranging from $29,000 to $650,000, were described as marketing and/or assignment fees. In fact, however, the fees were kickbacks to defendants Louidort and Michel based on inflated sales prices. The audit also revealed that the majority of the suspect loans were originated by defendant Lauren Jasky, senior vice president of Compass Mortgage. To execute the scheme, the defendants fraudulently bought and sold residential property in Palm Beach County, FL.  Defendants Louidort and Michel received large assignment and marketing fees and Jasky received mortgage brokerage fees. The defendants prepared fraudulent loan applications for the purchasers and submitted them to the lenders. The applications included materially false information about the borrowers’ employment verification, income, funds on deposit, and rent history.

Three Florida Residents Sentenced for Mortgage Fraud

On December 1, 2008, in Miami, Fla., Berry Louidort received a 37 month prison sentence for his participation in a $6.5 million mortgage fraud scheme. His co-defendant, Lauren Jasky, was sentenced to 36 months imprisonment on December 4, 2008. Another co-defendant, Ralph Michel, a/k/a Ralph Duverneau, was sentenced to 30 months imprisonment. The three defendants previously pleaded guilty to conspiracy to commit bank fraud and mail fraud. Michel and Louidort also pleaded guilty to a money laundering charge. According to court documents and court testimony, the Florida Office of Financial Regulation audited 24 sub-prime mortgage loans initiated by Compass Mortgage Service, Inc. (“Compass Mortgage”), in Boca Raton, FL. The initial audit revealed that the loans included excessively large fees paid to defendants Louidort and Michel. The fees, ranging from $29,000 to $650,000, were described as marketing and/or assignment fees. However, the fees were kickbacks based on inflated sales prices. The audit also revealed that the majority of the suspect loans were originated by Jasky, who was the company’s senior vice president. The defendants fraudulently bought and sold residential property in Palm Beach County, FL. Louidort and Michel received large assignment and marketing fees and Jasky received mortgage brokerage fees. The defendants prepared fraudulent loan applications for the purchasers and submitted them to lenders. The applications included false information about the borrowers’ employment verification, income, funds on deposit, and rent history.

Mortgage Fraud Scheme in Texas Results in Prison Term for Florida Man

On November 24, 2008, in Sherman, Texas, Michael Guy Cary, Sr., of Hollywood, Florida, was sentenced to 60 months in prison and ordered to pay $5 million for money laundering, bank fraud and conspiracy to commit mail fraud. Cary and his co-defendant, Richard Kirkpatrick, were convicted earlier for their roles in a mortgage fraud scheme.  According to court testimony, Cary’s scheme involved the purchase and sale of 211 homes in Texas involving a variety of fraudulent transactions. Cary purchased the homes directly from home builders and then arranged the transfers of the deeds into names deceptively similar to that of the home builders. Upon completion of the transfers, Cary had real estate appraisers artificially inflate the values of the homes and arranged their subsequent sales to out-of-state investors who believed that they were purchasing the homes directly from the home builders and who qualified for mortgage loans on the inflated amounts based on fraudulent loan applications. Kirkpatrick provided the inflated appraisals on 89 of the 211 homes.

Owner of Funding Corporation Sentenced on Income Tax and Bank Fraud Charges

On November 4, 2008, in Cincinnati, Ohio, Toby Groves was sentenced to 24 months in prison, followed by three years of supervised release, and ordered to pay $299,997 in restitution to the Internal Revenue Service (IRS) for income tax evasion and bank fraud.  According to court documents and testimony, Groves owned a business known as Groves Funding Corporation (Groves Funding). Beginning in June 2003 and continuing through 2005, Groves provided loans to individuals who were purchasing residential real estate through his business. Groves obtained the funds to make these residential real estate loans from a line of credit supplied by a financial institution to Groves Funding. Groves Funding sold these loans to other financial institutions and Groves profited through the sale of these loans. Groves used Groves Funding to obtain loan proceeds from lenders at interest rates and in greater total sum than he would have otherwise been able to obtain. He submitted loan applications and real estate closing packages to lenders that contained false statements and omissions with the intent of inducing the lenders to provide funding. At times, Groves provided lenders with fraudulent income tax returns that were never filed with the IRS. Additionally, on his 2003 federal income tax return, Groves falsely reported his taxable income was $1,718 and that he owed no federal income tax. In his plea agreement, Groves admitted that the tax loss to the IRS for 2003 was $111,409. Also pursuant to his plea agreement, Groves agreed that there would be an additional total tax loss to the IRS for the 2001 and 2002 tax years.

Second Tucson Defendant Pleads Guilty to $13 Million Mortgage Fraud Conspiracy

On November 3, 2008, in Tucson, Ariz., Carlos Bent was sentenced to 16 months in prison and ordered to pay $867,916 in restitution for wire fraud and engaging in illegal monetary transactions in a $13 million mortgage fraud scheme. Bent pleaded guilty in January 2007 admitting that he and co-defendant Frank Padilla solicited the owners of residential real estate that had not been sold despite being on the market for substantial periods of time, and convinced these owners to use them as sales agents. The owners were told that the properties were worth more than the listed price, and that a buyer would be found if the owners agreed to a “net listing” of the property wherein Padilla and Bent would retain any sales proceeds above the owner’s asking price. Bent and Padilla found “straw buyers” to be the purported purchasers of the properties and paid the “straw buyers” a substantial fee for their fraudulent participation. Bent, Padilla and others created fraudulent documents, including false employment verifications, bank statements, mortgage loan applications and contractor’s licenses in order to qualify the “straw buyers” for 23 mortgage loans from financial institutions totaling over $13 million in order to purchase 21 residential properties (2 properties were each sold twice). Minimal, if any, mortgage payments were made on the properties and they were allowed to go into default and foreclosure. Finally, the defendants negotiated 33 checks totaling $1.3 million from title companies for currency. Every check totaled more than $10,000 and represented proceeds of the fraud. Padilla received a 24 month prison sentence in June 2008 and was ordered to pay $1.1 million in restitution.

Florida Man Sentenced to 240 Months on Mortgage Fraud and Tax Evasion Charges

On October 30, 2008, in West Palm Beach, Fla., Gregory Claude Brown was sentenced to 240 months in prison, to be followed by three years of supervised release, and ordered to pay over $2 million restitution to the financial institutions and other victims of his fraud. In June 2008, Brown was convicted by a trial jury of conspiracy, wire fraud and mail fraud arising from a scheme to obtain more than $9 million in home mortgages by submitting false information to banks regarding the purchase of more than 10 homes.  Brown was also convicted of failure to timely file his federal income tax returns for the 2001 through 2005 tax years and of income tax evasion with regard to his 1998, 1999, and 2001 through 2005 taxes. According to the superseding indictment and evidence presented at trial, Brown failed to pay his 1998, 1999, and 2001 through 2005 income tax liabilities, which totaled approximately $214,299, and engaged in willful acts of evasion, including concealing his income and assets, filing false documents with the Internal Revenue Service, and placing funds and property in the names of nominees.  According to evidence presented during the trial, Brown and others created false income tax returns to justify the false income information on the mortgage applications.  Brown filed these false returns well after the filing dates required and failed to pay any taxes due and owing despite buying more houses, buying a 40 foot go-fast boat, traveling to foreign countries, leasing high end motor vehicles, and buying luxury items.  Co-defendant Monica Martinez, defendant Brown’s girlfriend, pleaded guilty to filing a false tax return in connection with the scheme to obtain mortgages fraudulently. On July 28, 2008, defendant Monica Martinez was sentenced to three years of probation. In addition, co-defendant Wilfredo Martinez pleaded guilty to one count of wire fraud and was sentenced to 12 months probation on August 25, 2008.

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.

Organizer of Massive Mortgage Fraud Scheme Sentenced to 28 Years in Prison

On September 21, 2007, Atlanta, GA, Phillip E. Hill, of Sumatra, Florida, was sentenced to 28 years in prison, to be followed by five years of supervised release, and ordered to pay $41,764,244 in restitution.  Hill was sentenced for perpetrating a massive mortgage fraud scheme that targeted the metro Atlanta housing and condo market from 2000 through 2003.  According to evidence at trial, Hill was the owner and operator of “We Build Atlanta, Inc.,” “The Estate Firm, Inc.,” “Estate Artistians of Georgia, Inc.,” “Estates Atlanta, Inc.,” and numerous other Georgia corporations.  Hill held himself out to be a real estate developer and either individually or through one or more of the corporations he controlled, purchased and sold numerous residential properties in the Atlanta area.  Hill oversaw the conspiracy, loan fraud, wire and mail fraud and money laundering activity related to mortgages obtained in the sale of over 50 homes and over 250 condominiums in eight Atlanta-area condominium complexes. These properties were all owned at one time by one of the Hill's entities.  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 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.  Some of the properties were “flipped” more than one time.  Evidence showed that Hill generated in excess of $112 million in fraudulent loans during the time of the scheme.  Hill alone received over $14 million in profits from the scheme.  In addition to Hill, at least 20 other individuals have been convicted or pleaded guilty to charges associated with this multi-million dollar mortgage fraud scheme.

Owner of Ohio Mortgage Company Sentenced on Money Laundering and Income Tax Charges

On August 8, 2007, in Dayton, OH, Glen Hurst was sentenced to 30 months in prison, to be followed by two years of supervised release, and ordered to conduct 100 hours of community service.  On May 25, 2006, Hurst pleaded guilty to conspiracy to launder money and income tax evasion.  According to court documents and testimony, Glen Hurst was the owner/operator of American Funding Group, Inc. (American Funding), a mortgage brokerage firm in Dayton, Ohio.  Earl Marshall, Janell Stephens, and others were clients of American Funding.  Court documents further state that between August 1997 and March 2004, Hurst conspired with Marshall, Stephens, Debra Hurst, and others to launder the proceeds of an illegal source.  Earl Marshall secured, either for himself or others, mortgage loans through American Funding.  He provided information, much of it false, to American Funding, which was used to create fraudulent documents in support of loan requests.  Glen Hurst was aware that these documents were based, at least in part, on false information provided by Earl Marshall and others.  These loan requests were submitted to lenders and they were approved based in part on the fraudulent information.  Glen Hurst willfully attempted to evade or defeat the income tax due to the IRS by failing to file a 1999 income tax return; failing to pay income tax to the IRS on the income he received; failing to file the 1999 corporate income tax return (Form 1120s) and Schedule K-1 with the IRS for American Funding; and by paying American Funding employee’s gross wages without any employment tax withholdings.  All of this was done by Glen Hurst in an attempt to conceal his true source of income and the amount of income from the IRS.  The total tax loss to the IRS in this case was $55,733.  Additionally, on June 8, 2007, Debra Hurst, was sentenced to serve two years of probation and ordered to perform 50 hours of community service for willfully failing to file Employer’s Quarterly Federal Tax Returns, Forms 941, with the IRS.  For the four quarters in 2003, Debra Hurst caused federal withholdings to be withheld from American Funding employees.  However, she knowingly failed to file Forms 941 on each of the quarterly due dates reflecting these federal withholding amounts.  American Funding employees were not issued Forms W-2 for the wages and withholding taxes attributable to them due to their employment.

Real Estate Closing Attorney Sentenced to Over Three Years in Prison in Mortgage Fraud Scheme

On August 8, 2007, in Atlanta, GA, Christopher Halcomb, a former Atlanta area real estate closing attorney, was sentenced to 37 months in prison, to be followed by three years of supervised release, and ordered to pay $15,619,742 in restitution.  Halcomb was a real estate closing attorney for Phillip E. Hill of Blountstown, Florida, and also did legal work for Hill's related business entities. On March 14, 2007, Hill and nine co-defendants were found guilty by a federal jury of related mortgage fraud charges.  According to the evidence presented in court, Halcomb participated in the mortgage fraud scheme orchestrated by Hill between early 2000 and early 2001.  With the assistance of Halcomb, Hill and his co-defendants defrauded financial institutions and other mortgage lenders by fraudulently inflating property values and submitting false borrower qualifying information to obtain mortgage loans.  In the overall scheme, the defendants conspired to use straw borrowers to apply for fraudulently inflated loans totaling over $100 million over a period of approximately three years.  False employment, income, assets and liabilities were listed on loan applications to qualify the straw borrowers for these loans.  Halcomb assisted Hill in defrauding the lenders and laundered the loan proceeds through escrow accounts.  On January 8, 2007, the Georgia State Supreme Court disbarred Halcomb based upon his admission of his conviction and his voluntary surrender of his license to practice law in the state of Georgia.

Newport Beach Man Sentenced for Orchestrating Mortgage Fraud Scheme that Cost Lenders $9 Million

On July 2, 2007, in Los Angeles, CA, Kenneth Christopher Ketner was sentenced to 57 months in prison, to be followed by three years of supervised release, and ordered to pay $9,274,246 in restitution.  Ketner who ran Mortgage Capital Resource Corporation (MCR) pleaded guilty in August 2006 to wire fraud and money laundering charges related to a scheme that cost lenders more than $9 million.  According to court documents, Ketner and MCR used lines of credit from commercial lenders for the purported purpose of funding home loans for borrowers throughout the country.  Rather than using the commercial lenders' money to fund mortgages as promised, Ketner diverted the money for his own use.  To conceal that he had misappropriated the money, Ketner caused MCR to find new loans that lenders would agree to fund.  Ketner then caused the money earmarked for these new loans to pay off the original borrowers whose funds he had misappropriated, thereby keeping the scheme alive.

Kansas City Businessman Sentenced for $17.5 Million Mortgage Fraud

On May 9, 2007, in Kansas City, MO, Jeffrey Tyler Wine was sentenced to 60 months in prison without parole for his role in a $17.5 million mortgage fraud scheme that involved 280 residential properties.  In addition, Wine was ordered to pay $4,946,748 in restitution.  In July 2006, Wine pleaded guilty to mortgage fraud conspiracy and money laundering.  Wine admitted that from November 2001 to May 2005 he conspired with others to defraud mortgage lenders by inducing them to loan $17,558,440 to withholding amounts for the purchase of 280 residential properties.  Wine was in the business of purchasing, rehabilitating, managing and selling residential properties in the metropolitan area through various business entities that he created and operated, including Sunrise Equities, Inc.; Sunrise Assets, LLC; Sunrise Investments Holdings, LLC; Brooklyn Properties, LLC; Arsenal Investments, LLC; Sunrise St. Louis, LLC; Woodland Properties and Larch Investments.  According to court documents, co-conspirators, who included mortgage brokers, prepared false and fraudulent loan applications and supporting documents to submit to mortgage lenders in the names of victim-investors. Sometimes Wine and co-conspirators provided money to the victim-investors to deposit into their bank accounts to mislead the lenders regarding the buyers’ assets.  They also furnished money for the victim-investors to take to closing to pay the buyers’ closing costs.  While Wine and co-conspirators managed the rental properties, they submitted false monthly reports to victim-investors of rent received, expenses incurred, and income earned, and paid to the victim-investors the amount of income reflected.  This induced victim-investors to purchase additional properties.  Wine also pleaded guilty to money laundering, admitting that he engaged in a monetary transaction involving criminally-derived property, by drawing upon the funds obtained by fraud to purchase a 400-ounce gold bar for $177,000 in May 2005.

Defendant Sentenced to 46 Months in Mortgage Fraud Scheme

On April 11, 2007, in Charlotte, NC, Charles M. Gabriel, Jr., was sentenced to 46 months in prison and ordered to pay $278,367 in restitution.  Gabriel pleaded guilty in December 2004 to one charge of conspiracy to defraud the United States.  According to the Bill of Information, Gabriel created and used entities known as Southern Investment Properties, JW Settlement Services, SB Homes Carolina, DRE Settlement Services and NVG Carolina to induce prospective real property buyers to provide them with credit information in order to purchase real properties.  Gabriel and his co-conspirators used a variety of methods to defraud mortgage lenders and real estate investors, including inflating the purchase price purportedly paid by buyers in obtaining mortgage loans in the name of those buyers.  As part of this scheme, lenders lost approximately $2.4 million. 

Indianapolis Man Sentenced to 37 Months in Prison for Mortgage Fraud Scheme

On February 23, 2007, in Indianapolis, IN, John Wagner, was sentenced to 37 months in prison and ordered to pay $1.75 million in restitution for his role in a mortgage fraud scheme. Wagner had pleaded guilty to conspiracy to commit mail fraud and money laundering. Wagner recruited “investors” for Romero Brice. Brice was sentenced to 87 months in prison on February 20, 2007 for fraudulently obtaining more than $4 million in loans from a Michigan lending institution. Brice bought properties in low income neighborhoods and then used “investors” to buy the properties at 3-4 times their fair market value. Wagner recruited numerous people, including his relatives to participate in the scheme. He held “investor” meetings and gave presentations to “investors” to convince them to participate in the scheme. “Investors” were encouraged to buy 3-4 properties at a time, for “no money down.” They were given $10,000 per property back at closing by Brice. For providing investors to Brice, Wagner received up to $2,000. Wagner was directly involved in 53 of the 83 fraudulent loans obtained by Brice.

Ohio Man Sentenced for His Role in Mortgage Fraud Scheme

On February 21, 2007, in Cincinnati, OH, Troy S. Clements was sentenced to 24 months in prison, three years of supervised release and fined $10,000 for his role in a $2.3 million mortgage fraud scheme. Clements pleaded guilty to money laundering and conspiracy to commit mail, bank and wire fraud. Clements and others recruited homebuyers by advertising that they could finance 100 percent of a house with no money down. When clients found a property that they wanted to buy, Clements reviewed the house for potential value and then bought it, if he determined that it could be refinanced for the final buyer. After buying the property, Clements would resell the property to the client borrower and have the client sign a note and mortgage due to a company that he owned called American Funding. The note and mortgage included an additional amount over what he paid for the property, referred to an “investor fee”. To pay off the note and mortgage, Clements directed employees of his mortgage company to arrange for refinancing loans to be obtained by the borrower from legitimate mortgage lenders. In order to obtain these loans, false documents were created and false information was supplied to lenders on loan applications. Clements laundered money by using the money acquired through illegally obtained mortgages and bought other properties with the money, which allowed him to continue the scheme.

Chicago Man Sentenced to 87 Months in Prison for Mortgage Fraud Scheme

On February 20, 2007, in Indianapolis, IN, Romero Brice, of Chicago, IL, was sentenced to 87 months in prison and ordered to pay $2.6 million in restitution for conspiracy to commit mail fraud and money laundering. Brice fraudulently obtained over $4 million in loans from a Michigan lending institution when he lived in Indianapolis, IN, by submitting false loan applications, fraudulent financial documents, and falsely inflating appraisals for the purpose of obtaining mortgage loans. The court found that the lender lost $2.7 million due to Brice’s fraudulent activities. As the owner Promise Land Mortgage, Brice bought properties in low income neighborhoods of Indianapolis and used “investors” to buy the properties at three to four times their fair market value. The investors were encouraged to buy several properties at a time, for “no money down.” Brice paid them $10,000 per property at closing. The Michigan lender approved and financed at least 83 loans, based upon the false documents submitted by Brice. False settlement statements (Forms HUD-1) were prepared and checks were issued to disburse loan proceeds. The falsely obtained proceeds were paid to Brice, primarily through a business he set up called Greenhouse Resources. Brice then kicked back money to the investors who purchased the properties and the recruiters who brought the investors into the scheme. False invoices were submitted to support the issuance of the checks, showing that Greenhouse and the individuals who had fronted the down payments were actually owed money by the sellers for services rendered. None of the loans were paid as agreed and the properties became the subject of foreclosure proceedings.

Multiple Defendants Sentenced in Mortgage Fraud Scheme

On February 20, 2007, in Hattiesburg, MS, Richard B. Lucas, Kimberly A. Castle, Kenneth Stalnaker, Loretta Joy Champ, Jacquelyne B. Mosley, Kenneth Fairley, Jr., and Michael T. Cox were sentenced for their involvement in a mortgage fraud conspiracy involving wire fraud in violation of federal law. In addition, Richard B. Lucas and Kimberly A. Castle were sentenced for conspiracy to commit money laundering. Lucas, the ringleader of the conspiracy, was sentenced to 168 months in prison, to be followed by five years of supervised release, and ordered to pay $1,326,727 in restitution to Countrywide Home Loans, Inc. Castle, who served as Lucas’s lawyer in handling all of the loan closings involved in the scheme, was sentenced to 48 months in prison, followed by three years of supervised release, and ordered to pay $1,390,250 in restitution. Stalnaker, a real estate appraiser who was charged with preparing inflated appraisals, was sentenced to 28 months in prison, followed by five years of supervised release, and ordered to pay $938,767 in restitution. Champ, who also prepared inflated real estate appraisals, was sentenced to nine months in prison, followed by three years of supervised release, and ordered to pay $152,089 in restitution. Mosley, another real estate appraiser, was sentenced to three years of probation with six months of house arrest. She was ordered to pay $120,000 in restitution. Fairley, who served as a straw buyer of properties for Lucas, was sentenced to five years of probation with six months of home confinement. He was ordered to pay $97,055 in restitution. Cox, who prepared bogus financial documents for Lucas, was sentenced to three years of probation with nine months of house arrest. He was ordered to pay $91,774 in restitution. 

The five other defendants, Phillip N. Weary, William Vaston Fairley, Jafus Jones II, Kristy N. Packer, and Marcy Irby, pleaded guilty to federal charges and were sentenced on February 1, 2007. Weary, who was the nominal purchaser of all of the properties acquired as part of the scheme, was sentenced to 19 months in prison, followed by three years of supervised release and ordered to pay $925,540 in restitution. Fairley, who helped recruit investors, was sentenced to seven months in prison, followed by seven months in a halfway house and three years of supervised release and ordered to pay $355,475 in restitution. Jones, who also served as a recruiter for Lucas, received three years of probation with nine months of home confinement and was ordered to pay $128,120 in restitution. Packer, a straw buyer for Lucas, received five years of probation with six months of home confinement and was ordered to pay $191,888 in restitution.  Irby, a straw buyer who testified about the scheme at trial, received 48 months of probation and was ordered to pay $101,673 in restitution.

Lucas arranged for Clark and Jones to recruit persons to serve as borrowers on mortgage loans for the properties with the understanding that the borrowers would put no money down and would often receive cash payments for use of their names and credit ratings. Where the borrowers’ credit histories did not support the mortgage loans, Lucas arranged for Cox to prepare false income statements and bank account information to be submitted to the lenders. In addition, Lucas arranged for Fairley, Packer, and Irby to acquire properties in their names.

Oklahoma Woman Sentenced to Prison for Bilking Investors of $3.3 Million

On January 29, 2007, in Oklahoma City, OK, Bobbie Stacy Andrews was sentenced to 46 months in prison and ordered to pay restitution of $2.6 million for defrauding investors of $3.3 million and laundering the scheme’s illegal proceeds. Andrews convinced investors that their $3.3 million would be used to buy mortgages for investment purposes; however, she actually used the money for her personal benefit and for business expenses. Andrews also admitted to engaging in a money laundering transaction over $10,000 with funds acquired through the wire fraud scheme. Andrews forfeited money seized from two bank accounts and forfeited a Harley Davidson motorcycle acquired with funds from the fraud.

Husband and Wife Among Defendants Sentenced on Fraud and Tax Charges in Mortgage Fraud Scheme

On January 19, 2007, in Miami, FL, Mary Jo Bellavia-Sabag, Sheila Henry and Howard Henry, husband and wife, Lindsay Jacobs, and Christe M. Eker were sentenced for their roles in a wide-ranging identity theft, mortgage fraud and real property theft scheme. The defendants had previously pleaded guilty to the following charges: Mary Jo Bellavia-Sabag pleaded guilty to money laundering and filing a false income tax return; Sheila Henry pleaded guilty to money laundering conspiracy; Howard Henry pleaded guilty to mail fraud; Lindsay Jacobs pleaded guilty to money laundering; and Christa M. Eker pleaded guilty to conspiracy to commit mail and wire fraud and filing a false income tax return. According court documents, the defendants and others orchestrated a scheme in which they created and used false deeds and other documents to fraudulently obtain title to various residential properties in Miami-Dade and Broward Counties. They then used the properties as collateral for mortgages, bank loans and personal lines of credit, obtaining more than $2.5 million in ill-gotten gains. On occasion, the defendants would re-sell the properties to unsuspecting buyers. Additionally, several of the defendants failed to report their illegally derived proceeds to the Internal Revenue Service. Mary Jo Bellavia-Sabag was sentenced to 50 months in prison; Sheila Henry was sentenced to 42 months in prison; Howard Henry was sentenced to 32 months in prison; Lindsay Jacobs was sentenced to 30 months in prison; and Christe M. Eker was sentenced to five months in prison. In addition, all defendants who pleaded guilty to tax charges were ordered to pay all income taxes due and owing.

Former Indianapolis Police officer and Two Indianapolis Area Businessmen Last of 16 Defendants to be Sentenced in Mortgage Fraud Schemes 

On January 18, 2007, in Indianapolis, IN, Michael C. Smith, Joseph Britton and Mark Speckman were sentenced to prison following their jury convictions for conspiracy, wire fraud, and money laundering. Smith, a former Indianapolis police officer was sentenced to 57 months in prison, followed by five years supervised release, and ordered to pay approximately $1.1 million in restitution. Smith was convicted of two separate conspiracies to commit wire fraud and money laundering in connection with two mortgage fraud schemes ongoing in Indianapolis between 2001 and 2003. The schemes involved two separate mortgage brokerage companies – Quantum Investments and American Savings Mortgage (ASM). Smith worked part-time as a licensed real estate appraiser, providing inflated appraisals for loans to purchase real estate to the two mortgage brokerage companies. The appraisals were used to obtain loans on properties well in excess of their true value. Britton and Speckman were both sentenced to 33 months in prison, followed by three years supervised release, and ordered to pay $900,000 in restitution for their roles in providing properties for sale through ASM and then paying kickbacks to others in the scheme. Britton and Speckman bought properties, in the names of businesses that they either owned or were partners of, that were sold at approximately double their true value. After receiving the loan proceeds, they kicked back some of the money to the other involved in the conspiracy including the owners of ASM and the buyers of the properties.  

Wilbraham Man Sentenced to Prison for Role in Multi-Million Dollar Mortgage Fraud

On January 18, 2006, in Springfield, MA, Michael Bergdoll was sentenced to two years and nine months in prison, to be followed by three years of supervised release and ordered to pay restitution in the amount of $318,000 to the victim lending institutions.  On May 4, 2006, Bergdoll pleaded guilty to conspiracy to launder money and wire fraud in connection to his role in a land-flipping and mortgage fraud scheme.  Had the case proceeded to trial, the Government’s evidence would have proven that Bergdoll conspired with others to purchase distressed properties and then re-sell the properties at artificially inflated values.  Bergdoll induced prospective buyers by telling them they would not have to make any down payment and promising money back to the buyers at the real estate closing.  The buyers were then referred to mortgage brokers who were involved in the land-flipping schemes.  Since many of the prospective buyers did not have the financial ability to qualify for the loans, Bergdoll and his co-conspirators generated and produced false and fraudulent loans for the prospective buyers.  The false documentation included false down payment information, fraudulent income information, and false documentation to show improvements to the properties that were never made.  Bergdoll and his co-conspirators also used real estate appraisers involved in the scheme to generate false and fraudulent appraisals to support the loan amounts for the artificially inflated property values.  Once the unwitting lending institutions approved the loan applications of the prospective buyers, Bergdoll and his co-conspirators then referred the buyers to attorneys also involved in the scheme.  The attorneys generated false and fraudulent real estate closing documentation to facilitate and conceal the fraud.  Bergdoll is the eleventh person to be sentenced for participation in this fraudulent land-flipping scheme.

Husband and Wife Sentenced on Tax Charges in Mortgage Fraud Scheme

On December 15, 2006, in Miami, FL, Scott Warren and Samantha Johnson, husband and wife, were sentenced following their roles a wide-ranging mortgage fraud scheme.  Samantha was sentenced to 60 months in prison and Scott was sentenced to 12 months in prison.  Together the Johnsons forfeited $500,000 in cash and were ordered to pay all income taxes due and owing.  According to the indictment, Samantha Johnson and others orchestrated a scheme whereby they created and used false and fraudulent deeds and other documents to obtain title to residential properties in Miami-Dade and Broward Counties. They then used the properties as collateral for bank loans, personal lines of credit, and the like, obtaining in excess of $2.5 million.  On occasion, the defendants would then profit by selling the properties to unsuspecting buyers.  Additionally, the defendants failed to report their illegally derived proceeds to the Internal Revenue Service.

Three Corporations Ordered to Pay Over $7.5 Million in Federal Mortgage Fraud Case

On November 27, 2006, in Raleigh, NC, three corporations – Donald W. Gupton, Inc.; CRE Properties, LLC; and M & G Properties II, Inc. – were sentenced to five years probation and ordered to pay over $7.5 million in restitution. The corporations were also ordered to forfeit all property. Donald W. Gupton, president of Donald W. Gupton, Inc., pleaded guilty to commit mail fraud, wire fraud and making material false statements, as well as conspiracy to commit money laundering. His sentencing is scheduled for January 2007. Richard D. Meador and Donald Scott Carroll, co-conspirators with Gupton, have already been sentenced. On September 20, 2006, Meador was sentenced to 53 months in prison, three years of supervised release and ordered to pay $1,270,299 in restitution; Carroll was sentenced to 30 months in prison, three years of supervised release and ordered to pay $1,476,830 in restitution. According to information disclosed in court proceedings, Gupton, Meador, and Carroll falsified information on loan applications, provided false trade-in information and titles, provided false gift letters and false down payment information for prospective buyers. This lowered buyer’s debt to income ratio and allowed them to qualify for a loan. Between 1999 and 2002, the conspirators sold more than 150 manufactured homes resulting in HUD mortgages exceeding $11 million. Gupton used the proceeds from the fraudulent loan activity to purchase real and personal property for himself and to purchase properties placed in the names of CRE Properties, LLC and M & G Properties II, Inc.

Participant in $1 Million Mortgage Fraud Scheme Involving South St. Louis Properties is Sentenced to Prison

On November 22, 2006, in St. Louis, MO, James McMullen was sentenced to 38 months in prison for money laundering and conspiracy to commit bank and wire fraud in a mortgage fraud scheme that caused more than $1 million in losses. McMullen and co-defendants Rodney Tate and Reginald Mayes devised a scheme to buy property in St. Louis City for fair market value. The defendants arranged for false appraisals to inflate the property’s value, then paid people known as "straw buyers" who let them use their names and other financial information to “buy” the properties at inflated prices. The defendants prepared false loan applications which misstated the “straw buyers'” salary, employment history and financial assets and usually lied about their intention to occupy the property as a primary residence. Using this false information, financial institutions and mortgage brokers loaned them millions of dollars. Tate was sentenced in October 2006 to 57 months in prison and ordered to pay more than $1 million in restitution. Mays was sentenced to 36 months probation in early November.

Real Estate Attorney Sentenced for Laundering Drug Money

On November 3, 2006, in Seattle, WA, Joel Manalang, a real estate attorney, was sentenced to 18 months in prison, two years of supervised release and ordered to pay a $6,000 fine for money laundering.  Manalang, a real estate attorney, operated an escrow business. Court papers allege that during 2003 and 2005, Manalang received large quantities of cash from clients under circumstances indicating to Manalang that the money was derived from drug trafficking.  Manalang received the money in shoe boxes and duffle bags and assisted drug traffickers in the acquisition of real estate.  On August 1, 2006, Manalang pleaded guilty and acknowledged that he knew the funds were derived from criminal activity.  Additionally, he admitted that his actions were intended to conceal the true nature of the funds and from whom they were obtained.  He also admitted to evading currency reporting requirements imposed by law.  Manalang is one of four attorneys in the past year to plead guilty to financial crimes in connection to drug trafficking.  James L. White, an attorney and Municipal Court Judge, was sentenced in December 2005, to 18 months in prison for money laundering.  In a related case, A. Mark Vanderveen, an attorney, was sentenced to three months in prison and three months of home confinement for failing to file a currency transaction report as required by Federal law.  Stephen J. Plowman pleaded guilty last month to failing to report cash transactions in excess of $10,000. He will be sentenced in January 2007.

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