Federal prosecutors in Ohio have received guilty pleas from two more participants in a mortgage fraud ring that cost lenders more than $10 million.
Steven Carey, who owned the Seven Hills Financial Group in Cincinnati, and real estate investor Philip Jasper plead guilty in U.S. District Court for the Southwest District of Ohio to bank, wire, mail and mortgage fraud charges.
Their pleas bring to 13 the number of people who have admitted their guilt in the property flipping scheme that cost ABN AMRO and other lenders millions of dollars.
“The defendant(s) knowingly executed or attempted to execute the scheme or artifice to defraud” lenders and committed “overt act(s) of…conspiracy,” according to court documents signed by an assistant U.S. Attorney.
Carey was indicted on charges that he used fraud to receive nearly $1.5 million from lenders, prosecutors said in court documents.
Jasper, prosecutors said, bilked mortgage lenders out of more than $300,000.
Court records show that the entire scheme involved buying mostly dilapidated properties in poor neighborhoods, doctoring appraisals to receive loans for more than the property was worth and then quickly selling it to an investor who was in on the ruse.
The records show that Carey purchased a house for $72,000 on April 2, 2001. He then sold it in early January for $145,000.
A federal settlement statement known as a HUD-1 indicates the buyer brought a down payment of $19,765 to the closing.
“In reality (the buyer) did not provide the funds used to make the down payment on this property,” prosecutors said. “Mr. Carey, as the seller, signed the HUD-1 Statement knowing it was false.
“In addition an appraisal … supporting the sales price of $145,000 was submitted to the lender,” prosecutors said. “The loan package was submitted to ABN AMRO.
“Mr. Carey’s actions, as well as those of his co-conspirators, were committed in furtherance of a scheme to defraud ABN AMRO,” they said.
Carey was also accused of submitting phony tax returns to the Internal Revenue Service by understating his 2001 taxable income by $28,097, court records show.
Jasper was involved in similar activities as an investor in the properties, prosecutors charged.
Federal authorities launched their crackdown on the mortgage fraud ring last summer when they raided five mortgage-related businesses in southwest Ohio.
Among those who have plead guilty are real estate investors, title agents, mortgage brokers and a retired school teacher who made more than $2.5 million through the scam.
The defendants face up to 30 years in prison, authorities have said.
