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Mortgage broker, originator and banker criminal cases. Real estate flipping and appraisal fraud. Mortgage fraud prevention, studies and analysis.

2 Mortgage Fraud Cases, 1 Indictment, 1 Guilty Plea

Randez Long indicted, Billy Joe Cannon Sr. pleads guilty

Dec. 7, 2012

By CARY SPIVAK Milwaukee Journal Sentinel - McClatchy-Tribune Information Services

Three of the key figures in a 2007 deal in which a learning disabled man was duped into buying an inner city home are facing unrelated federal mortgage fraud charges.

Randez Long this week pleaded not guilty to charges that he collected more than $1 million by leading a crew of people who scammed lenders into writing inflated mortgage loans during a three-year period when the housing market was booming.

Unlike mortgage fraud schemes that involve one loan, Long is charged with using fraudulent information to have lenders provide two loans for the same property -- one when it was initially purchased by one of his associates and a second when the property was later sold to different Long associates.

Long, 33, is charged with money laundering, bank and wire fraud. He is scheduled for trial in February.

Also this week, Billy Joe Cannon Sr., 47, a career criminal whose rap sheet includes convictions for drug and financial crimes, pleaded guilty to one count of wire fraud and one count of money laundering for masterminding a separate mortgage fraud scheme. Cannon, who received his mortgage broker's license in October 2004 -- about a month after finishing federal probation for a drug conviction -- ran a scheme that cost lenders at least $400,000, according to a 2011 indictment. The scheme ran from 2003-2007, prosecutors say.

Also facing charges in the Cannon case is Margaret Keefe, who was the closing agent in the deal involving the learning disabled man. Keefe is charged with playing the same role in the Cannon mortgage fraud scheme.

The actions of Cannon, Long and Keefe were profiled in a 2008 Journal Sentinel story that detailed how Pedro Medellin, a then-24-year-old bank teller with a learning disability was duped into buying an inner city house and becoming responsible for its $103,500 high-interest loan. Medellin -- who had a negative net worth -- said he thought he was filling out a job application when he was actually signing loan documents.

The 2007 mortgage was eventually canceled, and Medellin was paid $87,000 by the now-defunct lender's insurance company. The criminal charges against Cannon, Long and Keefe, are not related to the Medellin matter.

In the Long indictment, the grand jury charged that he recruited individuals, including his mother and sister, to buy properties in Milwaukee and to obtain inflated mortgages by providing lenders with false information about the buyer's finances and employment. The buyers would quickly default on the loans and arrange for the properties to be sold in a "short sale."

In a short sale, the property is sold for less than the amount owed on the mortgage, and the lender agrees to accept that sale amount.

"In fact, these 'short sales' were fictitious and never occurred," the indictment states.

Instead, the properties were sold to others at a price greater than the amount told to the lenders and new mortgages -- again based on fraudulent applications -- were received from other lenders, the indictment charges, noting that "Long again received a substantial portion of the sale proceeds."

The case was investigated by the Internal Revenue Service criminal investigation division and the FBI. Though the indictment describes transactions involving two north side properties, a source familiar with the case said Long was involved in the purchase and sale of at least 30 area properties.

The case was investigated by the Internal Revenue Service criminal investigation division and the FBI. Though the indictment describes transactions involving two north side properties, a source familiar with the case said Long was involved in the purchase and sale of at least 30 area properties.

Long's attorney, James Toran, declined to comment.

Cannon pleaded guilty to charges that he ran a mortgage fraud scheme in which he used straw buyers to dupe lenders out of at least $400,000. Cannon provided lenders with false financial information for the buyers who did not see the properties or play any role in buying the homes. After the purchases were completed and the loan money collected, the buyers defaulted, according to the plea agreement.

Cannon, whose indictment came following an IRS investigation, is well known in Milwaukee law enforcement circles. He was one of the city's biggest cocaine dealers in the 1980s, serving about nine years in federal prison for drug trafficking. He did time again last year for a tax conviction.

In the current mortgage fraud case, Cannon is likely to receive up to 16 months in prison when he is sentenced in March, according to the plea agreement.

John Diedrich of the Journal Sentinel staff contributed to this report.

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Copyright (c) 2012, Milwaukee Journal Sentinel

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