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$6.5 Million Fraud Ring Broken Up

IndyMac, ABN AMRO defrauded

July 21, 2006

By PATRICK CROWLEY


photo of Patrick Crowley
A Cincinnati mortgage broker and a loan processor were among 20 people guilty of participating in a massive fraud ring that stung the likes of IndyMac Bank and ABM AMRO.

Guilty pleas from Cathy Yocum, Milton Trice III and Gene W. Hite bring to 20 the number of people convicted in the federal probe into property flipping, fraud and income tax evasion.Among the lenders scammed were Indy Mac Bank and ABM AMRO.

The fraud, which the feds have investigated for more than two years, involved nearly 200 homes, 28 lenders and loans totaling $6.5 million, court documents show.

Ringleader Ron Trester of Cincinnati, the former owner of Charter First Banc mortgage brokerage, pleaded guilty in October to charges of conspiracy, bank fraud and tax invasion. He landed a prison term of 46 months.

In documents filed in U.S. District Court in Cincinnati, prosecutors say the scheme involved brokering homes and loans with phony documents that included inflated appraisals, tactics often found in illegal property flipping operations.

According to court papers Yocum filed phony paperwork with ABN AMRO that showed a buyer had $39,000 in a bank account for a down payment on one of Trester's properties.

"In reality," prosecutors said in the documents, "(the buyer) did not have these funds and did not provide the funds used to make the down payment. In fact, Ms. Yocum made the down payment."

Prosecutors also said that Yocum "was aware that the buyer often received a 'kickback' outside of the closing, which was not disclosed to the lender."

Yocum, a Cincinnati mortgage broker, "furthered the scheme by serving as the mortgage broker on some of the 'flipped' properties," according to court documents. She was sentenced to a year in prison, fined $20,000 and ordered to make $115,075 in restitution and perform 600 hours of community service.

Hite worked for Trester as a loan processor and was paid $300 for each loan he processed. Prosecutors say he "aided and abetted others" in submitting false documents in 25 to 30 loans.

"This included creating false bank statements and including them in the loan package," prosecutors said.

Hite also tax evasion. He received six months of home incarceration and a $10,000 fine. He was also ordered to pay $14,415 in back taxes to the Internal Revenue Service and perform 600 hours of community service.

Trice pleaded guilty to filing a false loan application to IndyMac Bank "for the purpose of obtaining" money, prosecutors said in the court filings. He also admitted to charges of tax evasion.

Trice operated a home repair company, court documents show, and did work on some of the properties involved in the flipping scheme. Prosecutors say he was also involved in recruiting buyers for the scheme and was aware that false documents, including phony appraisals, were used to defraud lenders into making mortgage loans.

"As a result of his fraud," prosecutors said, "(Trice) caused an actual or intended loss to various financial and lending institutions of $2,236,770."

Trice was given a year in prison and ordered to pay $70,867 in back taxes and perform 300 hours of community service.


Patrick Crowley is a feature journalist and blogger for MortgageDaily.com. He is also a reporter, blogger and columnist for The Cincinnati Enquirer.
e-mail Patrick at: [email protected]

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