Prosecutors in several mortgage-related criminal cases involving hundreds of millions of dollars have produced indictments, plea agreements and convictions. Attention was drawn to some of the cases because the banks where the crooked executives worked applied for federal bailout funds. Some of the defendants have been sentenced to more than a decade in prison.
Appraisal Institute President Sara W. Stephens testified in March before the U.S. Sentencing Commission that a special rule should be adopted that requires real estate appraisals to be prepared by professional appraisers for determining losses in mortgage fraud cases. The reports should be completed in accordance with the Uniform Standards of Professional Appraisal Practice instead of using tax assessments.
Former Countrywide Home Loans loan officer Paige Kinney was sentenced to 15 years in prison on March 7 for her role as leader of a mortgage fraud ring that generated $38,745,215 in fraudulent loans, the U.S. Attorney's Office for the District of Arizona announced. Kinney, who is also known as Jamie Lee Lawler, allegedly continued the fraud even after she was indicted. The crimes reportedly occurred from 2005 until 2007 and netted her $8,754,485. She was also accused of bankruptcy fraud and insurance fraud.
A 29-month sentence was handed down by U.S. District Judge Roger W. Titus on May 14 to Carole Nelson, who was also ordered to pay $34,340,830 in restitution, the Justice Department announced. Nelson is one of five people to be sentenced for her role in the "Dream Home" scam which promised homeowners that a $50,000 investment and an administrative fee of up to $5,000 would be invested in automated teller machines -- with the returns used to pay off their mortgages. But the deal was a sham, and more than a thousand investors lost around $78 million.
Nelson was also accused of using company funds to make it look like she personally had more assets in order to fraudulently qualify for a mortgage.
Among Nelson's co-conspirators was Metro Dream Homes founder Andrew Hamilton Williams Jr., who was sentenced on March 30 to 150 years in prison.
Hundreds of investors in California, Florida, Georgia, Tennessee and Virginia allegedly lost more than $45 million in a mortgage fraud scheme operated by Joshua O. Dobson and Paul E. Gott III, according to the Federal Bureau of Investigation in Knoxville, Tenn. The two men appeared on an indictment before U.S. Magistrate Judge Susan K. Lee on May 9.
A guilty plea was made on May 9 by former Bank of Commonwealth vice president Jeremy C. Churchill, according to the Office of the Special Inspector General for the Troubled Asset Relief Program. Churchill and another bank executive are accused of helping a distressed small business owner cover up delinquency on $8 million in loans by trying to help him fraudulently obtain another $5.1 million that was supposed to be used for pre-development costs for an office tower and the acquisition of a partially completed condominium project.
Churchill's actions contributed to the September 2011 failure of the Norfolk, Va.-based bank at an estimated of $268 million to the Federal Deposit Insurance Corp. The case fell under SIGTARP's jurisdiction as a result of a withdrawn November 2008 application for $28 million from the Troubled Asset Relief Program. Churchill's sentencing is scheduled for Aug. 24.
Also contributing to Bank of Commonwealth's failure was Eric H. Menden, who pled guilty to a $41 million scheme on April 20, according to SIGTARP. From 2008 through 2011, Menden and his business partner got preferential lending treatment from the bank for assisting bank insiders in covering loan programs by purchasing the bank's real-estate-owned assets. They also performed favors for bank executives such as spending more than $6,000 on home renovations for one bank executive.
The pair would bid enough on Bank of Commonwealth's REOs at foreclosure auctions to cover the amount of the underlying mortgages. In one case they acquired a property from a bank insider using financing from the bank. After all was said and down, more than $41 million in loans were made to Menden -- with the bank ultimately losing $13,263,443.
Menden faces sentencing on July 23.
Another SIGTARP news release indicated that former First Community Bank chief executive officer Reginald R. Harper pled guilty to bank fraud on April 26. Harper allegedly hid delinquency on more than $2 million in development loans to real estate developer Troy Fouquet through mortgage fraud utilized to secure loans from permanent lenders. The scheme enabled false call reports that were used to apply for $3.3 million in TARP funding -- though the bank withdrew its application before funding.
Around $8 million in material omissions and misrepresentations used to defraud Centennial Mortgage and Funding Inc.'s bank has landed the company's chief financial officer in prison for five years. In addition, Joseph W. Traxler was ordered to pay $5,395,923 in restitution. Traxler, who pled guilty in October, admitted that he helped Centennial cover up the fact that it was using funds intended to finance new originations instead to cover operating losses.
Traxler also admitted to a check-kiting scheme, to hiding delinquent loans and to double funding 23 mortgages.
George Todd Powers, a former cashier and director of Iowa State Bank, was sentenced to 121 months in prison on March 7, the U.S. Attorney's Office announced. He allegedly stole $5,986,781 from the bank over a 19-year period starting in 1991 by opening several accounts in fictitious names and altering bank records.
The owner of At Home Mortgage and At Home Settlements LLC, Gary Pierce, was sentenced on March 9 to six years in prison and ordered to pay restitution of $4,174,044, the Justice Department announced. The Edgewater, Md., resident allegedly diverted payoff proceeds on 17 property closings then continued making payments to avoid alerting the lenders. Borrowers' addresses were changed online to avoid being alerted to the unpaid loans.
On the same day, co-defendant and At Home Mortgage assistant manager Todd R. Bettin pled guilty.
Todd Hoss was convicted on March 30 of diverting $2 million in investor funds intended for hard-money lending for his own personal use, according to the U.S. Attorney for the Western District of Washington. The scheme was operated from 2007 to 2009 through his company, Hoss Mortgage Investors.
Mary Henry obtained $1,910,101 in loans from FNB Southeast. Problem was that Henry had Alzheimer's Disease and didn't know about the loans. Turns out her son, Russell Kinnard Henry, a senior vice president at the bank, originated and approved the fraudulent loans for his own use -- including for the purchase Chevrolet Tahoe, John Deere vehicles and Coca Cola memorabilia. Some of the loans were obtain after she died in 2005. Henry was sentenced on March 21 to 57 months in prison, according to the U.S. Attorney's Office for the Western District of Virginia.
A 102-month sentence was handed down on March 29 to Susan A. Curtis, according to the U.S. Attorney for the District of Connecticut. Curtis allegedly embezzled $6.8 million from her employer Webster Bank. She also failed to pay $1 million in income taxes on the illicit earnings -- which funded personal expenses such as first-class airfare, cruises, automobiles, artwork and jewelry. Curtis, who negotiated and managed bank properties, formed separate companies with her current and former husbands that she represented as brokers and exempt from due diligence and annual reviews.
Curtis additionally obtained a $649,000 loan from Bank of America using mortgage fraud. Her ex-husband, Kevin W. Caffrey, pled guilty in October 2010, while her current husband, Gary Stocking Jr., pled guilty in March 2011.
A retired investor who put up $1.5 million to beef up the balance sheet of Coral Mortgage Bankers Corp. was told by Matthew Kent, David Rubin and Joshua Gold that the funds would remain intact. But the trio instead used the capital to pay for business expenses and provided fraudulent statements to the investor to cover up their crimes. Rubin was sentenced in March to six months' home confinement and ordered to pay $1.2 million in restitution, a Justice Department announcement indicated. Kent was previously sentenced to 30 months in prison, while Gould was previously sentenced to 97 months.
Maryland accountant Lloyd M. Mallory Jr. admitted in March that he deceived Southern Management Corporation Retirement Trust by pretending to be an independent certified public accountant in his review 31 loans originated by mortgage broker Robert Fulton Rood IV, the U.S. Attorney for the Eastern District of Virginia announced. The pension fund requested the review because only eight of the loans were performing satisfactorily. But it turns out that Mallory, through his company M-Financial Services Inc., was actually working on behalf of Rood -- who allegedly prepared almost the entire review himself. The report misstated the funds being held by Rood in escrow.
Alabama mortgage broker Don Walter Williams Jr. was indicted on March 28 for failing to file tax returns from 2005 through 2009, the U.S. Department of Justice for the Northern District of Alabama reported. Williams owned Covenant Mortgage Co. and earned $838,180 during the period.
Dan Oaheyoh Two Feathers pled guilty on March 7 to fraudulently collecting up-front fees for hard money loans, the U.S. Attorney for the District of Montana reported. Two Feathers allegedly used a $1.5 billion letter of credit from Wachovia Bank to fool the victims into believing he had the credit available. In all, he collected $800,000. Sentencing is scheduled for June 15.
The owner of Cornerstone Financial Holding LLC, Gerald Lee Kelly, was indicted on Jan. 10 for allegedly promising investors up to 25 percent returns by investing in real estate secured loans. But the government claims that the investments were worthless, and the company was unable to deliver the promised returns. The East Valley Tribune reported that Kelly pled guilty on May 14.
Lee Bentley Farkas, whose criminal conviction for operating a massive scheme to defraud secondary lenders and investors was the most high-profile of the mortgage meltdown, asked a three-judge panel of the 4th U.S. Circuit Court of Appeals on Wednesday to reverse his conviction and send the case back for a retrial, according to a story by the Associated Press. Farkas' attorney reportedly claims that U.S. District Judge Leonie Brinkema denied the Taylor, Bean and Whitaker founder his constitutional right to effective counsel in rejecting a request to delay his trial.
Frederick Darren Berg, who ran Meridian Group, was sentenced in February to 18 years in prison for operating what the Department of Justice called the biggest Ponzi operation ever prosecuted in Western Washington. On April 6, U.S. District Court Judge Richard Jones ruled that Berg must pay $140 million to 562 of victims, a story from the Puget Sound Business Journal.
An indictment handed down on May 9 accuses Jeffrey C. McLendon of theft between 2009 and 2011 while he worked for McLendon Mortgage Co. and Greater Ohio Mortgage in Zanesville, Ohio, the Zanesville Times Recorder reported. The indictment, along with a March 7 indictment, involved cash and check payments to McLendon under the guise of credit repair, application fees and appraisal fees. McLendon has pled not guilty to the charges.
Pueblo, Colo., mortgage broker Anthony Paglione was arrested in 2010 over allegedly mishandling $350,000 in payments for borrower David Roscover. In another criminal case against Paglione, a jury convicted him earlier this month of bilking at least $160,000 from Vincent Gagliano through a complicated series of loan swaps between two residential properties, according to a story from the Pueblo Chieftain. He is scheduled to be sentenced in July.
Fifth Third Bank mortgage officer Richard D. Meisinger was charged with six counts of theft by the Plainfield, Ill., police department, the OswegoPatch reported. He allegedly charged customers additional fees, which he kept for himself.
The Press Herald reported that Annamarie Skillings was sentenced on March 12 in U.S. District Court for the District of Maine to supervised release. Skillings admitted that she embezzled $10,000 from her employer, KeyBank, to support her former husband's drug habit.