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IU Star Turned Originator Busted for 21 Bogus Transactions

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In 1982 and ’83 Duane Gunn was the leading receiver for the Indiana University football team, snagging 85 catches and scoring 11 touchdowns over those two seasons with the Hoosiers.

Today is he is facing 30 months in a federal prison for participating in a two-year mortgage loan scam that cost lenders more than $730,000, according to a statement from federal prosecutors in Indiana.

Gunn, 42, also faces two years of supervised release after serving his prison term and must pay restitution of $335,514, according to a statement from Susan W. Brooks, U.S. Attorney for the Southern District of Indiana.

He plead guilty to one count of conspiracy to commit mail fraud and one count of money laundering.

Gunn worked as a mortgage originator from December 2000 to November 2002 for two firms, Upscale Mortgage and A.J. Mortgage.

“During those periods Gunn and other co-conspirators fraudulently obtained over $730,000 through 21 mortgage loan transactions,” Brooks said in her statement. “The scheme in which Gunn was involved utilized what are commonly referred to as ‘flip’ transactions.”

Brooks gave the following description of how the scam worked.

Gunn and his accomplices provided money to purchase property in either their own names or the names of others. The houses were in low-income areas primarily on the near northeast side of Indianapolis.

A short time after buying a house at a low but fair market price, Gunn and his crew would enter into a second transaction to sell the property.

“In the second sale,” Brooks said, “the sales price far exceeded the value of the property.”

Gunn and the others recruited buyers for the property then originated loans to obtain financing for the second purchases.

“They prepared and submitted to mortgage lenders false loan applications supported by fraudulent bank account information,” Brooks said. “They also submitted falsely inflated appraisals to induce the lending institutions to make the loans.”

Gunn also brought in title company closing agents to help in preparing and processing the false settlement statements and to disburse the fraudulently obtained loans.

“They also submitted fictitious invoices to support payments to fictitious entities they created,” Brooks said. “They also ‘fronted’ down payments to the buyers by obtaining cashier’s checks showing the buyers as remitters in order to make it appear that the buyers were making down payments on the properties when they were not.”

Gunn and his associates shared the funds they obtained through the scam “and engaged in various transactions to hide or ‘launder’ the money,” Brooks said.

Most of the loans have not been repaid, are in default and are or have been the target of foreclosures.

Brooks said the U.S. Postal Inspection Service, the Internal Revenue Service and the FBI assisted in the investigation.

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