Five people, including a retired teacher, have been snagged by federal authorities in a Cincinnati real estate flipping ring that bled investors of more than $7 million.
All five have pleaded guilty to federal charges that include bank fraud, conspiracy, submitting phony mortgage papers and income tax evasion, according to documents filed with the U.S. District Court for Southwest Ohio in Cincinnati.
They face up to 30 years in prison and fines of more than $1 million, Fred Alverson, a spokesman for the U.S. Attorney’s office in Cincinnati, confirmed to MortgageDaily.com.
The guilty pleas were all made after the defendants were indicted and before any went to trial.
Federal prosecutors have now charged nine real estate investors and title agents in what appears to be a real estate flipping ring operating in Cincinnati and southwest Ohio, the court documents shows.
Most are cooperating with federal authorities in an investigation Alverson described as “ongoing.”
“It’s not over yet,” he said.
Those charged are Horace Roberson, 29; Richard Reynolds, 32; Roger Pepples, 59; John Todd Killinger, 35; and Rodger Randall, 51.
Sentencing has not been set.
Flipping is basically the quick buying and selling of real estate. It’s not illegal, except when it involves fraud.
“Flipping involves someone acquiring an over-inflated loan on a rundown neglected property, often using fraudulent documents,” authorities said in court papers.
Prosecutors say the ring relied on inflated appraisals, bogus documents and phony mortgage applications to illegally receive millions of dollars in fraudulent loans.
Pepples, a retired Cincinnati math and gym teacher, was the biggest fish in the ring, making more than $2.5 million in the scam. He also failed to pay more than $100,000 in taxes.
In one instance a home was purchased for $40,000 and resold just two weeks later for $83,000, court records show. To receive the mortgage loan the ring used a phony appraisal that boosted the value of the home.
The court documents also show that income statements used to secure loans were falsified.
Another time a real estate investor who has also been implicated sold two homes to Killinger for $95,000 each. The investor had purchased the homes just weeks earlier for a total of $80,000, prosecutors said in the court filings.
Mortgage documents indicate Killinger put about $24,000 down. It turned out, prosecutors said, that he had put down no money at all.
“Neighborhoods can become victims of fraud in the mortgage industry,” Greg Lockhart, United States Attorney for the Southern District of Ohio in Cincinnati, said when the investigation was first revealed more than a year ago.
