Mail Fraud and Wire Fraud are offenses under United States Federal Law which refer to specific statutory crimes committed in the United States of America pursuant to any scheme that attempts to unlawfully obtain money or property in which the U S Postal system is used at any point in the commission of a criminal offense.

Michael Milan, 49, of Bethesda, MD, faces a maximum penalty of 20 years in prison when he is sentenced on Feb. 12, 2010. As part of a guilty plea, Milan has agreed to pay restitution of $3,141,409 and to forfeit $1,061,890.31 in proceeds he obtained.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia, and Joseph Persichini Jr., Assistant Director in charge of the FBI Washington Field Office, announced that Milan pleaded guilty yesterday to conspiracy to commit mail and wire fraud for his role in carrying out a multi-million dollar mortgage fraud scheme. The plea was accepted by United States District Judge T.S. Ellis, III.

This is the statement of facts issued by the Department of Justice in its press release filed on Tuesday, December 1, 2009:

“Milan admitted that he was a consultant to various mortgage brokerage companies and conspired with others to defraud mortgage lenders into lending funds for the purchase and refinance of residential properties. Milan caused his associates to prepare false mortgage applications which contained false information about the income and assets of the borrowers. Some of the mortgage applications falsely claimed that the borrowers earned hundreds of thousands of dollars from a company, Collid LLC, which Milan controlled. Milan’s conspiracy submitted fraudulent loan applications for the purchase and refinance of 11 different properties and caused losses of more than $2.5 million but less than $7 million.

Milan fled from the United States after the execution of a search warrant at his office in June 2008 and did not return until April 2009. During a detention hearing held after his return, Milan attempted to explain his extended flight from the U.S. by providing fraudulent Iranian court documents, which falsely claimed that he had been incarcerated in Iran during the summer of 2008. As part of his plea, Milan acknowledged that he attempted to obstruct justice with these false documents.”

Milan is the sixth defendant convicted by the investigation. Others convicted include a settlement agent, a loan officer who worked with Milan, and Milan’s son, Dustin Milan.

This case was investigated by the FBI’s Washington Field Office. Assistant United States Attorneys Edmund P. Power and Stephen P. Learned prosecuted the case on behalf of the United States.

Scott Rothstein, former south Florida lawyer, pleaded not guilty on Dec. 1 to U.S. charges he sold investors stakes in fictitious legal settlements.

Rothstein, charged with leading a $1.2 billion Ponzi scheme, has surrendered more than 20 properties, plus a collection of luxury cars (Ferraris, Rolls Royces), jewelry and business interests to federal prosecutors who sought forfeiture of those items. He was disbarred by the state’s Supreme Court on Nov. 25.

According to the press release submitted by the Department of Justice, the information alleges:

“From around 2005 through November 2009, Rothstein engaged in a pattern of racketeering activity through his law firm, Rothstein, Rosenfeldt, and Adler, P.A. (RRA), located in Ft. Lauderdale. Specifically, the information alleges that RRA was the criminal enterprise through which defendant Rothstein and others fraudulently obtained approximately $1.2 billion from investors through bogus investment and other schemes. The information alleges that defendant Rothstein and co-conspirators used RRA to fraudulently induce investors to: (1) loan money to non-existent borrowers based upon promissory notes and requests for short-term bridge loans for business financing; and (2) invest funds based upon anticipated pay-outs from purported confidential civil settlement agreements.”

The U.S. can now “dispose” of the properties or funds obtained from their sale and help repay victims, according to the agreement, which said that Rothstein didn’t admit to any wrongdoing and is trying to avoid litigation costs.

The co-founder of Fort Lauderdale law firm Rothstein Rosenfeldt Adler PA faces as much as 100 years in prison if convicted of two counts of wire fraud and three conspiracy charges. Prosecutors say his law firm was a racketeering enterprise that fleeced investors in a Ponzi scheme.

Rothstein has raised money for former U.S. President George W. Bush and was appointed by Florida Governor Charlie Crist, a Republican, to a committee that nominates appellate judges.

Authorities sought a court order Nov. 9 to seize Rothstein’s cash, real estate, cars, boats, jewelry, sports memorabilia and guitar collection.

The 22 properties Rothstein is surrendering include real estate along the Florida coast from Fort Lauderdale to Boca Raton, a Manhattan apartment and two parcels in Narragansett, Rhode Island. Today’s court filing lists two Ferraris, two Rolls Royces, a Hummer sport utility vehicle and a red Chevrolet Corvette convertible.

He is also giving up an investment account worth more than $1.2 million and his interest in dozens of businesses, according to court documents.

Rothstein’s attorney, Marc Nurik, wasn’t immediately available to comment. Rothstein, who is being held without bail, isn’t cooperating with federal prosecutors, the lawyer said in a phone interview earlier today.

“The only people he’s talking to are his cellmates. And me. Other than that he’s talking to nobody,” Nurik said. “We are weighing our options.”

Creditors placed the Rothstein law firm in bankruptcy on Nov. 10.

Herbert Stettin, the bankruptcy court-appointed trustee for the firm, sued the alleged Ponzi-schemer on Dec. 1, arguing that his assets should go to the practice.

“Rothstein used his position in the firm to perpetrate his scheme, simultaneously enlarging the practice from seven lawyers in 2002 to 70 attorneys and a support staff of 80 by 2009,” Stettin said in that filing. “All of the property held by Rothstein and the Rothstein entities was acquired with funds misappropriated from the debtor and hence constitutes property of the debtor’s bankruptcy estate.”

While acknowledging Sloman’s forfeiture suit, Stettin asked the bankruptcy court for an order consolidating Rothstein’s assets and liabilities with those of the law firm.

Bank fraud is the use of fraudulent means to obtain money, assets, or other property owned or held by a financial institution through skillful ingenuity, as opposed to bank robbery or theft.

Andrew Rosenfeld, age 39, of Ellicott City, Maryland, pleaded guilty today to conspiracy to commit bank fraud. In a November 30, 2009 announcement made by United States Attorney for the District of Maryland, Rod J. Rosenstein gave the following details:

According to Rosenfeld’s plea agreement, from June 2008 to January 2009, Rosenfeld was part of a scheme to defraud Wells Fargo Bank, where he worked as a Vice President and Client Service Manager. (Wells Fargo acted as a trustee for Collateralized Debt Obligation (CDO) clients and was responsible for using money generated by the CDOs to pay invoices for its CDO clients.)

Rosenfeld was responsible for supervising a team of Wells Fargo employees who executed wire transfers on behalf of certain CDO clients. To do this, a member of Rosenfeld’s team would receive an invoice to pay, fill out a wire instruction and submit both to Rosenfeld, or another supervisor at his level, for approval. Once approved, the wire transfer would be executed to pay the invoice.

Here is the statement of facts issued in a press release by the Department of Justice, Monday, November 30, 2009:

“Beginning in June 2008, Rosenfeld and another Wells Fargo employee on a different team, created false invoices. Sometimes Rosenfeld submitted a false invoice to an unwitting member of his team causing a fraudulent wire transfer to be processed, which Rosenfeld would approve. The other employee also personally processed fraudulent wire transfers and submitted them to another unwitting supervisor to approve. Rosenfeld and the other employee transferred money into bank accounts controlled by the other employee or the other employee’s friends. Rosenfeld, the other employee and the other employee’s friends would then share the proceeds of the fraud among themselves. For example, on about August 7, 2008, Rosenfeld approved an $18,500 wire transfer to be executed from one of Wells Fargo’s CDO clients’ bank accounts to a bank account controlled by a friend of the other employee and the three shared the proceeds amongst themselves.

Rosenfeld recruited another Wells Fargo employee from his team to execute one of the wire transfers and split his portion of the proceeds of that fraudulent wire transfer with him as well.

Rosenfeld was laid off in January 2009. At that time, 21 fraudulent wire transfers had been executed, resulting in a total loss of approximately $226,000. For about six weeks after he was no longer working for Well Fargo, Rosenfeld continued to receive money from the other employee with whom he concocted the scheme and who still worked at Wells Fargo.”

Rosenfeld faces a maximum sentence of 30 years in prison. U.S. District Judge J. Frederick Motz has not yet scheduled a date for sentencing.

Acting United States Attorney for the Southern District of New York, Lev Dassin, announced on February 25 of this year that Woolf-Turk, had pleaded guilty in federal court to participating in a mail and wire fraud conspiracy.

An accomplice, Michael Hershkowitz, of New York, NY, pleaded guilty to a similar charge on March 23 and is scheduled to be sentenced on Dec. 21.

Working through a Manhattan real estate development company, The Kingsland Group, Inc., and related entities, Woolf-Turk and Hershkowitz, fraudulently persuaded approximately 100 individuals to lend the Kingsland Group over $27 million to fund the renovation of approximately sixteen multi-family apartment buildings located in upper Manhattan.

According to a story in The North Country Gazette, the pair falsely represented to the investor/victims that they would hold, as collateral for the loans, interests in bona fide first mortgages in the various properties in which they thought they were investing. In fact, the victims did not hold recorded, first mortgages in the properties. Yet, interest was paid on the loans through 2005.

From September of 2003 until July 2007, Woolf-Turk and Hershkowitz maintained the fraud by making the required interest payments as they came due to the unsuspecting investors. In wasn’t until April 15, 2005 that their fraud conspiracy began to unravel. On that date their principal payment came due. The ponzi-pair went into action by fabricating and falsifying documents to placate their victims.

The victims were shown “doctored” mortgages supposedly registered with New York City’s Automated City Registration Information System (ACRIS), when in fact, the real mortgages were held by other investors. The Title Insurance Policies were forgeries and never issued by any title insurance company. Their forgeries included the correct official seals of the city and related agencies.

This Manhatten Ponzi scheme was allowed to happen and continue for as long as it did because no one asked questions; and, secondly, because of the lack of oversight by the agencies responsible for these matters.

Personally, I think these two criminals deserve more than five years to atone for their crimes. My heart goes out to the unsuspecting victims of any scheme that separates hard-working people from their savings. These fraud cases also hurt the system that is set up to protect us. This kind of breakdown erodes the public’s trust and confidence in the system.

Disbarred Lawyer, Real Estate Investor Convicted of Massive Fraud Schemes

NORFOLK, VA—Troy A. Titus, 43, of Virginia Beach, Virginia, was convicted by a Norfolk federal jury today of operating multiple fraud schemes to steal and misappropriate more than $7 million from clients and investors.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia, and A.J. Turner, Special Agent in Charge of the Norfolk Field Office of the Federal Bureau of Investigation, made the announcement after the jury issued its verdict following four days of deliberations.

“Today, a jury found Troy Titus stole millions from people who trusted him to protect their investments,” U.S. Attorney MacBride said. “Today’s conviction is a testament to the ability of our law enforcement partners to tackle complicated investment and mortgage fraud cases. Especially in the light of the recent economic crisis, we are even more determined to work together to aggressively fight financial fraud in this district.”

“This case represents a strong investigative and prosecutive effort to protect our citizens and the financial services industry, and by extension, the larger economy,” said Special Agent in Charge Turner. “To that end, we will continue to target those who, motivated by greed, prey on honest investors and damage our country’s financial confidence.”

On March 25, 2009, a grand jury charged Titus in a superseding indictment with 49 counts of fraud-related charges. After a four-week trial, a jury at the Norfolk federal courthouse found Titus guilty of 33 charges, and he faces up to 590 years in prison when he is sentenced on April 15, 2010 by United States District Judge Raymond A. Jackson.

According to court documents and evidence at trial, Titus was a lawyer practicing in Virginia who also conducted investment seminars focusing primarily on real estate and estate planning. Titus approached clients or seminar participants and induced them into investing money with him to purchase and rehabilitate real estate, promising to return the money at a later date with a high rate of interest. However, Titus obtained many of the real properties involved through fraud or transferring the properties into trusts controlled by him. Instead of using the funds as promised, Titus directed the investment income toward paying business or personal expenses, backfill investment losses, and at times to make token payments or repay previous investors.

In addition, Titus misappropriated funds given to him by elderly or incapacitated clients who provided him with income intended to be held in trust and took steps to conceal those uses from those who inquired about the management of the trust. Trial evidence showed that Titus failed to make payments for the trust clients’ basic medical and housing needs. Titus engaged in a similar scheme to defraud involving real estate closing funds he held in trust.

Court records and evidence at trial indicate that the loss amount attributed to Titus’s activities totaled more than $7 million and affected approximately 30 victims. The Virginia State Bar revoked his law license in 2005.

This case was investigated by the Norfolk Field Office of the FBI, with assistance from the Virginia Attorney General’s Office, the State Corporation Commission, and the Virginia State Bar. The case was prosecuted by Assistant United States Attorneys Melissa O’Boyle and Michael Moore.

MTSU Professor Sentenced to 12 Months and a Day for Mortgage Fraud Scheme

NASHVILLE, TN—Edward M. Yarbrough, United States Attorney for the Middle District of Tennessee, and My Harrison, Special Agent in Charge, Memphis Division, Federal Bureau of Investigation, announced that, on November 13, 2009, U.S. District Judge Aleta Trauger sentenced Pamela Gail Holder to 12 months and one day in prison for her role in a mortgage fraud scheme. Dr. Holder had been found guilty of bank fraud and wire fraud offenses related to that scheme following a one-week jury trial in April 2009.

Dr. Holder, a professor of nursing at Middle Tennessee State University and the former coordinator of the statewide Tennessee Board of Regents On-Line Degree Program, was originally charged in a four-count indictment in June 2008. At trial, the jury heard evidence that Dr. Holder and others helped orchestrate a multi-million dollar mortgage-fraud scheme that involved a “straw buyer” with a good credit score, who was deceived by Dr. Holder into borrowing $2.4 million for the purpose of purchasing a $1.5 million dollar home in Hendersonville, Tennessee. In the months leading up to the purchase, Dr. Holder helped prepare or send false documents that, among other things, falsely claimed that the straw buyer was president of “Team Fat Man,” an automotive-sales business owned by Dr. Holder’s deceased husband, and greatly inflated the straw buyer’s income. Through those documents and other fraudulent misrepresentations, Dr. Holder was able to qualify the straw buyer for large loans well beyond what the straw buyer could afford. The scheme involved loans obtained at Bank of Nashville, Countrywide Home Loans, and First Tennessee Bank. After the straw buyer purchased the lavish home, Dr. Holder and her husband moved in and spent the excess loan funds on various purchases, including several pieces of diamond jewelry. When the straw buyer was unable to make the monthly mortgage payments of approximately $10,000, the mortgage defaulted and the property was foreclosed upon.

At the sentencing hearing, the government focused on the profound damage that Dr. Holder’s crime caused an innocent victim and the negative effect of mortgage fraud on the banking industry and the lending process. After the sentencing, United States Attorney Edward Yarbrough remarked, “Mortgage fraud is a serious crime, and we are pleased that the Court has imposed an appropriately serious sentence in this case. The United States Attorney’s Office and our law-enforcement partners will continue to investigate such frauds and bring those who commit them to justice.” In addition, My Harrison, Special Agent in Charge of the FBI’s Memphis Division, stated, “The FBI will continue to target those who criminally manipulate our financial system for personal gain and keep working to bring criminals like this to justice to ensure that they pay for their crimes.”

The investigation of the case was conducted by the Federal Bureau of Investigation. Assistant U.S. Attorney Ty E. Howard of the Middle District of Tennessee and Trial Attorney Peter A. Frandsen of the U.S. Department of Justice Fraud Section represented the United States.

Five Indicted in Foreclosure Rescue and Mortgage Fraud Scheme
Scam Involved Lawyers, Mortgage Brokers, and More Than $14.6 Million in Loans

PHILADELPHIA—A 15-count indictment was filed today against five defendants charged in a $14.6 million mortgage fraud scheme that resulted in at least 35 fraudulent mortgage loans, announced United States Attorney Michael L. Levy, Special Agent-in-Charge of the FBI Janice K. Fedarcyk, and Pennsylvania Secretary of Banking Steven Kaplan. Charged are Edward G. McCusker and John Alford Bariana, owners of Axxium Mortgage, Inc., McCusker’s wife, Jacqueline, and Jeffrey A. Bennett and Stephen G. Doherty, owners of the Doylestown law firm Bennett & Doherty, P.C.

According to the indictment, the defendants targeted financially distressed homeowners facing foreclosure, falsely promised them help in saving their homes, engaged in real estate transactions with straw purchasers, and obtained dozens of fraudulent mortgages. The defendants took whatever equity the homeowner had left, funneled it through various shell corporations they controlled, used some of it to pay the new mortgages, and put the rest of the equity into their own bank accounts.

“Unfortunately, the downturn in the economy has given rise to unscrupulous predators looking to cash in on the misfortune of others,” said Levy. “This sort of fraudulent activity not only preys on desperate homeowners, it weakens our financial institutions, destroys neighborhoods by leaving properties abandoned, and devalues the homes of innocent neighbors. This office will investigate and prosecute those who victimize financially distressed homeowners.”

The indictment alleges that the defendants promised financially distressed homeowners that they would find an “investor” who would help them save their home. The defendants would then arrange for a straw purchaser to obtain a fraudulent mortgage and then transfer of the title of the homeowner’s residence to the straw purchaser. Using their company Axxium Mortgage, Edward McCusker and Bariana, along with Jacqueline McCusker obtained the fraudulent mortgages by submitting false documents to mortgage lenders and making false claims about the straw purchasers’ finances. The defendants also concealed from the lender the fact that the homeowner was going to continue to reside in the home and that the mortgage payments were going to continue to be made, in part, by the distressed homeowner and funneled through the straw purchaser. Bariana and Jacqueline McCusker each acted as straw purchasers for 10 homes. The defendants also recruited at least seven other persons to act as straw owners in order to obtain additional fraudulent mortgages.

Bennett and Doherty participated in the scheme at the front and back end. Doherty solicited and referred distressed homeowners to Edward McCusker and used fraudulent bankruptcy filings for some of the distressed homeowners to delay foreclosure until McCusker had obtained an investor and a mortgage. Bennett handled the closings for the real estate transfers, manipulating the information provided to the lender in order to hide the nature of the scheme until after the loan was funded.

“Governor Rendell and I are pleased when state and federal agencies can cooperate to protect consumers and deter improper and criminal activity,” said Pennsylvania Secretary of Banking Steve Kaplan. “U.S. Attorney Levy’s announcement today helps underscore our respective commitments to consumer protection and the Department of Banking’s ability to bring financial expertise to criminal prosecutions.”

“The type of criminal activity alleged in this indictment is particularly despicable in that it targeted those victims who were the most vulnerable financially and the most desperate for some type of assistance to avoid foreclosure on their properties,” said Special Agent-in-Charge Janice K. Fedarcyk of the Philadelphia Division of the FBI. “It also represents an affront to the millions of hard-working Americans who struggle every day to meet their mortgage obligations and keep their families in their homes. The FBI is committed to aggressively pursuing those who engage in schemes designed to illegally profit from the current economic situation of many of our fellow Americans.”

The defendants are charged with conspiracy to commit mail and wire fraud, mail and wire fraud, and conspiracy to commit money laundering. Doherty is also charged with bankruptcy fraud.

INFORMATION REGARDING THE DEFENDANTS

NAME
ADDRESS
YEAR OF BIRTH

EDWARD G. MCCUSKER
New Hope, PA
1964

JEFFREY A. BENNETT
Springfield, PA
1966

STEPHEN G. DOHERTY
Doylestown, PA
1966

JOHN A. BARIANA
Mullica Hill, NJ
1972

JACQUELINE D. MCCUSKER
New Hope, PA
1964

Defendants Edward and Jacqueline McCusker, Jeffrey Bennett, and John Bariana face maximum sentences of 240 years’ imprisonment, $3.25 million in fines, three years supervised release, and a $1,200 special assessment. Defendant Stephen Doherty faces a maximum sentence of 385 years’ imprisonment, $4 million in fines, three years supervised release, and a $1,500 special assessment. These are the maximum sentences that may be imposed if the defendants are convicted; the advisory United States Sentencing Guidelines call for a sentence less than the statutory maximum.

The indictment seeks forfeiture of the proceeds of the fraudulent scheme, which is alleged to be approximately $14.6 million.

This case was investigated by the Federal Bureau of Investigation and the Pennsylvania Department of Banking. It is being prosecuted by Assistant United States Attorney Nancy Rue.

Federal Grand Jury Indicts Portland Mortgage Broker

PORTLAND, OR—A Federal Grand Jury has indicted a Portland mortgage broker for bank fraud related to the sale of his parent’s home in 2006. Alex Z. Biscocho, 42, of Portland, is accused of devising a scheme to defraud First Franklin Financial Corporation during the time he was a mortgage broker at Countrywide Mortgage. Biscocho is alleged to have prepared a loan application, on behalf of a third-party borrower, which contained falsified and inflated income and asset information. The indictment further alleges that, at closing, the borrower became concerned about information contained in the closing documents and refused to complete the transaction. Without the borrower’s knowledge, according to the indictment, Biscocho then closed the $475,000 loan and thereafter made two loan payments from his personal account, including one check that was made to appear as if the borrower was the payor.

Biscocho appeared before U.S. Magistrate John V. Acosta today for arraignment on the bank fraud charges. The crime of bank fraud carries a maximum penalty of 30years in prison and a maximum fine of $1,000,000.

Grand Jury Indicts Mortgage Loan Officer, Former Local Radio Host, Family Member in Mortgage Fraud Scheme
Three Men Allegedly Obtained More Than $4.5 Million in Fraudulent Mortgage Loans

DAYTON—A federal grand jury here has indicted James L. Mack, 64, a former loan officer at the Centerville branch of Republic Bank, Walter A. Millat, 70, and his son William E. Millat, 49, all of Dayton, charging the three men with operating a scheme to fraudulently obtain more than $4.5 million in mortgage loans by fraudulently orchestrating the purchase and sale of more than 100 properties in the Dayton area between 2001 and 2006.

Carter M. Stewart, United States Attorney for the Southern District of Ohio; and Nancy Grinnell, Special Agent in Charge, Federal Deposit Insurance Corporation Office of Inspector General (FDIC), and other members of the Greater Dayton Mortgage Fraud Task Force announced the indictment returned Tuesday, November 10, 2009.

The indictment charges each man with one count of conspiracy, four counts of mail fraud and four counts of bank fraud. Each count is punishable by up to 30 years’ imprisonment. The indictment also charges William Millat and Walter Millat with conspiracy to launder money, punishable by up to 20 years’ imprisonment. The indictment also seeks forfeiture of the proceeds of the scheme.

The indictment identifies Mack as a former mortgage loan officer at the Republic Bank branch in Centerville. William Millat and his father, Walter Millat, operated various real estate businesses and corporations in the time period covered by the indictment. Between April 2005 and May 2006, William Millat hosted a Saturday morning radio call-in talk show entitled “Real Estate Investing for Everyone” on a Dayton radio station.

The indictment alleges that William Millat and Walter Millat recruited investors through newspaper ads in Dayton, New York City and Indianapolis to participate in a plan to buy and renovate single family houses in distressed inner city neighborhoods in Dayton. Investors were promised a 50 percent return on their investment if they would invest for three months.

The men are charged with directing potential buyers to Mack and preparing false and fraudulent loan documents. Prospective buyers were promised that they would receive the properties without putting any money down, receive a check at closing, and that the properties would be renovated, rented, and generating positive cash flow without any cost to the buyers. The scheme victimized at least 12 separate individual property investors.

The three allegedly used the buyers’ information and created false documents to obtain all the mortgages from Republic Bank, netting more than $2 million in proceeds for themselves through the scheme.

Stewart commended the joint investigation by the FDIC Office of Inspector General and members of the Greater Dayton Mortgage Fraud Task Force. Agencies participating in the Greater Dayton Mortgage Fraud Task in addition to the FDIC include the FBI, IRS-Criminal Investigation, the Ohio Department of Commerce, Ohio Attorney General Richard Cordray’s Office, the U.S. Postal Inspection Service, the U.S. Department of Housing and Urban Development Office of Inspector General, and the Perry Township Police Department.

Georgia Man and California Man Criminally Charged with Interstate Investment Fraud Scheme

RALEIGH—United States Attorney George E.B. Holding announced today a six-count Indictment charging GREGORY BARTKO, 56, of Berkeley Lake, Georgia, and DARRYL LYNN LAWS, 58, of La Jolla, California, with a criminal investment fraud scheme. The Indictment was issued by the Grand Jury on November 4, 2009, and unsealed today.

BARTKO and LAWS are charged with one count of conspiring to commit mail fraud, launder monetary instruments, engage in unlawful monetary transactions, make false statements, and obstruct proceedings of the United States Securities and Exchange Commission. The two defendants are also charged with three counts of mail fraud and two counts of false statements. Scott Bradley Hollenbeck is identified in the Indictment as an unindicted co-conspirator.

The Indictment alleges that, beginning in early 2004, BARTKO and LAWS participated in an interstate criminal scheme to profit from fraudulent sales of investments. BARTKO, a licensed attorney, held himself out as an investment banker operating through Capstone Partners, L.C. LAWS, who falsely purported to have a Ph.D. in finance, held himself out as an investment banker operating through Charlotte Square Capital Ventures. Numerous entities were formed and/or used in conducting the scheme, including “Franklin Asset LLC Fund I”; “Caledonian Partners LLC”; and “Capstone Private Equity Bridge & Mezzanine Fund, LLC.”

The Indictment alleges that defendants BARTKO and LAWS used bank accounts controlled by BARTKO in Georgia to collect hundreds of thousands of dollars in proceeds from fraudulent sales of investments. The indictment alleges that nearly all of the money collected by BARTKO and LAWS as part of the scheme had been obtained by a single salesman, Hollenbeck. In making these sales, Hollenbeck used numerous materially false statements and omissions, including false promises to investors designed to conceal the true risk of the investment, such as “guarantees” of yearly earnings of at least 12%, and the promise that the investment was insured when it was not.

The Indictment also provides notice that the United States is seeking forfeiture of property from BARTKO and LAWS, including all property constituting or derived from fraud proceeds.

Investigation of the case was conducted by the United States Postal Inspection Service, the Federal Bureau of Investigation, and the Internal Revenue Service – Criminal Investigation. Assistant United States Attorney Clay C. Wheeler is in charge of the prosecution.

Manhattan U.S. Attorney Charges Company Executive with Multimillion-Dollar Bank Fraud

PREET BHARARA, the United States Attorney for the Southern District of New York, and JOSEPH M. DEMAREST, JR., the Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (”FBI”), announced the unsealing of an Indictment today charging BILL SURI, a/k/a “David Miller,” the owner of a furniture company called Woodkraft International Inc. (”Woodkfraft”), with defrauding four banks—Citibank, Wachovia, North Fork, and HSBC—into providing Woodkraft with a total of approximately $2.1 million in loans and lines of credit.

According to the Indictment unsealed in Manhattan federal court today:

Between September 2002 and October 2006, SURI made a series of false statements in loan applications he submitted to the banks. Among other things, SURI repeatedly changed and operated Woodkraft under various names when applying for loans to different banks to conceal the Woodkraft’s true credit history. SURI also failed to disclose Woodkraft’s prior loans and credit lines to the banks. In addition, SURI concealed his ownership of Woodkraft from the banks and arranged for another individual (”CC-1″) to pose as the owner of the company. SURI and CC-1 also falsely represented that the loaned funds would be used to purchase additional inventory and new equipment for Woodkraft, when, in truth and in fact, the proceeds were to be used largely to pay SURI’s personal expenses and to repay the creditors of Woodkraft-related entities. SURI and CC-1 submitted financial statements to the banks that were purportedly prepared by an independent accountant, but which were really complete fabrications prepared by SURI’s wife.

The Indictment charges SURI with bank fraud and bank fraud conspiracy. If convicted on the charges, SURI faces a maximum sentence on each charge of 30 years in prison and a maximum fine of $1,000,000 or twice the pecuniary loss or gain that resulted from the offense.

SURI, 66, of New York, New York, was arrested earlier today and is expected to be presented in Manhattan federal court this afternoon. This case has been assigned to United States District Judge SIDNEY H. STEIN.

Mr. BHARARA praised the investigative work of the FBI.

The case is being handled by the Complex Frauds Unit of the United States Attorney’s Office. Assistant United States Attorney WILLIAM STELLMACH is in charge of the prosecution.

Six Individuals Charged in Multi-Million Dollar Mortgage Scheme Against Flaherty Funding

ROCHESTER, NY—U.S. Attorney Kathleen M. Mehltretter of the Western District of New York announced that six individuals located in the New York City area were charged yesterday in a criminal complaint with defrauding Flaherty Funding, a mortgage company located at 2595 Brighton Henrietta Town Line Road, Rochester, New York 14623. Specifically, Manre Ebhomielen has been charged with mail fraud, bank fraud, and conspiracy; Tyshe Bankston, Merrick Henry and Val Taylor have been charged with mail fraud and conspiracy; and Jocelyn Joseph and Bernard Lawson have been charged with mail fraud.

Assistant U.S. Attorney Richard A. Resnick, who handled the case, stated that in April 2008, Flaherty Funding contacted Vista Mortgage, a licensed mortgage company located in Queens, New York, in an effort to expand its business into the New York City area. Flaherty Funding and Vista Mortgage eventually agreed that Vista Mortgage would close its operation and some of its staff would become employees of Flaherty Funding. One such person was Ebhomielen. Subsequently, Ebhomielen and the other defendants participated in a scheme to obtain large mortgage loans from Flaherty Funding by submitting false information and documents to Flaherty Funding during the mortgage loan approval process. The scheme involved five properties that were purchased in the New York City area. The purchasers were promised $10,000 if they purchased the homes and applied for a mortgage loan from Flaherty Funding. During the mortgage loan approval process, the defendants submitted false information and documentation which included false employment information, false monthly income amounts, false bank records, false Form W-2s, and false down payment information. As a result of this false information and documentation, Flaherty Funding provided three mortgage loans in the amounts of $533,850, $533,850 and $646,300, totaling $1,714,000. The remaining two mortgage loans, which were not provided by Flaherty Funding due to the discovery of the fraud, would have totaled $913,500.

The complaint in this case was the culmination of an investigation by the United States Postal Inspection Service, Boston Division, under the direction of Acting Inspector in Charge Robert Malaby, the United States Postal Inspection Service, New York Division, under the direction of Inspector in Charge Ronald Verrochio, and the Federal Bureau of Investigation, under the direction of James H. Robertson, Special Agent in Charge.

Today three of the defendants were arrested and will have their initial appearances in the New York City area. These defendants are Ebhomielen, Henry and Taylor. After their initial appearances, the defendants will be ordered to appear in Rochester, New York at a later date.

Former Real Estate Investment Company Owner Pleads Guilty to Laundering Proceeds of Mortgage Fraud

ALBANY, NY—Andrew T. Baxter, United States Attorney, Patricia J. Haynes, Special Agent in Charge, Internal Revenue Service, Criminal Investigation Division (New York Field Office), John F. Pikus, Special Agent in Charge, Albany Division of the Federal Bureau of Investigation, and Robert Bethel, Inspector in Charge, United States Postal Inspection Service, announce that KEVIN M. O’CONNELL, age 35, of Albany, pled guilty in United States District Court in Albany before the Honorable Norman A. Mordue today, to a one-count information charging him with the felony offense of laundering of monetary instruments in violation of Title 18, United States Code, Section 1956(a)(1)(A)(i), in connection with his role in an extensive mortgage fraud scheme that defrauded financial institutions and other mortgage lenders of over $5.3 million in loans.

In court today, O’CONNELL admitted his participation in a mortgage fraud scheme that occurred from at least July 2003 through December 2007, in connection with his former businesses PB Enterprises, Inc., and Greater Atlantic Associates, Inc., located on Central Avenue in Albany, New York. O’CONNELL admitted that, together with others, he knowingly and willfully executed a scheme to defraud banks and other mortgage lenders by arranging to secure excessive mortgages for numerous residential properties in the Capital District through the use of fraudulent loan applications and settlement statements, and by diverting mortgage funds for his personal use, and to others. O’CONNELL admitted that the scheme operated in the following manner:

O’CONNELL and others identified below-market real estate properties for sale by owner, which were in need of substantial rehabilitation. The properties were located in Albany, Rensselaer, and Schenectady Counties. O’CONNELL and others located buyers for the properties with the promises of ownership of income-producing property and money back at or after closing, for necessary repairs. In order to obtain funding for the purchases, O’CONNELL and others caused buyers to submit fraudulent loan applications to lenders which concealed the source of the buyers’ funds necessary for down payments and other associated closing costs. In some instances, O’CONNELL and others loaned buyers “gift” money to make the purchases and to pay closing costs. The “gift” loans, in reality, were buyer liabilities that were not disclosed in loan applications. In other instances, they merely placed money into the bank accounts of buyers to increase the likelihood that lenders would approve the loan applications, and then withdrew the funds after the loans were approved. As part of the scheme, sales contracts and other documents submitted to mortgage lenders contained forged signatures and other false statements.

O’CONNELL and others created and used “Assignment of Contract of Sale” agreements to disguise the purchase and resale of properties by PB Enterprises and Greater Atlantic. The agreements permitted PB Enterprises and Greater Atlantic to “assign” their contracts to buy the distressed properties to other purchasers. Frequently, the original sellers were unaware that O’CONNELL and others had executed such contractual assignments on their properties. O’CONNELL and others then assigned their contracts to the buyers they had recruited, at new and significantly higher prices.

O’CONNELL and others used “double HUD closings”, by which they arranged for the closings for the original sellers and those for the newly-assigned buyers to be held at different times. At the original seller’s closing, the HUD-1 itemized all of the fees associated with the sale of the property. The sales price reflected the lower sales amount that PB Enterprises or Greater Atlantic and the seller had agreed upon. The seller was paid the asking price, and all valid fees that were disclosed on the HUD-1 were paid. At the newly-assigned buyer’s closing, the HUD-1 reflected the higher sale price. However, the forms used to record the sales of the properties, which were filed in the various county clerks’ offices, did not reflect the fact that in each instance, PB Enterprises or Greater Atlantic purchased the property from a seller at a given price, and then resold that property to another buyer at a higher amount. The forms that were filed with the corresponding county clerk’s offices reflected only the lower sale price, and falsely showed that the original seller sold the property to the end buyer who was assigned the contract from PB Enterprises or Greater Atlantic. No records exist at the county clerk’s offices that PB Enterprises or Greater Atlantic purchased and resold the properties.

O’CONNELL and others also typically arranged for multiple purchases, by the same buyer, to take place close in time – often on the same day – so that subsequent lenders did not learn of the buyer’s recent loans and liabilities. These additional mortgage loans held by buyers were not disclosed to the lenders at the time of the subsequent closings, and the subject loan applications were not amended to include the buyers’ additional liabilities. In contrast to what was reported to lenders on the HUD-1 Settlement Statements and sales contracts associated with the loans, sellers received only the actual asking prices for properties, minus the amount used to pay off existing mortgages. After paying sellers actual asking prices and the valid fees disclosed on HUD-1s, O’CONNELL and others fraudulently directed the settlement agent to disburse the remaining mortgage proceeds to themselves, to buyers, and to other third parties, in manners and in amounts not disclosed on the HUD-1 documents, in the sales contracts, or in any other manner to the lenders.

Through their mortgage fraud scheme, O’CONNELL and others obtained excessive mortgages totaling at least $5,324,225.00, in at least 73 real estate transactions, and diverted a total of approximately $4,628,886.48 of mortgage proceeds to themselves and others. All 73 of these mortgages were subsequently placed in foreclosure, resulting in substantial losses to various financial institutions and other lenders. O’CONNELL admitted he laundered the fraudulent mortgage proceeds in a variety of ways, with the intent to promote the continuation of the scheme.

O’CONNELL agreed to forfeit criminal proceeds totaling over $4.6 million, and to pay full restitution. Chief Judge Mordue scheduled O’CONNELL’s sentencing for March 1, 2010, at 10:30 a.m. in U.S. District Court in Albany. O’CONNELL faces a maximum possible sentence of twenty years of imprisonment, a fine of up to $500,000, a period of up to five years of supervised release and the legal disabilities flowing from conviction of a felony.

The case is being investigated by the Internal Revenue Service, Criminal Investigation Division, the Albany Division of the Federal Bureau of Investigation, and the United States Postal Inspection Service. It is being prosecuted by Assistant United States Attorney Joshua S. Vinciguerra.

Former Las Vegas Resident Charged with Committing Mortgage Fraud in Nevada

LAS VEGAS—A former Las Vegas resident has been charged with federal conspiracy and fraud charges for his involvement in a Nevada mortgage fraud scheme involving straw buyers and falsified mortgage loan documents, announced Daniel G. Bogden, United States Attorney for the District of Nevada.

Brian K. Jackson, 38, currently of Anaheim, California, was indicted by the Federal Grand Jury in Las Vegas on October 21, 2009, and charged with Conspiracy to Commit Bank Fraud, Mail Fraud, and Wire Fraud. On Tuesday, November 10, 2009, Jackson was arrested in the Los Angeles area, and appeared before a U.S. Magistrate Judge there and was released on a $50,000 surety bond. Jackson is scheduled to be arraigned by U.S. Magistrate Judge George W. Foley in Las Vegas on Friday, November 20, 2009, at 8:30 a.m.

The Indictment alleges that from about 2002 to May 14, 2008, Jackson, owner of Unlimited Properties, a now-revoked Nevada limited liability corporation, participated in a conspiracy to defraud financial institutions by causing money from mortgage loans to be diverted to his own use and benefit. Jackson solicited and paid persons (straw buyers) to apply for mortgage loans in their name. The loans were processed through Sapphire Mortgage, located in Henderson, Nevada. Jackson caused false and fraudulent information to be placed in the straw buyers’ mortgage loan applications concerning their employment, income, assets, intent to occupy property, etc. Jackson caused the same home to be purchased multiple times by different straw buyers at ever increasing prices. Jackson caused the “equity” to be diverted to himself personally or his company, Unlimited Properties. Jackson also placed renters in the properties, and caused the mortgages to default.

The Indictment specifically discusses several transactions involving a home located at 2061 Scenic Sunrise Drive in Las Vegas. Between March 2002 and late 2004, Jackson twice orchestrated the sale of the property using two straw buyers and the placement of false information in their loan applications. In June 2004, Jackson also orchestrated the sale of the Scenic Sunrise property to himself and falsely stated in his loan application that he intended to reside in the property when he knew he did not. During this period, Jackson also leased the Scenic Sunrise property to another individual and accepted money from the individual as guarantee that he would purchase it in the future, even though Jackson knew that the property at the time was owned by the first straw buyer and was in the process of being sold to the second straw buyer. The indictment alleges that Jackson or his company received about $179,000 from these fraudulent transactions.

In May 2008, the owner of Sapphire Mortgage, Cindy Birkland, was arrested and charged in state court in Las Vegas with mortgage fraud related offenses. If convicted, Jackson faces up to 30 years in prison and a $1,000,000 fine.

This investigation is being led by IRS Criminal Investigation and the FBI, and other agencies of the Southern Nevada Mortgage Fraud Task Force, including the Las Vegas Metropolitan Police Department, the Nevada Attorney General’s Office, Office of the Inspector General for the Social Security Administration, Office of the Inspector General for the Department of Housing and Urban Development, the U.S. Postal Inspection Service, and the U.S. Secret Service. The case is being prosecuted by Assistant United States Attorney Brian Pugh. Persons who have information concerning potential mortgage fraud may contact the Southern Nevada Mortgage Fraud Hotline at (702) 584-5555.

Federal Mortgage Fraud Charges Filed Against Two Las Vegas Men

LAS VEGAS—Two Las Vegas men have been charged with conspiracy and fraud charges for devising and implementing a mortgage fraud scheme involving straw buyers and falsified mortgage loan documents, announced Daniel G. Bogden, United States Attorney for the District of Nevada.

Tarl Brandon, 43, and Calvin A. Gribble, 50, were indicted by the Federal Grand Jury on December 1, 2009, and charged with one count of Conspiracy to Commit Mail Fraud, Wire Fraud, and Bank Fraud. Gribble was arrested and appeared on Monday, December 7, 2009, before U.S. Magistrate Judge Lawrence R. Leavitt, and was released pending trial. Brandon surrendered to authorities this morning, and is scheduled for an initial appearance and arraignment at 3:00 p.m.

The Indictment alleges that from about June 2004 to January 31, 2005, Brandon, managing member of KTB Construction Company, LLC, and Gribble, owner of C. A. Gribble and Associates, a mortgage broker, solicited and paid persons to act as straw buyers to apply for mortgage loans to purchase real estate in Las Vegas. In most instances, Brandon and Gribble had the straw buyers apply for mortgages for more than one house at a time and concealed from the lenders that they were purchasing more than one property. To induce the lenders to fund the loans, Brandon and Gribble caused the loan applications and supporting documentation to include false and fraudulent information concerning the straw buyers’ income, assets, employment, and intent to occupy the home. Once the financial institutions funded the loans, the escrow companies made disbursements to Brandon’s shell company, KTB Construction and paid commissions and fees to Gribble.

The Indictment specifically discusses two fraudulent transactions involving the purchase of two homes in the fall of 2004 by a straw buyer - one at 2317 Cameridge Elms Street, in North Las Vegas, and the other at 8682 Belinda Court in Henderson. Once the loans were approved, Brandon and Gribble caused the financial institutions to wire monies from New York to a local lender in Las Vegas to fund the loans, and caused the title company to fraudulently pay KTB Construction $105,000 for these transactions. Brandon and Gribble then paid the straw buyer $14,000 for applying for the mortgages. Gribble made a mortgage payment on the properties to conceal the fraud from immediate scrutiny.

If convicted, the defendants face up to 30 years in prison and a $1,000,000 fine.

This investigation is being led by and the FBI, and other agencies of the Southern Nevada Mortgage Fraud Task Force, including IRS Criminal Investigation, the U.S. Postal Inspection Service, Office of the Inspector General for the Department of Housing and Urban Development, the U.S. Secret Service, the Las Vegas Metropolitan Police Department, the Nevada Attorney General’s Office, and Office of the Inspector General for the Social Security Administration. The case is being prosecuted by Assistant United States Attorney Brian Pugh.

Persons who have information concerning potential mortgage fraud may contact the Southern Nevada Mortgage Fraud Hotline at (702) 584-5555.

Missouri Man Sentenced to Nine Years in Major Mortgage Fraud Scheme

CAPE GIRARDEAU, MO—Robert P. Wrolstad, of O’Fallon was sentenced on a mortgage fraud scheme involving the sale of residential real estate located in Sikeston, MO, Acting United States Attorney Michael W. Reap announced today. After sentencing, the district court remanded Wrolstad to the custody of the United States Marshals to commence serving his sentence.

Wrolstad was sentenced to 108 months on a 34-count indictment for his involvement in the scheme.

Wrolstad’s co-defendant, Russell Todd McBride, who was sentenced to 135 months yesterday, was an operator of Century Mortgage and Finance, Inc., which was in the business of providing mortgage-related services, and had offices located in Sikeston, Cape Girardeau, St. Louis County, and elsewhere. As a mortgage broker, Century Mortgage would locate and obtain prospective mortgage lenders for prospective borrowers. Employees and others associated with Century Mortgage would prepare mortgage applications and supporting documents for borrowers. Then, for a fee, Century Mortgage would find a mortgage lender to make the loan. Wrolstad worked with McBride and for Century Mortgage, providing services including assisting in closing real estate transactions and working with title companies.

“Investors need to know the market and understand realistic terms and rates of return before investing,” said J.R. Ball, Assistant Inspector in Charge of the U.S. Postal Inspection Service, St Louis Field Office.”Victims in these types of cases often become shortsighted and only focus on front-end promises. In this case, some victims may be holding properties that will never realize their mortgaged value.”

“Buying property can potentially be a good investment,” said Roland J. Corvington, Special Agent in Charge of the FBI in St. Louis. “But because of unscrupulous people like Mr. McBride and Mr. Wrolstad, investors need to do some research and verify what they are buying and not have blind trust.”

The scheme, which occurred from at least July 2005 and continued through November 28, 2006, involved investors recruited by McBride and Wrolstad purchasing real estate primarily located in Sikeston, Missouri. The owners of the real estate would sell the properties at or near fair market value to investors recruited by and known to McBride and Wrolstad. However, the investors paid prices significantly greater than the actual selling price received by the sellers for the properties. The investors would purchase the property at a fraudulent and overvalued price by obtaining loans to purchase the property. As part of the scheme, McBride and Wrolstad obtained appraisals, which significantly overvalued the properties, which enabled them to personally obtain inflated loan proceeds despite having no interest in the conveyed real estate.

McBride, and in some cases, Wrolstad, represented to investors that the residential real estate properties were good investment properties, that the rents would pay the mortgage, that the properties could be acquired with “no money down,” and that the properties could be sold, sometimes in approximately a year, at a profit. As part of the scheme, McBride and Wrolstad also paid monies to investors as an inducement for them to purchase residential real estate funded by loans brokered through Century Mortgage. For example, in one case a purchaser paid $66,000 for a property that the seller sold for $7,500. In another real estate transactions, the purchaser paid $54,000 for property that the seller sold for $15,000.

In many cases, purchasers of real estate secured by loans brokered by Century Mortgage did not provide closing costs or down payments to acquire the real estate. McBride and Wrolstad, and others acting on their behalf, provided the investors with the funds for the down payment and closing costs. McBride and Wrolstad also caused mortgage loan companies to send the loan proceeds by wire transfers in interstate commerce, and caused warranty deeds, deeds of trusts and other closing documents to be sent from the offices of the closing agents by commercial interstate carrier to the lenders and the Recorder of Deeds in Scott County, MO.

McBride and Wrolstad directed purchasers and closing agents to pay McBride and Wrolstad substantial sums of the mortgage loan proceeds by checks or wire transfers into their personal bank accounts or other bank accounts controlled by them.

There were approximately 341 transactions involving the sale of residential real estate located in the Eastern District of Missouri during the past six years in which McBride and Wrolstad fraudulently obtained mortgage loan proceeds causing losses to lenders and purchases of between $7 million and $20 million. Wrolstad was ordered to pay restitution exceeding $9 million to the lenders and investors defrauded and victimized by the mortgage fraud scheme.

Wrolstad was sentenced on one count of conspiracy to commit wire fraud and mail fraud, 12 counts of wire fraud and 12 counts of mail fraud. n addition, Wrolstad was sentenced on three counts of money laundering. After sentencing, the district court remanded Wrolstad to the custody of the United States Marshals to commence serving his sentence.

The U.S. Attorney’s Mortgage Fraud Task Force consists of over 70 residents of the Eastern District of Missouri involved in banking, mortgage brokerage, real estate sales, title insurance, real estate appraising, as well as federal, state, and local law enforcement, regulatory officials, and non-government organizations. Anyone wishing to report suspected mortgage fraud or participate in the work of the task force is encouraged to call the Mortgage Fraud hotline at 1-866-587-9571.

Reap praised the Postal Inspection Service, Federal Bureau of Investigation, the Internal Revenue Service, and Assistant United States Attorney Paul W. Hahn, who handled the prosecution for the government.

Owner of USA Properties, LLC Sentenced on Mortgage Fraud Charges

ST. LOUIS, MO—William E. McKanry was sentenced to 27 months in prison on multiple conspiracy and fraud charges involving the multi-million dollar sale of 12 local properties, Acting United States Attorney Michael W. Reap announced today.

William E. McKanry owned, operated and managed USA Properties, LLC; his son, William C. McKanry owned, operated and managed USA Title, LLC; and Paula Enders, was a licensed mortgage broker. She operated under the mortgage brokerage company known as Foundation Mortgage, Inc.

According to testimony presented at trial, between December 2005 and January 31, 2006, the McKanrys’ sold 12 real estate properties through Enders. The properties are located in Florissant, St. Charles, O’Fallon, Hazelwood, Lake St. Louis, Ballwin, St. Louis City and County, and the total sale price of the properties was approximately $2.7 million.

Enders would shop on-line to obtain mortgage financing for all of the 12 properties. On the loan applications for these properties Enders falsified that the source of the down payments, settlement charges and subordinate finances were to be made by the buyer of these properties, when they were actually made by William E. and William C. McKanry, the sellers of the properties. All closings were made at USA Title, LLC, St. Louis County, and documents falsely showed the buyer as making cash payments that were actually made by the McKanrys.

At the closings, Enders received $226,000 above her commission fees as the mortgage broker to buy Foundation Mortgage, Inc. On the seller’s settlement statement these monies were falsely represented to be construction rehab costs on the particular properties. Money would be going to Paula Enders at the closings as construction rehab on these properties when they actually were to be used to purchase Foundation Mortgage, Inc.

Since the closing on the twelve properties at USA Title, 11 out of 12 properties ended up in foreclosure and were resold for $1.2 million for a loss of approximately $1.5 million. USA Properties, LLC maintained and provided a list of their “for sale” properties to area brokers and real estate agents. The list identified the particular property address and corresponding “retail value” and “sale price.” In order to sell the properties, USA Properties, LLC was willing to sell these properties below the purported appraised value to buyers. This market of favorably priced real estate to which Paula Enders, William C. McKanry and William E. McKanry had access provided an opportunity. By matching USA Properties, LLC with buyers, they exploited the difference between what USA Properties, LLC was willing to take for a property “sale price” and what a prospective investor, induced by special deals, willing to pay, i.e., the “spread” or “retail value.”

William E. McKanry, 70, Warrenton, MO, was convicted of one felony count of conspiracy to commit bank, wire and mail fraud; one felony count of making false statements; four felony counts of wire fraud; and three felony counts of mail fraud on October 9, 2009 after a five-day trial before United States District Judge Charles A. Shaw. In addition to his prison sentence, he was also ordered to pay restitution of $752,000.

William C. McKanry, 44, St. Albans, MO; pleaded guilty to related charges and was sentenced October 15, to three years probation and restitution of $248,877. Paula Enders, 38, Florissant, MO, also pleaded guilty and was sentenced November 10 to one year and one day in prison.

Reap commended the work on the case by the Missouri Department of Insurance, the United States Postal Inspection Service, and the Federal Bureau of Investigation; and Assistant United States Attorneys Tom Albus and Jeff Jensen, who prosecuted the case for the U.S. Attorney’s Office.

Owners of Guaranty Title Indicted for $2.6 Million Bank Fraud, Wire Fraud, Money Laundering Conspiracies

SPRINGFIELD, MO—Matt J. Whitworth, United States Attorney for the Western District of Missouri, announced today that the owners of Guaranty Title, formerly headquartered in Nixa, Mo., have been indicted by a federal grand jury for participating in a $2.6 million conspiracy to commit bank fraud, wire fraud and money laundering.

Richard G. “Rick” Burton, 59, of Nixa, and Kathy Cyrena Allen, also known as Kathy Stanton, 66, of Sarcoxie, Mo., were charged in a 19-count indictment returned by a federal grand jury in Springfield on Tuesday, Nov. 17, 2009.

The federal indictment alleges that Burton and Stanton, through their companies, conspired to defraud financial institutions of more than $2.6 million through a series of illegal financial transfers related to stolen escrow payments. The indictment also alleges that Burton and Stanton attempted to conceal their criminal activities through a substantial check-kiting scheme.

Burton and Stanton were the co-owners of Guaranty Title Company of Southwest Missouri, Guaranty Title Company d/b/a Guaranty Title and Closing Company, and Guaranty Properties, Inc. The companies, referred to collectively as Guaranty, provided real estate title and closing services. Guaranty’s main office was located in Nixa, with at least 10 branch offices located in Aurora, Branson, Mount Vernon, Ozark, Springfield and Republic, Mo.

Conspiracy to Commit Wire Fraud

The federal indictment alleges that Burton and Stanton participated in a conspiracy to commit wire fraud from May 12, 2005, to June 18, 2007. According to the indictment, Burton and Stanton defrauded mortgage companies and individual customers of escrow money which had been wired to Guaranty to pay real estate closing costs.

When real estate buyers and sellers hired Guaranty to facilitate the closing of real estate contracts, Guaranty agreed to hold buyers’ money for closing costs in an escrow funds account separate from funds that Guaranty owned. Guaranty was prohibited from commingling that escrow money with the firm’s business operations money, because it did not own the escrow money it received. The escrow money deposited into Guaranty’s main escrow account was electronically transferred to certain escrow accounts at several branch banks in southwest Missouri. These transfers made escrow money available for mortgage closings at a particular Guaranty branch office that a particular branch bank served.

In May 2005, Burton and Stanton allegedly began taking a portion of the escrow money that had been transferred into these escrow accounts. In violation of Guaranty’s promise not to do so, Burton and Stanton caused $2,040,937 of stolen escrow funds to be deposited into the firm’s business operations account and used the money for the day to day business operations of Guaranty.

Burton and Stanton allegedly instructed Guaranty’s in-house bookkeeper to record deposits of stolen escrow money into Guaranty’s business operations account as loans from Stanton or from a fictitious company called “K & S Investments” (named for Stanton’s initials).

In addition to the conspiracy, the indictment charges Burton and Stanton with six counts of wire fraud related to wire transfers of escrow funds from financial institutions into Guaranty’s main escrow bank account.

Conspiracy to Commit Bank Fraud

The federal indictment alleges that Burton and Stanton participated in a conspiracy to commit bank fraud from April 1, 2007, to June 18, 2007.

By April 2007, the indictment says, current deposits into Guaranty’s main escrow account no longer covered shortages caused by the theft of escrow funds. Burton and Stanton concealed this shortage by causing checks to be written and deposited between various accounts held by Guaranty at Great Southern Bank and Ozark Mountain Bank that did not contain sufficient funds to cover the checks. This check-kiting scheme continued until June 18, 2007, when Old Missouri Bank discovered the fraud and closed the bank account. As a result of this check kiting, Burton and Stanton caused Ozark Mountain Bank to lose approximately $682,954.

In addition to the conspiracy, the indictment charges Burton and Stanton with five counts of bank fraud related to financial transactions that occurred as part of the check-kiting scheme.

Conspiracy to Commit Money Laundering

The federal indictment alleges that Burton and Stanton participated in a conspiracy to commit money laundering from May 12, 2005, to June 18, 2007.

Burton and Stanton allegedly conducted financial transactions that involved the proceeds of the wire fraud and bank fraud conspiracies, in order to promote that criminal activity and to conceal the source of the proceeds of the unlawful activity.

In addition to the conspiracy, the indictment charges Burton and Stanton with five counts of money laundering related to financial transactions of wire fraud proceeds.

Whitworth cautioned that the charges contained in this indictment are simply accusations, and not evidence of guilt. Evidence supporting the charges must be presented to a federal trial jury, whose duty is to determine guilt or innocence.

This case is being prosecuted by Assistant U.S. Attorney Randall D. Eggert. It was investigated by the Federal Bureau of Investigation, IRS-Criminal Investigation and the Missouri Department of Insurance, Financial Institutions and Professional Registration.

Seven Northland Residents Indicted in Parkville Mortgage Fraud Scheme

KANSAS CITY, MO—Matt J. Whitworth, United States Attorney for the Western District of Missouri, announced today that seven Kansas City, Mo., residents have been indicted by a federal grand jury for their roles in a mortgage fraud scheme that involved the purchase of a $605,000 house in Parkville, Mo.

Lloyd Claerhout, 26, Scott J. Schirmer, 32, William R. Wonder III, 31, David E. Twitty, 27, Cameron D. Bennett, 34, Jennifer R. Hernandez, 37, and Katherine S. Sartain, 53, all of Kansas City-North, were charged in a two-count indictment returned by a federal grand jury in Kansas City.

The federal indictment alleges that each of the defendants participated in a conspiracy to commit bank fraud from July to October 2007. In addition to the conspiracy, each defendant is charged with one count of bank fraud. According to the indictment, the defendants planned to purchase the property for $605,000 then immediately re-sell it at a profit.

Schirmer allegedly located a residential property at 8118 Clearwater Pointe in Parkville, with the understanding that it would be purchased and then resold at a profit to everyone involved. Schirmer paid Wonder $3,000, the indictment says, in order to use his name for the initial purchase of the property.

Wonder completed a loan application, with the assistance of Bennett and Twitty, which contained false financial information. Wonder allegedly signed two loan applications for Bank of America, totaling $605,000, which each contained false information regarding his monthly income, employment and bank account balances.

Schirmer then arranged to have Claerhout purchase the property from Wonder at a profit. Schirmer allegedly arranged the collection of the necessary down payment from Bennett, Wonder, Twitty and ot! hers to assist Claerhout in the purchase of the property. Co-defendants allegedly submitted loan applications and supporting documentation containing material false representations to North American Savings Bank, the mortgage lender.

Claerhout allegedly signed a Uniform Residential Loan Application for $637,600, which contained false and fraudulent information regarding his monthly income, employment, and bank account balances, in order to obtain a loan for a portion of the purchase.

Hernandez, who was employed as a teller at Mazuma, allegedly signed a “Request for Verification of Deposit” which stated that Claerhout had a current balance of $127,131 in his savings account, and an average balance for the previous two months of $127,882. Hernandez allegedly manipulated the records by transferring funds from other Mazuma accounts into Claerhout’s account to falsely reflect a substantial savings account balance, then later voiding the transfers.

Sartain, a real estate agent, allegedly signed a “Request for Verification of Rent or Mortgage Account” which falsely indicated that Claerhout was paying $4,300 rent.

Whitworth cautioned that the charges contained in this indictment are simply accusations, and not evidence of guilt. Evidence supporting the charges must be presented to a federal trial jury, whose duty is to determine guilt or innocence.

This case is being prosecuted by Assistant U.S. Attorney David M. Ketchmark. It was investigated by the FBI.

Former Madison County Real Estate Investor Charged in Mortgage Fraud Scheme

JACKSON, MS—United States Attorney Stan Harris, Federal Bureau of Investigation Acting Special Agent in Charge Stephen F. Gomez, Federal Deposit Insurance Corporation - Office of Inspector General Special Agent in Charge Thomas C. McDade, and Madison/Rankin County District Attorney Michael Guest announced today that a federal grand jury has returned a six count indictment against Earline Y. Rawls in connection with a fraudulent mortgage loan scheme. The indictment charges Rawls with one count of conspiracy to commit bank fraud and six counts of bank fraud.

According to the indictment, Rawls devised a scheme which began in August of 2006, and continued through March 29, 2007, and involved the purchase of four residential properties in Madison and Hinds County. The indictment alleges that the primary objective of the conspiracy was to induce approval, funding and distribution of over $1,000,000.00 in loan proceeds through the deceptive submission of fraudulent representations to Merchants and Farmers Bank, Community Bank of Mississippi and BancorpSouth. The indictment further alleges that Rawls, doing business as Heavenly Homes, manufactured fraudulent documents indicating business revenues of $1,301,689 and a profit of $271,530.00 from January 1, 2006 through November 20, 2006. Rawls allegedly submitted this information in furtherance of her scheme with unindicted co-conspirators.

This mortgage fraud investigation is a joint effort led by the Federal Bureau of Investigation, and the Federal Deposit Insurance Corporation, and was assisted by other agencies in the Jackson Financial Crimes Task Force, including the Internal Revenue Service, the United States Postal Inspection Service, Housing and Urban Development - Office of Inspector General, Mississippi Department of Banking and Consumer Finance, Mississippi Real Estate Commission and Appraisal Board, the Madison Police Department, and the Madison-Rankin County District Attorney’s Office.

Stephen F. Gomez, Acting Special Agent in Charge of the FBI in Mississippi applauded the work of the Jackson Financial Crimes Task Force, stating, “By combining the assets and resources of our respective agencies, the Task Force is extremely well equipped to address this threat to the financial well-being of the citizens and financial institutions in our community.”

Michael Guest, the Madison/Rankin County District Attorney, said, “Our office is pleased to have the opportunity of working with the United States Attorney’s Office and other state and federal authorities in bringing perpetrators of mortgage fraud in Madison County to justice. The fraudulent representations made to lenders in many instances may be viewed as significantly contributing to the high rate of foreclosures and economic uncertainty in Mississippi. We will continue efforts to prosecute these cases whenever and wherever wrongdoers are discovered. ”

U.S. Attorney Stan Harris commended the federal, state, and local agencies who are participating in the Jackson Financial Crimes Task Force. Harris said, “This is a good example, on the anniversary of September 11th, of the excellent work that law enforcement agencies can accomplish when they partner together.”