GREENBELT, Md. -  Authorities Tuesday arrested a Maryland man in what the Department of Justice called a massive mortgage fraud scheme that left victims homeless.

Rolando Alonzo Cousins, 31, of Bowie, Md., was indicted Monday on charges of conspiracy to commit mail fraud, mail fraud and money laundering, the Maryland U.S. Attorney’s office said in a news release. Prosecutors said the alleged scheme involved promises to help homeowners avoid foreclosure, keep their homes and repair their credit, but ended up leaving victims homeless and with no equity.

The 11-count indictment alleges that Cousins, a senior loan officer with the Metropolitan Money Store in Lanham, Md., and several business associates paid straw buyers who then obtained fraudulently inflated loans, raised their credit scores and then qualified for more favorable mortgages. Straw buyers allegedly took equity out of the properties for their personal use and stopped making mortgage payments, resulting in properties being foreclosed upon.

Victims were persuaded to sell their homes but only on a temporary basis, and would be able to reacquire the title to their properties after repairing their own credit and obtaining more favorable mortgages, the Justice Department said.

The indictment seeks forfeiture of $1.5 million that prosecutors allege Cousins collected through the scheme.

Cousins faces a maximum sentence of 30 years in prison and a $1 million fine for the conspiracy and each of the mail fraud counts, and 10 years in prison and a $250,000 fine on each of the money-laundering counts.

Eleven co-conspirators have already pleaded guilty and have been sentenced in the case.

SAN FRANCISCO—John A. Bui was sentenced today to 41 months in federal prison and ordered to pay $3,500,000 in forfeiture as a result of his convictions for conspiring to commit wire fraud, destruction of records in a federal investigation, and witness tampering, United States Attorney Joseph P. Russoniello announced.

Mr. Bui pleaded guilty to these charges on August 21, 2009. In pleading guilty, Bui admitted that, in a scheme that began no later than 2003 and continued until approximately April 30, 2009, he defrauded mortgage lenders and financial institutions by providing false and fraudulent information in support of mortgage loan applications.

Working out of an office in Milpitas, Calif., Bui and his employees assisted individuals who wanted to obtain mortgages from mortgage lenders so they could purchase residential properties in the Northern District of California and elsewhere. As a part of this scheme, Bui routinely transmitted fraudulent loan applications to mortgage lenders that contained false employment information and false and inflated income and bank account information.

The information was intended to inflate the borrowers’ creditworthiness. In addition, the loan applications were supported by false and forged documents that purported to verify the borrowers’ employment, income, and assets. Bui and other members of the scheme used a network of co-conspirators who agreed to pose as the borrowers’ employers and to falsely verify to the mortgage lenders the accuracy of the employment and income information listed on the loan applications.

As a result of Bui’s participation in this conspiracy, he illegally earned at least $3.5 million. To date, Bui has paid $460,000 in forfeiture toward the $3.5 million he has been ordered to repay.

Bui, 46, of San Jose, Calif., also admitted at the time of his guilty plea that on or about May 2, 2009, after learning that agents of the Federal Bureau of Investigation had executed a search warrant on the San Francisco office of a co-conspirator, he destroyed and caused to be destroyed substantially all of the loan files in his possession with the intent of preventing the FBI from obtaining evidence of his mortgage fraud activities.

Bui also admitted that on or about May 28, 2009, he caused a letter to be delivered to an individual located within the Northern District of California who he believed was cooperating with the FBI’s investigation. Bui’s letter asked the individual not to provide information to the FBI agents assigned to the investigation.

The sentence was handed down by U.S. District Court Judge Susan Ilston. Judge Illston also sentenced the defendant to a three year period of supervised release to follow his prison term. Bui has been in custody since May 2009.

Jeffrey Rabkin and Jeffrey Finigan are the Assistant U.S. Attorneys who are prosecuting the case with the assistance of Elizabeth Garcia and Rayneisha Booth. The prosecution is the result of an investigation by the Federal Bureau of Investigation.

Merced County’s stock of empty, foreclosed homes can be a magnet for criminal activity: metal theft, tagging, vandalism, illegal squatting. On Thursday, Merced County law enforcement officials gathered in North Merced to call attention to another crime gaining traction in our community: real estate fraud.

Last year, a joint federal, state and county real estate fraud task force, headed by the FBI, was created to confront the Central Valley’s dramatic increase in fraud reports. Merced County District Attorney Larry Morse’s fraud team has been up and running since 2009, but used this event to call attention to the crackdown.

“While our local economy wrestles with the financial fallout from a real estate depression, and thousands of homeowners are wracked with worry about losing everything, others have seized on an opportunity,” Morse said. “Those of us in law enforcement know all too well that in every tragedy there are criminal profiteers that will seek to exploit the misery of others.”

The Merced County fraud investigators have submitted eight cases for prosecution, half of them involved manipulation of elderly homeowners, Morse said. Two of the cases were settled when the defrauders pleaded to the crimes, he added.

If a fraud case spans several counties, the U.S. Attorney’s office will lead the prosecution. If a fraud scheme is confined to Merced County, Morse’s office will take the case.

The real estate fraud investigators here have 20 active investigations right now. The U.S. Attorney’s office in Fresno has several current fraud investigations, said Benjamin Wagner, U.S. Attorney for the Eastern District of California. Two years ago, the Eastern District led the country in mortgage fraud indictments, with nearly 50 cases, he added.

The Merced task force has two district attorney’s investigators dedicated full time to real estate fraud issues. Anna Hazel, one of the investigators, said most of the fraud crimes in Merced involve foreclosure rescue promises. More sophisticated schemes that originate outside of the county also hit people here, she said.

“By the number of foreclosures and the fact that we have so many people underwater, I can say the victim potential is great here,” Hazel said. “We get lots of complaints. We also have individuals in this county that are victims of much larger statewide plots.”

Authorities warned residents about the two most common schemes:

Foreclosure prevention fraud is an offer to help homeowners in foreclosure, but the criminal is actually looking to eventually get a large sum of money or the property itself.

In a loan modification fraud scheme, a businessman might promise to change a borrower’s loan terms for a fee.

Charging advance fees for loan modification workouts became illegal in California in October 2009.

Homeowners who need help should call a foreclosure avoidance counselor approved by the U.S. Department of Housing and Urban Development, or their bank. One local avoidance counselor, No Homeowner Left Behind, is at (559) 234-1492.

The task force agencies also stressed that they would look into frauds perpetrated by borrowers. Homeowners should never let someone talk them into making false statements — like overstating their income — on loan documents, the agencies warned.

To report suspected real estate fraud, or to get more information, contact the Merced County District Attorney’s real estate fraud unit at 1944 M Street, Merced, or by phone at (209) 385-7383. Spanish speakers can call (209) 385-7383, ext. 4229.

FEDERAL COURT — A San Diego gang member who federal authorities said was the leader of a massive mortgage fraud scam pleaded guilty yesterday to participating in a racketeering conspiracy involving bank fraud, money laundering and other crimes.

Darnell Bell, 39, faces a maximum of 20 years in prison. Prosecutors said he was a chief orchestrator of a fraud and kickback scam that used straw buyers, fraudulent loan applications and bogus escrow documents on more than 100 properties in San Diego County.

The scheme resulted in real estate losses between $20 million and $50 million.

He’s the fourth person, and second principal, to plead guilty under an indictment naming 24 people that was unsealed last year.

Earlier, Michael Ivy pleaded guilty to a conspiracy charge. Ivy was the owner of The Real Estate Center of La Mesa, which authorities said played a central role in the scam. He is awaiting sentencing.

The ring identified properties that had been languishing on the market for months. Then, using “straw buyers,” ring members used 100 percent borrowed money and paid more than the asking price for the homes.

That overage amount was put into an account for a bogus construction company that Bell set up. The money was ostensibly to be used for retrofitting homes for disabled access, but no work was ever done.

The “buyers” later walked away from the homes, sending them into foreclosure and sticking the lenders with losses.

Bell, known as “D-Bell,” is a documented member of the Lincoln Park street gang in San Diego.

The indictment said he used his status in the gang to recruit other members and enforced discipline among the diverse web of conspirators.

They included an appraiser, a notary, an escrow officer, a tax preparer and a real estate broker.

When the ring was broken up, the bank account Bell set up contained $9 million in proceeds.

Ivy was alleged to have pocketed $200,000 during the time of the scheme, which took advantage of the lax lending standards widely at play during the real estate bubble years.

Because the case is still active, the U.S. Attorney’s Office declined to comment on the plea yesterday.

Two other principals still face charges. Stanley Gentry, a real estate broker, allowed the ring to have access to the multiple listing service and received a $10,000 fee per month, according to the indictment.

One other defendant, Billie Bishop, was the escrow officer on more than 100 transactions.

No trial date has been set, but court records show plea deals are on the table for some of the straw buyers.

The lawyer for one of those buyers said in a court filing that prosecutors have a “package deal” proposal for eight of the buyers, including her client, Ray Logan.

The others are not identified, and the indictment lists at least 13 straw buyers.

Damiani said they are weighing the offer, which, as a package deal, must be accepted by all defendants or none of them gets it.

She declined to outline the terms of the deal but said the penalty would be “significantly lower than what my client would face if he went to trial and was convicted of all the charges.”

One straw buyer, Marcus Dozell, pleaded guilty to racketeering conspiracy and was sentenced Feb. 16 to 46 months in prison.

The indictment said Dozell recruited other straw buyers and was paid $100,000.

Frederick Earle Deen, 30, was sentenced to 24 months in prison today for his role in a $20 million mortgage fraud scheme that operated in the Twin Cities.

U.S. District Court Judge Richard Kyle handed down the sentence, which was reduced because Deen cooperated with investigators and is expected to testify at future proceedings.

Sentencing guidelines called for Deen to spend 46 to 57 months in prison, Kyle said. Deen’s attorney, Joe Friedberg, told Kyle that “there’s no way he would dare not cooperate in the future.”

Deen was a part owner of Legacy Lending, which obtained mortgage loans from unsuspecting lenders using straw buyers. From 2005 to 2007, Deen and business associates used inflated appraisals and received $2.2 million payments out of loan proceeds. Some of the largest fraudulent deals involved properties in Rogers and Otsego, Minn.

Deen had earlier pleaded guilty to wire fraud involving a transfer of more than $575,000 and evading taxes on $200,000 in income. At Friday’s sentencing, he apologized to his friends and family for his actions.

At one point Deen’s sentencing turned into a debate over the role of Taylor Trump in the fraud scheme. Trump, who has a criminal record and served as a police informant, was sentenced to 20 years in prison back in 2008. The U.S. Bureau of Prisons has said Trump is in custody, but would not disclose the location.

Friedberg said that Deen and the others involved in the scheme “we’re scared to death” of Trump. “They were worried they’d end up with their bodies in a field,” Friedberg said.

But Tim Rank, an assistant U.S. attorney prosecuting Deen, said that Trump worked with Deen for two years, and that Deen also carried out the scheme on his own with other colleagues after Trump was no longer involved.

Earlier this week Thomas John Hunter, another part owner of Legacy Lending, pleaded guilty to wire fraud and money laundering.

Deen was released after Friday’s hearing and will surrender to federal authorities in six weeks to begin his sentence. Friedberg said he’ll ask federal authorities that Deen serve his time at a federal prison in Duluth, Minn.

Yesterday in federal court in St. Paul, the 30-year-old part owner of Legacy Lending pleaded guilty to participating in a mortgage fraud scheme that involved 37 separate real estate transactions and $20 million in loan proceeds. Appearing before United States District Court Judge Richard H. Kyle, Thomas John Hunter, of Maple Grove, pled guilty to one count of wire fraud and one count of money laundering in connection to this crime. He was charged via an information on January 26, 2010.

In his plea agreement, Hunter admitted that from September 2005 through July 2007, he and others carried out a fraud scheme, through which mortgage loans were obtained from unsuspecting lenders by straw purchasers, in amounts far exceeding actual purchase prices, based on inflated property appraisals. Hunter also admitted that during the course of this scheme, he and others failed to inform lenders that funds in excess of the actual property purchase prices were misappropriated by those involved in the fraud scheme, and that concealed payments were made out of loan proceeds to participants in the scheme.

To further the scheme, Hunter and others caused fraudulent loan applications to be provided to potential lenders in which property purchasers were falsely identified and property was falsely described as “owner occupied” when in fact each straw buyer was purchasing multiple properties at the same time. In application materials submitted to lenders, the defendant and others also inflated the income and assets of potential borrowers, and a licensed real estate appraiser involved in the fraud scheme created inflated appraisals of the properties to support the fraudulent loan amounts. The defendant participated in 37 separate fraudulent real estate transactions, worth approximately $20 million in total loan proceeds, from which at least $2.2 million was received by participants in the scheme through illegal, concealed payments.

Specific to the charges filed against him in this case, Hunter admitted that on April 20, 2006, he and others engaged in an illegal wire transaction when they obtained $825,000 in mortgage loan financing for the purchase of a residence in Rogers, Minnesota. Hunter also admitted that from those funds, he and his co-conspirators misappropriated at least $110,000. In addition, Hunter admitted that on April 21, 2006, he engaged in an illegal monetary transaction when a check in the amount of $13,2000, representing proceeds from the fraud, was deposited into a Legacy Lending bank account.

For his crimes, Hunter faces a potential maximum penalty of 20 years in prison on the wire fraud count and 10 years on the money laundering count. Judge Kyle will determine his sentence at a future date. This case is the result of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation Division. It was prosecuted by Assistant U.S. Attorneys Timothy C. Rank and Christian S. Wilton.

One of Hunter’s co-conspirators, Frederick Earle Deen, age 30, of Minneapolis, who also had part ownership interest in Legacy Lending, is scheduled to be sentenced this Friday for his role in the fraud scheme. Another co-defendant, Taylor Trump, was sentenced for his involvement in this crime on August 21, 2008.

The former chief financial officer of a New Hope-based development corporation embezzled more than $6 million from the company over a nine-year period and invested some of the funds in his multi-million dollar shore home, federal authorities said Tuesday.
After stealing the money from Scannapieco Development Corp., Michael G. Spada, 50, of Norristown hid the embezzlement from the Internal Revenue Service and a bank that extended him a $3.2 million loan, according to the U.S. Attorney’s Office for the Eastern District of Pennsylvania.
The once trusted CFO used the $6.26 million he allegedly stole to trade securities and purchase real estate in Brigantine, N.J., including an oceanfront home worth $4.2 million, a federal information filed against Spada said.
Spada was charged Monday with wire fraud, bank fraud, filing a false tax return and making a false statement to federal authorities investigating a fraud case.
If convicted, Spada faces up to 60 years in jail, a $1.75 million fine and could be ordered to pay more than $6 million in restitution and forfeit his swanky shore home, among other things.
From 2000 to 2009, Spada allegedly embezzled the funds by diverting company checks to his own account and taking more than $430,000 in unauthorized salary from Scannapieco Development Corp., a construction firm with more than 25 years experience that has built large-scale projects in New Hope, Philadelphia, Baltimore and Atlantic City.
From 2000 to 2004, Spada got company owner Tom Scannapieco to sign off on 56 checks, some of which were up to $100,000, that Spada said were to pay for a mortgage the company had on the Sheraton Atlantic City Convention Center Hotel in Atlantic City.
But authorities said Spada diverted the money to his own Bank of America accounts. The rip off tied to those particular checks totaled nearly $2 million, the information said.
The CFO allegedly opened a Univest Bank account in or about September 2002 to gain greater access to Scannapieco’s personal accounts at that bank. Spada then transferred large sums of cash out of the owner’s personal accounts, said authorities.
From February 2005 to May 2009, Spada illegally deposited 53 checks worth nearly $3 million combined into his account.
Again, the CFO got the company’s owner to sign off on the checks, this time by telling him they were for a refinanced mortgage on the Atlantic City Sheraton, said authorities.
Spada siphoned another $824,000 from a company account into his personal bank account from February 2005 through April 2009, said records.
The accused man also allegedly arranged for himself to collect $430,280 in unauthorized salary between 2001 and 2008.
Spada was legitimately owed about $1.25 million over the seven-year period. Records said Spada was supposed to earn between $90,000 and $100,000, plus bonuses, annually.
Records state Spada filed an income tax return in 2008 claiming he had $265,192 in taxable income for the year. In reality, his taxable income was about $1.18 million, authorities said.
Spada lied about the embezzlement when questioned by special agents from the IRS, according to the government. He also did not tell Bank of America about his swindling when the bank agreed to extend him and his wife a loan.
“By making false representations…Spada exposed Bank of America to potential losses of up to $3.2 million,” according to the information.
A call to Spada’s home for comment was not immediately returned.
The case was investigated by the IRS and the Federal Bureau of Investigation. It is being prosecuted by Assistant United States Attorney Mark B. Dubnoff.
Scannapieco Development Corp.’s projects include redeveloping a factory in New Hope into a 62-unit riverfront condominium community called The Waterworks. The firm also reworked some 40 forty Civil War era buildings in Philadelphia’s Spring Garden area into 95 luxury condominiums, dubbed Wallace Court.

A Weld District Court judge has ruled in favor of eight Greeley-area Latino residents in their civil rights complaints against owners of a former Greeley real estate agency and its mortgage company for targeting Latino homebuyers with deceptive practices.

The families last year filed civil rights complaints against JS Real Estate and co-owners Mark Strodtman and Dean Juhl, their assistant, Flora Carmona, and mortgage brokers Charles Brandt and Jessica Feliciano-Brandt.

The Colorado Civil Rights Coalition filed two separate lawsuits on behalf of the families, who said the defendants targeted them and tricked them into buying homes they could not afford, or put them in loans with adjustable and ballooning interest rates.

In the case filed by Martin Zozaya and Angelica Quintana, Judge Dan Maus issued a default judgment against all the defendants — except Strodtman and Carmona — ordering they each pay a $10,000 penalty. Damages in the second case, filed on behalf of Gerardo and Delia Bravo, Jesus and Cira Devora and Ramon and Blanca Madrigal, will be argued at a court hearing in May.

Contacted Monday, Juhl said he knew of the penalty, but he declined to comment.

Strodtman was found guilty last fall of 11 counts of felony theft, 11 counts of felony forgery and one count of racketeering under the Colorado Organized Crime Control Act for a mortgage scheme in 2006-07 involving a west Greeley subdivision. He was sentenced to 31 years in prison. Charges against Carmona, Brandt and Feliciano all were dropped in exchange for their testimony against Strodtman.

Strodtman and Carmona’s civil rights cases are still pending, according to the state Department of Regulatory Agencies. Strodtman’s attorney asked that the judge defer the civil case against him while his criminal case was still pending, and Carmona answered the first case, avoiding a default judgment; she did not answer the second case.

DORA director Steven Chavez found in November 2008 that the defendants violated Colorado’s Fair Housing laws by targeting Latino homebuyers in the Greeley area, with the intent to discriminate, which eventually forced the homebuyers into foreclosure.

DORA stated the defendants focused their advertising in traditional Spanish media markets and used affinity marketing techniques, such as using bilingual sales staff to lure buyers to specific properties that they were not financially qualified to buy, according to a prepared release.

Many homebuyers were promised that they would refinance in a few years and make a profit. When they tried to refinance, the complainants were told the homes weren’t worth what they paid for them and that they had no equity, the release stated.

The lawsuit states that Strodtman made discriminatory statements such as, “The whole Hispanic population can be likened to trained pigs coming to a trough; you give them reason to come and they’ll come and give you all their money.”

 
Mortgage fraud isn’t only a result of professional con men tricking innocent homeowners. Federal figures and criminal cases indicate that deceptive borrowers are responsible for a large part of current losses on mortgage loans.

According to a federal interagency called The Financial Crimes Enforcement Network, borrowers or customers constitute 57 percent of the subjects of Suspicious Activity Reports filed by banks and other reporting institutions. Brokers were next in line, representing 10 percent of the complaints, followed by appraisers, employees and agents.

“When borrowers are having difficulties in making payments, any fraudulent activity regarding the loan normally sticks out like a sore thumb, so many individuals and institutions are found to be participants in various types of mortgage fraud,” said Jason Boone, research assistant for the National White Collar Crime Center, in an interview.

Mortgage fraud is the fastest growing white collar crime in the U.S. The FBI estimates annual losses of $4 billion to $6 billion in mortgage-related fraud, and the numbers are expected to increase. According to the FBI, debt settlement companies, lawyers, brokers and real estate agents are among those involved in schemes of money laundering and creating fake legal documents. To obtain upfront fees, schemers create phony documents which they guarantee will satisfy struggling mortgage owners’ loan requirements.

“As properties affected by mortgage fraud are sold at artificially inflated prices, properties in surrounding neighborhoods also become artificially inflated,” stated an FBI report on mortgage fraud.

According to the FBI, the number of SARs filed for the third quarter of 2009 were 7 percent greater than in the year-earlier quarter, and a preliminary report for the full year 2009 showed an increase of 44 percent in SAR filings since the full year 2007, before the economic meltdown. In the 2009 third quarter Illinois ranked fourth in mortgage-fraud-related Suspicious Activity Reports in the U.S, with 1,441 SARs. California was first.

In 2008 federal prosecutors in Chicago charged 67 defendants with carrying out fraudulent mortgage schemes, and last June they brought similar cases against another 41 persons.

In some cases the defendants were charged with fraudulently inflating the values of dilapidated homes in urban areas. Other defendants were accused of fraudulently obtaining loans totaling than $17.2 million on expensive condominiums and penthouses in a River North building known as the Millenium Centre.

One defendent, Lawrence A. Luckett, CEO of the former Home Mortgage Inc., in Burr Ridge. Ill., allegedly submitted loan requests to GMAC Bank between August 2007 and March 2008 for more than 450 fictitious residential mortgage loans, causing the bank a loss of more than $15 million.

John Terzakis, a 52 year-old resident of Hindsdale, Ill., owner of Vesta Strategies, was arrested in January and charged with money laundering, wire fraud and stealing from clients to whom he promised real estate. He is currently in home confinement with electronic monitoring awaiting trial.

“Mortgage fraud is a serious issue that affects not just financial institutions but ordinary citizens who may have invested in such financial institutions,” stated Patrick J. Fitzgerald, U.S. attorney for the Northern District of Illinois, in the FBI report.

In other Midwest federal cases, Beverly A. Ross, of Noblesville, Ind., was sentenced to 63 months in federal prison following her guilty plea for fraudulently obtaining loans on 34 properties, causing several lenders a loss of $5.6 million.

Last month Debbie Sferrazza of Westchester, Ohio was indicted along with five members of her family for allegedly using her mortgage lending companies to submit loan applications using false employment documents and Social Security numbers, among other things. According to another federal indictment, handed up Feb. 10, Jeremy Beadle, a mortgage broker, bought five properties in St. Louis for $32,000, obtained false appraisals of them and sold them to people who qualified for mortgages based on false loan applications.

“Over the course of the next year or two, I expect mortgage fraud numbers to remain high, if not increase since the economy will most likely still be on shaky grounds,” said Boone of the National White Collar Crime Center.

According to the federal interagency report, lenders’ Suspicious Activity Reports  of SARs reported foreclosure and loan modification fraud as common, evidenced by occupancy misrepresentation, Social Security number discrepancies, and altered or forged documentation.

“SARs involving loan modifications described potential fraud in either the application for the loan modification, or in the older loan which came under review subsequent to the modification application,” the report stated.

Thirty-five percent of the SARs indicated an amount ranging from $100,000 to $250,000, while 5 percent were filed for suspected amounts of $1 million or more.

The other side of mortgage fraud is evidenced by complaints from homebuyers, which are also rising. Illinois Attorney General Lisa Madigan’s office reports that nearly 4,000 homeowners filed residential mortgage complaints last year, a 65 percent increase over 2008. 

“Hardworking people are struggling to make their mortgage payments on time. They’re fighting to cope with mounting debt, and they’re being targeted by con artists looking to make a quick buck,” Madigan stated in a press release.

In October 2008 she sued Countrywide, the nation’s largest mortgage lender, on charges of predatory lending and obtained an $8.7 billion settlement.

This month Madigan sued four “debt settlement companies” alleging that they engaged in deceptive marketing practices, charging excessive fees and not changing their customer’s debt situation.

“These companies are unfairly luring financially strapped consumers with misleading claims that they can effectively eliminate consumer’s debt,” Madigan stated in a release.

Last year Madigan filed 31 lawsuits targeting mortgage rescue scams.

BALTIMORE, MD—David Wehrs, Sr., age 54, of Annapolis, Maryland, pleaded guilty today to wire fraud in connection with a scheme to defraud investors and financial institutions of more than $2.3 million.

The charge was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation.

According to his plea agreement, Wehrs owned Maryland Title and Escrow Company, Inc., located in Annapolis, and operated a small home remodeling company called Show-Me. From 2007 to October 2009, Wehrs induced individuals to invest money through Maryland Title into a purported FDIC-insured money market fund that Wehrs “guaranteed” would pay monthly interest payments of 10.85%.

Instead of depositing the money into an “American Funds Fixed Rate Money Market” as promised, Wehrs deposited investor funds into one of two bank accounts he controlled in the name of his title company. Wehrs wire transferred a large portion of these investor funds to a brokerage account in the name of his title company, then used the money to “day trade.” Day trading is the rapid buying and selling of securities throughout the day in the hope that the stocks will continue climbing or falling in value for the seconds to minutes that they are owned, allowing a person to lock in quick profits.

During the scheme, Wehrs conducted millions of dollars of stock trades per month. From early 2008 until mid-2009, Wehrs lost approximately $1 million.

In addition to day trading, Wehrs used some of the investor funds to: pay “monthly interest” and “redemptions” to other investors; pay expenses of his other businesses, including Show-Me; make escrow payments for his title company; buy real estate and personal property; and pay other personal expenses.

Wehrs admitted that in June 2009, when he had no money left in his personal bank accounts or day trading accounts to pay interest due to investors, he used $630,611 earmarked to pay lending institutions for mortgage payoffs from his escrow account at Maryland Title to pay investors, causing that amount of loss to the title insurance company for Maryland Title. He also used $100,000 from the Maryland Title escrow account that was earmarked as earnest money for the purchase of an individual’s home to pay interest to investors, causing a loss of $100,000 to the home buyer.

The total loss as a result of Wehrs’ scheme is $2,371,061 to investors and the title insurance company. U.S. District Judge Benson Everett Legg has scheduled sentencing for May 19, 2010 at 3:00 p.m.

Wehrs faces a maximum sentence of 20 years in prison. As part of his plea agreement, Wehrs is required to pay restitution of $2,371,061 and to forfeit any assets derived from the scheme. Any forfeited assets will be applied to the restitution amount.

Mr. Rosenstein and Mr. McFeely gave special thanks to the Securities and Exchange Commission and the Maryland Insurance Administration for their work in the investigation and prosecution of this case.

United States Attorney Rod J. Rosenstein commended Assistant United States Attorney Tonya Kelly Kowitz, who is prosecuting the case.