On May 12, 2014, in Kansas City, Missouri, Leann Raejeana Turner, of Blue Springs, was sentenced to 36 months in prison and ordered to pay $4,912,040 in restitution. Turner pleaded guilty on May 30, 2012 to one count of conspiracy to commit wire fraud and one count of money laundering. Turner is one of nine defendants who participated in an $11 million mortgage fraud scheme from early 2005 to Aug. 4, 2006. According to court documents, Turner was a real estate agent working for a series of real estate companies. Mortgage lenders made loans of approximately $11,092,886 on 16 residential properties in Missouri. From that total, buyers received approximately $2,006,845 from the loan proceeds in illegal secret kickbacks. The scheme resulted in a financial loss to mortgage lenders of nearly $5 million. The scheme involved buying and selling homes at inflated prices, obtaining mortgage loans at the inflated prices, then kicking back $100,000 of the excess loan proceeds to each of the home buyers without the lenders’ knowledge. Carole L. Colson, a real estate agent, was sentenced to five years of probation, including six months of house arrest, and ordered to pay $2,291,110 in restitution. Bruce Q. Williams, a loan officer, was sentenced to 12 months and one day in prison and ordered to pay $3,443,123 in restitution. Anthony E. Hicks, a loan officer, was sentenced to 10 months in prison and ordered to pay $953,958 in restitution. Linda Joyce Henry Johnson, of Corona, California, was sentenced to five years of probation, including six months of house arrest, and ordered to pay $228,744 in restitution. Several others in this scheme await sentencing.
May 12, 2014
November 2, 2010
JEFFERSON CITY, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced today that a former bank officer at US Bank in Columbia, Mo., has been sentenced in federal court for embezzling bank funds and must pay more than $1 million in restitution.
Timothy Earl Ferguson, 48, of Columbia, was sentenced by U.S. District Judge Nanette K. Laughrey on Thursday, Oct. 28, 2010, to three years and five months in federal prison without parole. The court also ordered Ferguson to pay $1,053,684 in restitution, which includes the conduct to which Ferguson admitted guilty in his plea agreement as well as additional relevant conduct.
On Feb. 23, 2010, Ferguson pleaded guilty to embezzling bank funds. Ferguson admitted that, while he was an officer with US Bank in 2002 and 2003, he issued a series of fraudulent loans to three individuals that totaled $660,400. Ferguson also admitted that he embezzled $216,974 from the proceeds of those loans, which he deposited into his and/or his wife’s accounts at Edward Jones.
This case was prosecuted by Assistant U.S. Attorney Larry Miller. It was investigated by the Federal Bureau of Investigation.
October 31, 2010
Scheme Forced Bank to Close, FDIC Paid $4.3 Million in Losses
KANSAS CITY, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced that the former president of Hume Bank in Bates County, Mo., pleaded guilty in federal court today to making false statements to the FDIC as part of a bank fraud scheme that caused such significant losses that the bank was pushed into insolvency.
Jeffrey W. Thompson, 40, of Hume, Mo., pleaded guilty before U.S. Magistrate Judge Sarah W. Hays to the charges contained in a Dec. 1, 2009, federal indictment.
Thompson became president of Hume Bank in 2001. From Jan. 1, 2004, through Aug. 31, 2007, when he left the bank, Thompson concealed problem loans from state and federal bank examiners. Due primarily to loan losses on loans originated and administered by Thompson, in which he masked past due loans by altering loan maintenance records, the bank became insolvent and was closed by the Missouri Division of Finance on March 7, 2008. In order to meet obligations to depositors, the FDIC insurance fund sustained a loss of $4,324,463.
Thompson admitted that he masked past due loans by altering loan maintenance records. For example, past due principal was reduced to zero in 1,584 instances, past due interest was reduced to zero on 1,460 occasions, and 1,445 maturity dates were changed on the loan maintenance reports. The great majority of these changes were not supported by loan modification agreements in bank files. Thompson personally made the majority of the changes. The false loan maintenance reports concealed problem loans from state and federal bank examiners and from the bank’s board of directors.
Thompson also completed false Officer’s Questionnaires, by falsely stating that the bank had no accommodation loans, or nominee loans, and by falsely stating that the bank had no instances of capitalized interest. In truth, Thompson had made accommodation, or nominee loans, to relatives from which he personally profited, and had made loans which capitalized interest.
By pleading guilty today, Thompson agreed to forfeit to the government $300,000, which represents proceeds from the fraud scheme, or his residential property.
Under federal statutes, Thompson is subject to a sentence of up to 30 years in federal prison without parole, plus a fine up to $1 million and an order of restitution. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.
This case is being prosecuted by Assistant U.S. Attorney Kate Mahoney. It was investigated by the Federal Deposit Insurance Corporation and the Federal Bureau of Investigation.
July 24, 2010
KANSAS CITY, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced today that seven more defendants have been sentenced in federal court for their roles in a $12.6 million mortgage fraud conspiracy that involved 25 upscale residential properties in Lee’s Summit, Mo., and Raymore, Mo.
Stefan M. Guerra, 31, of Lee’s Summit, Mo., Jerome Shade Howard, 41, of Anaheim, Calif., Michael Conrad Smith, 49, of Lancaster, Calif., and Gerald D. Williams, 49, and his wife, Judith E. Williams, 49, both of Bunkie, La., were sentenced in separate hearings today by U.S. Chief District Judge Fernando J. Gaitan. James F. Simpson, 41, of Lee’s Summit, and Cheryl Ann Romero, 52, of Santa Fe Springs, Calif., were sentenced on Thursday, July 22, 2010.
Howard was sentenced to three years in federal prison without parole, and ordered to pay $5,945,996 in restitution and to forfeit $900,731 to the government. Guerra was sentenced to one year and one day in federal prison without parole, and ordered to pay $2,425,787 in restitution. Smith was sentenced to five years of probation, including six months of home detention and 4,000 hours of community service, and ordered to pay $640,289 in restitution. Gerald Williams was sentenced to five years of probation, including six months of home detention and 2,000 hours of community service, and ordered to pay $238,008 in restitution. Judith Williams was sentenced to five years of probation, including four months of home detention and 100 hours of community service, and ordered to pay $238,008 in restitution. Simpson was sentenced to one year and one day in federal prison without parole, and ordered to pay $495,578 in restitution. Romero was sentenced to five years of probation, including six months of home detention and 4,000 hours of community service, and ordered to pay $488,102 in restitution.
They are among 18 defendants who have pleaded guilty in connection with a conspiracy to defraud mortgage lenders from June 2005 to May 2007. Eleven co-defendants have now been sentenced.
Conspirators were involved in buying and selling new homes in the Raintree and Belmont Farms subdivisions in Lee’s Summit and the Eagle Glen subdivision in Raymore. Buyers purchased the homes at inflated prices, obtaining mortgage loans by providing false information to mortgage lenders, then keeping the extra proceeds. Buyers created shell companies for the purpose of receiving those kickbacks from the builder, Jerry R. Emerick, 40, of Raymore. Kickbacks ranged from $60,000 to $125,000 on each house.
Emerick, who pleaded guilty to conspiracy to commit mortgage fraud and wire fraud and to transfer funds obtained by fraud across state lines, is scheduled to be sentenced on July 30, 2010. Angela R. Clark, 41, of Lee’s Summit, a real estate agent who sold new homes for Emerick, has also pleaded guilty to her role in the conspiracy and awaits sentencing. Co-defendant Cynthia Jordan, 43, of Lee’s Summit, another mortgage broker, has also pleaded guilty and awaits sentencing.
In total during the course of the conspiracy, mortgage lenders approved 25 loans totaling $12,616,990. From that total, buyers received approximately $2,343,337 without the lenders’ knowledge. Lenders sustained actual losses totaling $6,434,043.
Guerra was a mortgage broker who obtained loans for co-defendants to purchase 11 properties in the fraud scheme. The loan applications were fraudulent, and all the loans went into default and were foreclosed. Some of the property buyers in the scheme purchased more than one property. In those instances, Guerra processed the loans quickly so that the loans for the subsequent purchases would be completed before the earlier purchases showed up on the buyers’ credit reports. Guerra also used different lenders for multiple loans to avoid the risk that the lender would notice an individual was buying more than one property.
Howard purchased two properties in the fraud scheme and recruited five other California residents—including Romero and Smith—who completed a total of 10 additional purchases. Howard acted as the middleman or contact person for the California buyers. He also provided false Social Security numbers to co-defendants Ronald E. Brown, Jr., 40, of Gladstone, Mo., and Daryle A. Edwards, 39, of Olathe, Kan. Brown and Edwards were sentenced on June 11, 2010. All the loans for Howard and the buyers he recruited went into default and were foreclosed. The properties were then sold to third parties, with a net loss of $5,945,996.
Romero was vice president and branch manager of Bank of the West in Pico Rivera, Calif., and became acquainted with Howard as a customer of the bank. Romero purchased two properties in Lee’s Summit as part of the mortgage fraud scheme and obtained $180,000 in kickbacks from the loan proceeds.
Smith, Howard’s brother-in-law, purchased two properties in Lee’s Summit as part of the mortgage fraud scheme and obtained $180,000 in kickbacks from the loan proceeds.
Simpson purchased four properties in Lee’s Summit and Raymore as part of the mortgage fraud scheme and obtained $301,500 in kickbacks from the loan proceeds. The loans for all four properties went into default; Simpson arranged a short sale of one of the properties to his parents and the rest of the homes went into foreclosure. The foreclosed properties were sold to third parties, wit! h a loss of $676,413.
Gerald and Judith Williams purchased one property in Lee’s Summit as part of the mortgage fraud scheme and obtained $100,150 in kickbacks from the loan proceeds. They defaulted on the loans and the loans were foreclosed, for a loss of $238,008.
This case is being prosecuted by Assistant U.S. Attorneys Linda Parker Marshall and Kathleen D. Mahoney. It was investigated by the Federal Bureau of Investigation and IRS-Criminal Investigation.
July 13, 2010
KANSAS CITY, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced today that an Overland Park, Kansas man has been sentenced in federal court for actions taken as part of a bank fraud scheme that forced several low-income homeowners into bankruptcy by saddling them with more debt than they were able to repay.
Harris Poulikidis, 62, of Overland Park, was sentenced by U.S. District Judge Ortrie D. Smith on Friday, July 9, 2010, to two years and nine months in federal prison without parole. The court also ordered Poulikidis to pay $62,100 in restitution to individual homeowners who were defrauded in the home improvement refinancing scheme, as well as $58,252 in restitution to financial institutions that made loans on behalf of the victims.
On March 16, 2010, Poulikidis pleaded guilty to causing an individual to travel across state lines as part of a fraud scheme. Poulikidis admitted that he caused a homeowner to obtain a $61,500 loan from Fremont Investment and Loan to refinance a mortgage and to provide approximately $19,350 in home improvements by Poulikidis’ company, Roofing & Siding Plus. On the same day, Poulikidis caused the homeowner to obtain a second mortgage, a $9,000 loan from his company. The second mortgage was later sold to another financial company.
Poulikidis assured the homeowner that her new payments under the refinancing would be no more than, or less than, what she was paying previously. In reality, however, the monthly payments increased so much that the homeowner could not afford them and filed for bankruptcy.
This case was prosecuted by Assistant U.S. Attorney J. Daniel Stewart. It was investigated by the Department of Housing and Urban Development, Office of the Inspector General, and the Federal Bureau of Investigation.
May 27, 2010
KANSAS CITY, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced today that two more defendants have pleaded guilty in federal court to charges related to mortgage fraud schemes, including a $12.6 million conspiracy that involved 25 upscale residential properties in Lee’s Summit, Missouri and Raymore, Missouri and a property-flipping scheme in Kansas City, Missouri.
Cynthia D. Jordan, 43, of Lee’s Summit, pleaded guilty before U.S. District Judge Howard F. Sachs on Friday, May 21, 2010, to mail fraud and wire fraud. Jordan, who was a mortgage loan broker for various mortgage brokers in the Kansas City area, admitted that she participated in a property flipping scheme. Anahit Nshanian, 30, of Long Beach, California, pleaded guilty before U.S. Magistrate Judge John T. Maughmer on Thursday, May 20, 2010, to her role in the $12.6 million conspiracy.
Jordan and Nshanian are among 18 defendants, all of whom have now pleaded guilty.
Jordan admitted that she was involved in a scheme to flip properties — buying residential properties that could immediately be sold in flip transactions for substantially more than the purchase price, without improvements to the properties. Jordan obtained mortgage loans to purchase the properties by submitting fraudulent documentation and making false representations. Jordan falsely represented that she would occupy the homes as her primary residence. As a result of the scheme, Jordan obtained money from the loan proceeds and directed loan proceeds be paid to others under the guise of false invoices and other false documents.
As part of the scheme, Jordan purchased a Kansas City property for $355,000. At the time she entered the contract, she and co-conspirators planned to sell the property before a mortgage payment was due so that she did not have to make a loan payment. Jordan signed a contract to sell the property for $555,000 five days later, for which she received $17,500. Two co-conspirators, as a result of submitting fraudulent invoices, received a total of $172,974.
Jordan also purchased another Kansas City property for $537,000 that she agreed to sell within six days of her purchase for $775,000. Jordan received $17,173 and two co-conspirators, as a result of submitting fraudulent invoices, received a total of $193,000.
Under the terms of today’s plea agreement, the government and Jordan agree that the sentence imposed should not exceed nine years in federal prison without parole. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.
Nshanian admitted that she was involved in a scheme to buy and sell new homes — all of which were built by Jerry R. Emerick, 40, of Raymore — in the Raintree and Belmont Farms subdivisions in Lee’s Summit and the Eagle Glen subdivision in Raymore from February 2005 through May 2007. Buyers purchased the homes at inflated prices, obtaining mortgage loans for more than the actual sale price by providing false information to mortgage lenders, then kept the extra proceeds. Buyers created shell companies for the purpose of receiving those kickbacks from Emerick, with kickbacks of up to $125,000 on each house. Emerick pleaded guilty to his role in the conspiracy and awaits sentencing.
In total during the course of the conspiracy, mortgage lenders approved loans for 25 homes totaling more than $12.6 million. From that total, buyers received approximately $2.3 million without the lenders’ knowledge. Nshanian received approximately $148,614 in kickbacks.
Nshanian purchased two properties in Lee’s Summit as part of the conspiracy. In obtaining mortgage loans, Nshanian made material misrepresentations upon which the lenders relied. Nshanian also admitted that she received money back unbeknown to the lenders.
Nshanian received a $510,000 loan for one property; after closing, she received an $89,307 kickback, of which co-defendant Jerome Shade Howard, 41, of Anaheim, Calif., received $20,693. Nshanian received a $657,500 loan for another property; after closing, she received a $80,000 kickback and Howard received $25,000.
Under federal statutes, Nshanian is subject to a sentence of up to five years in federal prison without parole, plus a fine up to $250,000 and an order of restitution. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.
This case is being prosecuted by Assistant U.S. Attorneys Linda Parker Marshall and Kathleen D. Mahoney. It was investigated by the Federal Bureau of Investigation and IRS-Criminal Investigation.
April 24, 2010
Involved Hundreds of Properties
KANSAS CITY, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced that a Lee’s Summit, Missouri man and a Grain Valley, Missouri man pleaded guilty in federal court today to charges related to a $23 million mortgage fraud scheme that involved 350 residential properties, including inner-city properties.
“This is among the largest mortgage fraud schemes ever prosecuted in the Western District of Missouri,” Phillips said. “As in so many fraud cases, the culprits thought they were getting away with their crime for awhile; but inevitably, their scheme collapsed and left a paper trail that federal agents diligently followed.
“This should be a warning to anyone who might consider exploiting a financial crisis for personal gain,” Phillips added. “Short-term profit isn’t worth the certainty of prosecution, punishment and prison.”
Nathan N. Anderson, 32, of Grain Valley, and Kyle J. Wine, 29, of Lee’s Summit, each waived his right to a grand jury and pleaded guilty before U.S. District Judge Gary A. Fenner this morning to a two-count federal information that charges both men with participating in a conspiracy to transport money obtained by fraud across state lines and with money laundering. Kyle Wine is the brother of Jeffrey Tyler Wine of Kansas City, who pleaded guilty to a related mortgage fraud scheme and was sentenced in May 2007 to five years in federal prison without parole.
Anderson and Kyle Wine admitted that, from February 2002 to November 2005, they defrauded mortgage lenders by inducing them to loan investors a total of $23,324,114 to purchase 350 residential properties. Anderson was involved with 264 properties totaling $18,918,542; Kyle Wine was involved with 86 properties totaling $4,405,572.
Anderson and Wine were in the business of purchasing, rehabilitating, managing and selling residential properties in the metropolitan area. Both Anderson and Kyle Wine worked at Sunrise Equities, Inc., which was operated by Jeffrey Wine. Anderson left to work as co-owner of AMIC and Real Estate Holdings, Inc., at which point Kyle Wine began working at Sunrise Equities and took over Anderson’s duties. Kyle Wine likewise worked with AMIC, and he also did business as Rockhill Realty LLC, selling residential real estate.
Anderson and Kyle Wine acquired residential properties at reduced rates. After rehabbing the properties (at times, they admitted, doing poor quality work), they were advertised for sale as investment properties with no money down. Anderson and Kyle Wine told investors that they would provide the down payment and closing costs for the sale, secure renters for the property and ensure that mortgage payments were paid even if the properties were not rented. Anderson and Wine guaranteed a positive cash flow from the properties.
Anderson and Wine, along with their co-conspirators, prepared false and fraudulent loan applications and supporting documents to submit to mortgage lenders in the names of investors.
Anderson and Kyle Wine, along with their co-conspirators, managed the rental properties for the investors for one year after purchase. During that time, they submitted false monthly reports to investors of rent received, expenses incurred, and income earned, and paid to the investors the amount of income reflected. This induced victim-investors to purchase additional properties.
Under federal statutes, Anderson and Kyle Wine are each subject to a sentence of up to 15 years in federal prison without parole, plus a fine up to $500,000. Sentencing hearings will be scheduled after the completion of pre-sentence investigations by the United States Probation Office. This case is being prosecuted by Assistant U.S. Attorney Linda Marshall. It was investigated by IRS-Criminal Investigation, the U.S. Department of Housing and Urban Development – Office of Inspector General, and the Federal Bureau of Investigation.
April 15, 2010
SPRINGFIELD, MO—Beth Phillips, United States Attorney for the Western District of Missouri, announced today that the owner of Guaranty Title, formerly headquartered in Nixa, Mo., pleaded guilty in federal court today to his role in a $2.7 million wire fraud conspiracy and money laundering.
Richard G. “Rick” Burton, 59, of Nixa, pleaded guilty before U.S. Magistrate Judge James C. England this morning to conspiracy to commit wire fraud and conspiracy to commit money laundering. Burton was charged in a Nov. 17, 2009, federal indictment.
Burton admitted that he participated in a scheme to defraud financial institutions of more than $2.7 million through a series of illegal financial transfers related to stolen escrow payments. Burton attempted to conceal his criminal activities through a substantial check-kiting scheme.
Burton was the president and majority owner 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
Burton admitted that, from May 12, 2005, to June 18, 2007, he 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.
Burton admitted that he took 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 caused $2,040,937 of stolen escrow funds to be diverted into the firm’s business operations account and used the money for the day to day business operations of Guaranty.
Burton instructed Guaranty’s in-house bookkeeper to record deposits of stolen escrow money into Guaranty’s business operations account as loans, including loans from a fictitious company called “K & S Investments,” which was created to help conceal the source of the deposits.
By April 2007, deposits into Guaranty’s main escrow account no longer covered shortages caused by the theft of escrow funds. Burton assisted in concealing 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 caused Ozark Mountain Bank to lose approximately $682,954.
Conspiracy to Commit Money Laundering
Burton admitted that he participated in a conspiracy to commit money laundering from May 12, 2005, to June 18, 2007. Burton 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.
Under federal statutes, Burton is subject to a sentence of up to 40 years in federal prison without parole, plus a fine up to $1,250,000 and an order of restitution. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.
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.
February 19, 2010
ST. LOUIS, MO—The United States Attorney’s Office announced today that Randall Penberthy, Jr., has pleaded guilty to bank fraud in connection with brokering real estate transactions between 2006 and 2007.
From 2003 through 2008, Randall Penberthy, Jr. was engaged in the business of brokering real estate transactions in the St. Louis metropolitan area and elsewhere. Penberthy marketed real estate deals to associates and investors as potential rental properties. Penberthy operated and controlled several business entities, including Covenant Financial LLC, First Choice Investment and Loan LLC, and Midwest Management LLC. Penberthy operated his business initially out of an office in Chesterfield and later moved to 93 Centre Pointe, St. Charles.
According to court documents, between late 2006 and October 2007, Penberthy devised and executed a scheme to defraud financial institutions by means of material false representations. As part of the scheme, Penberthy recruited investors to buy residential real estate directly from distressed property sellers whose homes were in danger of foreclosure.
With Penberthy’s assistance, investors would finance the purchases through bank loans. Penberthy would fraudulently place and record a second or third deed of trust on the property, typically in the name of First Choice or some other entity he controlled, in order to make it appear that a legitimate second or third mortgage had been placed against the property, when in fact he knew that no such legitimate second or third mortgage existed.
Bank loan funds were used to pay the sales price of the property as well as to pay off the fraudulent second or third mortgage. Funds used to pay off the fraudulent second or third mortgage were paid to entities controlled by Penberthy, including First Choice and Midwest. He then used a portion of those funds to make the down payment on the property being purchased. Penberthy fraudulently misrepresented the source of down payment funds on loan documents. Penberthy’s scheme has caused financial institutions to incur financial losses in excess of $500,000.
Penberthy, 40, St. Charles, pleaded guilty to one felony count of bank fraud before United States District Judge E. Richard Webber.
He now faces a maximum penalty of 30 years in prison and/or fines up to $250,000, when he is sentenced on May 13, 2010.
February 13, 2010
F. Jeffrey Miller, the primary defendant in an alleged $25 million mortgage fraud scheme, has been acquitted by a federal jury.
A jury in U.S. District Court in Kansas City, Kan., on Friday said Miller was not guilty of 56 criminal counts of money laundering and bank fraud.
Miller was one of the top Kansas City-area home builders in 1999 and 2000. He and several others were charged in 2006 with falsifying loan documents to lenders on behalf of customers with credit problems who lacked enough money for down payments on homes. The scheme also involved fraudulently inflated appraisals on homes in the Kansas City area.
Some defendants had been dismissed from the original indictment; several others have pleaded guilty.
Jeffrey Morris, a Berkowitz Oliver Williams Shaw & Eisenbrandt LLP lawyer representing Miller, was not immediately available for comment.
This case is separate from another 2006 indictment against Miller. In 2008, he was convicted along with two others of conspiracy, bank fraud and money laundering for trying to continue to perpetrate his alleged fraud while under his original indictment for the $25 million fraud. A jury ordered Miller to forfeit $2.6 million in that case.
A Kansas City home builder already under indictment for fraud was arrested Thursday in connection with a new federal grand jury indictment for allegedly continuing to operate illegally while his trial is pending.
F. Jeffrey Miller, 45, of Stanley, was indicted in May on charges including conspiracy to commit bank fraud and money laundering. Miller, a building contractor in Kansas, Missouri and other states, was allowed to continue doing business after agreeing that an outside court-approved consultant could monitor his activities, U.S. Attorney for Kansas Eric Melgren said in a release Thursday.
On Wednesday, a federal grand jury in Topeka indicted Miller and three others on new charges of conspiracy, bank fraud, unlawful monetary transactions, destroying records, criminal contempt and interfering with a witness, Melgren said.
Also charged in the new indictment are Stephen W. Vanatta, 43, of Lenexa; Hallie Irvin, 26, of Lenexa; and James Sparks, 35, of Lawson, Mo.
If convicted, Melgren said, the accused would be subject to the following penalties:
* Conspiracy: A maximum of five years in federal prison and a fine of as much as $250,000.
* Bank fraud: A maximum of 30 years and a fine of as much as $1 million on each count.
* Unlawful monetary transactions: A maximum of 10 years and a fine of as much as $250,000.
* Destruction of records in a federal investigation: A maximum of 20 years and a fine of as much as $250,000.
* Attempting to intimidate a witness: A maximum of 10 years and a fine of as much as $250,000.
* Criminal contempt: A maximum of five years and a fine based on the court’s discretion.
February 9, 2010
FBI officials said mortgage fraud is the top priority of the white collar crime squad in the St. Louis area.
Mark Aldrich, supervisory special agent for white collar crime squad said mortgage fraud hasn’t hit Missouri as hard as Arizona, California and numerous other states–but it is still a problem.
A problem that officials say can cause victims to lose their homes, file for bankruptcy and rack up bad credit.
FBI officials said they most often see scam artists taking advantage of individuals whose homes are foreclosed upon.
Aldrich said these fake companies encourage home owners on the brink of foreclosure to sign their deeds over to them.
The company agrees to act as landlord and pay the owner’s bills if the owner pays them–but the companies take the money, don’t pay and the home goes into foreclosure.
“They agree to A but by the time they get to B things have changed.” Aldrich said.
Aldrich said another situation the FBI has seen in St. Louis, is buyers submitting documents with overstated bank accounts to mortgage lending companies and brokers selling the loans to a larger company and letting the loans go into default.
Aldrich said homeowners are not likely to be the subject of mortgage fraud if they read carefully over their documents before closing on a home or dealing with a foreclosure rescue company.
The FBI official also recommended researching and checking with the Better Business Bureau when dealing with a company that claims they rescue foreclosed homes.
“Do research in the company that is going to help you and make sure they‘re going to help you,” he said.
St. Louis County is doing their part in preventing mortgage crime by now offering a free property fraud alert service for residents.
County property owners can register their names in the “Property Fraud Alert” through the county’s recorder of deeds web site.
Those who enroll will be alerted by their choice of phone or e-mail anytime a document is registered and recorded in their name.
St. Louis County Executive Charlie Dooley said he hopes the service will help catch fraud before it’s too late to save residents “headaches and lawyer fees” to get property back.
“In these economic times there are so many more scams going on,” Dooley said. “For some reason crooks find a hole and they use it against others.”
Dooley said signing up is simple and can be done by visiting the Property Fraud Alert web site www.propertyfraudalert.com and selecting St. Louis from the list of counties offering the service.
Interested residents may also call 1-800-728-3858 to sign up.
Aldrich said the county’s property fraud alert service is a good educational tool for the community.
“The more information the public has to be aware of mortgage fraud will help prevent it,” he said.
March 11, 2009
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Stefan M. Guerra, 30, of Lee’s Summit, Missouri, and Daryle A. Edwards, 37, and Leon T. Jones, 42, both of Olathe, Kansas., have pleaded guilty in separate appearances before a U.S. Chief District Judge for their roles in a $12.6 million mortgage fraud scheme that involved 25 residential properties in Lee’s Summit and Raymore, Mo.
Guerra, Edwards, and Jones each admitted to participating in a conspiracy to defraud mortgage lenders from June 2005 to May 2007. They are among more than a dozen scammers who were involved in buying and selling new homes in the Raintree and Belmont Farms subdivisions in Lee’s Summit and the Eagle Glen subdivision in Raymore.
According to court documents, buyers purchased the homes at inflated prices, obtaining mortgage loans by providing false information to mortgage lenders, then kept the extra proceeds. The buyers created shell companies for the purpose of receiving those kickbacks from the builder, with kickbacks reaching up to $125,000 on each house.
In total during the course of the conspiracy, mortgage lenders approved 25 loans totaling more than $12.6 million. From that total, buyers received approximately $2.3 million without the lenders’ knowledge.
Stefan Guerra, a former mortgage loan officer at Midwest Equity Mortgage, admitted that he was involved in the purchase of one property and acted as a broker on 11 other properties involved in the conspiracy. The loans on the 12 properties totaled more than $5 million.
Leon Jones admitted he purchased a property in Lee’s Summit as part of the conspiracy, a purchase that involved Stefan Guerra. Jones also admitted that he made material misrepresentations upon which the lender relied in making the mortgage loans totaling $509,000. From the purchase of this property, unbeknownst to the lender, Leon Jones received approximately $50,000.
For his part, Daryle Edwards admitted that he purchased a property in Lee’s Summit as part of the conspiracy, and that he made material misrepresentations upon which the lender relied in making the mortgage loans totaling $410,000. Edwards used a false Social Security number, a false address and false employment, and falsely claimed that he would occupy the property. Darlye Edwards also admitted that he made false representations regarding the use of loan proceeds; Edwards received a $76,600 check payable to DAECO Construction, Inc., a company owned by Edwards, which was not disclosed to the mortgage lender or to the title company.
Co-defendant Ronald E. Brown, Jr., 39, of Gladstone, MO, pleaded guilty in early January of this year, to his role in the conspiracy. Brown, a self-employed insurance agent doing business as The Brown Insurance Agency in Kansas City, Kansas, obtained insurance for the properties that were purchased. After purchasing two false Social Security numbers for $10,000, Brown used the false Social Security number to purchase three properties in Lee’s Summit. In each case, Brown made material misrepresentations upon which the lenders relied in making the mortgage loans, which totaled $1,339,700. From the purchase of these properties, unbeknownst to the lenders, Brown received a total of $279,426.
Under federal statutes, Stefan Guerra, Leon Jones and Daryle Edwards are each subject to a sentence of up to five years in federal prison without parole, plus a fine up to $250,000 and an order of restitution. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.
February 17, 2009
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Joseph Baumeister has pled guilty to bank fraud charges in a mortgage fraud scheme involving 16 area properties, United States Attorney Catherine Hanaway announced last week.
According to court documents, between January 2007 and October 2008, Joseph A. Baumeister operated a scheme to defraud several mortgage lenders through his St. Louis, MO-based company, Prophet Development. Baumeister used straw purchasers to buy 16 residential properties based on misrepresentations to lenders. He then took money from the closings of the properties by artificially inflating the sales price or by falsely claiming that various home improvements had been made.
After the closings on the properties, Baumeister found tenants for the properties, collected rent, and made mortgage payments on occasion. Eventually, mortgage payments fell behind or were not made, and the majority of these properties went into foreclosure. All told, Baumeister stole $364,523.00, which was used in large part to pay for a wide range of personal expenses.
Baumeister, 56, St. Louis, 63126, pled guilty to one felony count of bank fraud. He now faces a maximum penalty of 30 years in prison and/or fines up to $1,000,000, when he is sentenced on May 1, 2009.
As an aside, last November, U.S. Attorney Hanaway convened the first meeting of the U.S. Attorney’s Mortgage Fraud Task Force. The 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.
December 17, 2008
The Securities Division of Missouri’s Secretary of State office has issued a Cease and Desist Order against Greenleaf Companies, LLC, a Springfield, MO-based real estate company accused of selling more than $15 million worth of unregistered real estate investments to Missouri investors.
Greenleaf is accused of seeking out Missouri investors with good credit, offering an investment return of $10,000 in exchange for use of their credit to obtain financing for single-family homes. Missouri’s investigation found that each investor purchased a home recommended by Greenleaf, and did so under assurances that the company would make monthly payments and manage the property. The Secretary of State’s office received formal complaints from investors when their payments stopped in June 2008.
Missouri Secretary of State Robin Carnahan:
“This type of scheme has no place in Missouri. Missourians have a right to get the facts they need to make informed investment decisions. Greenleaf failed these investors at every turn. In these tough economic times, my office will aggressively investigate and stop those who wish to defraud Missourians.”
The Cease and Desist Order states that Greenleaf promised to send investor funds each month to pay principal, interest, taxes and insurance on homes, and The Real Estate Company of Missouri or Greenleaf would manage and maintain the property for three years. At the end of the three years, Greenleaf would sell the property and pay off the purchase loan. Greenleaf allegedly guaranteed to some investors that it would purchase the property if it did not otherwise sell.
The Order charges that Greenleaf began missing principal, interest, tax and insurance payments to investors for the houses in May 2008. Many Missouri investors have received no payments since June 2008, and several homes involved in these investments have been foreclosed upon or are scheduled for foreclosure.
The investments sold by Greenleaf and a related company, The Real Estate Company of Missouri, and their organizers Eric Gagnepain and Scott Dasal, were not registered as required by law. Both of the companies, Gangepain and Dasal are alleged to have also failed to provide material information about these offerings to their investors.
For its part, Greenleaf Companies released the following statement:
On Tuesday, December the 16th, 2008, representatives from Greenleaf Companies and The Real Estate Company of Missouri met with representatives from the Attorney General’s Office and agreed on the companies’ business going forward. Many of the changes requested of the companies were minor with respect to the companies’ current operations; therefore, an agreement was easily reached. We appreciate the Attorney General’s efforts to protect the citizens and consumers in the State of Missouri. It is and has been Greenleaf’s intention to cooperate and support this effort in every possible way. This agreement will be filed as a matter of the court’s record.
Greenleaf Companies has always adhered to the advice of outside legal counsel with regard to securities practices. The company looks forward to the continuation of the cooperative relationship it has had with the State Division of Securities.
December 1, 2008
California REALTOR® Jose Oliva Sentenced for Real Estate Fraud: A real estate agent from Fontana, Calif., who was arrested in July of this year on felony charges connected to real estate fraud, has finally been sentenced… to six (6) months in jail followed by three (3) years probation.
John Matouk pleads guilty in Michigan of quitclaim deed fraud: According to the Wayne County Prosecutor’s Office, in February 2004, Matouk, who owned half a property in the 1100 block of Telegraph in Dearborn, forged a quitclaim deed from an elderly couple that transferred the entire property to his company, LM Investments of Dearborn LLC. Before his sentencing last week, Matouk was ordered to pay $26,000 in real estate taxes, the outstanding balance on a $650,000 loan, and court and probation costs. Because of his plea, Matouk received a sentence of two (2) years’ probation.
Rockland County, New York, task force targets mortgage fraud: Rockland County, NY, officials are trying to fight the worsening mortgage fraud problem by forming a Real Estate Fraud Investigation Task Force. The task force, a joint effort of Rockland District Attorney, County Clerk and County Sheriff, will investigate and prosecute cases involving recorded real estate documents, with an emphasis on instances in which the victim’s home is at risk of foreclosure.
U.S. Attorney charges Missouri mortgage brokers with cash-back-at-closing fraud: John F. Wood, United States Attorney for the Western District of Missouri, announced that several mortgage brokers are among six Missouri residents indicted by a federal grand jury last week for participating in several related mortgage fraud schemes. Charles M. Davis, 34, of Rogersville, Mo., Cheryl Joan Kassebaum, 42, and her husband, Scott Allen Kassebaum, 42, both of Ozark, Mo., Randall Lee Hall, 59, and Shanda Lynn Moore, 44, both of Springfield, Mo., and Steven Ray Spencer, 47, of Carl Junction, Mo., were charged in a 55-count indictment returned by a federal grand jury in Springfield. Davis, a former mortgage broker, was the owner of Master Marketing Consultants. The Kassebaums, former mortgage brokers, were owners of Metro Consulting Group. Hall is a former mortgage broker.
Westport, Connecticut, mortgage broker Fred Stevens pleads guilty to mortgage fraud: Stevens, 53, of Easton, Conn., is charged with submitting fraudulent mortgage applications with IndyMac Bank and other financial institutions resulting in losses of over $1,000,000.
Florida real estate appraiser Juan Gonzalez guilty of mortgage fraud: Gonzalez fraudulently obtained loans on more than 40 properties, victimizing numerous lenders and grossing over $5,000,000 in the process. As a result, the 51-year-old will spend the next 30 years in federal prison and pay a $1 million fine.
October 9, 2008
A Missouri attorney has been sentenced in federal court for defrauding a North Kansas City, MO, bank in a series of loans totaling $866,810.00. Dawn Harpster, 38, of Kidder, MO, was sentenced by U.S. Chief District Judge Fernando J. Gaitan, Jr., on Monday morning to four years and two months in federal prison without the possibility of parole. The court also ordered Harpster to pay $866,810.00 in restitution.
On Nov. 28, 2007, Harpster pleaded guilty to five counts of bank fraud. Harpster, formerly doing business as Northwest Missouri Title Co., LLC, in Gallatin, MO, admitted that she defrauded Norbank (which was just bought by CCB Financial Corp. for an undisclosed amount) by obtaining five loans totaling $866,810.00 between March 2006 and December 2006.
For each of those loans, Dawn Harpster falsely claimed to have contracts with the Church of Jesus Christ of Latter-Day Saints in Salt Lake City, Utah, under which the LDS Church would purchase Daviess County, MO, properties from her. If Norbank would loan her the funds to purchase the properties, Harpster told the bank, then she would sell those properties to the LDS Church one year later at a price of at least $1,300 per acre above her original purchase price, or above the average appraised value of the properties.Image via Wikipedia
For each of the five loans, Harpster submitted false and fraudulent contracts in connection with applications for loans.
Harpster also told Norbank that Northwest Missouri Title would handle the closing and would obtain title insurance for her purchase of the properties and for the sale of the properties to the LDS Church. Harpster falsely represented to Norbank that she had obtained a title commitment and title insurance for each of the properties, when in fact she had not done so and the title insurance documents she provided to Norbank were false and fraudulent. Harpster falsely represented to Norbank that she had recorded deeds of trust from Northwest Missouri Title to Norbank, thereby securing the liens on the properties in the amounts of the loans.
When the bank disbursed the loans in the form of cashier’s checks, Harpster used the proceeds for personal expenditures and not for the purposes represented. Dawn Harpster’s license to practice law has been suspended due to matters unrelated to this felony conviction; the status of her license will be reviewed by the appropriate authorities as a result of today’s sentencing.
This case, which was investigated by the FBI, was prosecuted by Assistant U.S. Attorney Linda Parker Marshall.
September 16, 2008
John F. Wood, United States Attorney for the Western District of Missouri, announced that an Overland Park, Kansas, man was sentenced in federal court last Thursday (9/11/08) for his role in a nearly $16 million mortgage fraud conspiracy.
Monty J. Kinman, 27, of Overland Park, was sentenced by U.S. Chief District Judge Fernando J. Gaitan to two years and six months in federal prison without the possibility of parole. The court also ordered Kinman to pay a measly $2,500 fine.
Kinman was convicted at trial last November for the mortgage fraud conspiracy as well as one count of wire fraud related to the attempted sale of a residential property at 5034 Sunset Drive, Kansas City, Mo., at an inflated price. Kinman falsely represented to Fieldstone Mortgage that the sale price was $1.2 million, while in reality the actual sale price was $707,000 (by comparison, Zillow.com currently estimates the house to be worth $928,000). Kinman and others sought to obtain a loan to purchase the property through a fraudulent loan application and other fraudulent documents.
(5034 Sunset Drive, Kansas City, Missouri)
Kinman, formerly the regional manager and a loan officer at Soldi Financial in Overland Park, is the sixth co-defendant sentenced in this particular mortgage fraud scheme. Raymond Walter Zwego, Jr., 61, of Kansas City, Mo., pleaded guilty last October, to being the organizer and leader of the mortgage fraud scheme and awaits sentencing.
Zwego owned and operated Xpress Car Sales, Xpress Car Rental, North Mission Investments, Cobalt Blue, LLC, and Indigo Blue in North Kansas City. Zwego also pleaded guilty to 11 counts of wire fraud related to sending fraudulent documents in a series of facsimiles and email messages in furtherance of the conspiracy.
Zwego’s fraudulent real estate closings included 56 properties with loans totaling approximately $15.8 million. Each of the loans were structured in such a way that Zwego received excess funds from the loan closings as a result of inflated appraisals and numerous false and fraudulent documents. In total, the loans were financed by mortgages from 25 different lenders who sustained losses totaling approximately $6.2 million as a result of the scheme.
Seven other co-defendants have pleaded guilty and two were convicted at trial.
- Rick A. Peterson, 34, of Lenexa, Kansas, was sentenced to five years in federal prison without the possibility of parole. The court also ordered Peterson to pay a $2,500 fine. Peterson was convicted at trial on Nov. 7, 2007, for his role in the conspiracy and for wire fraud. Peterson was a title insurance officer and loan closer from 2004 to 2007, first at Parkway Title in Overland Park, then at Freedom Title in Kansas City, Missouri, where he was the manager of the office.
- James R. Rhoades, 48, of Kansas City, was sentenced to five years of probation and ordered to pay a $2,000 fine and more than $5 million in restitution $5,395,843 to be exact).
- Jeremy A. Plagman, 30, of Lee’s Summit, Missouri, formerly an appraiser doing business as JET Appraisals in Lee’s Summit, was sentenced to two years of probation, a $2,000 fine, and 30 days of home detention under electronic monitoring. As a condition of his probation, Plagman may not be involved in the real estate industry.
- Larry E. Barshaw, 57, and Linda M. Thompson-Barshaw, 59, of Kansas City, Kansas, were each sentenced to five years of probation, including six months of home detention. The court also ordered both to pay a $2,000 fine and $1,517,108 in restitution. The Barshaws were recruited as straw buyers, posing as purchasers of the property at 5034 Sunset Drive, Kansas City, Mo.. In reality, the Barshaws never intended to reside at the residence or to make payments on the mortgage. They were to be paid $40,000 for their role in the scheme. Linda Thompson-Barshaw (also known as Linda Barshaw or
) is the owner of Colormarc, Inc., a remodeling business that employs her husband, Larry Barshaw.
- James E. Coleman, 60, of Kansas City, pleaded guilty on May 21, 2007, to his role in the mortgage fraud conspiracy and to wire fraud, and awaits sentencing. Coleman, a Certified Public Accountant who formerly served as president of the board of a Kansas City magnet school, also pleaded guilty to four counts of wire fraud.
- Michael Rodd, 54, of Olathe, Kansas, pleaded guilty on June 27, 2007, to his role in the mortgage fraud conspiracy. Rodd was a real estate broker doing business as Heartland of America, Inc., in Olathe. Michael Rodd is currently a fugitive and a federal warrant has been issued for his arrest.
This case is being prosecuted by Assistant U.S. Attorneys Linda Parker Marshall and Gene Porter. It was investigated by the Federal Bureau of Investigation.
May 14, 2008
The FBI just released a comprehensive new report on real estate and mortgage fraud, and, as you might expect given everything we talk about here on Flipping Frenzy, it isn’t a pretty picture. The information contained in the report can get quite technical, with plenty of charts, graphs, and hard numbers. Regardless, it’s worth the read–see “The 2007 Mortgage Fraud Report.” Among the Report’s key findings:
- Real Estate and Mortgage Fraud is clearly on the rise. Although there is no central way to track the total extent of the problem, the FBI received 46,717 Suspicious Activity Reports related to real estate and mortgage fraud last year—compared to 35,617 in 2006 and just 6,936 in 2003. Only 7% of these reports documented an exact dollar amount in terms of losses, but even so, the total loss from this 7% was $813 million. The FBI’s caseload has also escalated. By the end of fiscal year 2007, the Bureau was handling just over 1,200 real estate and mortgage fraud investigations—a 47% increase from 2006 and a whopping 176% increase from 2003.
- The downward trend in the housing market will continue (see forecasts provided by the Mortgage Bankers Association in the report), providing further incentive for shady real estate industry insiders to look for dishonest ways to turn a profit and growing opportunities for scam artists to prey on vulnerable homeowners.
- The subprime lending crisis is a contributing factor to real estate mortgage fraud, both directly and indirectly. Subprime loans, designed for people with poor or limited credit histories, now represent more than 13% of all outstanding loans–double the percentage of five years ago. These high-interest, high-risk loans contributed to the 2.2 million foreclosures filed during 2007, up 75% from 2006. The trouble actually began when home prices were rising a few years ago, leading to relaxed lending practices throughout the industry and the exaggeration of assets by industry insiders and borrowers under their charge anxious to qualify for loans, both of which contributed to fraud.
- The top 10 hotspots nationwide for mortgage fraud in 2007, carefully mapped from multiple public and private sources, were:
- New York
Other states significantly affected include: Arizona, Maryland, Utah, Nevada, Missouri, Indiana, Tennessee, Virginia, New Jersey, and Connecticut. The north-central region of the United States had the largest share of fraud, followed by the west and southeast regions.
- The latest mortgage scams run the gamut: from builder-bailout schemes where developers unload excess inventory through financial trickery, to foreclosure rescue schemes that trick homeowners into signing over the deed to their house; from seller-assistance scams that use false appraisals to sell homes, to identity theft that leads to home equity credit lines being opened and drained.
The FBI’s report also briefly recounts the agency’s own response to the problem, including the Bureau’s participation in the Department of Justice’s Mortgage Fraud Working Group, through which the agency says it is helping to identify large-scale real estate industry insiders and criminal enterprises conducting systemic real estate fraud
The purpose of the The 2007 Mortgage Fraud Report is to provide insight into the breadth and depth of real estate and mortgage fraud crimes in the United States. The report updates the 2006 Mortgage Fraud Report and addresses current fraud projections, issues, and hot spots (as noted above). The objective of the report, according to the FBI, is to provide FBI program managers with relative data to justify real estate and mortgage fraud investigative and preventive resources and for investigators to identify real estate and mortgage fraud activity.
February 19, 2008
Daniel Mann of Arnold, Missouri, was sentenced to 15 months in prison today for his role in a mortgage fraud scheme that previously netted his partner-in-crime a three-and-a-half-year jail term. Mann pled guilty to a one-count information filed by the U.S. Attorney for the Eastern District of Missouri in November of 2007. At that time, he admitted to participating in a mortgage fraud ring headed by Dack Daugherty of St. Louis. Daugherty was sentenced last month and ordered to pay more than $576,000 in restitution.
Mann admitted to teaming up with Daugherty on several properties for a scheme that involved lining up properties from distressed sellers who were willing to take a below-market sale price for a property and matching them up with willing buyers (in and of itself, there’s nothing wrong with that). Daugherty and Mann, however, arranged 100% financing for the buyers by means of false mortgage applications, which typically included lies about a buyer’s finances and intention to occupy a property. Buyers were also promised cash payments after closing that were not disclosed to the lending institution (can anyone say, illegal cash back at closing). In all, the scheme involved more than 60 properties, mostly in South St. Louis, that ran from 2005 through 2006.
Mann’s 15 months sentence was accompanied by an order to pay $84,820 in criminal restitution to six mortgage companies defrauded by his actions.