John C. Richter, the United States Attorney for the Western District of Oklahoma, announced last Friday afternoon that Terry Hugh Mahon, 69, of Broken Arrow, Oklahoma, has been sentenced to 13 years in federal prison in connection with a fraudulent investment scheme involving cash-back rebate coupons and home mortgages.

On March 26, 2008, a jury found Terry Mahon guilty on charges of conspiracy, mail fraud, and money laundering. Mahon has been incarcerated since the jury’s verdict in March. A co-defendant, Grover Harold Phillips of Stillwater, Oklahoma, pled guilty to conspiracy and money laundering on March 21, shortly before trial. His sentencing is pending.

Mahon and Phillips concocted a scheme whereby they falsely promised buyers and homeowners that if they took out a new mortgage or refinanced their existing mortgage they could pay it off in just five years, but there was just one catch — they had to buy a bogus “cashback rebate coupons” which promised financial freedom but delivered nothing but misery.

Starting in the year 2000, Terry Mahon operated a Nevada corporation called Rebates International, Inc., with its office in Hollister, Missouri. Grover Phillips worked in tandem with Mahon through a Nevada business trust called Amsterdam Fidelity Business Trust (Amsterdam’s offices were located in Phillips’s home in Stillwater, Oklahoma).

The evidence at trial showed that from 2000 to 2003, Phillips and Mahon worked with other people, including Emzie Huletty of Oklahoma City, to sell cashback rebate coupons that would supposedly allow purchasers to pay off their home mortgages in five years.

Mahon and the other conspirators made false representations that if victims paid 17% of the value of their homes to them, they would receive rebate coupons worth the entire value of their homes. The money that they paid was to be invested in high-yield trading programs, according to court documents. At the end of five years, the victims could supposedly redeem these rebate coupons for face value and pay off their mortgages.

Many victims re-financed their homes to generate the 17% required to participate in the program.

According to U.S. Attorney Richter, the jury in Terry Mahon’s case heard more than two days of testimony, including evidence offered by victims who took out mortgages so that they could pay tens of thousands of dollars into the program. The evidence presented at trial demonstrated that the only investment in anything resembling a “high-yield” trading program was a $50,000 payment in April of 2002 to OsGold, a massive Ponzi scheme that folded in the wake of a federal investigation.

The jury in this case also heard evidence that Terry Mahon and other conspirators siphoned off hundreds of thousands of dollars that were supposedly to be invested for the benefit of coupon holders.

After deliberating just over an hour, the jury convicted Mahon on all four counts in which he was charged. These included conspiracy to commit mail fraud, using a commercial interstate carrier to commit fraud, engaging in a financial transaction over $10,000 in criminally derived proceeds, and engaging in a financial transaction designed to conceal the nature of the funds involved.

Terry Mahon was sentenced to 13 years in prison for his crimes. He was also ordered to pay $3,079,684.95 in restitution to hundreds of victims and is subject to a forfeiture order in the amount of $1,061,294.85.

Emzie Huletty, who operated EASE Corporation, Vision Services, Inc., and Sunset Financial Group, all located in Oklahoma City, pled guilty to mortgage fraud on March 24, 2006, and was sentenced to two years in prison.

Hats off to the great investigative work conducted by the FBI and the Criminal Investigative Division of the IRS with the assistance of the Oklahoma Department of Securities.

The owners of a well established Minnesota home builder were sentenced last Friday in federal court for conspiring to commit mortgage fraud and money laundering in connection with a scheme involving approximately 200 residences and approximately $100 million in loans. In determining the following sentences, U.S. District Court Judge Ann Montgomery found the scheme resulted in a loss of between $20 million and $50 million and harmed more than 50 victims:

• Michael Parish, 63, of Eagan, MN: 13 years in prison along with three years of supervised release
• Ardith Parish, 62, Eagan: 5 years in prison followed by three years of supervised release
• Christopher Troup, 40, Eagan: 10 years in prison and three years of supervised release

Michael and Ardith Parish were the owners and officers of Parish Marketing Development Corp. (PMDC), a long-time Minnesota home builder, and Christopher Troup, their son-in-law, was an agent for the company. Along with the company, all three pleaded guilty in November 2007 to participating in the real estate fraud conspiracy. According to their pleas, the Parish’s and Troup acknowledged participating in the mortgage fraud scheme, by which PMDC utilized straw buyers to purchase approximately 200 Minnesota properties built by PMDC.

All three also acknowledged completing loan applications for the straw purchases (which–go figure–included false information), executing loan documents in the names of the straw buyers, and manufacturing and providing false documentation (i.e., false representations of employment and false verifications of deposit) for the straw buyers for purposes of obtaining loan proceeds to purchase the properties from PMDC.

The three also admitted:

1. Providing false information that resulted in appraisals that overstated the amount for which the residences could have been sold at the time of the transaction in a normal, arms-length transaction. The appraisals supported a higher sales price to the straw buyers, allowing PMDC to obtain additional funds from the loan proceeds.
2. That the straw buyers did not view the residences they were purchasing, did not negotiate the purchase price of the residences, and, often times, did not execute the sales documents and loan documentation, which were instead signed by the three pretending to be the straw buyers.
3. That the straw buyers made no payments on the mortgages that were taken out in their names. Instead, PMDC made all payments or allowed mortgages to go into foreclosure. Often times, PMDC utilized proceeds from the sale of one residence to a straw buyer to make monthly payments for the mortgages held on other residences in the names of other straw buyers.

Several other people connected to the conspiracy previously pleaded guilty to federal charges and are awaiting sentencing, including:

• Ramiz Yousef Saadeh, 30, of Apple Valley, MN, pleaded guilty in September 2007 to conspiracy to commit mortgage fraud. The former US Bank officer admitted providing false verifications of deposit to PMDC on behalf of straw buyers.
• Kristopher Robbins, 28, Brandon, South Dakota, pleaded guilty in September 2007 to conspiracy to commit mortgage fraud. The former closing agent admitted to permitting conspirators to forge signatures on mortgage documentation.
• Melissa Smith, 45, Gerard, Ohio, pleaded in September 2007 to conspiracy to commit mortgage fraud. Smith, a stay-at-home mother and the sister of Christopher Troup, admitted to acting as a straw buyer for the scheme, purchasing 46 residences for approximately $20 million from October 2004 through January 2007.
• Donald Yeager, 41, Ardamore, Oklahoma., pleaded guilty in October 2007 to one count of honest services fraud. The former appraiser admitted providing misleading and inflated appraisals of the homes to lenders.
• In June of this year, John Rubischko, 36, Eagan, a former mortgage broker implicated in the scheme, also pleaded guilty to mortgage fraud and identity theft charges.

Acting U.S. Attorney Frank J. Magill had this to say about the case:

The crime of mortgage fraud poses a significant threat to the national economy, as well as Minnesota’s economy. For many, the dream of home ownership has been shattered by those engaging in fraud, deception and illegal lending practices. These illegal practices have also resulted in communities blighted by foreclosed and boarded up homes, increased crime, property depreciation and other livability issues. Our office is working to ensure that those who devise and implement fraud schemes to bilk homeowners and lenders out of money will be prosecuted to the fullest extent of the law. Mortgage fraud will continue to be a top priority, and we thank our law enforcement partners on the federal, state and local level, for their efforts in investigating these schemes.

Following up on a story first reported by Flipping Frenzy in December of last year, 10 people were sentenced late last week for offenses stemming from a mortgage fraud scheme involving high profile RE/MAX affiliated Realtor Theresa Ann Campbell. According to Oklahoma’s The Journal Record, in April of this year, a federal jury convicted six of the 10 for participating in a plan involving doctored loan applications and the artificial inflation of sale prices for nine Edmond, OK, homes. Five others pleaded guilty in December, including the 66-year-old Campbell, who in June was sentenced to two months in prison followed by two years of supervised release and was ordered to pay restitution of $52,490.

Those sentenced last week include:

• Brandon Baum, 32, Joplin, MO — 7 years, 3 months in federal prison
• Gayle Caldwell, 39, Edmond, OK — 1 year, 6 months in federal prison
• Charles Caldwell Jr., 41, Edmond, OK — 1 year, 6 months in federal prison + $185,740 in restitution
• Rusty Therrien, 33, Edmond, OK — 1 year, 6 months in federal prison + $82,710 in restitution.
• Anthony Jew, 38, Edmond, OK — 1 year in federal prison + 104 hours of community service and $13,700 in restitution
• Joseph Therrien, 29, Oklahoma City, OK — 1 year in federal prison + $59,771 in restitution
• Teresa Therrien, 32, Edmond, OK — 1 month in federal prison + 90 days home detention and $82,710 in restitution
• Dalton Alford, 35, Oklahoma City, OK — 8 months in federal prison + 104 hours of community service and $172,489 in restitution
• Tony Mykel, 40, Edmond, OK — 6 months in federal prison + 104 hours of community service and $263,489 restitution
• Timothy J. McDaniel, 45, Edmond, OK — 6 months in federal prison + $57,641 restitution

According to The Edmond Sun, Baum was a real estate agent who acted as the buyers’ agent in the purchases of properties in the Oak Tree subdivision of north Edmond. Baum’s buyers were told they could receive cash back at closing under the guise of “repair costs,” which they could use for their personal benefit, if they agreed to purchase the Oak Tree homes at an inflated price.