Eric Hill, 50, Tyrone, Georgia (charged by Information); Robert Kelske, 52, Smyrna, Georgia; Fawziyyah Connor, 41, Tyrone, Georgia; Stephanie Hogan, 57, Norcross, Georgia; Jerod Little, 42, McDonough, Georgia; Renee Little, 33, McDonough, Georgia; Maurice Lawson, 36, Powder Springs, Georgia; Todd Taylor, 54,  Fairburn, Georgia; Paige McDaniel, 49, Stockbridge, Georgia; Donald Fontenot, 52, Locust Grove, Georgia (charged by Information); Anthony Richard, 44,  Locust Grove, Georgia; Cephus Chapman, 49, Warner Robins, Georgia, have been charged in a mortgage fraud scheme allegedly spanning more than four years and resulting in the approval of more than 100 mortgages based on fabricated documents and false information.

According to the indictment, and other information presented in court: The defendants participated in a scheme in which homebuyers and real estate agents submitted fraudulent loan applications to induce mortgage lenders to fund mortgages.  Listing agents Eric Hill and Robert Kelske represented a major nationwide homebuilder, and helped more than 100 homebuyers who were looking to buy a home, but who were unqualified to obtain a mortgage, commit fraud.  The agents instructed the homebuyers as to what type of assets they needed to claim to have in the bank, and what type of employment and income they needed to submit in their mortgage applications.

Hill and Kelske then coordinated with multiple document fabricators, including defendants Fawziyyah Connor and Stephanie Hogan, who altered the homebuyers’ bank statements to inflate the their assets and to create bank entries reflecting false direct deposits from an employer selected by the real estate agent.  The document fabricators also generated fake earnings statements that matched the direct deposit entries to make it appear that the homebuyer was employed, and earning income, from a fake employer.  Other participants in the scheme then acted as employment verifiers and responded to phone calls or emails from lenders to falsely verify the homebuyers’ employment.  Defendants Jerod Little, Renee Little, Maurice Lawson, Todd Taylor, Paige McDaniel and Donald Fontenot acted as employment verifiers.  Hill and Kelske coordinated the creation and submission of the false information so that the lies to the lenders were consistent.

In another aspect of the scheme, real estate agents Anthony Richard and Cephus Chapman falsely claimed to represent homebuyers as their selling agents in order to receive commissions from the home sales.  In reality, these real estate agents had never even met the homebuyers they claimed to represent.  To avoid detection, the agents often notified closing attorneys that they would not be available for the home closing, and sent wire instructions for the receipt of their commissions.  When these purported selling agents received their unearned commissions, they kicked back the majority of the commissions to Hill or Kelske for enabling them to be added to the deal, keeping a small share for their role in the scheme.

Many of the loans are insured by the Federal Housing Administration (FHA) resulting in claims being paid for mortgages that have gone through loan modification.

These defendants allegedly used their knowledge of the real estate lending process to manipulate the system for their own benefit,” said U.S. Attorney Byung J. “BJay” Pak.  “Mortgage fraudsters threaten the soundness of the real estate market in our community.  We will investigate and charge anyone who takes advantage of our mortgage lending system for their own personal gain.”

These charges represent the government’s commitment toward combating such alleged criminal activity,” said Chris Hacker, Special Agent in Charge of FBI Atlanta. “We will steadfastly protect American citizens and the real estate market from predators who drag down our economy by deceit to line their own pockets.”

What we have here is a group of mortgage industry professionals that have allegedly perpetrated a sophisticated mortgage fraud for profit scheme that was designed to enrich themselves at the expense of a federal housing program,” said Wyatt Achord, Special Agent in Charge, Office of the Inspector General, U.S. Department of Housing and Urban Development. “The efforts that brought forward these charges demonstrate that when law enforcement is made aware of such schemes, we will commit the necessary resources to make sure that fraudsters are brought to justice.”

As charged, the defendants engaged in a multiyear scheme to defraud Fannie Mae and Freddie Mac.  The Federal Housing Finance Agency Office of Inspector General (FHFA-OIG) will investigate and hold accountable those who seek to victimize these Government Sponsored Entities supervised and regulated by FHFA”, said FHFA-OIG Special Agent in-Charge Edwin Bonano.

Members of the public are reminded that the indictment and informations only contain charges.  The defendants are presumed innocent of the charges and it will be the government’s burden to prove the defendants’ guilt beyond a reasonable doubt at trial.

This case is being investigated by the Federal Bureau of Investigation, Department of Housing and Urban Development Office of Inspector General, and Federal Housing Finance Agency Office of Inspector General.

Assistant U.S. Attorney Alison Prout is prosecuting the case.

For further information please contact the U.S. Attorney’s Public Affairs Office at USAGAN.PressEmails@usdoj.gov or (404) 581-6016.  The Internet address for the U.S. Attorney’s Office for the Northern

On June 30, 2011, Lee Farkas was sentenced to serve 360 months in in Federal Prison.  He has been serving that time at Coleman Low Federal Correctional Institution in Sumterville, Florida and was scheduled to be released from prison on October 31, 2036.  

Yesterday, U.S. District Court Judge Leonie Brinkema in Alexandria, Virginia granted an emergency motion for compassionate release and reduced his sentence to time served.  He will be on supervised release for the next 3 years.

The motion was based on the “global health crisis created by the COVID-19 pandemic and the active outbreak of COVID-19 at FCI Coleman” (Emergency Motion for Compassionate Release, August 20, 2020, PACER ID 7748)  According to the declaration in support of the motion, Mr. Farkas, who is 67 years old, “has been diagnosed with coronary artery disease, hypertension, and hyperlipidemia … as well as atrial fibrillation, arthrosclerosis, actinic keratosis, gastro-esophageal reflux disease, anemia, sleep apnea, a heart murmur, and has a documented medical history of several bouts of bronchopneumonia” and, while in the custody of the Bureau of prisons, “suffered from gastritis and diverticulosis resulting in
gastrointestinal bleeding and requiring an extensive period of hospitalization.”

According to the declaration, when released, Mr. Farkas plans to reside with his sister, Terri Huber, in Albuquerque, New Mexico.

According to the Orlando Sentinel, prosecutors opposed the release and asked the judge to at least impose home confinement.  However, Judge Brinkema said it is “unreasonable to expect him to live 21 years in his sister’s house.”

Mr. Farkas had previously requested compassionate release from the Warden at FCI Coleman and that request was denied on April 8, 2020.  He also requested compassionate release under the CARES act but was found ineligible as he had not completed 50% of his sentence. Reconsideration was refused.

As of August 13, 2020, according to the memorandum, FCI Coleman low security had reported 21 staff members and 131 inmates with confirmed positive COVID-19 tests.  And additional 63 inmates had recovered while one inmate had died as a result of COVID-19.  At FCI Coleman medium security, 31 staff members and 78 inmates were reported with confirmed positive COVID-19 tests with an additional 110 inmates having recovered and one inmate whose death was attributed to COVID-19.

Lee Farkas only served 9 years of his 30 year sentence.

For those of you who don’t remember the Taylor, Bean & Whittaker debacle, Lee Farkas was essentially accused of stealing over a billion dollars through his company, Taylor Bean & Whittaker.   TBW overdrew its warehouse operations account and Colonial Bank covered the overdrafts by sweeping money from the investor funding account.  The end of day reports would show no overdraft and, first thing in the morning, Colonial would transfer the funds back to the investor funding account. This happened for over a year, during which time the overdraft was growing by tens of millions of dollars a month.  By December 2003, the overdraft was $120 million dollars.

As the overdraft grew, it became more difficult to hide and Farkas came up with a plan, referred to as “Plan B” where TBW would put dummy loans on Colonial’s books in order to keep track of the outstanding overdraft – basically, selling fake assets to Colonial or “selling” loans to Colonial that had already been sold to a different bank. No loans were actually transferred to Colonial, the only thing that Colonial received was data. TBW would refresh the data to make it appear that the fake loans were being sold and new loans were being originated.  Under Plan B, by mid-2005, the deficiency was over $300M.

When the ‘refreshing’ of these individual loans became burdensome, the overdraft was moved into loan pools.  This also reduced the amount of regulatory scrutiny.  Under this scenario, TBW would fund an entire pool of fake or double-sold loans through Colonial.  The pools would be “recycled” to avoid notice.  Over $500M in fake pools were on Colonial’s books by 2009.  At that time, Cathie Kissick and her staff at Colonial refused to provide further funds to TBW.

TBW then started to use its own related warehouse facility, Ocala Funding, to generate money.  By August of 2009, the deficit at Ocala Funding was around $1.5B 9.

On August 3, 2009, the FBI raided TBW.

According to the government’s argument at trial, the total losses from the scheme were $2.9 Billion. (The above facts are summarized from testimony at Mr. Farkas’s trial)

As a result, TBW and Colonial Bank failed.

All others indicted and convicted with Mr. Farkas have completed their sentences and have released from custody.  Teresa Kelly was sentenced to 3 months and was released on 11/14/2011.  Sean Ragland was setenced to 3 months and was released on 10/26/2011.  Ray Bowman was sentenced to 30 months and was released on 9/20/2013.  Paul Allen was sentenced to 40 months and was released on 6/20/2014. Desiree Brown was sentenced to six years and was released on 11/21/2016. Cathie Kissick, who was considered by many to be a victim of Lee Farkas, was sentenced to 8 years in prison and was released on August 3, 2018.

 

 

Alagi Samba, 50, Bronx, New York, who was convicted of conspiracy to commit wire and mail fraud affecting a financial institution, was sentenced today to time served.

Between about June 2008 and February 2009, the defendant conspired with others to devise a scheme to commit mortgage fraud and obtain eight loans for unqualified borrowers for homes in the Bronx, New York.

As part of the scheme, Samba served as a realtor on behalf of co-conspirator Daniel Badu in the purchase of a property in the Bronx, New York. The defendant was aware that Badu was employed as a home health aide and did not have the income or assets to qualify for a mortgage loan in the amount of $574,543 to purchase the property. Samba obtained Badu’s personal identification information and business documents and provided them to another co-conspirator, a mortgage broker, knowing that the documents would be altered or falsely created to indicate that Badu was an ophthalmologist at his company Eagle Eyes. In addition, fraudulent paystubs and tax returns were submitted to support the loan application. Samba provided these false loan documents in order to secure a loan insured by the Federal Housing Administration. Based on that false application and supporting documentation, the loan was approved.

The defendant and his co-conspirators arranged for additional fraudulent loans to be approved, including another loan for Badu, and caused wire communications to be transmitted in interstate commerce for those loans. The defendant caused losses of approximately $547,000 affecting financial institutions in Buffalo and elsewhere.

Five co-defendants, including Daniel Badu, were previously convicted and sentenced.

Samba was also ordered to pay restitution totaling $790,350.40 to M&T Bank and the U.S. Department of Housing and Urban Development.

U.S. Attorney James P. Kennedy Jr. made the announcement.

The sentencing is the result of an investigation by the United States Postal Inspection Service, Boston Division, under the direction of Inspector-in-Charge Joseph W. Cronin, Boston Division; the Department of Housing and Urban Development, under the direction of Special Agent in Charge Brad Geary; and the Federal Bureau of Investigation, under the direction of Special Agent-in-Charge Stephen Belongia.

Eva Christine Rodriguez, 65, Laguna Hills, California, and Sergio Lorenzo Lawrence, 46, Laguna Niguel, California, were arrested and charged today with wire fraud offenses in connection with a fraudulent foreclosure rescue scheme that took in more than $5 million in prohibited advance fees from thousands of financially distressed homeowners..

According to the Complaint[1] unsealed today in Manhattan federal court:

From approximately March 2014 through April 2018, Eva Christine Rodriguez and Sergio Lorenzo Rodriguez (the “Defendants”) owned and/or managed a series of mortgage modification companies through which they perpetrated a scheme to defraud and attempt to defraud financially distressed consumers who were facing or were at imminent risk of foreclosure through deceptive marketing practices.  Those companies were National Servicing Center, American Home Servicing Center, National Advocacy Center, National Advocacy Group, and Capital Home Advocacy Center (collectively, the “Companies”).  Among other ways, the Defendants charged desperate homeowners thousands of dollars in prohibited advance fees by tricking them into believing that they had been pre-approved by their lender or servicer for a mortgage modification; falsely represented prohibited advance fees to be closing costs or other non-prohibited costs; fraudulently claimed that the Companies achieved success rates of 95 percent or higher for mortgage modifications; and made empty promises of a no-risk money back guarantee.  As a result of their intentional misrepresentations, and misrepresentations that they encouraged their subordinates to make, the Defendants induced thousands of homeowners to pay an aggregate of more than $5 million in prohibited advance fees to the Companies, including a large number of consumers who were ultimately denied mortgage modifications or who received modification offers that were less favorable than they had been led to expect at the time they paid advance fees.

In February 2018, the Federal Trade Commission brought a civil lawsuit against Eva Christine Rodriguez and Sergio Lorenzo Rodriguez, among others, in federal court in Santa Ana, California.  That civil action resulted first in a temporary restraining order and then a permanent injunction barring the Defendants from marketing and selling all debt relief products and services.  As alleged in the Complaint, the Defendants flouted those judicial orders by having a relative create another mortgage modification company named 1st Premier Asset Solutions, which the Defendants operated using aliases and some of the same deceptive practices.

The Defendants will be presented in federal court in Santa Ana later today.

Each count carries a maximum sentence of 20 years in prison and a maximum fine of $250,000 or twice the gross gain or loss from the offense.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

Audrey Strauss, the Acting United States Attorney for the Southern District of New York, and Philip R. Bartlett, Inspector-in-Charge of the New York Office of the United States Postal Inspection Service (“USPIS”) made the announcement.

Acting Manhattan U.S. Attorney Audrey Strauss said:  “As alleged, Eva Christine Rodriguez and Sergio Lorenzo Rodriguez preyed on vulnerable homeowners at risk of foreclosure by making false and misleading promises that they knew they would not or could not keep.  They allegedly continued to do so even after they were barred from the debt relief industry by a federal court in California.  They now face serious criminal charges.

USPIS Inspector-in-Charge Philip R. Bartlett said:  “Loan Modification Scams are a cruel fraud targeting very desperate homeowners faced with losing their homes. While a loan modification may appear to be a lifeline, these scams often become a nightmare. This is allegedly what happened to victims who did business with Eva and Sergio Rodriguez. Postal Inspectors remain on alert for fraud scams targeting consumers, bringing fraudsters to justice worldwide.”

Ms. Strauss praised the investigative work of the USPIS and thanked the Federal Trade Commission and the United States Trustee for Region 5 for their assistance.

This case is being handled by the Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Sarah Lai is in charge of the prosecution.

If you believe you are a potential victim of this fraud, please contact Postal Inspector Brandy King-Gonzalez of the USPIS at bnking-gonzalez@uspis.gov, or (212) 330-5252.

The charges contained in the Complaint are merely accusations and the defendants are presumed innocent unless and until proven guilty.

 

Christopher Lee Horn, 58, and Sondra Horn, 57, both of Richville, Minnesota, a former Mount Vernon, Ohio couple pleaded guilty today to accepting federal mortgage assistance in Ohio while living in another state and renting the Ohio property to a tenant.

Part of the relief programs funds targeted aid to families in states hit hard by the 2008 economic and housing market downturn. The program provided state housing finance agencies funding to develop locally tailored foreclosure prevention solutions. In Ohio, the housing finance agency created “Save the Dream Ohio,” a statewide program focused on unemployed and underemployed homeowners at risk of mortgage loan default or foreclosure.

According to court documents, the Horns admitted to receiving more than $14,000 in Save the Dream Ohio mortgage assistance funds to which they were not entitled.

In September 2014, the couple received more than $2,800 in rescue payment assistance and was approved to receive 18 monthly mortgage assistance payments of $692 each for their property at 18 Marion Street in Mount Vernon.

Also in September 2014, Christopher and Sondra Horn negotiated to rent their Marion Street residence to a tenant for $655 per month. In later months, the amount increased. The couple requested the tenant pay his monthly rent in cash or personal check to a third party, who then deposited the money into a joint credit union account controlled by the Horns.

Both pleaded guilty to conspiring to defraud the United States Treasury Department’s Troubled Asset Relief Program.

Each pleaded guilty to conspiring to commit theft of government property, a crime punishable by up to 10 years in prison.

Today the defendants join 388 defendants convicted of crimes the Special Inspector General for the Troubled Asset Relief (SIGTARP) investigated,” said Special Inspector General Christy Goldsmith Romero. “Christopher and Sondra Horn knowingly defrauded a TARP program that helps unemployed homeowners stay in their primary home. The Special Inspector General commends the Office of the U.S. Attorney for the Southern District of Ohio for standing with SIGTARP to combat rescue fraud.”

Congress sets the maximum statutory sentence. Sentencing of the defendants will be determined by the Court based on the advisory sentencing guidelines and other statutory factors.

David M. DeVillers, United States Attorney for the Southern District of Ohio; and Special Inspector General Christy Goldsmith Romero, Troubled Asset Relief Program; announced the plea offered today before U.S. Magistrate Judge Norah McCann King. Assistant United States Attorney Sheila G. Lafferty is representing the United States in this case.

 

Aminullah “David” Sarpas, 37, Irvine, California and Samuel Paul Bain, 40, Tustin, California were sentenced late this afternoon, with one being ordered to serve 12 years in federal prison, for their key roles in businesses that offered bogus modification programs to homeowners struggling to pay their mortgages in the wake of the 2008 financial crisis.

The two defendants who were associated with the Santa Ana, California based company U.S. Homeowners Relief and several related businesses participated in a long-running “advance fee” scheme that caused more than 1,600 homeowners to suffer over $3.5 million in losses. Many victims lost their homes in subsequent foreclosure proceedings.

The Defendants were also co-owners of Greenleaf Modify, Waypoint Law Group, and American Lending Review.

Sarpas and Bain established U.S. Homeowners Relief in late 2008, using it and the subsequent companies to offer programs that falsely offered to help distressed homeowners obtain modifications of their mortgages. Sarpas and Bain initially marketed the programs themselves, but they also used TV, radio and internet advertisements, as well as a team of telemarketers to entice victims. Homeowners who agreed to participate – based on false claims, including that the companies had a 97 percent success rate in obtaining loan modifications that dramatically reduced monthly mortgage payments – were charged an advance fee ranging between $1,450 and $4,200. In short, the scheme “compounded these homeowners’ financial woes by inducing them to dig the hole they were in even deeper,” prosecutors wrote in court documents.

There were two other defendants named in a 2014 indictment. One man was acquitted of all counts. The fourth defendant, Louis Saggiani, 70, Huntington Beach, California pleaded guilty and is scheduled to be sentenced in October.

Sarpas was sentenced to 144 months in federal prison after being convicted by a jury in April 2019 of 10 counts of conspiracy and mail fraud.

Bain was sentenced to five years in prison after pleading guilty in 2016 to conspiracy and mail fraud.

The two men were sentenced by United States District Judge Cormac J. Carney.

The investigation was conducted by the United States Postal Inspection Service, the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) and IRS Criminal Investigation.

This matter was prosecuted by Special Assistant United States Attorney Ryan G. Adams of the Santa Ana Branch Office and Assistant United States Attorney David H. Chao of the Major Frauds Section.

Mary Beyer Halsey, age 59, Rising Sun, Maryland, the former President and Chief Executive Officer of Cecil Bank, pleaded guilty today to the federal charges of conspiracy to commit bank fraud, receipt of a bribe by a bank official, and false statement in bank records, in connection with the straw purchase of a home in Elkton, Maryland, upon which Cecil Bank had foreclosed.

Cecil Bank, located in Elkton, Maryland, had received $11,560,000 in federal taxpayer funds in 2008, under the Capital Purchase Program, as part of the Troubled Asset Relief Program. On April 20, 2011, Cecil Bank initiated the foreclosure of a single-family house located at 127 Ebenezer Church Road in Elkton.

According to her plea agreement, from 2012 to 2013, Halsey conspired with Daniel Whitehurst, an employee of a real estate development company that did business in Maryland, to defraud Cecil Bank and another bank to purchase a home through false pretenses, representations and promises. Specifically, on March 28, 2012, Halsey and Whitehurst met at a restaurant in Cecil County. Whitehurst asked Halsey if she could help him and a business partner get a $500,000 line of credit from Cecil Bank. Halsey agreed to help Whitehurst to obtain a line of credit from Cecil Bank, in exchange for Whitehurst agreeing to serve as the straw purchaser of 127 Ebenezer, Elkton, Maryland on behalf of Halsey. Halsey suggested that she increase the line of credit for Whitehurst to $650,000 to include the funds needed to buy the house. Whitehurst agreed to Halsey’s request to secretly buy 127 Ebenezer on Halsey’s behalf. On May 9, 2012, Halsey participated in a loan committee meeting at Cecil Bank that considered and approved a $650,000 line for credit for Whitehurst and a $500,000 line of credit for his business partner.

Halsey admitted that at her request, on May 14, 2012, Whitehurst visited 127 Ebenezer and provided Halsey with an estimate of the costs to update the house. Whitehurst determined that beyond replacing the kitchen subflooring at a cost of about $1,000, there were no significant repairs needed. Whitehurst provided a letter of intent to purchase the home from the bank for $150,000 for Halsey to review. Halsey suggested lowering the price to $145,000 to allow room to increase the offer later. Halsey knew that an exterior-only appraisal of the property ordered by Cecil Bank on November 9, 2011, showed a market value of $263,000. A full appraisal on September 10, 2012, reflected a market value of $295,000. To support the below-market price that Halsey wanted to pay, Whitehurst included in the letter of intent a list of lower-priced home sales in the same area that were not comparable to 127 Ebenezer and therefore was not reflective of the property’s actual market value.

As detailed in the plea agreement, on May 23, 2012, Whitehurst e-mailed Cecil Bank his offer to purchase 127 Ebenezer for $145,000. On the same day, during a meeting of the Cecil Bank Board of Directors, Halsey advised the Board that Whitehurst had made a purchase offer of $140,000 for 127 Ebenezer, $5,000 less the actual offer. To support the below-market price of $140,000, Halsey falsely characterized the property as having “structural deficiencies [that] will require significant repairs.” Halsey did not disclose her personal interest in the property, nor Whitehurst’s role as her nominee to acquire the property on her behalf. The Board authorized Halsey to “negotiate the best price.” Thereafter, Whitehurst submitted a contract for him to purchase 127 Ebenezer from Cecil Bank for $150,000, which Halsey signed on August 17, 2012 on behalf of Cecil Bank.

According to the plea agreement, subsequent to authorizing the sale of 127 Ebenezer, Halsey told Whitehurst that he should not use his line of credit from Cecil Bank to purchase the house, but should instead get the funds from a different source. Whitehurst applied for and obtained a $100,000 loan from another bank to purchase 127 Ebenezer, fraudulently claiming that he was purchasing the property for himself and that the down payment was from an investment account. On October 31, 2012, prior to 127 Ebenezer going to settlement, Halsey wired $75,000 to Whitehurst’s bank account to cover the cost of the down payment as well as closing costs and upgrades to the property that Halsey directed Whitehurst to arrange. To conceal the true purpose of the wired funds, Whitehurst sent Halsey a fictitious real estate contract purporting to show that the $75,000 was the down payment for a different property that Whitehurst owned in Havre de Grace, Maryland.

On November 21, 2012, the settlement of 127 Ebenezer was held with Halsey representing Cecil Bank as the seller, and Whitehurst as the purported purchaser, selling the property to Whitehurst for $150,000. Both signed the HUD-1 form which falsely represented that Whitehurst had paid approximately $52,566 at settlement, when in fact, the down payment and all related closing costs were paid from the $75,000 Halsey had wired to Whitehurst’s bank account beforehand. From October 31, 2012 through March 29, 2013, Halsey transferred an additional $60,000 to Whitehurst to cover the cost the upgrades to the house that they had previously discussed, as well as to reimburse Whitehurst for mortgage payments he made on the property. Halsey and Whitehurst also made plans to transfer title of the property to Halsey by selling the house to her at a price that would minimize the tax consequences of the sale for Whitehurst.

In December 2012, in response to a question from a bank examiner for the Federal Reserve Bank of Richmond inquiring about the sale of the property to Whitehurst, Halsey falsely stated that she was “not totally familiar with [that] property” and that the bank had difficulty marketing the property and had not listed it with a realtor because of “issues with the county over the bonds outstanding.”

In April 2013, federal agents began interviewing employees and other borrowers about banking irregularities at Cecil Bank. Title to 127 Ebenezer was never transferred to Halsey. Halsey never told the bank that she was the true purchaser of 127 Ebenezer, nor did the bank know that Halsey and Whitehurst had orchestrated the sale of the foreclosed property at the fraudulent price of $150,000, instead of the appraised pre-renovation price of $295,000.

As a result of Halsey’s misrepresentations and omissions, the bank lost approximately $145,000.

Halsey faces a maximum sentence of 30 years in federal prison for each offense: conspiracy to commit bank fraud; false statement in bank records; and receipt of a bribe by a bank official. Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors. U.S. District Judge Deborah K. Chasanow has scheduled sentencing for November 6, 2020 at 11:00 a.m.

The guilty plea was announced by United States Attorney for the District of Maryland Robert K. Hur; Special Agent in Charge Mark P. Higgins of Federal Housing Finance Agency, Office of Inspector General (FHFA-OIG), Mid-Atlantic Region; Special Agent in Charge Patricia Tarasca of Federal Deposit Insurance Corporation, Office of Inspector General (FDIC/OIG), New York Region; Special Inspector General Christy Goldsmith Romero for the Troubled Asset Relief Program (SIGTARP); and Inspector General Hannibal “Mike” Ware of the Small Business Administration, Office of Inspector General (SBA/OIG).

Mary Beyer Halsey used her position as President and CEO of Cecil Bank for her personal benefit, causing a loss to the bank, which had already received federal taxpayer funds as part of the Troubled Asset Relief Program,” said U.S. Attorney Robert K. Hur. “Corrupt bank officials undermine the public’s trust in our financial system.

The Federal Housing Finance Agency Office of Inspector General (FHFA-OIG) is committed to investigating allegations of fraud committed by officers of financial institutions which are members of the 11 Federal Home Loan Banks (FHLBanks) because their crimes strike at the heart of the FHLBank System,” said Mark Higgins, Special Agent in Charge of the FHFA-OIG’s Mid-Atlantic Region. “We are proud to have partnered with the U.S. Attorney’s Office for the District of Maryland on this case.”

This plea illustrates the tremendous harm bank insiders can cause when they use their positions for personal gain, breaking the trust placed in them by their employees, shareholders, and customers,” said Patricia Tarasca, Special Agent in Charge, New York Region, Office of Inspector General for the Federal Deposit Insurance Corporation. “We thank our law enforcement partners and appreciate the cooperation between investigating agencies.

Today, another bank CEO pleads guilty to committing fraud against the bank while the bank was in TARP,” said Special Inspector General Christy Goldsmith Romero. “Cecil Bank CEO Halsey pled guilty to conspiracy to commit bank fraud, making false statements in bank records, and receiving a bribe in a fraud that caused losses to Cecil Bank. Taxpayers lost nearly $11 million in TARP when Cecil Bank failed. SIGTARP commends U.S. Attorney Robert Hur and his team for fighting financial fraud related to TARP.”

OIG and its law enforcement partners are poised to root out fraud and bring wrongdoers to justice,” said SBA Inspector General Hannibal “Mike” Ware. “I want to thank the U.S. Attorney’s Office and our law enforcement partners for their dedication and pursuit of justice.”

Daniel Whitehurst, age 36, Bel Air, Maryland, pleaded guilty under seal to the federal charge of mail fraud on April 6, 2018. Whitehurst faces a maximum sentence of 30 years in federal prison for conspiracy to commit bank fraud. Judge Chasanow has not scheduled a date for Whitehurst’s sentencing.

United States Attorney Robert K. Hur commended the FHFA-OIG, Mid-Atlantic Region; FDIC/OIG; SIGTARP; and SBA/OIG for their work in the investigation. Mr. Hur thanked Assistant U.S. Attorneys Martin J. Clarke and Harry M. Gruber, who are prosecuting the case

Michael Scott Leslie, 57, Boulder, Colorado, pleaded guilty today to federal bank fraud and aggravated identity theft charges.

According to the stipulated facts contained in Leslie’s plea agreement, Leslie owned, operated, or otherwise had an interest in several business entities, some of which were operated out of Colorado.  These entities were involved in or affiliated with financing or originating residential mortgage loans.  Through these business entities, Leslie sold residential mortgage loans to investors, including an FDIC-insured bank in Texas (“the victim bank”).

Between October 2015 and October 2017, Leslie devised and executed a scheme to defraud the victim bank by selling it 144 fraudulent residential mortgage loans valued at $31,908,806.88.  These loans were purportedly originated by one of Leslie’s companies, Montage Mortgage, and “closed” by Snowberry, which earned fees for the closing.  The loans were then presented and sold to the victim bank until Montage identified a final investor.  For these 144 fraudulent loans, that final investor was Mortgage Capital Management (MCM)

Leslie never disclosed to the victim bank that he operated MCM and Snowberry, or the fact that sales to investor MCM, even if they had been real, were not arms-length transactions.

The 144 residential mortgage loans sold to the victim bank were not, in fact, real loans.  The borrowers listed on these 144 fraudulent loans were real individuals, but they had no idea that their identities had been used as part of the sale of the fraudulent loans. The defendant had access to their personal identifying information in one of two primary ways:  (1) the borrowers had used Montage for legitimate residential real estate transactions which were properly executed and closed, or (2) the borrowers had been solicited by Montage about refinancing their existing loans.  In the case of refinance transactions, Montage secured permission from the borrowers to request credit scores and history from the major credit agencies.  After receipt of those credit scores, Montage often told these would-be refinance borrowers that they did not qualify for a refinance.  Leslie then recycled the borrowers’ information, obtained through prior legitimate transactions or attempted refinances, to create and sell nearly $32 million of fraudulent loan packages.

To execute this scheme, Leslie forged signatures on closing documents and fabricated and altered credit reports as well as title documents, often by using the names of legitimate companies.  The fraudulent real estate transactions were never filed with the respective counties in which the properties were located, there were no closings, and no liens were ever recorded.  Through numerous bank accounts for the various business entities and his personal accounts, the defendant used money in a Ponzi-like fashion from prior fraudulent loans sold to the victim bank to fund future fraudulent loans.  This complex flow of money continued until the defendant’s fraud was detected.  When the fraud was discovered, the victim bank still had 12 fraudulent loans, valued at $3,887,505.93, on its books that it could not, given that the loans did not exist, sell to any other legitimate third-party investor.

Leslie appeared remotely on a $50,000 unsecured bond, which was continued at the hearing’s conclusion.  The Denver office of the FBI, and the Offices of the Inspector General for both the Department of Housing and Urban Development (HUD) and the Federal Deposit Insurance Corporation (FDIC) joined in today’s announcement.

United States Attorney Jason R. Dunn made the announcement.

Chief U.S. District Court Judge Philip A. Brimmer presided over the change of plea hearing today, July 31, 2020.  Leslie was first charged by information on June 5, 2020.  This case was investigated by the Denver office of the FBI, and the Offices of the Inspector General for both the Housing and Urban Development and the Federal Deposit Insurance Corporation.  The defendant was prosecuted by Assistant U.S. Attorneys Hetal J. Doshi and Jeremy Sibert.

A copy of this press release is located on the website of the U.S. Attorney’s Office for the District of Colorado.  Related court documents can be found on PACER by searching for Case Number 20-cr-171.

The year 2020 marks the 150th anniversary of the Department of Justice.  Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.

Barry Wayne Plunkett Jr., 60, and Nancy Plunkett, 55, both of Hyannis Port, Massachusetts, a former Massachusetts attorney and his wife were indicted today in federal court in Boston in connection with various mortgage fraud schemes.

According to the indictment, until he was disbarred in October 2017, Barry Wayne Plunkett Jr. owned and operated the Plunkett Law Firm where his wife, Nancy Plunkett, was his office assistant and paralegal.

The indictment alleges that the defendants engaged in several bank fraud schemes. In one scheme, from September 2012 to July 2016, the defendants defrauded six mortgage lenders and 14 homeowners for whom the Plunkett Law Firm handled the closings for new mortgage loans to refinance residential properties. The defendants informed the mortgage lenders that pre-existing mortgages were paid off from the new loan proceeds when, in fact, the Plunketts intentionally failed to pay off the prior liens and instead converted more than $900,000 in payoff funds for their own purposes.

In other bank fraud schemes – between April 2015 and March 2018 – it is alleged that the Plunketts fraudulently used various names, entities and false documents to obtain three successive mortgage loans on their home in Hyannis Port, Massachusetts in amounts of $412,000, $470,000 and $1.2 million. The defendants pledged as collateral a property in Hyannis Port that was held in a family trust for which Barry Wayne Plunkett Jr. was one of three beneficiaries. Both defendants participated in providing false documents to the lenders, including false title reports and other records to falsely represent that the property was free and clear of existing mortgage liens and forged documents in the names of other people. The defendants also allegedly made misrepresentations to a lender that Nancy Plunkett was a single woman living in Wellesley who was purchasing the property in her maiden name as a business investment when, in fact, the defendants had been married since 2014 and the property was their residence.

Both were were indicted on five counts of bank fraud and one count of aggravated identity theft. Barry Wayne Plunkett Jr. was also charged with one count of tax evasion.

The charge of bank fraud provides for a sentence of up to 30 years in prison, five years of supervised release and a fine of $250,000. The charge of tax evasion provides for a sentence of up to five years in prison, three years of supervised release and a fine of $250,000.  The charge of aggravated identity theft provides for a mandatory two-year sentence to be served consecutively to any other sentence imposed. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.

 

United States Attorney Andrew E. Lelling; Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; and Kristina O’Connell, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston made the announcement today. Assistant U.S. Attorney Victor A. Wild of Lelling’s Securities, Financial & Cyber Fraud Unit is prosecuting the case.

David Daughtrey, 60, El Cajon, California, pleaded guilty in federal court today to bank fraud and tax evasion charges, admitting that over the course of several years he evaded taxes by failing to report $498,612 of income to the IRS, and also orchestrated an illegal scheme to fraudulently obtain a mortgage for his $1.8 million residence using a third party.

Daughtrey admitted that from July 2006 until April 2016, he conspired with others to commit bank fraud and tax evasion. As part of the bank fraud scheme, Daughtrey directed another individual to submit a mortgage application to Wells Fargo to purchase a $1.8 million five-bedroom residence, and to falsely claim that the funds used as down payment belonged to the third party and the residence would be used by the third party.  In reality, Daughtrey provided the funds, and the home was intended to be Daughtrey’s primary residence. Daughtrey made monthly mortgage payments of approximately $8,000 for his residence, but continued to represent to the bank that the third party owned the house.  Daughtrey later submitted a false hardship letter on behalf of the third party in an effort to get the bank to modify the terms of the loan on the home.  As part of the plea agreement, Daughtrey admitted he was the true owner of the residence at all relevant times, and promised to make a good faith effort to transfer the legal ownership of the home into his own name.

Daughtrey also admitted as part his plea that over several years, he and his spouse (who is not charged in the case) conspired to commit tax evasion by filing tax returns listing substantially less income than Daughtrey actually earned.  Daughtrey’s tax return for the year 2012 omitted at least $498,612 in income.  Daughtrey failed to report his total income in tax years 2013, 2014, and 2015, and did not file timely tax returns for subsequent years.  According to the plea agreement, the resulting tax loss to the IRS for the years 2012-2014 was $456,536.   Daughtrey agreed to pay $1,016,457.91 in restitution to the IRS, which includes the total tax loss plus penalties and interest.

As part of his plea agreement, David Daughtrey also agreed to pay over $1 million in restitution to the Internal Revenue Service. He is scheduled to be sentenced on November 16, 2020, before U.S. District Judge Larry A. Burns.

People who cheat on their taxes are cheating all other law-abiding tax payers,” said U.S. Attorney Robert Brewer. “Mr. Daughtrey blatantly disregarded his tax obligations for years.  The defendant not only abused the tax system for his own financial benefit, but conspired to commit bank fraud in order to maintain this lifestyle.” Brewer commended the excellent work of prosecutor Oleksandra Johnson and FBI and IRS agents.

The FBI is dedicated to ensuring that white collar crimes are uncovered and prosecuted,” stated FBI Acting Special Agent in Charge Omer Meisel. “Today, David Daughtrey has admitted to mortgage fraud and tax evasion.  This case illustrates that the FBI will continue to investigate those individuals that engage in fraudulent financial schemes that cause harm to our banking industry and defraud the government of tax revenue.

Our Nation’s tax system funds critical infrastructures and vital programs, including supporting our citizens and small businesses during the ongoing pandemic,” Ryan L. Korner, Special Agent in Charge, IRS Criminal Investigation. “Honest Americans’ compliance with the tax laws is imperative. Rather than pay his fair share, David Daughtrey chose to live lavishly, while intentionally failing to report his true income and evading the payment of over $400,000 in taxes.  Today’s guilty plea demonstrates that the IRS will diligently continue our important enforcement efforts despite the ongoing challenges posed by Covid-19.  We will work alongside our law enforcement partners in a collective effort to enforce the law and ensure the public trust.”

SUMMARY OF CHARGES

Conspiracy to Commit Bank Fraud and Tax Evasion, 18 U.S.C. § 371 (count 1); and

Making a False Tax Return, 26 U.S.C. § 7206(1) (count 2).

Maximum penalty:

Five years’ imprisonment and $250,000 fine (count 1)

Three years’ imprisonment and a maximum fine of $250,000 or twice the gross gain or gross loss resulting from the offense, whichever is greatest (count 2)

AGENCY

Federal Bureau of Investigation

Internal Revenue Service