2 Sentenced for Illegal Real Estate Flipping Scheme

Allison Tussey —  March 18, 2013 — Leave a comment

Geoffrey Montani, 36, and Kenneth Jones, 50, both of Portland, Oregon, were sentenced to 15 months in prison in separate hearings following their convictions for wire fraud in connection with a mortgage fraud scheme.

Montani was sentenced by the Honorable Robert E. Jones on Friday March 15, 2013. Jones was sentenced by the Honorable Anna J. Brown on Thursday, March 7, 2013. In addition to the prison sentence, each was ordered to pay restitution in an amount exceeding $1.4 million.

In mid-2005 through April 2007, Montani and Jones bought and resold, flipped, houses in the Portland metropolitan area. Rather than sell these houses to real buyers in arms-length negotiations, the defendants, in 37 separate transactions, knowingly sold the houses to straw buyers provided by another member of the scheme, Marty Folwick. Folwick was convicted in 2008 and sentenced to 63 months in prison.

The scheme, in essence, worked as follows: Montani and Jones purchased residential houses in the Portland area with money provided by Montani‘s father, Stephen Montani, and other hard money investors. In some cases, remodeling was done on the house after purchase. Rather than listing the house for resale through a real estate agent or other traditional means, Montani and Jones contacted Folwick, told him they had a property for sale at a set price, and solicited him to produce a straw buyer for the property in exchange for a kickback following closing.

These straw buyers had no intent to live in the property or pay the monthly mortgage, but they allowed (or were duped into allowing) their names and credit scores to be used on the mortgage applications, on the false promises that they would become successful real estate investors. Once a straw buyer was identified, a mortgage application was prepared by Montani and Jones or their associates for the straw buyer to sign. Montani and Jones knew that each application contained false information and would be submitted to a lender for approval based on the false information in the application.

In a number of cases, Montani and Jones created false supporting documentation for inclusion with the application. Once the mortgage loan was approved, the property was sold to the straw buyer; thereafter, Montani and Jones paid off the hard money loan and divided the significant profits between themselves and others. In every case, the property subsequently fell into foreclosure, causing losses to the mortgage lender. The losses on the 37 properties identified by the government for prosecution totaled $1.9 million.

U.S. Attorney for the District of Oregon Amanda Marshall said, “Mortgage fraud committed during the housing bubble of 2005-2008 continues to impact the livability of our community. These convictions demonstrate that the Department of Justice remains committed to investigating and prosecuting those who are responsible for the damage done to our neighborhoods and financial institutions.”

The investigation was initiated by the Portland Field Office of the Federal Bureau of Investigation. The case was prosecuted by Assistant U.S. Attorney Scott Erik Asphaug.

Allison Tussey

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