Adrian Levale Cole, 40, and Albert Terrance Watkins, 47, both of Houston, Texas, have been sentenced to prison for their roles in a multi-million-dollar mortgage fraud scheme.
Cole owned and operated the “fictitious” companies AC Homes and WT Homes and generated more than $10 million in fraudulent home loan submissions at and through Phantom Marketing, Capri Mortgage, and United National Mortgage by recruiting borrowers with good credit in Houston and the surrounding area. He pleaded guilty to wire fraud and false representation of Social Security numbers in June 2010. United States District Judge David Hittner sentenced Cole to a 108-month term of incarceration to be followed by a three-year term of supervised release.
Watkins who devised the scheme with Cole to purchase multiple residential properties in the greater Houston area through fraudulent mortgage loans, was sentenced to 150 months’ incarceration by United States District Judge David Hittner. Watkins’ role in the scheme was two-fold. He was both a recruiter of borrowers with good credit on behalf of Phantom Marketing and a loan processor at Capri Mortgage and subsequently at United National Mortgage. Watkins pleaded guilty in June 2010 to conspiracy to commit wire fraud. Judge Hittner has also imposed a three-year term of supervised release to be served by Watkins upon completion of his prison term.
The scheme involved the borrowers with good credit to agree and to apply for home mortgage loans from multiple lenders, with the understanding that they would not be responsible for the monthly mortgage payments-rather, Phantom Marketing would make all payments on all loans. Watkins explained to the borrowers that the portions of the approved loan proceeds from the purchased homes would go to them and/or Watkins and/or Cole and others. As was true of most of the other loans that were part of this scheme, only the first few monthly mortgage payments were made, and then the mortgage loans went into default for non-payment.
Specifically, as related to Cole and his counts of conviction, in December 2004 Cole purchased a Houston residential property for $110,000, an “inflated” sales price, using a false Social Security number belonging to a minor on the home mortgage loan application with a “created” line of credit that was ultimately approved for $99,000. Loan funds from the bank account of the lender, People’s Choice Home Loans Inc., were wired into the bank account of the title company. Out of the loan proceeds, a check in the amount of $69,100 issued to AC Homes, Cole‘s company, as a “Contractor Loan.” No construction work of any kind was ever done by AC Homes on that property located in Houston. On June 23, 2005, Cole sold this property to a “straw purchaser,” who purchased it for a greater “inflated” sales price of $150,000. According to the title file, $105,000 went to pay off Cole mortgage loan and $39,551.33 cash went to seller, Cole. No improvements were ever done to this property. The straw buyer defaulted on $150,000 in loans and the loss to bank, after resale of the foreclosed home, has been determined to be $105,128.
In addition to the prison terms, Judge Hittner has also ordered Cole and Watkins to pay restitution, jointly and severally, to various financial institutions who are currently the servicers of the loans as a result of the bankruptcy and closure of the now defunct, initial lenders. The final amount of restitution will be determined by the court within 90 days.
United States Attorney José Angel Moreno announced the sentencing.
The investigation leading to the charges was the result of a joint investigation conducted by agents of the FBI, Friendswood Police Department, Internal Revenue Service – Criminal Investigations and the Social Security Administration – Office of Inspector General. Assistant United States Attorneys Melissa J. Annis and Carolyn Ferko prosecuted the case.