5 Indicted for Real Estate Development Conspiracy

Allison Tussey —  January 24, 2012 — 1 Comment

David P. Drake, Donald D. Snider, Jr., Vickie A. Hall, Heather A. Gibbs, and James B. Clarkson have been indicted in federal court, District of Kansas, for their roles in a mortgage fraud and investment scheme in Branson, Missouri.

According to the Indictment:

Defendants David Drake and Donald Snider, Jr., through Northshore Investments, LLC, entered into an arrangement with another person to purchase Tract 34, Indian Ridge, Branson, Missouri, for $3,260,000.  The defendants began seeking “investors” to obtain loans for the purchase of Tract 34.

Drake and Snider entered into an arrangement with the operators of My Investing Place (MIP), a company located in Salt Lake City, Utah. Under the arrangement, MIP obtained individuals, referred to as “credit-partners” to “invest” in the purchase of lots in Tract 34 and the construction of condos and houses in Indian Ridge, which were to be built by Western Site Services (WSS). MIP was given a $5,000 commission for each loan in which they provided the borrower.

In addition to agreeing to locate “credit-partners,” one principal with MIP agreed to act as a credit-partner himself, taking out loans for four properties in Indian Ridge. The credit-partners obtained construction loans in their names and were told they would not have to repay the loans and they would receive approximately $10,000 per loan. The credit-partners were also told they would not have to pay a down-payment for the loan, or make any of the loan payments. The credit-partners purchased the lots for $135,000 each from Northshore.

The defendants never informed the credit-partners that Northshore was controlled by defendants Drake, Snider, and Gibbs. Persons who agreed to be “credit-partners” applied for construction loans, which were funded by Columbian, Wells Fargo, and Lawrence Bank. At least 51 such loans were obtained. Columbian held 28 notes, Wells Fargo held 16, and Lawrence Bank held 7.

Defendant James B. Clarkson was a mortgage broker with Top Flight Mortgage. Drake and Snider used Clarkson to broker the credit-partner loans for the Indian Ridge project. Clarkson assisted the credit-partners by putting together loan applications that were submitted to the bank.

In the loan applications submitted to Columbian and Wells Fargo, Clarkson falsely listed the loan broker as “Shawn Johnson” because Clarkson was not licensed as a mortgage broker in Missouri or Kansas.

In some of the Indian Ridge project loan applications defendant Clarkson submitted, Clarkson stated the borrowers made more money than they actually earned, to ensure the borrower qualified for the loan.

Columbian, Wells Fargo, and Lawrence Bank relied upon the information in the loan applications submitted by Clarkson in determining whether to approve the loans for the Indian Ridge Project.

The defendants caused letters to be sent to Wells Fargo and Lawrence Bank stating credit-partners had paid an initial down payment, which was a false statement because no down payments were actually made.

WSS was supposed to construct the buildings on Tract 34, Indian Ridge. To fund the construction, WSS was required to submit invoices after work was completed. The invoices were referred to as “loan draws.”

WSS submitted invoices for loan draws for work that was either never performed, or the invoices grossly overstated the true value of the work.

For instance, WSS submitted loan draws for $8,258,565.93, which is approximately 76% of the total loans funded by Columbian. However, only 13 of the 28 properties with notes held by Columbian had any work performed on the property. None of the 28 properties were completed.

Defendant Victoria Hall set up CMH, which was purported to be a manufacturer of modular constructed buildings. However, as it related to the Indian Ridge project, CMH was used for the sole purpose of submitting false invoices. Drake and Hall submitted invoices for modular buildings allegedly provided by CMH for the Indian Ridge project, however, no modular construction was used at Indian Ridge Tract 34.

The proceeds from the loan draws were submitted by the banks to WSS. Defendant Heather Gibbs deposited the funds into a WSS account.

Instead of being used to pay for expenses related to the Indian Ridge project, the defendants used the loan money for personal expenses and business expenses for projects not related to the Indian Ridge project.

All of the Indian Ridge loans were defaulted upon. Columbian failed as a financial institution on August 22, 2008, and the loans it issued related to the Indian Ridge project were placed in receivership.

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Allison Tussey

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One response to 5 Indicted for Real Estate Development Conspiracy

  1. It’s amazing that they didn’t think this fraud would catch up to them. Any diligent bank would periodically check on the property to view it’s % of completion and compare that to the bank draws.

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