6 Borrowers Sentenced for Involvement in $7M Mortgage Fraud Scam

Allison Tussey —  September 9, 2013 — Leave a comment

Six borrowers were sentenced in Oregon by U.S. District Court Judge Ann Aiken for their roles in a large-scale mortgage fraud scheme.

Cary Martinez, 41, Boulder, Colorado, was sentenced to 36 months of prison, 200 hours of community service, and three years of supervised release; Barry Seaton, 50, Long Beach, California, was sentenced to 24 months in prison, and three years of supervised release. Aside from their role in the mortgage fraud scheme, they were also sentenced for laundering drug proceeds through real estate and financial transactions. Kurtis Israel, 40, Portland, Oregon; Sean Bart, 43, Bend, Oregon; Jason Hoby, 40, Albany, Oregon; and David McNulty, 40, Bend, Oregon, were each sentenced to five years of probation and 500 hours of community service.

The last charged defendant in these cases, Amy Ridley, 54, a Kentucky resident, pled guilty on Wednesday, September 4, 2013, to her role in the scheme and is scheduled to be sentenced on January 22, 2014, at 9 a.m. before U.S. District Chief Judge Ann Aiken. The maximum penalty for conspiracy to commit wire fraud is 20 years in prison and a $250,000 fine.

Each of the defendants were client-borrowers of Peter Wilkinson, 43, Eugene, Oregon, and six others for their roles in a $7 million mortgage fraud scheme. Wilkinson received the largest sentence: 57 months in prison and five years of supervised release. The court has not yet ruled on restitution.

According to court records, Wilkinson was a former state-licensed mortgage broker and owned and operated Deschutes Mortgage Group, Bend, Oregon, during the housing boom. As part of his scheme, Wilkinson knowingly submitted almost 60 bad loans for more than 30 properties, causing lenders to lose between $2.5 million and $7 million. Wilkinson pocketed more than $500,000 from these loans. He also involved seven of his client-borrowers in his scheme: Cary Martinez, Barry Seaton, Kurtis Israel, Sean Bart, Jason Hoby, David McNulty, and Amy Ridley.

To convince lenders to approve the loans, Wilkinson and his client-borrowers falsely inflated their monthly incomes on home loan applications, omitted their liabilities from home loan applications, falsely claimed on home loan applications that the financing was for a primary residence rather than an investment property, or used straw borrowers to obtain financing for real estate. Additionally, Wilkinson and his client-borrowers deposited large amounts of money, often $100,000 or more, into their checking accounts to falsely prove cash reserves needed for the loan approval process.

U.S. Attorney Amanda Marshall noted, “The defendants’ fraud was extensive, involving at least eight individuals, more than 30 properties, more than 50 loans, money laundering, numerous victims, countless financial transactions, straw borrowers, millions of dollars in losses, and potentially millions of dollars in restitution. These defendants, members of the finance and real estate industries, and home buyers need to understand that fraud will not be tolerated. Such selfish choices affect more than a few individuals. They affect entire industries and communities. The defendants’ conduct, when taken with similar fraudsters, contributed to the housing bubble that left our great state and nation reeling when it burst.”

This case was investigated by the Internal Revenue Service-Criminal Investigation and the Federal Bureau of Investigation and is being prosecuted by Assistant U.S. Attorney Scott E. Bradford.

Kenneth Hines, Special Agent in Charge of IRS-Criminal Investigation in the Pacific Northwest, stated, “Mortgage fraud continues to be a burden on our economy and affect our daily lives. When so-called professionals lie and cheat to pay for an elaborate lifestyle that includes expensive cars and tickets on the 50-yard line, it may bring an illusion of success. However, the ultimate outcome may be serving time in jail.”

“The main defendant put hundreds of thousands of dollars into his own pockets while defrauding more than 20 banks and businesses out of millions of dollars,” said Greg Fowler, Special Agent in Charge of the FBI in Oregon. “This case represents a systematic and deliberate attempt to undermine the ground on which the housing market in the Bend region is built. The fraud has a direct impact on the health of our economy and, therefore, on the financial well-being of all people in central Oregon.”

Allison Tussey

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