Numerous federal cases and other court actions have been unsealed involving attorneys, mortgage brokers, real estate professionals, and developers, who are charged with federal crimes pertaining to mortgage fraud.
1. Triple-R Enterprises at al.
DEXTER TIRRELL JONES, 42 Raleigh, North Carolina; developer RICKY LAMONT CONGLETON, 43, Zebulon, North Carolina; closing attorney PHILLIP GRAHAM ROSE, 42 Raleigh; developer VINCENT MALDINI, 46, Seabright, New Jersey; developer JOHNNY RAY PEELE, 43, Wake Forest, North Carolina; JOSEPH CARL HOLLIS, 35, Raleigh; developer DWAYNE THOMAS HALL, 49, Wake Forest, and former real estate broker, TRESHELL MAYO HERNDON, 39, Raleigh, have each been charged for their roles in a conspiracy to defraud mortgage lenders.
Chief United States District Judge James C. Dever ordered the unsealing of the cases against the mortgage broker, developers and closing attorney. Each charged in a one-count criminal information with Conspiracy to Commit Bank and Wire Fraud (and in some instances, also Conspiracy to Commit Mail Fraud), in violation of Title 18, United States Code, Section 1349, which carries a maximum penalty of 30 years in prison and a $1 million fine, or twice the gain or loss from the conspiracy, whichever is greater. HOLLIS is charged with Conspiracy to Commit Mail, Wire, and Bank Fraud, in violation of Title 18, United States Code, Section 371, which carries a maximum penalty of up to five years in prison and a fine of up to $250,000, or twice the gain or loss from the conspiracy, whichever is greater.
The charging documents collectively allege that between 2003 and 2009, CONGLETON, HERNDON, PEELE, HALL, MALDINI, JONES, HOLLIS, ROSE, and others known to the United States Attorney, were involved in a conspiracy to defraud numerous banks and lenders in the United States, resulting in mortgage loan disbursements exceeding $20 million, $5 million in loan proceeds, and losses exceeding $1 million. The conspiracy further resulted in substantial losses to the United States Department of Housing and Urban Development (HUD) through its Federal Housing Administration (FHA) program.
The charging documents indicate that various developers in the scheme, including but not limited to CONGLETON, operating through Triple R Enterprises, LLC; HERNDON, operating through Herndon & Herndon Enterprises, LLC; HALL, operating through Dwayne T. Hall Builders; PEELE, operating through P.A.P’s Custom Home Builders, LLC and C and P Custom Homes, LLC; and MALDINI, operating through NY Construction, LLC, unlawfully profited from the sale of properties purchased or developed by the conspirators to individuals who did not have the financial means to purchase the properties, identified in the charging documents as “straw buyers”. To execute the scheme, CONGLETON, HERNDON, HALL, PEELE, MALDINI, and others involved in the scheme referred to as “Builders”, would cause entities owned or controlled by them to purchase and develop a property for quick resale. The builders caused individuals, referred to herein as “Intermediaries”, to locate individuals who were willing to allow their name and credit to be used to purchase properties from the Builders. The Intermediaries, including but not limited to HOLLIS, MALDINI and then mortgage broker, JONES, assisted the straw buyers to complete a loan application with a lender. For their services to the Builders, the conspirators paid the Intermediaries a kickback, or lump sum of cash, from the loan proceeds used by the straw buyers to purchase the properties from the Builders.
Conspirators enticed the straw buyers to participate in the scheme by making certain promises and representations including, but not limited to the following: (1) The straw buyers would be paid a sum of cash for purchasing the properties, (2)the straw buyers would not be required to make a down payment, (3) the straw buyers were told that the homes would be rented and the rental income would be used to pay the mortgage,(4) the straw buyers would not be required to make interest payments on the mortgage loans utilized to purchase the properties from the Builders.
CONGLETON, HERNDON, HALL, PEELE, MALDINI, and other Builders executed contracts to sell properties to the straw buyers for their appraised value, but set aside 15 to 20% of the sales price to use as the straw buyer’s down payment, and to pay kickbacks to the straw buyers and others participating in the scheme. The Builders further obtained and caused others to obtain cashier’s checks from accounts owned or controlled by the Builders to cover the down payment obligations of the straw buyers. The cashier’s checks were written to make it appear to lenders and banks that the straw buyers were providing the down payment funds when, in fact, such funds came from the Builders. These cashier’s checks were given to a closing attorney who handled the sale of the property from the Builder to the straw buyer.
Raleigh attorney PHILLIP GRAHAM ROSE served as the closing attorney on some, but not all, real estate transactions between Builders and straw buyers that were funded by banks and mortgage lenders in the scheme. In connection with the transactions involving the Builders and straw buyers, ROSE created and executed, and had the buyers and sellers execute, HUD-1 settlement statements that falsely indicated that the borrower brought cash to the closing when, in fact, as ROSE knew, the cash was provided by the Builders, including CONGLETON, HERNDON, HALL, PEELE, MALDINI, and others. ROSE and his staff transmitted the false HUD-1 settlement statements via mail and interstate wires to banks and mortgage lenders who relied upon them in funding the transactions. The Builders and straw buyers executed the HUD-1 settlement statements reflecting that the straw buyers were making the down payment on the properties, when in fact, the down payments were made by the Builders.
Because of the foregoing actions, banks and other lenders were deceived into disbursing loan proceeds to fund the purchase of the properties from CONGLETON, HERNDON, HALL, PEELE, MALDINI, and other Builders. The banks and lenders issued loans they either would not otherwise have made, or issued loans on terms they would not otherwise have authorized, had the Builders and others not concealed the true terms of the transactions, the actual qualifications and intentions of the straw buyers, the promises and representations made by the Builders and others to the straw buyers, and the false down payments of the straw buyers as reflected on the HUD-1 settlement statements.
Rental income was collected and sometimes not forwarded to pay the mortgage, as promised. The Builders also did not always make interest payments on loans issued to the straw buyers. As a result of the scheme, straw buyers were left accountable for loans that they did not have the financial means to repay, and banks were forced to initiate foreclosure proceedings and sell the properties at a loss.
In an effort to recover losses associated with the scheme, the United States Attorney’s Office, with the cooperation of the various federal agencies participating in the Mortgage Fraud Task Force, and the United States Marshal’s Service, has seized or encumbered various parcels of real property and other property in North Carolina deemed to be forfeitable to the United States as criminal proceeds of the offense.
ROSE, JONES, CONGLETON, and MALDINI have each admitted their their role in the scheme and are awaiting sentencing, anticipated to occur later in 2013. PEELE is scheduled to appear on the charges on July 15, 2013. HERNDON, HALL, and HOLLIS are each scheduled to appear on the charges on August 19, 2013.
The investigation of this matter is ongoing and anyone with knowledge is encouraged to contact the FBI at (704) 672-6100. If you believe that you are a victim in connection with this investigation please contact the Victim/Witness Coordinator for the United States Attorney’s Office at (919) 856-4003.
2. EZN HOMES / PREMIER PROPERTIES INVESTIGATION
Chief United States District Judge James C. Dever ordered the unsealing today of the cases against real estate developers DAVID LEWIS JOHNSON, 39 of Cary, and ARTHUR LEE BARNES, JR., 46 of Rocky Mount. The BARNES and JOHNSON cases are related to the pending cases against real estate agent MARK TKAC, 47, of Raleigh, former mortgage broker MARK THOMAS BOWE, 56, of Jonesboro, Georgia, LILLIANA DELIA DEIAC, 43, of Jamaica, New York, and the recently concluded case against closing attorney JEFFERY SCOTT TAGGART, 48, of Winterville. JOHNSON, BARNES, and TKAC, were each charged in a one-count criminal information with Conspiracy to Commit Mail, Wire, and Bank Fraud, in violation of Title 18, United States Code, Section 1349, which carries a maximum penalty of 30 years in prison and a $1 Million fine. TAGGART was charged with Conspiracy to Commit Mail, Wire, and Bank Fraud, in violation of Title 18, United States Code, Section 371, which carries a maximum penalty of five years in prison and $250,000 in fines, and Subscribing to a False Income Tax Return in violation of Title 26, United States Code, Section 7206(1), which carries a maximum penalty of three years in prison and a $100,000 fine, plus costs of prosecution. BOWE was charged in an indictment with Conspiracy to Commit Wire and Bank Fraud, in violation of Title 18, United States Code, Section 1349; Bank Fraud, in violation of Title 18, United States Code, Section 1344; Wire Fraud, in violation of Title 18, United States Code, Section 1343; and Making False Statements to Federally Insured Financial Institutions, in violation of Title 18, United States Code, Section 1014; all of which carry a maximum penalty of 30 years in prison and a $1 Million fine.
The criminal informations for JOHNSON, BARNES, TKAC, and TAGGART collectively allege that between September of 2002 and May of 2008, JOHNSON, BARNES, TKAC, and TAGGART entered into an agreement to defraud banks and home mortgage lenders located throughout the United States. The charges indicate that JOHNSON, operating through EZN Homes, Inc., BARNES, operating through Premier Investments, Inc., and TKAC recruited investors, who were in fact “straw buyers,” to secure home mortgage loans under the guise of an investment plan. The straw buyers allowed the conspirators to use their name and credit to purchase properties and obtain loans from banks and mortgage lenders. The straw buyers lacked the financial means to service the debt on the loans acquired in their names. The straw buyers also did not have a long-term interest in the properties that the conspirators caused to be purchased in their names. The conspirators induced the straw buyers to allow their name and credit to be used by making various representations, including, but not limited to, the promise of a cash kickback from the loan proceeds disbursed at the time of the real estate closing.
TKAC, a licensed real estate broker at the time, participated in the conspiracy first by acting as a straw buyer, and later recruiting others to serve as straw buyers to facilitate the scheme by JOHNSON and BARNES.
The conspirators directed straw buyers to conduct the real estate closings with co-conspirator attorney TAGGART. TAGGART prepared false HUD-1 settlement statements for execution by the straw buyers as a part of the real estate closing and loan funding process. TAGGART then caused the HUD-1 settlement statements to be transmitted via mail and wire to banks and mortgage lenders, including FDIC regulated financial institutions, under the pretense that they reflected the economic truth of the underlying transaction.
In fact, however, the HUD-1 settlement statements prepared by TAGGART as a part of the scheme routinely contained false statements that were material to the lenders’ funding decisions including, but not limited to: the existence and degree of the buyer’s down payment, the actual contract price for the property, the rightful owner of the real estate specific to the transaction, and the true recipient of all loan proceeds disbursed by banks pursuant to the real estate closing.
The various banks and mortgage lenders who issued loans related to the mortgage fraud scheme were deceived by the use of straw buyers, in addition to the foregoing false and fraudulent statements made by JOHNSON, TAGGART, and other co-conspirators in connection with the loan closings. As a result of the scheme, lenders issued several million dollars in loans, a substantial portion of which are in default or foreclosure.
JOHNSON, BARNES, and TKAC each admitted their role in the scheme and are awaiting sentencing. TAGGART was previously sentenced on April 17, 2013, to 36 months in prison, followed by three years of supervised release for his role in the offense. JOHNSON, BARNES, and TKAC are scheduled to be sentenced in October of 2013 by Chief Judge Dever in Raleigh.
BOWE was indicted on April 4, 2013 for, among other things, Conspiracy to Commit Wire and Bank Fraud. The indictment alleges that BOWE, a former mortgage broker operating through New Equity Mortgage, LLC and Anna Mortgages, LLC, participated in the scheme by falsifying various aspects of loan applications including, but not limited to, the amount and source of income and assets of borrowers, the existing debts of borrowers, and borrowers’ intent to occupy the property being purchased as the borrower’s primary residence. It is also alleged that BOWE and another promoted the scheme by supplying false verifications of deposit and false account statements purporting to show that borrowers held assets with “Mutual Southern Investments”, when in fact Mutual Southern Investments did not exist, and the assets were entirely fictitious. BOWE’s arraignment is presently scheduled for Chief Judge Dever’s August 5, 2013 term of court.
DEIAC was indicted on April 4, 2013 for Making False Statements to a Federally Insured Financial Institution, and Making Material False Statements to the FBI. The indictment alleges that DEIAC forged her husband’s name and credit information without his knowledge on a $1,950,000 loan from Wells Fargo Bank for her purchase of 1016 Clear Creek Farm Drive in Raleigh. The indictment further alleges that DEIAC falsely told the FBI that she believed she was leasing a building in New York when she executed loan and closing documents for the Clear Creek Farm property. DEIAC is scheduled to be arraigned on the charges against her at Chief Judge Dever’s August 5, 2013 term of court in Raleigh.
An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent unless and until proven guilty in court.
The investigation of this matter is ongoing and anyone with knowledge is encouraged to contact IRS-CI at (910) 254-5150. If you believe that you are a victim on connection with this investigation please contact the Victim/Witness Coordinator for the United States Attorney’s Office at (919) 856-4003.
3. ALPINE PROPERTIES, ET AL. INVESTIGATION
JAMES THOMAS WEBB, 52, Miami, Florida, a former Raleigh developer, is presently scheduled to be sentenced in August of 2013 by Chief United States District Judge James C. Dever in Raleigh. WEBB was indicted on charges of Conspiracy to Commit Bank and Wire Fraud, in violation of Title 18, United States Code, Section 1349; 10 counts of Bank Fraud and Aiding and Abetting, in violation of Title 18, United States Code, Sections 1344 and 2; 3 counts of Wire Fraud and Aiding and Abetting, in violation of Title 18, United States Code, Sections 1343 and 2; and 36 counts of Making False Statements to Influence Banks on Loans and Aiding and Abetting, in violation of Title 18, United States Code, Sections 1014 and 2. On March 18, 2013, WEBB pleaded guilty to the offense of Conspiracy to Commit Wire and Bank Fraud, the maximum punishment for which is 30 years in prison and up to $1,000,000 in fines, or twice the gain or loss arising from the offense, whichever is greater.
WEBB’s case relates to the pending cases against former closing attorney AMY ROBINSON, 35, of Rolesville, former real estate appraiser, JACKIE GALE WEAVER, 55, of West Hamlin, West Virginia, and former national appraisal instructor, LARRY MAX MCDANIEL, 71, of Vienna, West Virginia, who have each pleaded guilty to their roles in the scheme. ROBINSON faces up to five years in prison and a $250,000 fine on the charge of Conspiracy to Commit Mail, Wire, and Bank Fraud, in violation of Title 18, United States Code, Section 371. WEAVER faces up to five years in prison and a $250,000 fine for Conspiring to Make False Statements on Loans in violation of Title 18, United States Code, Section 371. MCDANIEL faces up to 30 years in prison and $1 Million fine for Making False Statements on Loans and Aiding and Abetting, in violation of Title 18, United States Code, Section 1014 and 2.
WEBB’s indictment charges that between 2002 and 2006, WEBB operated various real estate companies, including Alpine Properties, LLC and Webb Builders, LLC for a profit. WEBB promised investors in multiple states quick, large, and safe financial gains by investing money with him. WEBB promised investors that he would use their money to purchase, renovate, and resell properties to first-time home buyers in various states, including North Carolina, Virginia, and Tennessee. WEBB caused investors to take out loans on properties that he and his companies had allegedly renovated.
The indictment further alleges that despite alleged philanthropic and humanitarian objectives, that WEBB carried out a fraud upon both the investors who gave cash to WEBB, and the banks and lenders who WEBB caused to disburse loan proceeds. According to the indictment, WEBB conspired with former attorney, ROBINSON, to falsify closing statements associated with the loan transactions. It is alleged that the closing statements falsified various facts, including the amount of money paid to WEBB on the transactions. WEBB is also alleged to have conspired with a former appraiser and national appraisal instructor, MCDANIEL, and his associate, WEAVER, to falsify appraisal reports that were given to banks and lenders in connection with investor loans. The appraisal reports falsely stated that MCDANIEL had physically viewed the properties, when in fact he had not. The indictment also alleges that the properties sold to investors and financed by banks were not always completed or in the condition represented in the appraisal reports.
During the course of the scheme, the indictment charges that WEBB lived lavishly, residing in a multi-million dollar mansion, driving expensive vehicles including a Bentley, traveling extensively, and otherwise paying himself handsomely.
WEBB is alleged to have abruptly left North Carolina for Florida in 2004, where he continued to market his services under new company names.
According to the indictment, based upon WEBB’s statements and representations to investors, various individuals collectively invested millions of dollars with WEBB and his companies. Additionally, banks and lenders are alleged to have disbursed millions of dollars in loans, leaving investors holding millions in debt. The indictment alleges that WEBB left various neighborhoods in North Carolina and Virginia blighted with boarded up and dilapidated homes, many of which were ultimately demolished as uninhabitable.
MCDANIEL, 71, pleaded guilty in federal court on June 11, 2012, to Making False Statements to Federally Insured Financial Institutions, and Aiding and Abetting. WEAVER pleaded guilty in federal court on September 21, 2011, to Conspiracy to Make False Statements to Federally Insured Financial Institutions. ROBINSON, 35, pleaded guilty in federal court on May 3, 2010, to conspiracy to commit mail, wire, and bank fraud. Sentencing in the cases of MCDANIEL, WEAVER, and ROBINSON, is presently scheduled at the same time as WEBB’s sentencing during Chief Judge Dever’s August 2013 term of court.
The investigation of this matter is ongoing and anyone with knowledge is encouraged to contact the FBI at (704) 672-6100.
If you believe that you are a victim on connection with this investigation please contact the Victim/Witness Coordinator for the United States Attorney’s Office at (919) 856-4003.
4. RBR CAPITAL ET AL. INVESTIGATION
The United States Attorney also announces the upcoming sentencings in August of 2013 for the pending cases against developer JUSTIN LEE ROOKS, 31, of Loris, South Carolina; developer MICHAEL THOMAS BARTLETT, 46, of Myrtle Beach, South Carolina; closing attorney ROBERT HAROLD MELVILLE, JR., 50, of Lake Waccamaw; and ANTHONY MICHAEL TEW, 31, of Conway, South Carolina. On December 11, 2012, ROOKS and BARTLETT pled guilty to Conspiracy to Commit Mail, Wire, and Bank Fraud, in violation of Title 18, United States Code, Section 1349. MELVILLE pled guilty to Conspiracy to Commit Bank and Wire Fraud, in violation of Title 18, United States Code, Section 1349. The charges against MELVILLE, ROOKS, and BARTLETT carry maximum penalties of 30 years in prison and up to $1 Million in fines or twice the gain or loss from the conspiracy, whichever is greater. On February 12, 2013, TEW pled guilty to Conspiracy to Commit Mail, Wire, and Bank Fraud, in violation of Title 18, United States Code, Section 371, which carries a maximum term of imprisonment of five years and up to $250,000 in fines.
The charging documents in these cases collectively allege that between May of 2004 and August of 2008, ROOKS, BARTLETT, and others conspired to defraud banks and lenders in connection with the purchase, development, and resale of properties in Columbus, Brunswick, and New Hanover counties. It is further alleged that the conspirators solicited individuals at seminars in Raleigh and elsewhere to allow construction loans to be obtained in their names for the benefit of the conspirators in exchange for cash. The conspirators told the buyers that the buyers would not have to make a down payment or interest payments on the loans, and that the properties purchased in their names would be sold within twelve months. TEW and other conspirators also posted signs which included such representations as, “easy financing” and “no down payment required,” even though the buyer/borrowers were generally required to make down payments at the time of the closings. The buyers were told that if properties could not be sold in twelve months, the conspirators would buy the properties back.
The conspirators in fact enticed the buyers to participate in the transactions and engaged in various actions to make it appear to the banks and lenders that the buyers were qualified for the loans. The charges allege that TEW and other conspirators deposited money into the bank accounts of the buyers to make it appear that they had sufficient assets to conduct the transactions. To close the loans, the conspirators also referred the buyers to MELVILLE, who was at that time a North Carolina attorney who practiced real estate law. MELVILLE participated in the conspiracy by engaging in actions that made it appear to the banks and lenders that the buyers had given down payment money at the time of closing when, in fact, the buyers did not bring such money.
The banks and lenders who loaned funds to the buyers were not informed of the cash kickbacks to the buyers by the conspirators. The banks and lenders were also not informed that the buyers did not in fact have the cash to close the transactions, and that the down payment money, if any, was provided by the conspirators.
Ultimately, according to the charging documents, the conspirators were unable to sell many of the properties purchased in the names of the buyers. The buyers did not have the means to repay all of the loans obtained in the names of the buyers and, as a result, many of the loans went into default. The banks and lenders were forced to sell the properties at a substantial loss.
The investigation of this matter is ongoing and anyone with knowledge is encouraged to contact IRS Criminal Investigation at (910) 254-5143. If you believe that you are a victim on connection with this investigation please contact the Victim/Witness Coordinator for the United States Attorney’s Office at (919) 856-4003.
“Mortgage fraud impacts families and devastates neighborhoods. The FBI is committed to protecting our nation’s economy by aggressively investigating those who attempt to undermine the financial stability of our housing market,” said John Strong, Special Agent in Charge of the Charlotte Division of the FBI.
“The Federal Deposit Insurance Corporation—Office of Inspector General is committed to its partnerships with others in the law enforcement community as we address mortgage fraud cases throughout the country. The American people need to be assured that their government is working to ensure integrity in the financial services and housing industries and that those involved in criminal activities that undermine that integrity will be held accountable,” commented the Federal Deposit Insurance Corporation Inspector General Jon T. Rymer.
“We recognize the negative impact that mortgage fraud has on our economy and on our communities. With actions like those announced today, a very clear message is sent: if you don’t operate within the boundaries of the law, we will not hesitate to act. We will continue to work with our law enforcement partners to ensure the U.S. Mail is safe and not used to further schemes like this”, said Inspector in Charge Keith Fixel, U.S. Postal Inspection Service.
HUD-OIG Special Agent in Charge Lester Fernandez said: “We are especially committed to aggressively pursuing mortgage and real estate professionals who instead of honoring their fiduciary responsibilities, abuse their positions and cause harm to FHA’s mortgage insurance programs. HUD-OIG is committed to working cooperatively with our law enforcement partners to bring these individuals to justice and protect the integrity of our programs.”
“IRS Criminal Investigation is committed to uncovering fraud and abuse in all facets of the housing market—a market upon which so many American families have pinned their hopes and their futures for so many years,” said Special Agent in Charge, Jeannine A. Hammett, Charlotte Field Office. “Partnering with the United States Attorney’s Office and other federal agencies, IRS Criminal Investigation is committed to combating mortgage fraud and other financial crimes to protect the American homeowner and the national economy.”
Each of the cases are being prosecuted by the Economic Crimes Section of the United States Attorney’s Office as a part of its Mortgage Fraud Task Force which was created in June of 2010. The investigation of these cases has been jointly conducted by various agencies, including the Federal Bureau of Investigation (FBI), the United States Department of Housing and Urban Development Office of the Inspector General (HUD-OIG), the Internal Revenue Service Criminal Investigation (IRS-CI), the United States Postal Inspection Service, the Federal Deposit Insurance Corporation—Office of the Inspector General (FDIC- OIG) and the Raleigh Police Department. Assistant United States Attorney William M. Gilmore represents the United States in each of these matters.