David Wehrs, Sr., 54, Annapolis, Maryland, pleaded guilty to wire fraud in connection with a scheme to defraud investors and financial institutions of more than $2.3 million.
According to his plea agreement and as previously reported on Mortgage Fraud Blog, Wehrs owned Maryland Title and Escrow Company, Inc., located in Annapolis, Maryland and operated a small home remodeling company called Show-Me. From 2007 to October 2009, Wehrs induced individuals to invest money through Maryland Title into a purported FDIC-insured money market fund that Wehrs “guaranteed” would pay monthly interest payments of 10.85%. Instead of depositing the money into an “American Funds Fixed Rate Money Market” as promised, Wehrs deposited investor funds into one of two bank accounts he controlled in the name of his title company. Wehrs wire transferred a large portion of these investor funds to a brokerage account in the name of his title company, then used the money to “day trade.” Day trading is the rapid buying and selling of securities throughout the day in the hope that the stocks will continue climbing or falling in value for the seconds to minutes that they are owned, allowing a person to lock in quick profits. During the scheme, Wehrs conducted millions of dollars of stock trades per month. From early 2008 until mid-2009, Wehrs lost approximately $1 million.
In addition to day trading, Wehrs used some of the investor funds to: pay “monthly interest” and “redemptions” to other investors; pay expenses of his other businesses, including Show-Me; make escrow payments for his title company; buy real estate and personal property; and pay other personal expenses.
Wehrs admitted that in June 2009, when he had no money left in his personal bank accounts or day trading accounts to pay interest due to investors, he used $630,611 earmarked to pay lending institutions for mortgage payoffs from his escrow account at Maryland Title to pay investors, causing that amount of loss to the title insurance company for Maryland Title. He also used $100,000 from the Maryland Title escrow account that was earmarked as earnest money for the purchase of an individuals home to pay interest to investors, causing a loss of $100,000 to the home buyer.
The total loss as a result of Wehrs’ scheme is $2,371,061 to investors and the title insurance company. U.S. District Judge Benson Everett Legg has scheduled sentencing for May 19, 2010 at 3:00 p.m.
Wehrs faces a maximum sentence of 20 years in prison. As part of his plea agreement,Wehrs is required to pay restitution of $2,371,061 and to forfeit any assets derived from the scheme. Any forfeited assets will be applied to the restitution amount.
The charge was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation.
Mr. Rosenstein and Mr. McFeely gave special thanks to the Securities and Exchange Commission and the Maryland Insurance Administration for their work in the investigation and prosecution of this case.
United States Attorney Rod J. Rosenstein commended Assistant United States Attorney Tonya Kelly Kowitz, who is prosecuting the case.