Otis Ray Hope, 53, Aiken, South Carolina, formerly of Hagerstown, Maryland, has been to sentenced to 37 months in prison, followed by three years of supervised release for tax evasion and subscribing to a false document in connection with the filing of a federal tax exemption for Shiloh Ministries of Hagerstown (Shiloh Company); and for conspiracy to commit bank fraud, in connection with a $1.75 million loan he obtained on behalf of Shiloh Ministries. Judge Nickerson also ordered Hope to pay restitution of $2,422,320.
According to his plea agreement, Hope was hired in 1996 as the senior pastor for Montrose Baptist Church located in Rockville, Maryland. He supervised the Montrose Christian School and another educational component of the parish called the “English as a Second Language” Program (ESL), which taught foreign students English. In 2001, Hope advised members of the Church Council that the ESL program could be more lucrative if it were expanded and operated as a separate corporate entity. The Council took no action on Hope’s suggestion and shortly thereafter, Hope formed a company on his own called the Maryland International Student Association (MISA), to take over the management of the ESL program. MISA had no corporate minutes or general business ledgers and it never filed a federal or state tax return. Upon taking over the management of the ESL program, MISA substantially increased the price of tuition from approximately $7,400 to $12,500.
From approximately June 2001 to December 2003, foreign students who were admitted into the ESL program at the Montrose Christian School wired approximately $1.35 million in tuition payments into MISA bank accounts, which Hope controlled, without the knowledge of the Montrose Church Council. Other than to pay the salary of the ESL employee who oversaw the program, and incidental expenses, little of the wired funds was used to pay the expenses of the foreign students or the ESL program. Instead, Hope diverted much of the tuition payments from the ESL program, spending the money on personal expenses for himself and members of his family, such as golf outings, a family vacation in Hawaii, meals at restaurants, plane tickets, car payments, renovations of family-owned real estate, and investments in Shiloh Ministries of Hagerstown, Inc. When members of the Montrose Church Council learned that ESL’s expenses were not being paid in full, they confronted Hope at two Church Council meetings in September 2002, and after he admitted his conduct, accepted Hope’s resignation.
Hope filed joint tax returns in 2001, 2002 and 2003, in which he failed to report the expenditure of approximately $958,236 of MISA tuition receipts on personal and family expenses, resulting in the evasion of $287,131 in income taxes over those three years.
As previously reported on Mortgage Fraud Blog, from August 2006 through March 2007, Otis Hope was one of the trustees of the Shiloh Company and at different times served as its president. The company operated the Shiloh Conference and Retreat Center in a building the Shiloh Company owned at 149 North Potomac Street in Hagerstown. The company renovated and maintained the building and leased the space to groups for conferences and retreats.
On September 28, 2006, Hope and his co-conspirator applied for a commercial loan on behalf of the Shiloh Company, in the amount of $1.75 million to refinance the mortgage on the Shiloh Conference and Retreat Center and to release $108,835 being held in escrow by the previous lender for renovations, restoration of the building after a fire on June 21, 2006, and for environmental remediation. In order to obtain approval of the loan, the bank required submission of the company’s past and current year’s financial statements, minutes from the company’s annual meetings and a corporate resolution authorizing the company to borrow the money.
Otis Hope and his co-conspirator falsely represented to the bank that the Shiloh Conference and Retreat Center had reopened for business after the June 2006 fire, when it had not; submitted fraudulent financial statements to the bank overstating the company’s assets and monthly cash flow; submitted a bogus corporate resolution and fraudulent minutes of corporate meetings that never took place in order to give the impression that the Board of Directors and trustees of the Shiloh Company had voted to authorize the application for the loan and to permit Hope’s co-conspirator to act on behalf of the company during the application process and at settlement.
The bank granted the loan of $1.75 million and $108,835 was released from the previous lender’s escrow accounts. After paying off the outstanding loan balance and fees owed to the previous lender, the settlement company wired $77,640, the net proceeds of the closing to a bank account controlled by Otis Ray Hope. After receiving the loan, the Shiloh Company never made a monthly loan payment and the bank was forced to write off the loan balance and accrued interest.
Finally, Otis Ray Hope subscribed to a false application for exemption from federal taxes for Shiloh Ministries, in which Hope claimed that the recipients of the services provided by Shiloh Ministries did not have to pay for them; that the company’s financial support was derived from donations; and that the company conducted worship services. In fact, the company charged recipients for its services; the company’s financial support was derived from rental fees and other charges; and the company did not conduct worship services.
United States Attorney for the District of Maryland Rod J. Rosenstein announced the sentencing.
“Otis Ray Hope created false financial statements to defraud a bank into approving a $1.75 million loan, diverted hundreds of thousands of dollars of tuition revenue to pay his own personal expenses, and cheated on his taxes,” said U.S. Attorney Rod J. Rosenstein. “This sentence holds him accountable for a pattern of fraud and deceit.”
“Taxes are essential to ensure the smooth and efficient operation of our government,” stated C. Andre’ Martin, Internal Revenue Service – Criminal Investigation Special Agent in Charge. “Prosecuting individuals who intentionally omit income is a vital element in maintaining public confidence in our tax system. All Americans have a duty to pay their fair share.”
United States Attorney Rod J. Rosenstein thanked the Federal Bureau of Investigation and the Internal Revenue Service – Criminal Investigation for their investigative work. Mr. Rosenstein commended Assistant United States Attorney Martin J. Clarke, who prosecuted the case.