Former Broker Pleads Guilty to Scam

admin —  February 22, 2010 — Leave a comment

Randall Penberthy, Jr., 40, St. Charles, Missiouri, pled guilty to one felony count of bank fraud in connection with brokering real estate transactions between 2006 and 2007.

From 2003 through 2008, Randall Penberthy, Jr. was engaged in the business of brokering real estate transactions in the St. Louis, Missouri metropolitan area and elsewhere. Penberthy marketed real estate deals to associates and investors as potential rental properties. Penberthy operated and controlled several business entities, including Covenant Financial LLC, First Choice Investment and Loan LLC, and Midwest Management LLC. Penberthy operated his business initially out of an office in Chesterfield, Missiouri and later moved to 93 Centre Pointe, St. Charles, Missouri.

According to court documents, between late 2006 and October 2007, Penberthy devised and executed a scheme to defraud financial institutions by means of material false representations. As part of the scheme, Penberthy recruited investors to buy residential real estate directly from distressed property sellers whose homes were in danger of foreclosure. With Penberthy’s assistance, investors would finance the purchases through bank loans. Penberthy would fraudulently place and record a second or third deed of trust on the property, typically in the name of First Choice or some other entity he controlled, in order to make it appear that a legitimate second or third mortgage had been placed against the property, when in fact he knew that no such legitimate second or third mortgage existed. Bank loan funds were used to pay the sales price of the property as well as to pay off the fraudulent second or third mortgage. Funds used to pay off the fraudulent second or third mortgage were paid to entities controlled by Penberthy, including First Choice and Midwest. He then used a portion of those funds to make the down payment on the property being purchased. Penberthy fraudulently misrepresented the source of down payment funds on loan documents. Penberthy’s scheme has caused financial institutions to incur financial losses in excess of $500,000.

Penberthy now faces a maximum penalty of 30 years in prison and/or fines up to $250,000, when he is sentenced on May 13, 2010.

This case was investigated by the Federal Bureau of Investigation and the United States Postal Inspection Service. Assistant United States Attorney Reginald Harris is handling the case for the U.S. Attorney’s Office.

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