Monday, October 08, 2007

2 Plead Guilty in Montana Fraud Scheme

Scott William Hilgers, 34, Helena, Montana, and Todd Jeremy Rice, 34, Helena, Montana, pled guilty to conspiracy to scheme to defraud mortgage companies/wire fraud.  Hilgers is currently detained.  Rice is currently released on special conditions.

In an Offer of Proof filed by the United States, the government stated it would have proved at trial the following:

In 2004, Hilgers, a Helena mortgage broker, was introduced by a local realtor to Rice. Beginning in October of 2004, Hilgers assisted Rice in obtaining 100% financing on four residential properties in the Helena, Montana area.

Hilgers worked for a company called TriWest Mortgage.  Between October of 2004 and October of 2005, Hilgers brokered mortgages for Rice‘s purchase of four residences in the Helena area.  The total mortgage liability was over $686,000.  All properties were financed to 100% of their value.  Rice did not have sufficient income to justify the mortgage exposure caused by any one of these mortgages, much less all of them.  Hilgers and Rice then agreed to have Rice concoct fictitious income documentation for the mortgage file.  Using his computer, Hilgers generated counterfeit W-2 forms and wage statements that indicated that Rice was employed by either Davron Telco (2002-2003) or Northwest Wireless (2004-2005).  The two reported to the mortgage file that Rice was employed by Davron in 2002 and had made $51,975, when in truth, Rice had not worked for Davron.  False documents attached to the file indicated that Rice had made $54,926 from employment with Davron in 2003, when in truth, Rice had not worked for Davron and had a reported gross income of only $28,515 in 2003.  The paperwork indicated that in 2004, Rice earned $67,815 from Northwest Wireless, when in truth, Rice had not worked for Northwest Wireless in 2004 and had a reported gross income of only $19,170 for that year.  Finally, Hilgers and Rice put documentation – a purported wage and earnings statement – into the mortgage files that Rice had been paid by Northwestern Wireless $48,489 as of August 31, 2005, when in truth Rice had not been paid any wages by Northwestern Wireless. 

A borrower who is going to use the purchased property for his own personal residence can, under certain circumstances, qualify for 100% financing.  For the purchase of the four aforementioned properties, Rice represented on Fannie Mae Forms 1003, Occupancy Statements and Loan Applications, that each residence would be his primary home.  In addition, he made the same representation in the purchase of two other Helena properties through another mortgage broker.  However, except as necessary to make minor repairs, Rice never occupied the residences and rented them out.  This placed the ultimate purchasers of the mortgage fraudulently obtained at greater risk, and allowed Rice to obtain a better interest rate than would have been negotiated had the two men been honest in their representations as to occupancy of the residences.

Three separate mortgage companies purchased the mortgages on the secondary market.  Representatives of each company have confirmed that had they been aware of the falsifications in the mortgage files created by Hilgers and Rice, they would not have funded the mortgage proposals for these properties.  Using that as a guide for loss on the four properties charged in the indictment, the loss is approximately $686,000 to the mortgage companies and over $11,242 to TriWest (for the commissions they paid Hilgers for the fraudulent mortgage packages).

If compelled to fund the mortgages, the companies would have charged higher rates of interest.  Using that as a basis for loss on the properties, Hilgers and Rice would have defrauded the secondary mortgage companies in an approximate amount of $70,139. 

Hilgers and Rice each face possible penalties of 30 years in prison, a $250, 000 fine and 5 years supervised release.

Hilgers Offer of Proof

Ice Offer of Proof mortgage fraud