Thursday, December 27, 2007

5 Indicted for Mortgage Fraud and Ponzi Schemes

Darryl G. Moore, 41, Solon, Ohio, Leon S. Heard, 72, Cleveland, Ohio and Steven I. Helfgott, 54, Cleveland, Ohio, were charged in eleven-count superceding indictment charging them with one count of conspiracy to commit mail fraud, wire fraud, and securities fraud; one count of securities fraud; one count of wire fraud; one count of money laundering; and one count of conspiracy to commit money laundering resulting from defrauding investors in an extensive “Ponzi” scheme. Moore and Heard, along with Mark C. Olds, Robert E. McNair, Avis D. Scott, Lee A. Granger, and Craig M. Duncan were also charged with a conspiracy to commit mortgage fraud, wire fraud, and interstate transportation of stolen property (ITSP) in connection with a scheme to defraud mortgage companies. Heard is also charged with bank fraud in connection with his false application and statements in obtaining his residence in Richmond Heights, Ohio.

Olds was previously convicted and was sentenced in a separate case to 92 months imprisonment in connection with a fraud committed against the Ohio Department of Education and the Internal Revenue Service.

The indictment charges that, as part of the scheme, Heard and Moore solicited investors to purchase securities, and other investments, in purportedly exclusive investments, such as so-called medium term notes, offshore investments with a Swiss bank, or currency trading, when, in fact, as the defendants well knew, there were no such investments. As part of the scheme, Moore and Heard falsely promised investors that they would earn a high rate of return on their principal, in many cases as high as 10 percent per month, and that they would receive monthly interest payments reflecting that rate of return on their investments. The indictment also charges that Moore and Heard also falsely led investors to believe that their investments were safe and secure, when, in fact, the defendants converted these funds to their own use, and the use of others, without making any investments. As part of the scheme, Moore, Heard, and Helfgott, paid some investors purported interest payments for a period of time so as to give the false impression that there was an actual investment, when, in truth and fact, as the defendants well knew, any interest payments came from other investors’ funds as part of a classic Ponzi scheme.

A Ponzi scheme is where one set of investors’ funds are used to pay supposed interest payments to other investors to encourage others to invest, or re-invest, and to keep investors from realizing that there are no investments and that they have been defrauded.

The indictment also charges that Moore and Heard, when it was necessary to add legitimacy to their fraudulent investments, at the outset of the scheme, represented to a few investors that their money would go to a hot shot broker named Steve for investment.  Moore and Heard told one investor that Steve worked for Merrill Lynch. Steven Thorn was the step-son of defendant Heard and, was a business associate of Moore and a former licensed broker who had been dismissed by Merrill Lynch.

The indictment charges that Heard and Helfgott, together with Moore, collected and deposited a few investors’ funds and forwarded those funds to Steve Thorn for his own personal use instead of investing in Thorn‘s “investments.” After the United States Securities and Exchange Commission (“SEC”) filed an action in the United States District Court for the Southern District of Ohio and the Court ordered all of Thorn‘s bank accounts frozen, the defendants continued to funnel some of investors’ funds to Thorn so that Thorn could pay his expenses. As charged in the indictment, during the SEC case, Helfgott, an attorney, represented Heard, and attended hearings, knowing full well the allegations of the SEC and the ultimate finding of the Court that Thorn was committing securities fraud in selling fictitious securities as part of a “Ponzi” scheme, causing the loss of several million dollars to hundreds of investors. Following the Court’s freeze order, Moore and Heard continued to sell securities or investments that were the same as Thorn‘s investments and continued to lull investors who had not received their promised return of either principal or interest, without disclosing the SEC’s complaint or the Court’s Order.

Heard, Moore, McNair, Olds, Scott, Duncan and Granger were charged in a mortgage fraud conspiracy that enabled Moore, who had poor credit, to fraudulently sell his foreclosed residence at 6235 Arbor Glen, Solon, Ohio, and fraudulently purchase a more expensive residence at 6990 Woodlands Lane, Solon, Ohio. This conspiracy also enabled Olds, who also had poor credit, to obtain an interest in the Arbor Glen property through a nominee, and allowed all the defendants to enrich themselves. The indictment charged that McNair was a mortgage broker at Global Mortgage Co., Bedford Heights, Ohio, and that Scott was a real estate agent with Realty One, Pepper Pike, Ohio, and that Scott and Duncan were both employed by the Cuyahoga County Auditor’s Office. The indictment charged that Moore, in an effort to move out of his residence at Arbor Glen, sought a straw buyer with good credit to purchase his residence. In order to prevent the filing of additional liens against the Arbor Glen property, Moore and Heard filed a deed on the Arbor Glen property which purported to transfer the title to Moore‘s girlfriend. Heard prepared this deed even thought he was a disbarred attorney and not licensed to practice law.

Moore, McNair, Scott, and Olds arranged to bring in Granger as a straw buyer to purportedly purchase the Arbor Glen property. Granger had good credit but little in the way of assets or income, and in fact worked in a donut shop. Olds agreed to pay Granger $20,000 to complete the paperwork to purchase the Arbor Glen property. Moore set the sale price for Arbor Glen property at $545,000 so as to cover his mortgage and to take additional money from this transaction. In order to qualify for a 100 percent loan, and in order to finance that entire amount, Moore, McNair, Scott, Granger, and Olds falsified information as to Granger’s employment, income, and assets.

As a result of this false information, the mortgage company approved Granger’s loan for $545,000 to purchase the Arbor Glen property. These funds were wire transferred from the lender’s bank account in New York, New York, to the title company’s account at National City Bank, Cleveland, Ohio.

Simultaneous to the sale of the Arbor Glen property, Moore sought to purchase a more expensive residence at 6990 Woodlands Lane, Solon, Ohio. Moore offered to pay $725,000 for this property, well above the listed price of $647,500, so as to take additional money from this transaction when Moore was able to finance the purchase price. Moore had a poor credit history, so he and Scott sought out a straw buyer with good credit to purchase this property for Moore. Moore and Scott brought in Duncan to the offices of McNair so that Duncan could secure a loan for 100 percent value of the property. Moore and McNair falsified loan documents to inflate Duncan‘s income, assets, and length of employment. The defendant Moore paid Duncan $15,000 to complete this paperwork. The lending company approved Duncan‘s loans for $725,000 and wire transferring these funds from New York, New York, to Cleveland, Ohio. Moore directed $69,000 of the proceeds of his loan to purchase the Woodlands Lane property, through Duncan, to Olds so that Olds could make payments on the Arbor Glen property. Moore used the additional funds he received for the Woodlands Lane property to make his loan payments on that property.

The defendant Heard was separately charged with bank fraud in obtaining a mortgage loan to purchase his residence at 5214 Dickens Drive, Richmond Heights, Ohio, by submitting false employment and asset information to the bank.

mortgage fraud

1. Every choice has a consequence.  Having been convicted in the early ‘90’s for a Ponzi scheme in the mid ‘80’s - I understand the consequences of choices made.  I spent time in federal prison for my dumb choices and know that the consequences follow long after the crime has been commited.  Perhaps these folks will learn as they face substantial time in prison.

   Posted by  on  12/29  at  07:19 AM

2. And now to the post-conviction script:
   Heard, 72 magnificent years of age, is to deliver the following line:

   “Your honor, I apologize for my amoral and antiscoial behavior; it has ruined my life and that of my family. I beg the court, as an elderly remorseful man in poor health and lacking a moral compass, for leniency and compassion”.

   Judge:  Adios, amigo...30 years (read “life” in your case) in the slammer. Those who emulate you will now have second thoughts about comitting crime.

   Posted by  on  01/02  at  04:30 AM

3. when is sentencing?

   Posted by  on  03/06  at  09:02 AM