Friday, October 09, 2009

Husband and Wife Sentenced in Multi-Million Dollar Fraud Scheme

Darrell Underwood, 43, and Cynthia Underwood, 41, both of Chesterfield, Virginia, were sentenced for their roles in a multi-million dollar fraud scheme. Both previously pled guilty to Conspiracy to Commit Mail Fraud, in violation of 18 U.S.C. § 371. Darrell Underwood also pled guilty to Engaging in Unlawful Monetary Transactions, in violation of 18 U.S.C. § 1957(a). Chief United States District Judge James R. Spencer sentenced Darrell Underwood to 120 months' imprisonment and Cynthia Underwood to 36 months' imprisonment. Each defendant's prison sentence will be followed by a term of 3 years Supervised Release. Although the preliminary loss figure is approximately $9,000,000, the United States is still conducting an investigation to determine the final amount of restitution. Judge Spencer scheduled a final restitution hearing on the case for December 15, 2009, at 9:15 a.m.

According to court records, Darrell and Cynthia Underwood owned and operated Walkwood Properties, Midlothian, Virginia. Walkwood Properties was a real estate company that offered various home owners an opportunity to save their homes from foreclosure. Through that company, the Underwoods also offered an investment program to various individuals, allowing them to invest in Walkwood's real estate purchases. In connection with their guilty pleas, the Underwoods admitted to operating a "Ponzi" scheme through Walkwood's investment program in 2007. The essence of the "Ponzi" scheme was that the Underwoods induced individuals to invest money with Walkwood Properties by representing that investors' funds would be funneled directly into investment properties targeted by Walkwood's foreclosure efforts. In exchange, the Underwoods promised that the investors would receive returns of up to 50% within 60-120 days, depending on the timing of the investments as the scheme progressed. In 2007, the Underwoods paid their investors a rate of return, but this was rarely taken from the profits of investments. Instead, the funds used to repay investors were derived from monies paid by subsequent investors, or groups of investors.

As a result of the Underwoods' ongoing Ponzi scheme, the victim investors incurred significant losses. From April through December 2007, the Underwoods received approximately $18,400,000 in investor funds. Of that amount, the bank records established that only $2,100,000 was actually paid towards any type of real estate transaction. During the same time frame, the Underwoods paid approximately $16,200,000 to investors; of that amount, approximately $13,400,000 was derived from investor funds that were simply used to repay other investors. As of December 13, 2007 (the date of seizure of the investment accounts in connection with the investigation), the Underwood's investor account had a balance of $780,557.07. As of that same day, the Underwood's investment program had an outstanding balance of over $14,000,000 owed to various investors. That amount was comprised of over $9,000,000 in principle alone. The final restitution amount for victims will be determined at the December 15, 2009 restitution hearing.

Walkwood Properties is connected to another case styled United States v. Colin C. Connelly, Case No. 3:08CR466. In connection with a guilty plea entered on December 2, 2008, Connelly admitted to conspiring with representatives from Walkwood Properties to skim equity in housing transactions by making false entries on HUD-1 Settlement Statements. On March 10, 2009, Judge Spencer sentenced Connelly to 24 months imprisonment and ordered him to pay $376,464.62 in restitution.

Neil H. MacBride, United States Attorney for the Eastern District of Virginia, announced the sentences.

The investigation was conducted by the Internal Revenue Service, the Department of Housing and Urban Development Office of Inspector General, the United States Postal Inspection Service, the Federal Bureau of Investigation, and the United States Secret Service. Assistant United States Attorneys Michael Gill and John Adams prosecuted the case for the United States.

mortgage fraud