Friday, March 28, 2008

Jury Convicts In Rebate Coupon Scheme

Terry Hugh Mahon, 69, Broken Arrow, Oklahoma, was convicted by a federal jury in connection with a fraudulent investment scheme involving rebate coupons and home mortgages.  His co-defendant, Grover Harold Phillips, 70, Stillwater, Oklahoma, pled guilty to conspiracy and money laundering in connection with this scheme.

On November 14, 2007, a federal grand jury indicted Mahon and a co-defendant, Grover Harold Phillips, on charges of conspiracy, mail fraud, and money laundering.  Phillips operated through a Nevada business trust called Amsterdam Fidelity Business Trust; Amsterdam’s offices were at Phillips’s home in Stillwater, Oklahoma.  Mahon operated through a Nevada corporation called Rebates International, Inc.; the offices of Rebates International were in Hollister, Missouri.

From 2000 to 2003, Phillips and Mahon worked with other people, including Emzie Huletty of Oklahoma City, to sell cashback rebate coupons that would supposedly allow purchasers to pay off their home mortgages in five years.  The evidence at trial proved that Mahon and the other conspirators made false representations that if victims paid 17% of the value of their homes to conspirators, they would receive rebate coupons worth the entire value of their homes.  The money that they paid was to be invested in high-yield trading programs that conspirators claimed could generate approximately 60% interest per year.  At the end of five years, the victims could supposedly redeem these rebate coupons for face value and pay off their mortgages.  Many victims re-financed their homes, oftentimes on very unfavorable terms, in order generate the 17% required to participate in the program. 

The jury heard more than two days of testimony, including evidence offered by victims who took out mortgages so that they could pay tens of thousands of dollars into the program.  The evidence demonstrated that the only investment in anything resembling a high-yield trading program was a $50,000 payment in April of 2002 to OsGold, a massive Ponzi scheme that folded in the wake of a federal investigation.  The jury also heard evidence that Mahon and other conspirators siphoned off hundreds of thousands of dollars that were supposedly to be invested for the benefit of coupon holders. 

After deliberating just over an hour, the jury convicted Mahon on all four counts in which he was charged.  These included conspiracy to commit mail fraud, using a commercial interstate carrier to commit fraud, engaging in a financial transaction over $10,000 in criminally derived proceeds, and engaging in a financial transaction designed to conceal the nature of the funds involved.  As a result of these convictions, Mahon could be sentenced to twenty years in prison on the conspiracy, fraud, and concealment counts and ten years in prison for engaging in a transaction over $10,000 in criminal proceeds.  He also faces a forfeiture judgment in the amount of $1,061,294.85 and fines of more than $1,000,000.  Federal law will also require Mahon to pay restitution to the victims of his offenses.

After the jury returned its verdict, U.S. District Court Judge Stephen P. Friot determined that Mahon should be detained pending sentencing.  He was immediately placed in the custody of the U.S. Marshal’s Service.  Sentencing will take place in approximately ninety days.

Phillips did not stand trial.  On Friday, March 21, 2008, he entered pleas of guilty to conspiracy and engaging in a financial transaction involving more than $10,000 in criminally derived property.  His sentencing will also take place in approximately ninety days.

Emzie Huletty, who operated EASE Corporation, Vision Services, Inc., and Sunset Financial Group, all located in Oklahoma City, pled guilty to mortgage fraud on March 24, 2006, and is currently incarcerated in federal prison.

“These defendants, aided by others, concocted a scheme whereby they falsely promised buyers and homeowners that if they took out a new mortgage or refinanced their existing mortgage, they could pay it off in just five years with one catch – they had to buy a bogus cashback rebate coupon,” stated United States Attorney John C. Richter.  “This coupon promised financial freedom but delivered financial misery.  I want to commend the FBI and IRS Criminal Investigative Division for their fine work in making sure these con-artists were held accountable.”

mortgage fraud