Friday, May 19, 2006

Kansas Builder Charged in Charged with $25 Million Bank Fraud Scheme

A man once known as the largest home builder and developer in the greater Kansas City area has been charged in a 60-count indictment alleging he organized a $25 million scheme to boost his business through conspiracy, bank fraud and money laundering.

The developer, F. Jeffrey Miller, 45, Stanley, Kansas., is charged in a 20-page indictment detailing crimes that allegedly occurred from 1997 to the present in Johnson County, Kansas. Also charged are:

Todd Earnshaw, 45, Overland Park, Kansas;

Brian Rouse, 36, Overland Park, Kansas;

Paul E. Nicolace, 50, Overland Park, Kansas;

Angela Parenza, 39, Kansas City, Missouri;

Elizabeth L. Hessel, 46, Overland Park, Kansas;

James Moser, 62, Overland Park, Missouri;

Steve Middleton, 45, Stilwell, Kansas; and,

Lanny Ross, 64, Leawood, Kansas.

Mr. Miller advertised that he could sell homes to buyers with credit problems who had little or no money for a down payment, said U.S. Attorney Eric Melgren. In fact, with the help of willing co-conspirators, he defrauded banks and coerced buyers.

“There are hundreds of homeowners in the Kansas City metro area who lost everything due to these 8 criminals who were indicted today. I’m expecting more indictments down the road.” said Nancy Seats, President of Homeowners Against Deficient Dwellings, whose organization was instrumental in exposing the fraud. ”The case has been being investigated by one agency or another since 1999. Finally it appears there will be justice.” (Homeowners Against Deficient Dwellings (HADD), is a national not for profit run by unpaid volunteers in 25 states who were HADD by their builders.)

According to the indictment:

� Miller operated Miller Enterprises and Star Land Development, which built and developed houses in the greater Kansas City area and was the largest builder in the area in 1999 and 2000. Miller also started two companies called Associated Capital and Associated Finance, formed in June 1998, for the purpose of preparing loan applications on behalf of buyers to acquire homes built by Miller. The applications were made to federally insured financial institutions. Associated Finance serviced second mortgage payments to Miller on homes purchased from him.

� Angela Parenza and Beth Hessel were loan officers for Associated Capital. Acting under Miller�s control, they did anything required to complete a loan closing, including forging potential buyers� signatures on loan documents and providing home buyers with down payments and closing costs.

� Todd Earnshaw and Brian Rouse were loan officers for Maplewood Mortgage and Pronounce Mortgage. Earnshaw was a real estate agent who sold many of Millers houses.

� In 1999, Miller became the subject of lawsuits, actions by state law enforcement agencies and the legislature, and other kinds of adverse publicity. He was the subject of investigations by the Kansas Attorney General, the Kansas Bank Commissioner, and the Missouri Attorney General.

� In 2001, the Kansas legislature amended the Kansas Mortgage Act to require any person or business that regularly obtained second mortgages to be licensed in Kansas. Miller then adapted and reconfigured the conspiracy. He discontinued doing business through Associated Capital and Associated Finance. He started doing business through middlemen including Steve Middleton and Earnshaw.

� Paul Nicolace and Lanny Ross, real estate appraisers in the greater Kansas City area, provided inflated appraisals for Miller, Middleton and others.

� Due to adverse publicity about Millers illegal marketing methods and intentionally poor quality of construction, there came a time he had trouble selling houses to individuals. So he began to market his houses to investors to whom he agreed to sell at a discount if they purchased in volume. The discounting was not disclosed to lenders. Miller sold homes this way though middlemen such as Miller.

Unlawful acts identified in the 20-page indictment include these:

� Defrauding financial institutions to make loans by means of material false and fraudulent pretenses, representations, promises and omissions of fact. In this way, Miller is alleged to have caused more than $25 million in loans to be made.

� Falsifying loan documents to qualify home buyers for mortgages for which they would not otherwise qualify.

� Providing home buyers with down payments and closing costs without the knowledge of lenders.

� Increasing the sales prices of houses at closing.

� Manipulating home buyers into moving into houses before closing in an effort to coerce them into accepting last-minute increases in the sales price at closing to avoid losing their homes.

� Selling houses at discount to investors without disclosing it to lenders.

� Paying kickbacks to investors out of loan proceeds, concealing the payments by calling them referral fees or interior design fees.

Miller is charged in all 60 counts including:

� One count of conspiracy.

� 53 counts of bank fraud.

� 5 counts of money laundering.

� One count of criminal forfeiture in which the government seeks the forfeiture of all property traceable to the crime including $25 million, a residence at Foxhead Shores in Stilwell, Kansas, and a 1996 Sararoga II HP airplane.

Among the other defendants,

� Earnshaw is charged with one count of conspiracy, three counts of bank fraud and one forfeiture count.

� Rouse is charged with one count of conspiracy, 11 counts of bank fraud and one count of forfeiture.

� Nicolace is charged with one count of conspiracy, 7 counts of bank fraud and one forfeiture count.

� Parenza is charged with one count of conspiracy, one count of bank fraud and one count of forfeiture.

� Hessel is charged with one count of conspiracy, 9 counts of bank fraud, and one count of forfeiture.

� Moser is charged with one count of conspiracy, 31 counts of bank fraud, 5 counts of money laundering and one count of forfeiture.

� Middleton is charged with one count of conspiracy, 9 counts of bank fraud, one count of money laundering and one count of forfeiture.

� Ross is charged with one count of conspiracy, 5 counts of bank fraud, 2 counts of money laundering, and one count of forfeiture.

The penalties for conviction on these charges are as follows:

� Conspiracy: Up to 5 years in federal prison and a fine up to $250,000 on each count.

� Bank fraud: Up to 30 years and a fine up to $1 million on each count.

� Money laundering: Up to 10 years and a fine up to $250,000.

mortgage fraud

1. I am very familiar with this case and the demise of certain entire neighborhoods since the development of this fradulent empire from 1998. I have recently relocated to California and still watch this case. I was in the mortgage industry and saw many of his loan files that were funded by his organization with second and third loans. I had to actually recomend to clients that their homes were not constructed in a satisfactory condition to refinance and they should walk away and file bankruptcy due to the long term effects of the loans and homes. I can be reached at 925-429-5220 and will call anyone back to assist on low phone charges

   Posted by  on  10/31  at  09:01 AM