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imageRachel Dollar, the editor of Mortgage Fraud Blog, is an attorney and Certified Mortgage Banker who handles litigation for lending institutions and secondary market investors. She is an author and a nationally recognized speaker on the topic of mortgage fraud. Ms. Dollar is a shareholder with the law firm of Smith Dollar, PC, is licensed to practice law in California and maintains offices in Santa Rosa, California. Email Ms. Dollar

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Thursday, October 27, 2005

Three Men Plead Guilty in North Carolina Mortgage Fraud

Two businessmen and a real estate lawyer pleaded guilty in connection with a North Carolina mortgage fraud scheme involving more than 20 properties.

Charles Richardson Jr. and Phillip Wayne Middlebrooks plead guilty to mail fraud and attorney Rick Franklin Shumate pleaded guilty to lying to the FBI.  The trio were originally indicted on June 28, 2005, in a 20-count federal indictment

According to court documents, between August 1999 and January 2001, Richardson and Middlebrooks, with the assistance of others (including, in most cases, a mortgage broker from Oasis Mortgage Company), caused multiple fraudulent real estate transactions in and around Guilford County, North CarolinaRichardson and Middlebrooks would identify real property for sale, recruit straw buyers to obtain mortgage loans to purchase the property at prices substantially above the actual sales prices, and provided or caused the provision of false information to lenders (e.g. employment, intent to occupy). Richardson and Middlebrooks would routinely complete paperwork, such as sales contracts, reflecting that they owned the properties when they did not and thus concealing the flip.

Richardson and Middlebrooks enlisted the services of attorney Shumate in connection with closing the transactions. Shumate submitted or caused to be submitted, preliminary opinions of title for numerous transactions involving Middlebrooks and Richardson which reflected they owned property when they did not, thereby concealing the flip of property from the lenders.

The transactions were structured as ‘double-closings’ with the assistance of Shumate. Richardson and Middlebrooks would nominally purchase the real property at the lower price and simultaneously resell it to the straw buyers at a higher price.  Mortgage loan funds intended for the use of the straw buyers were redirected to cover the purchase payments to the original sellers.  Richardson and Middlebrooks skimmed off the fraudulently created ‘equity’ (i.e. the difference between the original sales prices and the amounts of the mortgage loans taken out in the names of the straw buyers.)

Richardson and Middlebrooks paid (or promised to pay) kick-backs to the straw buyers for participating in the scheme and deceived the straw buyers into believing that Richardson and Middlebrooks would make the mortgage payments and transfer the properties out of the names of the straw buyers.  Although they did collect the rents from the properties, they did not keep up the mortgage payments and allowed the properties to go into foreclosure.

One of the transactions involved the purchase of 3220 Cross Tree Way, Winston-Salem, North Carolina on July 26, 2000 in the name of Paul Hairston, a straw buyer.  This property was the third of four properties purchased in the name of Paul Hairston in less than two months. According to the factual basis submitted in support of Richardson’s guilty plea, when he was interviewed by the FBI about his involvement in these activities, he acknowledged that he and Middlebrooks had operated a ‘buyer-partner’ program where they paid ‘buyer-partners’ for the use of their credit in connection with purchasing residence in which the ‘buyer-partners’ would not live. He admitted that he and Middlebrooks had the ‘buyer-partners’ complete the initial loan applications falsely representing an intent to occupy and would provide the applications to a mortgage broker for submission to lenders.  Richardson acknowledged that ‘buyer-partners’ were used to conduct multiple transactions and stated that he knew such transactions had to be done within a 30-day period.  He further admitted splitting profits from the transactions with Middlebrooks, but failing to keep up mortgage payments as promised.  Middlebrooks admitted similar facts according to the factual basis submitted in connection with Middlebrooksguilty plea.

According to the factual basis submitted in connection with Shumate’s guilty plea, Shumate had Hairston execute multiple documents required by the lenders stating that Hairston was purchasing each property as a primary residence which he intended to occupy.  Shumate then forwarded the documents with false representations to the mortgage lenders.  According to Hairston, Shumate did not provide copies of the closing documents to Hairston.  The factual basis states that Shumate claimed, in interviews with the federal authorities, that he would not close transactions for one person to purchase four properties each as a primary residence but that, in connection with the closings for Richardson and Middlebrooks, he did not realize that individuals purchased multiple properties as primary residences. 

According to court documents, Richardson stated that he and Middlebrooks knew that fraudulent information was provided to mortgage lenders, including information as to the income of the buyer-partners.  Richardson admitted that he was present at a meeting in which the mortgage broker who assisted in most of the transactions stated:  “these are all phony loans anyway.” Richardson acknowledged that he was angry that the broker had discussed the fact openly in a meeting. Although Richardson denied direct involvement with the creation or submission of false information, according to the factual statement submitted in connection with the guilty plea, other evidence contradicts his assertions.

Richardson and Middlebrooks each face a maximum of five years in prison, three years supervised release and a $250,000 fine.  As part of the guilty plea, Richardson and Middlebrooks each agreed to pay restitution of $7,650 to Member’s Credit Union and Richardson agreed to pay restitution of $185,000 to MacRich Capital, LLC

Richardson and Middlebrooks are scheduled to be sentenced March 15, 2006 and Shumate is scheduled for sentencing on March 27, 2006.

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Posted by Rachel Dollar on 10/27/05 at 03:11 AM
Mortgage Fraud LocationsNorth Carolina • Total comments: (0)

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Today's News

Some Sources require Registration.

 

Mortgage Scam Ends with Prison
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A judge didn't hold back when Shirley Matthews appeared before him Tuesday to be sentenced for stealing from a Monroe County man instead of helping him save his home from foreclosure, as she was hired to do.

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A New Jersey woman will be spending two to five years in state prison after she was sentenced on Tuesday for promising to help homeowners avoid foreclosure and then keeping the money she was given for their mortgages.

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Prosecutors add extra charges to two who are charged in LI mortgage fraud with county legislator, dominatrix and her husband

Untangling Mortgage Fraud in Chicago Condo Buildings
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Why did so many units go into foreclosure all at once? In some cases, the reason can be traced to mortgage fraud.

No Contest Plea Entered in Real Estate Fraud Case
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Juan Carlos Alcala of Windsor pleaded no contest to nineteen felony counts and admitted three special allegations for defrauding real estate investors, money laundering and elder fraud.

Bedford Woman Sentenced to a Year in Prison for Mortgage Fraud
Plain Dealer
Sharon Cox, 49, of Bedford, was sentenced today to a year in prison for mortgage fraud involving money laundering, theft and receiving stolen property from August 2008 through March.

CITIZEN JOURNALISM: Mortgage Fraud High in Area
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According to the FBI, Virginia, Maryland and the District are among the top 10 jurisdictions experiencing mortgage fraud.

Former Vegas Resident Charged with Mortgage Fraud in Nevada
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A former Las Vegas resident has been charged with federal conspiracy and fraud charges for his involvement in a Nevada mortgage fraud scheme involving straw buyers and falsified mortgage loan documents...

Missouri Man Sentenced for Mortgage Fraud
Belleville News Democrat
A suburban St. Louis mortgage company operator has been sentenced to more than 11 years in prison for a mortgage fraud scheme.

12-Year Prison Term in Mortgage Swindle
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A Maryland woman who stole millions from Washington area homeowners trying to avoid foreclosure is a "vulture" whose case should serve as a warning to other con artists...

Previous Articles

TRIAL COVERAGE

Trial coverage provided by Anne Mitchell, Crazy Fish Realty.

F. Jeffrey Miller Update - October 20, 2009

A hearing was held in Topeka, Kansas in front of Judge Julie Robinson. Miller is currently being held pending his sentencing which is set for December 22nd, 2009 at 9:00 a.m.. Steve Vanatta and Hallie Irvin, Miller's codefendants, will be sentenced at that time also.

Several motions were heard this week. One was a motion for Miller to be released pending his sentencing. Miller's attorney, Jeff Morris, argued that the court had dismmissed with predjudice the matter involving Miller's purchase of a commercial lawnmower, violating the court ordered monitoring agreement. He also argued that Miller was not a flight risk and should be released. This motion was denied

Another motion heard by Judge Robinson was that of an escrow account containing proceeds from the sale of Miller's forfeited assets. This account has a balance of $143,000. Attorney Morris argued that his firm was due $100,000 for work done in the Miller matter, to date. The government argued that his 'un-itemized fees' were 'exhorbitant'. The balance of the funds, Morris argued, should be released to the Miller family to help pay for mounting household expenses.

The government argued that the 'Asset Forfeiture Provision' applies down to 'the last penny' and that 'the rights of the victims to made whole are of paramount immportance' and that no routine household expenses like Visa bills, are allowed.

Attorney Morris argues that there is more than enough assets to satisfy the jury's judgement of $2.65 million dollars. The government argues that the estimated value of his assets are only $1.4 million.

The government also stated that Miller has been paid dividends from a company Miller has an ownership interest in; Boreflex. From July, 2008 to present, Miller has been paid $330,509.30 from Boreflex, unbeknownst to the court appointed monitor.

Present in the courtroom was Todd Earnshaw. Earnshaw was indicted along with Miller and others in what is commonly referred to as 'Miller I'. That trial is scheduled to begin on January 11, 2010 in Topeka, Kansas.



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The information and notices contained on Mortgage Fraud Blog are intended to summarize recent developments in mortgage fraud cases and mortgage banking matters nationwide. The posts on this site are presented as general research and information and are expressly not intended, and should not be regarded, as legal advice. Much of the information on this site concerns allegations made in civil lawsuits and in criminal indictments. All persons are presumed innocent until convicted of a crime. Readers who have particular questions about mortgage banking, mortgage fraud matters or who believe they require legal counsel should seek the advice of an attorney. The creators, editors and sponsors of Mortgage Fraud Blog do not intend to create a confidential relationship or an attorney-client relationship by communication via or arising from this site.

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