William Barry Blythe, 67, Murrieta, California, has been arraigned and pled guilty to carrying out a scheme to defraud homeowners, mortgage lenders, and the U.S. Bankruptcy courts in the Southern and Central Districts of California. He also admitted that he willfully failed to adequately report over $175,000 in taxes owed on his income.
According to the criminal Information, Blythe created multiple trusts, including “R-C Business Trust,” “Phoenix Business Trust,” “GB Business Trust,” “GBB1,” “GBB2,” “GBB3,” and others. Blythe approached homeowners who were behind on their mortgage payments and offered to take ownership of their homes and negotiate better terms on their mortgages. To carry out his scheme, he directed the homeowners to deed their homes to one of Blythe’s trusts. Blythe then generously allowed the homeowners to stay in the homes if they paid a monthly fee to the trust that owned the house.
But the defendant knew that the trusts did not assume responsibility for the mortgages and, accordingly, that he could not negotiate better terms with lenders. In fact, when homeowners gave Blythe the monthly payments, he deposited the payments into his own Blythe Family Trust Account, instead of the bank accounts for the trust entity that supposedly held title to that homeowner’s property.
Blythe then filed bankruptcy for each of his trusts, first in the Central District of California and then in the Southern District of California. In each of the San Diego bankruptcy petitions, Blythe misrepresented to the U.S. Bankruptcy Trustee that the trust seeking bankruptcy protection had purchased real properties, owed mortgages on those properties, made no income from the properties, and had numerous unsecured debts. Ultimately, each of the bankruptcy petitions was dismissed.
As part of his scheme, Blythe misrepresented to mortgage lenders that he had purchased the properties encumbered by mortgages, when in fact he had paid nothing for the properties but instead had duped homeowners into deeding those properties to him by misrepresenting that he would assume responsibility for their mortgages.
Blythe admitted in his plea agreement, which remains sealed, that the monthly payments he received from homeowners as part of his scheme constituted income to him. He admitted that he filed false tax returns for tax years 2010, 2011, and 2012, omitting a total of at least $177,499 in taxes.
Blythe agreed to pay restitution to any victims of his bankruptcy fraud. He also agreed to pay a total of $320,257.25 in restitution to the IRS for back taxes, interest, and penalties. He is scheduled to be sentenced by U.S. District Judge Anthony J. Battaglia on June 13 at 9 a.m.
United States Attorney Laura E. Duffy announced the arraignment.