Frederick Earle Deen, III, 30, a Minnesota resident and part owner of Legacy Lending, a Minnesota mortgage brokerage company, was sentenced in federal court for bilking lenders out of more than $500,000 through mortgage fraud. Deen was sentenced to 24 months in prison on one count of wire fraud and one count of tax evasion in connection to this crime. Deen was charged via an information on April 21, 2009, and pleaded guilty to the charges on July 1, 2009.
In his plea agreement and as previously reported on Mortgage Fraud Blog, Deen admitted that from September 2005 through July 2007, he and others carried out a fraud scheme through which mortgage loans were obtained from unsuspecting lenders by straw purchasers, in amounts far exceeding actual purchase prices, based on inflated property appraisals. Deen also admitted that during the course of this scheme, he and others failed to inform lenders that funds in excess of the actual property purchase prices were misappropriated by those involved in the fraud scheme, and that concealed payments were made out of loan proceeds to himself and other participants in the scheme.
To further the scheme, the co-conspirators, including Deen, who was the loan officer for most of the transactions, caused fraudulent loan applications to be provided to potential lenders in which property purchasers were falsely identified and property was falsely described as “owner occupied,” when, in fact, each straw buyer was purchasing multiple properties at the same time. In application materials submitted to lenders, the defendant and others also inflated the income and assets of potential borrowers, and a licensed real estate appraiser involved in the fraud scheme created inflated appraisals of the properties that were provided to the lenders to support the fraudulent loan amounts. Deen admitted that he personally participated in 27 fraudulent real estate transactions, involving approximately $18 million in loan proceeds, from which at least $2 million was received by Deen and his co-conspirators through those concealed payments.
Specific to the charges filed against Deen in this case, he admitted that on October 17, 2006, he participated in an illegal wire transfer involving more than $575,000 in financing for the purchase of a residence in Otsego, Minnesota. He also admitted that for tax years 2006 and 2007, he evaded paying federal income taxes on approximately $200,000 in taxable income and, as a result, owes the U.S. Internal Revenue Service more than $50,000 in income taxes.
Following the sentencing, Julio LaRosa, Special Agent in Charge of the IRS-Criminal Investigation Division in St. Paul, Minnesota said, “Using false information and fraudulent documents to further a scheme meant to deceive those involved in the mortgage industry is a serious crime. Criminal investigation and prosecution of these types of individuals help ensure that those responsible begin to take responsibility for their actions and deters others from following in their footsteps.”
This case was the result of an investigation by the Federal Bureau of Investigation and the Internal Revenue Service-Criminal Investigation Division. It was prosecuted by Assistant U.S. Attorneys Timothy C. Rank and Christian S. Wilton.