Texas Man Indicted for Straw Buyer Scheme

Allison Tussey —  September 8, 2009 — 1 Comment

Melvin Lendall Brown, 49, Houston, Texas, the owner of Brownstone Construction, was charged in a 16 count indictment, with wire fraud arising from an alleged multi-million dollar mortgage fraud scheme. 

Brown, was charged with 16 counts of wire fraud arising from a scheme to defraud residential mortgage lenders of approximately $5 million in loans in connection with home purchases in the Houston area. Brown surrendered to the FBI on Thursday morning and appeared before Magistrate Judge Calvin Botley. Brown has been ordered released upon posting 10 percent of a $100,000 bond into the registry of the court. Arraignment has been set for Sept. 11, 2009.

According to the allegations in the indictment returned last week, over a one-year period beginning in June 2004, Brown recruited individuals with good credit to act as borrowers in applications for residential mortgage loans to purchase one or more homes in the Houston, Texas area, knowing the borrowers had no intention of making payments on the mortgage loans. Brown generally told each borrower he would buy the home in the borrower’s name, make any monthly mortgage payments, find others to live in the home and pay monthly rent, take the home out of the borrower’s name after a period of time and compensate the borrower. He then completed and caused to be completed Uniform Residential Loan Applications in the names of the borrowers that overstated their employment income and other assets, understated or omitted their debts and other liabilities, falsely represented that the borrowers leased the homes they resided in and received income from the rent and falsely claimed that the borrowers intended to occupy the newly purchased homes, all of which were material to the lenders’ decisions to approve the applications and fund the loans. In support of those fraudulent loan applications, Brown submitted and caused to be submitted false and fraudulent documentation, including sham lease agreements and bogus employment information.

At or near the closings for those home purchases, the indictment alleges Brown caused title companies to disburse the fraudulently-induced loan proceeds to various individuals and entities, including Brownstone Construction. Brown represented to the title companies that Brownstone Construction had been hired for projects to improve those properties when, in fact, Brown did not perform or arrange for others to complete the projects. Brown allegedly received more than $500,000 of the fraudulently-induced loan proceeds, which he used for expenditures unrelated to those properties.

The maximum penalty, upon conviction, for each wire fraud count is 20 years in prison and a fine up to $250,000.


United States Attorney Tim Johnson and FBI Special Agent in Charge Richard C. Powers announced the indictment.

The investigation leading to the charges was conducted by the FBI and the Department of Housing and Urban Development Office of Inspector General. Assistant United States Attorney Stephen L. Corso will be prosecuting the case.


An indictment is a formal accusation of criminal conduct, not evidence.

A defendant is presumed innocent unless convicted through due process of law.



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Allison Tussey

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