Virginia Businessman Pleads Guilty to $2.3M Mortgage Scheme

admin —  March 1, 2010 — Leave a comment

Robert S. Capehart, 55, Richmond, Virginia, pled guilty to committing a $2.3 million mail fraud on banks and investors over a six year period. 

Capehart was the president of two Virginia companies, Retirement Investment Group (RIG) and BYB Investments. Through these companies, he promoted real estate ventures, including a convenience store and multiple pieces of real estate that he purchased for rental and investment purposes. Capehart admitted to falsifying mortgage applications, check kiting and defrauding investors in a ponzi scheme. He is facing a maximum penalty of 20 years in prison, $250,000 in fines and full restitution when he is sentenced before U.S. District Court Judge James R. Spencer on May 24, 2010.

Court documents show that from 2003 until 2006, Capehart purchased approximately 40 rental properties with little or no down payment and a large mortgage-backed loan. In obtaining the loans from banks, however, he did not fully disclose all of his real estate loan liabilities and other real estate holdings. As time passed, he would obtain new appraisals and refinance the properties based on the appreciated value of the properties without disclosing all of his liabilities and real estate holdings. After paying off the original loan, Capehart would then use the excess funds for business and personal purposes. The combined losses of Wachovia Bank NA, J. P. Morgan Chase Bank, and Suntrust Bank were approximately $252,000.

Capehart also admitted that as the real estate appreciation slowed down or disappeared in or about 2006, he could not generate additional funds by simply refinancing the properties. Therefore, he turned to private investors whom he solicited with a promissory note program carrying high interest rates, such as 20 percent over three months, equating to an annual rate of 80 percent. He represented that he would be able to pay such high rates of interest because he was investing in a variety of properties, such as the Sans Souci Hotel and Apartment Complex, Buckroe Beach, Virgina, a beach house in Kure Beach, North Carolina, a convenience store in Richmond, Virginia, and various other properties in Newport News and Hampton, Virginia.

Capehart solicited money from approximately 22 potential investors and induced them to invest approximately $2.053 million by making materially false, fraudulent and misleading representations. Capehart’s program was a Ponzi scheme, in which early investors are paid with the contribution of later investors rather than the profit from an underlying business activity. Capehart also lulled investors into believing that their “investment” funds would be safe and secure. To prevent the discovery of the true use of investors’ funds and forestall legal action by investors, Capehart encouraged investors not to seek the immediate return of funds but to “roll over” their investments and thereby purportedly earn even greater profits.

Court documents show that in late 2006 and early 2007, in order to continue to buy time, Capehart began kiting hundreds of thousands of dollars of checks between First Market Bank, Village Bank and First Capital Bank. Check kiting is a fraudulent scheme that involves writing a check from one bank knowing the account has insufficient funds, then writing a check to another bank, also with insufficient funds. The purpose of the illegal scheme is to artificially inflate the balance of a checking account to allow checks that have been written to clear that would otherwise bounce.

Robert Capehart stole millions by lying to his lenders and investors,” said Neil H. MacBride, United States Attorney for the Eastern District of Virginia. “This deceit is at the heart of our financial crisis, and that is why we are dedicating so much of our resources to detecting and prosecuting financial fraud in this District.

Robert Capehart orchestrated an elaborate Ponzi scheme whereby he undermined the trust of family members and friends, some of whom entrusted their life’s savings to him,” said Michael F.A. Morehart, Special Agent in Charge of the FBI’s Richmond Field Office. “The FBI is committed to investigating financial fraud schemes which target innocent investors.”

Neil H. MacBride, United States Attorney for the Eastern District of Virginia; and Michael F.A. Morehart, Special Agent in Charge of the FBI’s Richmond Field Office, announced the guilty plea.

The case was investigated by the FBI’s Richmond Field Office. Assistant United States Attorney David T. Maguire is prosecuting the case on behalf of the United States.

Defendants are presumed to be innocent until and unless proven guilty.

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