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Michael Scott Leslie, 57, Boulder, Colorado, pleaded guilty today to federal bank fraud and aggravated identity theft charges.

According to the stipulated facts contained in Leslie’s plea agreement, Leslie owned, operated, or otherwise had an interest in several business entities, some of which were operated out of Colorado.  These entities were involved in or affiliated with financing or originating residential mortgage loans.  Through these business entities, Leslie sold residential mortgage loans to investors, including an FDIC-insured bank in Texas (“the victim bank”).

Between October 2015 and October 2017, Leslie devised and executed a scheme to defraud the victim bank by selling it 144 fraudulent residential mortgage loans valued at $31,908,806.88.  These loans were purportedly originated by one of Leslie’s companies, Montage Mortgage, and “closed” by Snowberry, which earned fees for the closing.  The loans were then presented and sold to the victim bank until Montage identified a final investor.  For these 144 fraudulent loans, that final investor was Mortgage Capital Management (MCM)

Leslie never disclosed to the victim bank that he operated MCM and Snowberry, or the fact that sales to investor MCM, even if they had been real, were not arms-length transactions.

The 144 residential mortgage loans sold to the victim bank were not, in fact, real loans.  The borrowers listed on these 144 fraudulent loans were real individuals, but they had no idea that their identities had been used as part of the sale of the fraudulent loans. The defendant had access to their personal identifying information in one of two primary ways:  (1) the borrowers had used Montage for legitimate residential real estate transactions which were properly executed and closed, or (2) the borrowers had been solicited by Montage about refinancing their existing loans.  In the case of refinance transactions, Montage secured permission from the borrowers to request credit scores and history from the major credit agencies.  After receipt of those credit scores, Montage often told these would-be refinance borrowers that they did not qualify for a refinance.  Leslie then recycled the borrowers’ information, obtained through prior legitimate transactions or attempted refinances, to create and sell nearly $32 million of fraudulent loan packages.

To execute this scheme, Leslie forged signatures on closing documents and fabricated and altered credit reports as well as title documents, often by using the names of legitimate companies.  The fraudulent real estate transactions were never filed with the respective counties in which the properties were located, there were no closings, and no liens were ever recorded.  Through numerous bank accounts for the various business entities and his personal accounts, the defendant used money in a Ponzi-like fashion from prior fraudulent loans sold to the victim bank to fund future fraudulent loans.  This complex flow of money continued until the defendant’s fraud was detected.  When the fraud was discovered, the victim bank still had 12 fraudulent loans, valued at $3,887,505.93, on its books that it could not, given that the loans did not exist, sell to any other legitimate third-party investor.

Leslie appeared remotely on a $50,000 unsecured bond, which was continued at the hearing’s conclusion.  The Denver office of the FBI, and the Offices of the Inspector General for both the Department of Housing and Urban Development (HUD) and the Federal Deposit Insurance Corporation (FDIC) joined in today’s announcement.

United States Attorney Jason R. Dunn made the announcement.

Chief U.S. District Court Judge Philip A. Brimmer presided over the change of plea hearing today, July 31, 2020.  Leslie was first charged by information on June 5, 2020.  This case was investigated by the Denver office of the FBI, and the Offices of the Inspector General for both the Housing and Urban Development and the Federal Deposit Insurance Corporation.  The defendant was prosecuted by Assistant U.S. Attorneys Hetal J. Doshi and Jeremy Sibert.

A copy of this press release is located on the website of the U.S. Attorney’s Office for the District of Colorado.  Related court documents can be found on PACER by searching for Case Number 20-cr-171.

The year 2020 marks the 150th anniversary of the Department of Justice.  Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.

BoostMyScore.net (BMS), a Colorado-based credit repair company and its owner have agreed to settle Federal Trade Commission charges they mislead consumers with promises to “drastically and immediately” improve credit scores and increase access to lower rates on mortgages.

In its complaint, the FTC alleges that the defendants guaranteed consumers that, in exchange for fees ranging from $325 to $4,000, they could “piggyback” on unrelated consumers’ good credit, artificially inflating their own credit score in the process.

In piggybacking, a consumer pays to be listed on another person’s well-maintained credit account, ostensibly receiving the benefit of the good account on their own credit even though they can’t access the account. In this case, the FTC alleges, defendants charged struggling consumers steep, illegal fees and made unsupported promises about how piggybacking would pave the way to new credit, including mortgages and other loan products.

According to the complaint, BMS made unwarranted promises in various advertisements that consumers’ credit scores would increase by anywhere from 100 to 120 points over two to six weeks. BMS also allegedly charged consumers upfront for the credit repair services they offered, which is illegal under the Credit Repair Organizations Act (CROA). The complaint alleges that the defendants violated the FTC Act, CROA, and the Telemarketing Sales Rule (TSR).

Under the terms of the proposed settlement with the FTC that will soon be filed with the court, BoostMyScore, LLC, BMS, Inc., and William O. Airy will be prohibited from selling fake access to another consumer’s credit as an authorized user and from collecting advance fees for credit repair services, as well as other violations of CROA. They will also be prohibited from misrepresenting a product or service as being legal, as well as from misrepresenting the terms of a refund or return policy. The defendants also will be banned from further violations of the TSR. The settlement also includes a monetary judgment of $6,630,678, which will be partially suspended upon payment of $64,863 due to the defendants’ inability to pay. Should the defendants be found to have misrepresented their financial condition, the full judgment would be immediately payable.

Good credit isn’t for sale,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. “This company charged people thousands of dollars based on hollow promises that ‘piggybacking’ on a stranger’s good credit would raise their credit score or help them get a mortgage.

The Commission vote authorizing the staff to file the complaint and stipulated final order was 5-0. The FTC filed the complaint and final order in the U.S. District Court for the District of Colorado.

NOTE: The Commission files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. Stipulated final orders have the force of law when approved and signed by the District Court judge.

The Federal Trade Commission works to promote competition, and protect and educate consumers. You can learn more about consumer topics and file a consumer complaint online or by calling 1-877-FTC-HELP (382-4357). Like the FTC on Facebook, follow us on Twitter, read our blogs, and subscribe to press releases for the latest FTC news and resources.

 

Jack V. Smalley, 70, Colorado Springs, Colorado was found guilty for bank fraud related to a mortgage application with the Navy Federal Credit Union.

On June 25, 2015, Smalley submitted a mortgage loan application with the Navy Federal Credit Union indicating that he earned a salary of approximately $200,000 dollars a year.  At the time, Smalley knew that wasn’t true.  In conducting its due diligence, the Navy Federal Credit Union requested a pay stub that would show Smalley’s monthly income, a letter from his employer to verify his employment and salary, and a bank statement to show Smalley’s income deposited into his bank account.

Smalley took steps to falsify the requested information, including falsifying a pay stub and his employment letter.  Based on the fraudulent documents, the Navy Federal Credit Union approved Smalley for a $998,000 loan.  Smalley defaulted on that loan in 2017.   In trying to mitigate his loan, Smalley provided two more fraudulent employment letters in 2018 and 2019.   Smalley used the proceeds of the loan to purchase a $1.1 million dollar residence in Colorado Springs, Colorado.   As part of the proceedings in this case, the Court ruled that the residence is subject to forfeiture based on the bank fraud.

United States Attorney Jason R. Dunn made the announcement.  The Department of Defense Criminal Investigative Service, the Internal Revenue Service–Criminal Investigations, and the Air Force Office of Special Investigations join in this announcement.

Lying to get a home loan is fraud, and the guilty verdict by the jury who heard this case made that perfectly clear,” said U.S. Attorney Jason Dunn.  “Thanks to the hard work of our office and the law enforcement agents investigating this case, Smalley is now a convicted felon facing prison time.”

Smalley is scheduled to be sentenced on April 27, 2020.   The case was investigated by the Department of Defense Office of the Inspector General, the Internal Revenue Service—Criminal Investigations and Air Force Office of Criminal Investigations.  The trial was before U.S. District Court Judge Daniel D. Domenico.  The defendant was prosecuted by Assistant U.S. Attorney Jeremy Sibert.

Franklin Thad Harris, 59, and Merlin D. Unruh, 53, both of Grand Junction, Colorado, were sentenced by U.S. District Court Judge Christine M. Arguello to serve 36 months and 28 months in federal prison, respectively, for money laundering.

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MetLife Home Loans LLC has agreed to pay $123.5 million to resolve accusations that its MetLife Bank unit violated the False Claims Act by knowingly originating and underwriting Federal Housing Administration-insured mortgages that did not meet applicable requirements.

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Intermundo Media, LLC, using the name Delta Prime Refinance, an Internet-based operation that finds potential borrowers for mortgage refinancing lenders, will pay a $500,000 civil penalty to settle charges that it deceived borrowers with false claims that they could refinance their mortgages for free.

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Chaval Williams, 53, Centennial, Colorado, was sentenced by U.S. District Court Judge William J. Martinez to serve 74 months in federal prison for wire fraud, identity theft and money laundering federal authorities for devising a scheme to defraud real estate lenders, particularly by fraudulently securing real estate financing for the purchase of properties, typically through the use of nominee home buyers.

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Six family members are the subjects of a Colorado statewide grand jury 37-count indictment for using their status in the real estate industry to perpetrate a fraud-for-profit mortgage fraud scheme. The family is accused of manipulating straw buyers to buy and sell properties destined for foreclosure.

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Franklin Thad Harris, 58, and Merlin D. Unruh, 53, both of Grand Junction, Colorado, pled guilty before U.S. District Court Judge Christine M. Arguello to money laundering for submitting false and fraudulent expense documentation, primarily false invoices, which represented various types of construction work that, in fact, had not been completed.

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Matthew Sysum, 44, Fort Collins, Colorado, who was convicted of running a mortgage fraud scheme, was sentenced in Weld County District Court to five years in prison.

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