Federal Criminal Defense Blog : Georgia Federal Criminal Defense Lawyer & Attorney : Gillen Withers & Lake Law Firm : White Collar Crime, RICO, Trial : Atlanta, Savannah, GA

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You've probably heard of reverse mortgages, pitched on television ads by celebrities such as Robert Wagner and Fred Thompson. The mortgages are part of the U.S. Department of Housing and Urban Development's (HUD) Home Equity Conversion Program (HECP) which permits senior citizens aged 62 years or older to purchase a home or remain in a home where it may be difficult for them to provide a conventional loan. There are two types of "reverse mortgages." First there is, the “refi-reverse” in which the lender pays the homeowner for a portion of the equity in the owner's home. The homeowner must have significant equity in the home to qualify. There is also the “purchase-money reverse,” in which the lender pays the homeowner towards the purchase of a home. The HECP is insured by the Federal Housing Administration (FHA).

On Monday, as fully recounted by RealEstateRama Georgia, six defendants, Kelsey Torrey Hull, Jonathan Alfred Kimpson, James Michael Green, Herbert Bush, Wilbur “Sonny” Letak, and Kevin Claude Barnett, were sentenced in the U.S. District Court for the Northern District of Georgia for reverse mortgage fraud. The defendants were charged with taking money from seniors to purchase homes under the HECP and then placing the seniors in homes worth only a fraction of the value paid. They were also alleged to have used forged and back-dated documents, faked down-payments, and to have purchased properties and resold them to seniors at up to 16 times their appraised value. The defendants included a closing attorney.

The defendants' sentences ranged from 5 years probation to 151 months' imprisonment. 

 

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H. Gregory Cordell, the former Mayor of Cartersville, Georgia, was sentenced to over two years imprisonment last Friday in the U.S. District Court for the Northern District of Georgia for mortgage fraud, as reported by the Chattanoogan. According to statements by the U.S. Attorney's Office for the Northern District of Georgia, Cordell inflated the purchase price of the property, lied on his mortgage application, and received a $1 million loan, from which Cordell was paid a kickback.

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Al Lewis of the Wall Street Journal's MarketWatch reports that mortgage fraud is surprisingly on the rise despite the current weakness in the housing market. Mr. Lewis cites the FBI's report on mortgage fraud for 2010, which reports that mortgage brokers, appraisers, underwriters, accountants, real-estate agents, settlement attorneys, land developers, investors, builders, lenders, and bank and trust account representatives continue to utilize fraudulent schemes to defraud lenders, from inflating appraisals and fabricating income statements to recruiting straw buyers. As a result of the depressed housing market, inventive would-be felons have also apparently developed scams involving short sales, loan modifications, and firms offering relief from foreclosures.

The report states that mortgage fraud cases increased 12% in 2010 and that the majority of cases arose in California, Florida, New York, Illinois, Nevada, Arizona, Michigan, Texas, Maryland, New Jersey and, of course, Georgia. The Bureau claims that at least $10 billion in loans were advanced on fraudulent mortgage applications in 2010.

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For exceptional representation in Federal or State, criminal or civil matters, call Gillen Withers & Lake LLC (912) 447-8400 Savannah, or (404) 842-9700 Atlanta. Please visit our new website gwllaw.com.

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As reported in the Charlotte Observer, Michael Rand, former Chief Accounting Officer for Beazer Homes USA and a resident of Alpharetta, Georgia, has been indicted in the U.S. District Court for the Western District of North Carolina on 11 counts, including securities fraud, witness tampering and making false statements. Rand is alleged to have directed a conspiracy to manipulate Beazer's books, achieve earnings targets, and deceive the company's auditors.

Specifically, the indictment alleges that, from 2005 to 2007, Rand entered into an agreement with another company to allow Beazer to get revenue from purported sales of model homes, and that he and others created a false set of books to understate income when business was doing well, and "smoothing" income when business became tighter. Beazer terminated Rand in June of 2007 for allegedly destroying documents during an internal investigation.

Federal authorities began investigating Beazer in 2007 after the Charlotte Observer ran a series that claimed that Beazer arranged larger loans than some customers could afford and violated federal lending rules, leading to high foreclosure rates in certain communities. Prosecutors filed mortgage fraud and accounting fraud charges against Beazer in July of 2009, and the company entered into a deferred prosecution agreement in which it agreed to pay up to $50 million. Beazer was also the defendant in a class action lawsuit over lending practices, which it settled in 2009 for $30.5 million. The company stopped mortgage lending in 2008. Beazer has reported 1,643 home closing in the third quarter of this year, as well as losses of $27.6 million.

A detention hearing for Rand is scheduled for Friday. Rand is also the subject of a lawsuit filed in July of 2009 by the Securities and Exchange Commission in the Northern District of Georgia.
 

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Arthur Marshall, a former wide receiver for the Denver Broncos, was sentenced to 69 months imprisonment yesterday for bank fraud in the U.S. District Court for the Southern District of Georgia, Augusta Division, as reported by the Augusta Chronicle. Marshall was indicted in June of last year and pled guilty to two counts of bank fraud last October for defrauding banks in the Augusta area of over $3 million in mortgage loans. Marshall admitted to falsifying information to obtain the loans.

Marshall's victims included veterans whom Marshall met through his father's American Legion post, who never received title to the properties they purchased. The post is in bankruptcy and has filed a $91,000 claim against Marshall. Marshall's company, Custom Contractors, declared bankruptcy in August of 2008, listing $11 million in debts.

Marshall was born in Fort Gordon, Georgia. He played football at Hephizbah High School before going on to play for the University of Georgia Bulldogs. Marshall was a wide receiver for the Broncos from 1992 through 1996, receiving for 1,267 yards during his five year NFL career and scoring four touchdowns.

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Last week, Adriene Newby-Allen was sentenced to 135 months imprisonment and ordered to pay $5,278,703 in restitution. According to a press release for the Office of the United States Attorney for the Northern District of Georgia, Newby-Allen had pled guilty in July to charges arising from a multi-million dollar mortgage fraud scheme. Newby-Allen was alleged to have conducted a mortgage fraud scheme from mid-2004 through March 2006 which fraudulently obtained millions from mortgage companies through inflated mortgage loans obtained by straw purchasers, including Newby-Allen's husband and co-defendant Brinson Allen, who was convicted on multiple charges relating to the scheme following a 10 day trial in July by a federal jury. Newby-Allen herself received approximately $1 million in loan proceeds.

Newby-Allen is alleged to have inflated the sales price of real estate and caused the submission of false loan applications and other documents. At the closings on the properties, Newby-Allen and her co-conspirators would cause lenders through false representations to disburse millions to a shell company created by Newby-Allen called "Swiss Acquisitions."

 

Gillen Withers & Lake LLC are white collar and corporate criminal defense attorneys with an outstanding reputation and track record, handling cases throughout Georgia and the nation. Call our Atlanta, Georgia, office at (404) 842-9700 or our Savannah, Georgia, office at (912) 447-8400.

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According to the Atlanta Journal and Constitution, Perimeter Mortgage Funding, which operated from 2001 to 2005 before collapsing, cost lenders $7 million. One of its principals, Kevin Wiggins has pled guilty to one count of conspiracy and two counts of wire fraud in the United States District Court for the Northern District of Georgia, and who faces up to 15 years in prison and a $750,000 fine and who will be ordered to repay the defrauded lenders. Wiggins' sister, Lydia Wiggins Christopher, and appraiser Frank Astwood have also pled guilty. The defendants will be sentenced on Tuesday.

Perimeter Mortgage Funding originated mortgage loans and sold them to larger lenders, including to Fannie Mae, Freddie Mac, Colonial Bank, JP Morgan Chase, Wachovia and Washington Mutual. It collapsed when it ran out of funds to reimburse purchasers of the fraudulent loans.

The prosecution claims that Wiggins would agree to purchase properties and then deed them to straw borrowers, who were really Wiggins' relatives and friends. The borrowers would then secure loans on the properties, either purchase loans or cash out refinancings, using falsified information, including inflated appraisals and false statements about renovations and rental income. Lenders were deceived by photographs showing false renovations and concealing damage to the properties. Wiggins used the proceeds of the loans to purchase the properties and to pay himself and his accomplices, including by having closing attorneys disburse checks to corporations controlled by him.

In all, Wiggins and his accomplices obtained inflated loans on 88 distressed properties, many in Atlanta's West End neighborhood. In one case, a loan for $128,000 was obtained for a home which was purchased for $24,000. Wiggins would not pay the mortgages, and the properties would go into foreclosure. Mortgage fraud by individuals such as Wiggins has made approximately 20 percent of the homes in West End vacant. Wiggins has claimed that he had good intentions for the properties, including a desire to rehabilitate the West End and rent the properties to students before selling them. West End residents Brent Brewer and Paulette Richards, have submitted a video to the court about their community's struggle with mortgage fraud entitled "When a House is Not a Home," and are asking for the maximum sentence for Wiggins.

A recent Fannie Mae report lists Atlanta as the second worst for mortgage fraud, only behind Minneapolis. In June, the United States Department of Justice began "Operation Malicious Mortgage," a nationwide crackdown on mortgage fraud. Last year, Phillip Hill and nine other defendants were convicted in Georgia's largest-ever mortgage fraud case.

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     The decline in the housing market has been accompanied by a huge increase in the area of “foreclosure rescue” fraud, as reported by the Atlanta Business Chronicle. Given the slowdown in the mortgage market and the rise in foreclosures, unscrupulous types have found new areas for fraud. Although foreclosure rescue fraud may take many forms, in its simplest manifestation, companies or consultants seek out homeowners facing foreclosure and offer to help them save their homes for a fee. According to Bill Brennan, Director of the Atlanta Legal Aid Society’s Home Defense Project, homeowners send $800 or $900 to the out-of-state companies which take the money and do nothing. Another form of the scheme involves consultants who convince homeowners voluntarily surrender the titles to their homes to them, and then walk away with all the equity in the home. The companies and consultants review court foreclosure lists and then target their victims through telemarketing and other means.

     States are responding to the rise of foreclosure rescue fraud by passing laws prohibiting foreclosure rescue fraud and giving victims recourse. California and Florida, which have the highest numbers of foreclosures in the nation, have already enacted laws. 19 other states, including Georgia, have introduced bills this year regarding the practice. Georgia’s bill, sponsored by State Senator Gail Davenport of Jonesboro, contains a series of restrictions on foreclosure rescue fraud, including requiring any rescuer obtaining a home through foreclosure to pay the owner at least 82% of the fair market value of the home, and allowing homeowners to obtain treble damages.

     Foreclosures in the metropolitan Atlanta area are up 23% from spring of 2007. Fulton, DeKalb and Gwinnett lead the area in the number of monthly foreclosures.

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