Don Hill who claimed his innocence – Found guilty faces 18 years in Federal Prison! Government Corruption doesn’t pay…

February 28, 2010

Restitution of $112,500 and 18 years in prison.  That’s $6,250 per year.  Was it worth it?  Clearly this is a message and with that length of time in federal prison Hill will clearly get the picture that life inside the hallowed halls of a prison make a lasting impression and are life changing.  Wonder, as he was “wheeling and dealing” if he ever thought that the outcome would be this dramatic?

Former Mayor Pro Tem Don Hill, 57, was sentenced to18 years in federal prison and ordered to pay $112,500 in restitution. He must surrender to the Bureau of Prisons on April 27, 2010, to begin serving his sentence. Hill, who was on the witness stand for nearly six days during the June – October 2009 trial, was convicted on seven of nine counts charged, including one count of conspiracy to commit bribery concerning a local government receiving federal benefits; two counts of bribery concerning a local government receiving federal benefits; one count of conspiracy to commit extortion; one count of extortion by a public official; and one count of conspiracy to commit money laundering.

“The sentences imposed today on Mr. Hill, his wife and his plan commission appointee hopefully will serve as a powerful reminder to all public officials and those who work with them, that seeking to personally profit by abusing the power given them by the voters can and will result in a long prison sentence,” said U.S. Attorney Jacks. “Public corruption is one of the most insidious crimes confronting our communities today. It contributes to the cynicism we are seeing today from the public who feel as though all politicians are corrupt and the government does not serve the needs of those citizens who can’t pay for access to their elected officials.”

Jacks continued, “The investigation into the actions of these defendants was lengthy and complicated. Many questioned why the investigation was taking so long. Hopefully, the verdict and the sentences handed down today and in the future, will serve as proof of the quality of the work done by the FBI, the IRS and the prosecutors assigned to this case. Throughout the investigation, amid all the questions and criticism, they remained focused on their mission, to thoroughly examine the evidence and to present their findings in a court of law before an impartial jury. The jury’s verdict demonstrates that the facts as revealed by their investigation conclusively showed the guilt of the defendants and was not a matter of interpretation or misunderstanding or selective prosecution. When corrupt politicians are exposed and punished, the entire community reaps the benefits.”

Hill’s wife, Sheila D. Farrington, 45, was sentenced to nine years in prison and ordered to surrender to the Bureau of Prisons on the same day as her husband, April 27, 2010. Farrington was convicted at trial on five of six counts charged, including one count of conspiracy to commit bribery concerning a local government receiving federal benefits; one count of aiding and abetting bribery concerning a local government receiving federal benefits; one count of aiding and abetting extortion by public officials; and one count of conspiracy to commit money laundering.

D’Angelo Lee, 43, Hill’s Plan Commission Appointee, was sentenced to 14 years in prison and ordered to pay $112,800 in restitution; he is currently in federal custody. Lee was convicted at trial on all seven of seven counts charged, including one count of conspiracy to commit bribery concerning a local government receiving federal benefits; two counts of bribery concerning a local government receiving federal benefits; one count of conspiracy to commit extortion; one count of extortion by public officials; and one count of conspiracy to commit money laundering.

Robert E. Casey, Jr., Special in Charge, Dallas FBI, said, “Communities have a right to expect that their elected leaders are ethical, trustworthy, and responsible, only representing the best interests of their constituents. Two of today’s defendants betrayed the trust bestowed on them as public officials. The sentences imposed reflect the gravity of their crimes. The FBI, its law enforcement partners, and the U.S. Attorney’s Office will continue to root out such graft in order to ensure that the citizens of Dallas receive honest representation by their elected officials.”

Two other defendants were convicted at trial, Darren L. Reagan, 50, and Rickey Robertson, 43. Both are scheduled to be sentenced by Judge Lynn on March 1, 2010. Reagan, described as a community activist, and the chairman and CEO of the Black State Employees Association, was convicted on two of four counts charged, including one count of conspiracy to commit extortion and one count of aiding and abetting in extortion by public officials.  Robertson, a local businessman/car dealer was convicted on two of three counts charged, including conspiracy to commit extortion. Robertson was also a principal of RA-MILL.

At that trial, the government presented evidence that beginning in 2004, Hill and his co-defendants entered into an association in which thousands of dollars in bribes were paid by co-defendants Brian L. Potashnik and his wife, Cheryl L. Potashnik, owners of Southwest Housing Development Company, Inc., through sham business contracts to the defendants. The government also presented evidence that Hill and Lee were involved in corrupt solicitation from developers in an effort to gain financial benefit. Brian and Cheryl Potashnik pleaded guilty prior to trial; Brian Potashnik pleaded guilty to one count of conspiracy to commit bribery concerning a local government receiving federal benefits and Cheryl Potashnik pleaded guilty to one count of bribery concerning a state government receiving federal benefits. Both are scheduled to be sentenced by Judge Lynn on May 7, 2010.

Other sentencing dates are as follows:

On March 19, 2010, Allen McGill, who pleaded guilty in April 2008 to one count of conspiracy to commit extortion; Andrea Spencer who also pleaded guilty in April 2008 to the same offense; Kevin J. Dean, who pleaded guilty in June 2009 to the same offense; and John J. Lewis, who pleaded guilty in March 2009 to the same offense, are scheduled to be sentenced.

On April 2, 2010, Terri Hodge, who pleaded guilty on February 3, 2010, to fraud and false statements on an income tax return, is scheduled to be sentenced.

On May 7, 2010, Jibreel A. Rashad, a.k.a. Vernon Cooks, Jr., who was convicted on February 10, 2010, following a one-week trial, of conspiracy to commit extortion, is scheduled to be sentenced.

A trial date has not been set for the charges pending against Ronald W. Slovacek. Last week the government filed a motion requesting that some of the counts be dismissed and indicating its intention to proceed to trial on only three counts: one count of conspiracy to commit bribery concerning a local government receiving federal benefits; one count of bribery concerning a local government receiving federal benefits; and one count of conspiracy to commit money laundering.


What have all the Ethics gone? Seems that Fraud is rampant! Business Ethics expert Chuck Gallagher comments

December 21, 2009

All too often I’m asked, especially as we review this past year on the anniversary month of the disclosure of Bernie Madoff’s fraud, whether fraud should decrease since we are more focused on ethics and ethical choices. Unfortunately, as I see it the answer is a resounding no!   Yet, the Ethics Resource Center in their new 2009 biennial National Business Ethics Survey reported a surprising conclusion:

We behave better in bad times.  “Contrary to what one might expect, misconduct declines in turbulent economic times and rises when the pressure’s off,” the report says.  When asked about specific abuses or ethical lapses – such as misusing company resources, lying to outside stakeholders or falsifying time or expenses – a smaller percentage of U.S. workers observed problems this year compared with the 2007 survey, taken before the recession began.  “Yet our research suggests that the improvements in ethical conduct will be temporary,” warned the ethics center’s CEO, Patricia Harned.

As I review ethics issues weekly I must say that I have a hard time believing in the validity of their survey.  Just look at these stories reported on here the first two weeks of this month.

Patricia Wilson, 57, of Draper, Virginia, has pleaded guilty to embezzling more than $167,000 from the Memorial Christian Church where she had served as the church bookkeeper for 9 years. Prosecutors alleged last April that Wilson diverted most of the monies from the Church’s building fund but also from it’s general fund.

Casey Jane Goebel, of Indio, California, was arrested last week for allegedly embezzling at least $250,000 from Hyde’s Air Conditioning where she had been employed as a bookkeeper. According to authorities, Goebel’s thefts ocurred between August 2007 and July 2009

Robin K. Ramey, 48, of Huntington, Ohio, pleaded guilty to charges she embezzled some $185,000 from the Huntington National Bank where she was a longtime employee, ultimately rising to the level of supervisor. Ramey caused at least 86 wire transfers in bank funds to be sent to her personal checking and saving accounts. If the plea agreement holds, Ramey will be ordered to spend two years in prison and repay the bank. She is scheduled to be sentenced on January 21, 2010.

Jessica Harmon, 32, of Lowell, Michigan, has been charged with embezzling more than $100,000 from a unnamed local law firm where she had been employed apparently in a bookkeeping position. The thefts reportedly occurred over a 3 year period. Specifically, Harmon faces charges of embezzlement of more than $20,000, uttering and publishing and using a computer to commit a crime. Harmon, who had been employed by the law firm for 10 years, allegedly made unauthorized withdrawals from firm accounts and wrote herself extra pay checks.

Capt. Michael Dung Nguyen, 28, of Beaverton, Oregon, pleaded guilty Monday to theft and money-laundering charges related to the theft of some $690,000 in cash intended for relief and reconstruction in Iraq. Nguyen was the U.S. Army battalion civil affairs officer in Muqdadiyah, Iraq and had been entrusted with cash designated for local commanders in Iraq and Afghanistan for urgent humanitarian relief and reconstruction. He was indicted last March on charges of theft of government property, structuring financial transactions and money laundering. The thefts occurred between April 2007 and February 2009, according to the indictment. He spend some of the money on luxury vehicles, among other personal items.

Three components come together when a fraud, like the ones reported above, take place.  NEED – OPPORTUNITY and RATIONALIZATION.  In the cases above – I cannot speak to the first and third component – Need and Rationalization, but in each case the fraudster exploited a weakness or put another way – found an OPPORTUNITY.

Patricia Wilson used her trusted position as church bookkeeper (9 years no less) to  exploit what was likely a weak system of internal controls for Memorial Christian Church.  Likewise, two other bookkeepers, Casey Jane Goebel and Jessica Harmon, used their positions of trust to embezzle funds from their employers.  Robin K. Ramey stated, related to her embezzlement, “Why it took so long is that (the bank) doesn’t usually check there.”  Finally, Capt. Michael Dung Nguyen had been entrusted with cash to benefit members of the US military.

What was common in each of the cases above – TRUST.  Did each of the fraudsters know better?  Sure they did!  Were they at one time ethical – I would guess so.  Yet, in each of their lives they made choices – choices that clearly reflect unethical behavior and consequences that are life changing that follow.

As a business ethics speaker, I often state to audiences – Every Choice Has A Consequence.

COMMENTS ARE ALWAYS WELCOME.  If you knew either of the individuals mentioned above – perhaps you’d be willing to share what motivated them to make the choices they made.


Mortgage Fraud Alive and Well in Ohio! Steven C. Gittinger Pleads Guilty to Mortgage Fraud Scheme Role

May 12, 2008

Either there is something in the water in Ohio when it comes to Mortgage Fraud – or – the US Attorney and others involved in law enforcement are serious about this wave of white collar crime. Either way, it seems that Ohio is talking a leading role in rooting out those involved in Mortgage Fraud.

Another Mortgage Fraud casualty is Steven C. Gittinger, who at age 50, pleaded guilty in United States District Court to one count of conspiracy to commit bank fraud and one count of money laundering for his participation in a mortgage fraud scheme.

According to a statement of facts filed with his guilty plea, Gittinger was a principal of Classic Title Agency, Inc. and helped close real estate sales. Between June 2003 and 2005, Gittinger received business and made money for performing closings of real estate sales. In 2003, Gittinger made various fraudulent representations on closing documents in which misrepresentations were made, then forwarded to financial institutions which funded loans for the property.

Gittinger agrees that for the purpose of the Sentencing Guidelines the amount of loss attributable to him is more than $400,000.00 but less than $1,000,000.00. Conspiracy to Commit Bank Fraud carries a maximum penalty of not more than thirty years imprisonment, a fine of up to $1,000,000 (or twice the gross gain to the defendant or loss of the victim. Money Laundering carries a maximum penalty of not more than ten years imprisonment, a fine of up to $250,000 (or twice the gross gain to the defendant or loss of the victim.

Since I jokingly mentioned Ohio as a hot spot…I decided as this was being written to verify if I was dreaming or has Ohio become a mortgage fraud “hot spot?” Interestingly enough with little effort the following was found on the FBI’s web site under mortgage fraud.

  • Analysis of available law enforcement and industry resources indicates that the top ten mortgage fraud areas are California, Florida, Georgia, Illinois, Indiana, Michigan, New York, Ohio, Texas, and Utah. Other areas significantly affected by mortgage fraud include Arizona, Colorado, Maryland, Minnesota, Missouri, Nevada, North Carolina, Tennessee, and Virginia. There is a strong correlation between mortgage fraud and loans which result in default and foreclosure.
  • Recent statistics suggest that escalating foreclosures provide criminals with the opportunity to exploit and defraud vulnerable homeowners seeking financial guidance. Perpetrators are exploiting the home equity line of credit (HELOC) application process to conduct mortgage fraud, check fraud, and potentially money laundering-related activity.
  • The FBI is proactively working with the mortgage industry in an effort to curb mortgage fraud crimes. The FBI signed a memorandum of agreement with the MBA to promote the FBI’s Mortgage Fraud Warning Notice.

Mortgage Fraud is defined as the intentional misstatement, misrepresentation, or omission by an applicant or other interested parties, relied on by a lender or underwriter to provide funding for, to purchase, or to insure a mortgage loan.

As a mortgage fraud and white collar crime speaker, I receive many calls from people who either think they may have become involved in committing some form of mortgage fraud or who have been convicted and wonder what is next. There is a clear pattern that seems to emerge. Either, the people involved are clearly doing what they know is wrong for immediate and personal (ill gotten) gain, or they are pushing the system for the purchase of property and doing so with the help of professionals who know where the gray areas are and just how far to push it.

Remember, if you do anything that is inaccurate and do so for the express purpose of having a financial institution to make a loan based on your representations – you may be guilty of mortgage fraud.

If you think you’ve been a victim feel free to comment!

White Collar Crime Speaker – Chuck Gallagher – signing off…


William J. Trier, II Faces Retirement in Prison for $5.2 Embezzlement – Comments by Chuck Gallagher White Collar Crime Speaker

May 2, 2008

The first step to a new life is to accept responsibility for your actions. Every choice has a consequence and after ten years of admitted fraud, William J. Trier, II has made a life changing choice – he plead guilty to an embezzlement scheme that lasted for ten years.

Now, as a white collar crime speaker, I must admit that it is generally unheard of for a white collar crime to last for that period of time. More times than not they fall apart before a decade passes.

William J. Trier, II, 57, of Williston, South Carolina, pled guilty today to embezzling approximately $5,200,000.00 from his former employer and to money laundering.

Trier worked at Crane Co., a vending machine manufacturing company in Barnwell County, as the director of logistics in the shipping department. From 1997 through October 2007, Trier embezzled funds from Crane by creating phony invoices from two fictitious freight transport companies and submitting them to Crane for
payment. He used his position to approve the payment of the fraudulent invoices, and received company payments mailed to a Post Office box he had opened as the mailing address for the phantom companies. Over a ten year period, Trier collected approximately $5,200,000.00 using the false invoice scam.

The maximum penalty Trier faces is twenty years imprisonment and a fine of $250,000. Trier must also make full restitution and has agreed to forfeit millions of dollars in assets towards restitution.

Wow…$5.2 million over ten years. This case is a classic example of lack of effective internal control. The ability to create an invoice and approve said invoice enabled Trier to effect this fraud. White collar crime consists of three parts: (1) need; (2) opportunity and (3) rationalization. While I can’t speak to Trier’s need, the opportunity was created thru simple lack of controls. Crane could have at any time thwarted the fraud with effective auditing and control mechanisms in place. As to “rationalization” – who knows, other than the longer a white collar criminal gets by with the crime, the greater the chance the white collar criminal thinks that the action is actually O.K. If I don’t get caught, I won’t get caught is the idea.

Every choice has a consequence. As a white collar crime and business ethics speaker, I speak from first hand experience about the truth about consequences. Reality is – no one escapes the consequences of their choices. While Trier may have enjoyed his good for a time and avoided the consequences – he did not avoid the consequences all together. Prison is no fun and Trier is facing many years plus substantial restitution for his conviction. Likely he will serve time and that will prove to be a dramatic change from his prior activities. You do reap what you sow.

If anyone reading has any background on Trierfeel free to comment as I study the behaviors and backgrounds of those convicted of white collar crime.

White Collar Crime Speaker – Chuck Gallagher – signing off…


A Ferrari, A Bentley and a Federal Indictment – Andrew Maxwell Parker Finds Himself on the Wrong Side of the Law!

May 2, 2008

Every choice has a consequence! May 2008 will be remembered by 40-year-old Andrew Maxwell Parker, owner of San Antonio Trade Group, Inc., since he was indicted on conspiracy, wire fraud, money laundering, false statements and tax charges. It appears that Parker’s choices may be having unexpected consequences.

Parker’s indictment alleges that from February 2003 to November 2006, Parker schemed to defraud the Export-Import Bank of the United States (Ex-Im Bank) by stealing millions of dollars in loan proceeds from private U.S. lenders to Mexican business owners and causing multi-million dollar losses to Ex-Im Bank who guaranteed or insured those loans based on false applications and support documentation submitted by Parker. The indictment also charges Parker with defrauding lenders in transactions not insured or guaranteed by the Ex-Im Bank.

The indictment further alleges that Parker attempted to evade paying taxes owed in calendar years 2003 and 2004 by disguising account transfers of $588,000 and $816,720.55, respectively. Parker allegedly claimed the money was used to purchase equipment being exported to Mexico when in fact, he used the $588,000 to purchase a house in Dallas, Texas, and the $816,720.55 to purchase two Ferrari automobiles and one Bentley automobile for himself. He also funneled money to relatives, all from nominee accounts. Furthermore, the indictment alleges that he under-reported his actual income on his 2003 and 2004 tax returns.

In all, Parker is charged with conspiracy, nine counts of wire fraud, two counts of use of a false document, 12 counts of money laundering, two counts of tax evasion, and two counts of filing a false income tax return. The indictment also seeks the criminal forfeiture of his San Antonio residence at 407 E. Wildwood Dr. and his 2004 GMC Hummer H2, plus a monetary judgement in the amount of $10 million representing proceeds obtained directly or indirectly as a result of Parker’s alleged scheme.

While an indictment is only a formal accusation of criminal conduct and not evidence of guilt, rarely does the US Attorney’s office lose a case like this. More than likely this will be an open and shut case. The government may not get a conviction on all charges, but they will get a conviction. Considering the recency of the indictment, my guess is that Parker will use his resources to secure legal help in reaching a plea agreement that will minimize his prison time. Although Parker’s lawyer, John Pinckney, said Parker denies the allegations and wants a jury trial. If convicted he will likely spend substantial time in federal prison.

Parker has been the target of the FBI and criminal investigators of the Internal Revenue Service over more than $163 million in loans backed by the Export-Import Bank of the United States. The bank is a little-known federal agency that is supposed to help American companies export their products by backing high-risk loans to foreign businesses that are supposed to buy the products. It works with some private commercial lenders to get the loans and has to pay with taxpayer funds if the borrower defaults. Court records allege millions of dollars of loans handled through Parker defaulted and the bank had to cover them.

“I have been calling for a (Congressional) investigation because there is ample evidence that hundreds of millions of dollars of taxpayer money is simply disappearing from the Export-Import Bank as they appear to be guaranteeing loans to businesses that don’t exist,” said Congressman Jeb Hensarling of Dallas. “A lot of money was provided to companies and they never, ever repaid the loans. The bottom line is this a mess, it deserves a full investigation. I don’t know of the particulars of the case in San Antonio, but it is further evidence of federal program that has run amok and needs accountability and an investigation.”

“It started out as a well-intentioned program… but there is no oversight, like a board of directors in private (banking), to ensure that things aren’t hinky,” said David Williams, vice president of policy for Washington-D.C.-based watchdog Citizens Against Government Waste. “The federal government has been notorious about its lack of oversight. The last thing we need is a corporate welfare program that has no oversight on it.”

Every choice has a consequence. As a white collar crime and business ethics speaker, I speak from first hand experience about the truth about consequences. Reality is – no one escapes the consequences of their choices. While Parker may have looked good for a time and avoided the consequences – he did not avoid the consequences all together. If convicted Parker will find that prison is no fun and likely will be facing many years plus substantial restitution for his conviction. Serving time will prove to be a dramatic change from his prior activities. You do reap what you sow.

If anyone reading has any background on PARKERfeel free to comment as I study the behaviors and backgrounds of those indicted for white collar crime.

White Collar Crime Speaker – Chuck Gallagher – signing off…

THIS JUST IN…another reader provided these links related to Export-Import Bank frauds and sentences. See here and here.

Thanks!!!


Mortgage Fraud – A Week in Review April 17- April 24: Comments by Chuck Gallagher

April 27, 2008

As each week passes the number of indictments and sentencing hearings seem to increase as the mortgage financial system seems to unravel. Some have claimed that the mess today will become larger and more costly than the Savings and Loan crisis of the ’80’s. Here’s a snapshot of the week.

San Franscisco: Mortgage Ponzi Scheme – Cheryl Hernandez Camus of Concord, California is alleged to have made a number of misrepresentations about a money lending investment, where she promised fixed returns and the return of the principle investment within a fixed period of time. The indictment alleges that Ms. Camus made one or more of the following material false representations and promises in order to induce the investor to give her money:

  • The investor’s money would be used to help finance real estate transactions, such as payment of closing costs or down payment;
  • The investor’s money would be used to pay medical costs;
  • The investor would receive a fixed monthly interest payment on the investment;
  • The investor would receive the return of the principle investment amount within a fixed period of time;
  • The loans would involve “really no risk.”
  • Ms. Camus screened the borrowers to ensure that money was only lent to borrowers who had the ability to repay;
  • Ms. Camus had been conducting similar transactions for three years and the returns had been “awesome.”
  • Ms. Camus would personally guarantee the investment;
  • The investment would be secured by a legitimate deed of trust.

Instead, according to the indictment, Ms. Camus used the money she obtained from investors for personal expenses and to pay back prior investors. Camus, if convicted, faces 20+ years in prison.

South Florida: Sentencing for Mortgage Fraud: Richard Weldon Crowder, II and Gary Mark Mills were sentenced to 108 months and 46 months imprisonment respectively for their roles in a multi-million dollar mortgage scheme. Co-defendant Karen Lynn Sullivan was sentenced yesterday to 50 months’ imprisonment.

Crowder is a former licensed mortgage broker and the former owner of America’s Best Mortgage Services, Inc., located in Coconut Creek, Florida. Mills is a former title attorney and the owner of Four Star Title Inc., located in Deerfield Beach, Florida. Sullivan is a former loan officer for Wachovia Bank.

To effectuate the mortgage scheme, Crowder identified residential properties, including luxury condominiums on South Beach, that were available for purchase. He then recruited buyers for the properties, representing that he could obtain 100% financing for their purchase. After finding a purchaser, Crowder would apply for equity lines of credit on their behalf with Wachovia. To induce Wachovia to issue the equity lines of credit, Crowder and Mills prepared fraudulent HUD-1 settlement forms. The forms falsely stated the buyers already owned the properties and also significantly understated the amount of the first mortgages on the properties. The fraudulent HUD-1 settlement forms were then given to Sullivan, who used the forms to facilitate the issuance of equity lines of credit from Wachovia.

Simultaneously, or shortly after obtaining the equity lines of credit from Wachovia, Crowder applied for the first mortgages on the properties. These applications overstated the buyers’ assets and income, and also included false verification of deposit forms prepared by Sullivan. To further induce the lenders to issue the loans, Mills prepared documents falsely representing that the buyers were using their own money for the down payments and closing costs. In fact, the buyers were using funds from the fraudulently obtained Wachovia equity lines credit or funds provided by Crowder. In total, the defendants caused the fraudulent purchase of seventeen (17) different luxury condominiums at The Continuum on South Beach and at The Point in Adventura using more than $37,000,000 in fraudulently obtained mortgage loans.

Palm Beach Co, Florida: Indictments in Sophisticated Mortgage Fraud Scheme: Berry Louidort, Lauren Jasky, and Ralph Michel, Palm Beach County, Florida were charged in a Criminal Complaint filed in federal court on April 22, 2008. The defendants are charged with bank fraud.

According to the Complaint, defendants Louidort, Michel and Jasky were involved in a sophisticated sub-prime mortgage fraud scheme in South Florida through which they submitted false qualifying information regarding potential borrowers to mortgage lenders. Among the false information the defendants submitted were false verification of earnings and false verification of deposits. As a result of these false submissions, defendants Louidort and Michel received approximately $6 million in loan proceeds.

This investigation began with an audit conducted by the Florida Office of Financial Regulation into 24 sub-prime mortgage loans in the period November 2006 to June 2007. The initial audit showed that the loans included what appeared to be excessively large fees paid to defendants Berry Louidort and Ralph Michel. The fees, ranging from $29,000 to $650,000, were described as marketing and/or assignment fees. In reality, the fees were kickbacks to defendants Louidort and Michel based on inflated sales prices. The audit also revealed that the majority of the suspect loans were originated by defendant Lauren Jasky, Senior Vice President of Compass Mortgage Services, located in Boca Raton, Florida.

Atlanta, GA: 5 Sentenced to Prison for Mortgage Fraud: Virginia Rose Novrit, Hilton Head, SC; Clarence Lorenzo Davis, Hilton Head, SC; Olympia D. Ammons, St. Louis, MO; Jerome Wings, Jr., Atlanta, GA; and Ronald Denzil Martin, Lithonia, GA were sentenced to prison for conspiracy, bank fraud, wire fraud, and money laundering in a multi-million dollar mortgage fraud scheme.

NOVRIT was sentenced to 3 years, 5 months in prison and ordered to pay $839,585 in restitution.

DAVIS was sentenced to 4 years, 3 months in prison and ordered to pay $839,585 in restitution.

WINGS was sentenced to 10 years, 2 months in prison and ordered to pay $8,577,845 in restitution.

AMMONS was sentenced to 5 years, 3 months in prison and ordered to pay $7,549,044 in restitution.

MARTIN was sentenced to 1 year, 1 day in prison and ordered to pay $423,595 in restitution.

From late 2004 through early 2006, NOVRIT, DAVIS, WINGS, AMMONS, and MARTIN participated in a mortgage fraud scheme that involved millions of dollars in fraudulently inflated mortgage loans being provided to unqualified straw borrowers. The straw borrowers were paid as much as $600,000 per property from fraudulently obtained loan proceeds through shell companies. NOVRIT and DAVIS together obtained mortgage loans totaling more than $4 million within a six month period to purchase eight properties. WINGS obtained mortgage loans totaling over $1.2 million to purchase a single property by providing the lender with false qualifying information. WINGS also recruited a number of other unqualified buyers into the scheme and obtained a share of the fraudulently obtained loan proceeds from those transactions for doing so. AMMONS was a loan originator for “Ace Mortgage Funding,” a national mortgage brokerage firm. AMMONS brokered fraudulent mortgages totalling over $7 million. MARTIN was paid $75,000 to act as a straw buyer and submit a fraudulent loan application for one property.

Kansas City, Kansas: Bonds Revoked in Mortgage Fraud Case: Wildor Washington, Jr. and Victoria Bennett were charged in November 2007 in an indictment alleging that Washington, Bennett and four co-defendants took part in a mortgage fraud scheme through businesses Washington owned including Heritage Financial Investments, Legacy Enterprises, B&L Custom Development and Liberty Escrow. According to the indictment, Hamilton and the conspirators prepared fraudulent loan applications and submitted them to lenders in Kansas, Texas, Ohio, Missouri and Michigan.

On Nov. 8, 2007, Washington and Bennett were released on bond subject to conditions including a prohibition against taking part in any illegal activities while on release. Subsequently, investigators obtained evidence that while on release Washington and Bennett were involved in further incidents of bank fraud and conspiracy to commit mail and wire fraud. Hence the two were taken into custody after their bonds were revoked.

Minnesota: Real Estate Owners Plead Guilty to Mortgage Fraud: Jonathan Edward Helgason, 45, Chisago City, and Thomas Joseph Balko, 37, Rogers, along with their company, TJ Waconia LLC, entered their guilty pleas to a scheme involving at least 162 properties, principally in north Minneapolis, and mortgage proceeds of approximately $35 million.

From approximately 2005 to 2007, Helgason and Balko executed a scheme to defraud and to obtain money by means of false and fraudulent pretenses. Using the TJ Group, Helgason and Balko purchased approximately 162 properties throughout the Twin Cities metropolitan area, principally in north Minneapolis. They would then resell the property within a few weeks to an “investor” who would purchase the property, sight unseen, at a price set by Helgason and Balko without negotiation, oftentimes $20,000 to $60,000 more than that the TJ Group had paid.

People were told by Helgason and Balko that the investors were simply “lending” his or her credit to TJ Waconia. In exchange for “lending” their credit, the investor would receive a kickback payment of about $2,500 and a promise of an additional payment after two years when the TJ Group was to repurchase the property from the investor.

Through the scheme, the defendants perpetrated a fraud on the lenders who were led to believe that the “investors” were the actual owners of the properties, when, in fact, the “investors’” ownership was in name only. During the two-year period during which the investor owned the property, the TJ Group was responsible for all payments and maintenance on the property. In some instances, Helgason and Balko also provided investors with funds to pay the buyer’s portion of the property purchase price and worked with others to provide lenders with false loan applications on behalf of the investors so that they would qualify for the loan.

The two men, on behalf of the investors, obtained approximately $35 million in mortgage proceeds to purchase the properties from the TJ Group. Ultimately, the scheme collapsed, and the TJ Group did not repurchase the properties or continue making payments to the investors in order to pay their mortgages. The investors were left owning properties with mortgages that exceeded their property’s market value.

Newark, New Jersey: Ex-Mayor Convicted of Flipping: As reported earlier, Sharpe James was convicted by a Newark, New Jersey, jury on all corruption charges against him in connection with a scheme that enabled his girlfriend, Tamika Riley, to fraudulently obtain steeply discounted city-owned land and resell it for hundreds of thousands of dollars in profits.

Riley was convicted with James on the same five charges: three counts of mail fraud related to the sale of the city lots to Riley, one count of fraud involving a local government receiving federal funds, and one count of conspiracy to defraud the public of James‘ honest services.

The prosecution was built around the sale to Riley of municipally-owned properties in Newark, New Jersey. The properties, according to evidence and testimony, were steered to Riley by James, who had a long-running romantic relationship with her. Riley paid only $46,000 for a total of nine properties, and then quickly resold, or “flipped” the properties for more than $600,000.

Summary and Comments:

Issues related to the mortgage crisis and melt down of the sub-prime market is all over the media. The FBI has reported that resources are being diverted to handle the up serge of complaints and abuse that seems to arise daily. The map below was provided by the FBI to show the dominate areas for mortgage fraud.

Every choice has a consequence. As a white collar crime and business ethics speaker, I speak from first hand experience about the truth about consequences. Reality is – no one escapes the consequences of their choices. More and more, I find that my newest presentation is in demand: MORTGAGE FRAUD: Fact from Fiction. Prison is no fun and most of those mentioned above are facing several years plus substantial restitution for mortgage fraud conviction(s). It is true, you reap what you sow and in the environment we formerly came from, it seemed that the cards were stacked in favor of mortgage fraud.

IF you feel you’ve been a victim of mortgage fraud – please share your experience so other may benefit.

Mortgage Fraud Speaker – Chuck Gallagher – signing off…


What do US Representative Richard Renzi, Real Estate Investor James Sandlin, and Andrew Beardall Have in Common? A 35 Count Indictment for Fraud, Extortion and Money Laundering!

February 23, 2008

On Friday, February 22, 2008, a federal grand jury in Arizona returned a 35-count indictment yesterday against Richard G. Renzi, 49, of Flagstaff, Ariz., the U.S. Representative from Arizona’s first congressional district; James W. Sandlin, 56, of Sherman, Texas, a real estate investor and Renzi’s business associate; and Andrew Beardall, 36, of Rockville, Md., Renzi’s business associate.

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The news release from the US Attorneys office states the following:

The indictment charges Renzi and Sandlin in 27 counts with honest services wire fraud, extortion and money laundering, and conspiracies to engage in these acts, based on Renzi’s active involvement in the sale of Sandlin’s property in Cochise County, Ariz. to a participant in a federal land exchange proposal. The indictment alleges that Renzi and Sandlin previously owned land together in Kingman, Ariz. and that in 2003, Sandlin bought out Renzi’s interest for $200,000 and a note for $800,000. The indictment further alleges that in 2005, at a time when Sandlin still owed Renzi $700,000 in principal on the note, Renzi insisted that two separate entities doing business in Arizona purchase Sandlin’s property in exchange for his support on land exchange legislation.

The indictment also alleges that Renzi failed to disclose to either entity Sandlin’s $700,000 debt to him; that after the second entity purchased Sandlin’s property, Renzi failed to disclose to that group the $733,000 he received from Sandlin at the commencement and close of escrow in the spring and fall of 2005; and that Renzi failed to disclose to Congress his earnings from Sandlin in his 2005 Financial Disclosure Statement. Finally, the indictment traces the manner in which Renzi and Sandlin used the alleged proceeds of the above unlawful activities for their own personal and business use.

The remaining counts of the indictment charge Renzi and Beardall with violations of federal insurance laws, by embezzling over $400,000 in insurance premiums from the trust account of the Patriot Insurance Agency, Inc., a business owned by the Renzi family in Santa Cruz County, Ariz., to fund his first Congressional campaign in 2001 and 2002, and by subsequently making false statements to influence state regulatory investigations.

As would be expected, Renzi’s attorneys, Reid Weingarten and Kelly Kramer, denied that their client had done anything wrong and vowed to fight, on behalf of their client, the charges.

“Among the allegations contained in the indictment, Congressman Renzi misused his public office by forcing a land sale that would financially benefit himself and a business associate, and in so doing, he betrayed the trust of the citizens of Arizona,” stated U.S. Attorney Diane J. Humetewa.

Did this come as a surprise to those named? Not a chance.

There has been an active question as to Renzi’s ethics ever since the FBI raided a family business last year. Questioned, the FBI said it was investigating whether Representative Renzi used his office for personal gain. Renzi stepped down from the House Intelligence Committee after the raid and has publically stated that he will not seek re-election. The 48-year-old Renzi, once a rising Republican in the nation’s capital, now faces calls for resignation and a possible prison term and fines if he is convicted.

Every choice has a consequence! As an ethics and white collar crime speaker, I share that simple five word statement with groups nationwide. So often you find people – from all walks of life – make choices that, to them, seem right at the time – only to find out that the consequences of their actions are far worse than they ever imagined. Under the circumstances, there are members of congress both democrat and republican who are asking if Renzi should step down as they question his ability to effectively represent his constituents.

A John McCain tie? Yes. According to the Arizona Republic:

Sen. John McCain, on the presidential campaign trail, said he feels for Renzi’s wife and 12 children, adding, “I don’t know any of the facts in the case. . . . I also have faith in the justice system.” Renzi is listed among two dozen co-chairs of McCain’s Arizona campaign. McCain said Renzi may have to step down because he will be tied up with the case.

Personal guess – Renzi will step down from the McCain election committee, not because he’ll be tied up with the case, but because he is now a liability and no presidential candidate needs that!

Outcome? Well, that’s uncertain at this time, but continue to read…as there will be more to come.

Business Ethics Speaker, Chuck Gallagher, welcomes your comments!