Lawyer – Ted Russell Schwartz Murray – Guilty! White Collar Crime Speaker Chuck Gallagher Comments

October 26, 2008

As the time of decision grew near, the only thing that Ted Russell Schwartz Murray could likely have wished for is another storm.

The trial which began on Sept. 8, 2008, was interrupted by Hurricane Ike, and concluded with the return of the guilty verdicts yesterday.  A Houston federal jury has convicted Ted Russell Schwartz Murray, a lawyer licensed in Texas and Florida, of conspiracy to commit mail fraud and securities fraud in connection with the operation of Money Mortgage Corporation of America, a subsidiary of Premiere Holdings, LP, a real estate investment program.  Murray was also convicted Murray of making a False Statement on Tax Returns for the years 1999 and 2000.

Murray and co-defendants David Isaac Lapin and Jeffrey Carl Wigginton, Sr. were all charged by indictment in August, 2006. Lapin and Wigginton pleaded guilty in August 2008 to the conspiracy to commit mail fraud and securities fraud for their roles in the scheme and are pending sentencing in Nov. 2008.  Murray was charged separately in a second indictment with the tax offenses.

Every choice has a consequence.  As a business ethics and white collar crime speaker I have seen over and over the consequences of greed motivated actions.  For a fraud to exist three things exit: (1) need; (2) opportunity and (3) rationalization.  The verdict was guilty.  The question is what was the motivation of Murray and his co-conspirators.

According to the US Attorney’s news release:

During trial, the United States presented its evidence proving that between 1996 and 2001, Murray, 57, conspired to commit mail fraud and securities fraud in the promotion and marketing of the Premiere 72 or “P72″ mortgage investment program. Murray testified at trial and denied he had made false representations to investors when the program was promoted with promises of (1) 12% interest; (2) 1st liens on real estate; (3) 72 hour liquidity; and (4) 70% loan to value ratio. However, the evidence proved that so-called interest payments were actually set aside from a portion of the investor’s principle and returned to them as interest; many loans were not secured by 1st liens on real estate; and many loans were not based on a 70% loan to value ratio. Lapin, a co-conspirator in the scheme, testified that he and his co-defendants failed to disclose to investors the fact that loans on certain projects were actually in default at the time the funds of new investors were placed in these loans. An expert witness, qualified in forensic accounting, testified that the Premiere 72 program was conducted like a Ponzi scheme, where the money from new investors is used to pay earlier investors.

Mortgage Crisis – no wonder.  With practically free money and a country that seemed to believe that real estate had no ceiling, the opportunity was right the perpetration of such a fraud.  Likewise, in the current economic climate with fear leading the way, others will rise to fill the void.

While admitting that the above material facts were not disclosed to investors, Murray blamed his partners claiming Lapin had failed to live up to his fiduciary duties and both Lapin and Wigginton failed to disclose to investors that Premiere Holdings charged fees ranging from 15 -25% from investor funds. Murray denied any responsibility to disclose any material facts to investors.

With sentencing following in March 2009 the failure to accept personal accountability will no doubt play a role in the length of sentence.

Over 500 people invested in the fraudulent mortgage investment program promoted by Murray and his co-conspirators.  During the five year period the scheme operated, Premier Holdings, LP, Murray and his co-conspirators generated more than $200 million in gross receipts. Premier Holdings, LP, filed for bankruptcy in Oct. 2001 at which time the company had more than $160 million of investor funds tied up in the fraudulent scheme.  Murray filed for personal bankruptcy a short time thereafter.

The jury found Murray guilty of all 20 counts submitted to the jury arising from the scheme to defraud investors including the conspiracy charge, 14 counts of mail fraud, and four counts of securities fraud. The conspiracy conviction and each of the convictions for mail fraud carry a maximum statutory penalty of five years imprisonment. The securities fraud counts of conviction each carry a maximum penalty  of  10 years imprisonment.  Each count also carries a maximum fine of $250,000.

In addition to the scheme to defraud, Murray was also charged and convicted in a separate case with two counts of making a false statement on his tax returns based upon evidence which proved that Murray disguised personal expenses as business expenses and deducted a portion of those expenses on his tax returns, including a $29,000 Rolex watch, payments to casinos, a series of payments totaling over $5 million for return of principal to investors, payments for a $1 million ownership interest in the building where Premiere held its offices at 11451 Katy Freeway, and gifts to family members.  Murray faces a maximum of three years imprisonment and a $250,000 fine on each of two counts of conviction.

Considering where we are today – economically – I would not be surprised to see that the sentence would err on the heavy side.  For those who read this – if you know Murray perhaps you could give some clue as to what motivated his behavior.  Obviously, Murray was educated and hence would know the difference between right and wrong, between ethical behavior and unethical behavior.

Comments are welcome


Fraudulent Appraisals Earns Georgia Man Time In Prison – Comments by Business Ethics Expert Chuck Gallagher

January 16, 2008

A Decatur, Georgia man – Darryl L. Cooper, age 27, was sentenced to one year and six months for a mortgage lender fraud scheme. Cooper created fraudulent appraisals reflecting completed construction for homes that were incomplete.

Beyond his 18 month sentence, he will have three years of supervised release and must pay restitution of $4,720,500. That’s a big ole number. However, his active sentence was reduced due to his cooperation in the investigation.

Jeffrey Alan Teague was a builder/coconspirator. Teague was sentenced to 15 years 8 months in prison and ordered to pay over $7,800,000 in restitution. The mortgage fraud blog reports:

According to information presented in court, Cooper was recruited by coconspirator/builder Teague of ”The Pacific Group, Inc.,” d/b/a ”Value Homes Ltd.,” to prepare fraudulent appraisals reflecting photographs and $5 million in appraisal valuations for 15 completed houses in the Greenleaf Subdivision of Forsyth County, when Teague had not completed the construction of these homes. A California lender relied on Cooper‘s fraudulent appraisals which reflected completed construction to make $4.7 million in mortgage loans secured by these properties, which in fact had no value whatsoever. Many of the borrower/purchasers from California, New York and Florida also relied on the Cooper appraisals, rather than inspecting the properties before closing on their loans.

United States Attorney David E. Nahmias said of the case, “This case highlights the problems created by mortgage fraud in which the appraiser conspired with the builder to misrepresent that construction on homes was complete, compounded by out-of-state ‘investors’ who sign for loans without inspecting the properties. The partially built houses in this case may be subject to condemnation, as the portions completed were not built to code, leaving mortgage lenders with little security for their loans and ‘investors’ with nothing to resell, and neighborhoods full of vacant and uninhabitable houses.”

Every choice has a consequence. According to the FBI collusion is one of the key factors in mortgage fraud and in this case it cost both of them.

Keep in mind that part of the guilty plea was conspiracy. While I’m not an attorney, therefore my characterization might be lame, but conspiracy is easy to prove as it is the intent to commit the crime. How many times do you seen guilty verdicts when conspiracy is involved? Plenty.

Chuck Gallagher - The Ethics Expert

As a business ethics speaker, I often speak to financial institutions on fraud – and these days – mortgage fraud is the hot topic.  To view my demo video click here:  youtube
Question:

Have you ever been a victim of mortgage fraud or known someone who committed mortgage fraud? Perhaps you’d be interested in sharing some of that experience.


Multiple Guilty Pleas and 433 Months in Prison – And That’s Just In Three Days!

November 22, 2007

prison1.jpg

Seems that it’s been a busy week for guilty pleas and sentencing for Mortgage Fraud and related crimes.

Let’s start from the beginning of the week. The multiple members of the Dorean Group were found guilty of multiple counts of various types of fraud in a scheme to eliminate client’s debt. Their scheme involved creating mortgage and home equity fraud in order to obtain hundreds of thousands of dollars in home equity loans from unsuspecting lenders. The scheme covered investigations in California, North Carolina, South Carolina, Texas, Utah, Washington, Florida, Montana, Nevada, and Colorado. Their sentencing is set for March 18, 2008. Expect their sentence to be stiff – certainly not “Club Fed” for them.

Then theres Anthony Belletteiri, a real estate attorney, who was sentenced to 121 months in prison for his creative and elaborate scheme involving his law firms corporate and escrow bank accounts – using funds marked for real estate closings. Belletteiri also admitted that he stole approximately $2 million from a client, falsely telling the client that he had invested the client’s money in private mortgages. In order to conceal his theft, he created phoney mortgage documents, which he provided to the client, so that the client believed that his money was secured by mortgages, when it was not. This (former?) attorney was ordered to surrender to Federal prison on December 26, 2007 to begin serving his sentence. At least he got some grace in that he will be able to enjoy his last holiday season for a long while with his family – a small gift.

According to the Mortgage Fraud Blog (an excellent source for mortgage fraud information), Wesley Snyder, age 71, plead guilty to fraud for his mortgage scheme. The mortgage fraud blog reports, “Snyder defrauded more than 800 individuals throughout Central and Eastern Penn. via his “Wrap Around, Equity Slide Down Discount” Mortgage Program and his “Mortgage Participation” Investment Program. The charge carries a potential penalty of 30 years imprisonment and $1,000,000 fine.” It would appear that once incarcerated he may never see freedom again in his lifetime. I am confident that once confined, he will have many nights sleeping on a thin prison mattress wondering if it was worth ending his life in confinement?

Bang the gavel drops and Matthew Bevan Cox, age 38, is sentenced to 26+ years. In the federal system, one must serve 85% of one’s sentence…so Matthew will be a little over 60 years old when he’s released. Every choice has a consequence! In this case Mr. Cox made choices that will mean that, what is typically some of the most enjoyable and productive years of one’s life will be spent in prison – working for 12 cents per hour. He and his girl friend ran mortgage and real estate scams that spanned several south eastern states.

“Cox will now be serving the long prison sentence he deserves for his crimes,” said United States Attorney David E. Nahmias in Atlanta. “While the subject of a nationwide manhunt, Cox repeatedly used the stolen identities of minor children, the homeless and others to place multiple fraudulent loans on the same property without the knowledge or consent of the true owners. His crimes resulted in clouded property titles in several states with years of unresolved litigation, a trail of over 100 victims, and millions of dollars in losses that cannot be recovered.”

“The Secret Service has taken an aggressive stance in the prevention and investigation of mortgage fraud and other forms of identity theft”, said James Byers, Special Agent in Charge of the United States Secret Service Atlanta Field Office. “This case shows both the wide-reaching effects of identity crimes as well as the importance of cooperation among law enforcement to focus resources and respond effectively to uncover and prevent this type of financial fraud.”

Every choice has a consequence. On a personal level I feel for the people mentioned above. Not to be mistaken, I do not in any way condone their crimes or actions – I don’t. I just know that since every choice has a consequence, the price paid will be significant. Perhaps they will find, like I, that they can make their time in prison useful – either for themselves or for others.

As a business ethics speaker, I know first hand the pain of incarceration, as I’ve been there. I also know that no matter what someone might believe, you cannot escape the consequences of your choices. Likewise, if you make positive ethical moral choices the results can be quite remarkable. I, too, am living remarkable results.

For more information on presentations I make…feel free to visit my web site: http://www.chuckgallagher.com

Any comments?

Texas Ethics Speaker – Chuck Gallagher – signing off…