Three Utah men charged in mortgage fraud scheme
By Dawn House
The Salt Lake Tribune
Updated: 03/18/2009 08:09:56 PM MDT
Three Utah men have been charged in a $2.9 million mortgage scheme that allegedly took advantage of sloppy lending practices. Federal officials say the fraud is similar to other swindles that helped bring about the nation’s financial crisis.
The 38-count indictment, returned by a grand jury on Wednesday, is the first of 50 other mortgage frauds under investigation involving $150 million in losses, said U.S. Attorney for Utah Brett Tolman.
“Prosecutions can be a great deterrence,” said Tolman, who promised to target mortgage fraud “so we can start rebuilding.”
Defendants named in the federal indictment are Ronald W. Haycock, Sr., 61, Bountiful; Lyle Smith, 43, Roy; and disbarred attorney Jamis Melwood Johnson, 57, Salt Lake City.
The three face 15 counts of money laundering, 12 counts of wire fraud, 10 counts of mail fraud and one conspiracy count. The money laundering counts carry a prison sentence of up to 20 years; the wire and mail fraud up to another 20 years, and the conspiracy charge also has a penalty of up to 20 years.
Haycock said he was shocked by the indictment and must talk to his attorney before making a comment. Smith could not be reached for comment. Johnson said he was not involved in any of the business entities or transactions outlined in the indictment. Johnson was disbarred in 2001 on an unrelated case.
Prosecutors say Haycock and Smith recruited “straw buyers” and used the purchasers’ favorable credit ratings to take out loans on 12 homes in Davis, Salt Lake and Utah counties from 2005 through August 2007. The three men are charged with closing loans by using false information that inflated the straw buyers’ income and assets. Cash from the loans were allegedly paid out to joint ventures controlled by the defendants and purportedly deposited into an account to fund other straw-buyer loans.
The defendants also took out loan proceeds from an account they referred to as the “slush fund,” according to the indictment. Tolman said the men “siphoned off” assets totaling nearly $2.9 million while leaving the straw buyers with mortgage payments they could not afford.
Haycock allegedly formed four companies, referred to as Haycock Properties. Prosecutors say the straw buyers were told that the companies would be making loan payments for them, buyers would not have to make a down payment and the homes, whose appraisals had been rigged for more than they were worth, would be quickly sold. Buyers were allegedly paid from $7,000 to $20,000 to sign purchase and loan documents.
The companies stopped making loan payments, leaving mortgage lenders with non-performing loans secured by properties worth far less than the outstanding loan balances, prosecutors said.
Mortgage companies that purportedly lost money in the scheme included the Utah offices of Countrywide Bank and Countrywide Home Loans, names that became synonymous with the mortgage industry meltdown, America’s Wholesale Lender, Argent Mortgage, Paragon Home Lending, Shoreline Lending and Mountain States Mortgage.