More Mortgage Fraud News

William A. McDowell, 30, Charlotte, North Carolina, was sentenced in U.S. District Court in Charlotte on Wednesday, March 18, 2009, for crimes in connection with a mortgage fraud scheme that involved numerous mortgage loans and houses in Charlotte, North Carolina, communities.

Convicted by a federal jury at trial in June 2008, McDowell received a term of nine years imprisonment to be followed by a three-year term of supervised release. McDowell was also ordered to pay restitution in the amount of $2.7 million to the affected lending institutions.

The charges against McDowell arose out of a conspiracy which took place from December 2002 through March 2005 in the Western District of North Carolina. The defendants include two promoters and an underwriter for Countrywide Homes Loans. The superseding bill of indictment identifies an attorney, three other promoters and a real estate investor as unindicted co-conspirators in the scheme. Those individuals all pled guilty and cooperated with the prosecution. As part of the scheme the defendants agreed to defraud home mortgage lenders, including federally insured financial institutions across the country. The scheme centered on the submission of false and fraudulent mortgage loan applications in the names of individual straw borrowers solicited to purchase real property through real estate purchase offers. The coconspirators obtained mortgage loans secured by properties throughout North Carolina with inflated values.

Defendant McDowell’s role, generally, was that of recruiter and as part of that activity, he caused prospective buyers (“straw buyers”) to apply for home mortgage loans, typically by promising that (1) the buyers would not be required to provide down payments on the property, (2) the promoter would pay the buyers at or near the time of closing for participating in the scheme, and (3) the promoters would assist the buyers in renting the property bought with the loan proceeds and later selling it at a profit. As part of the scheme, it was further arranged for loans to be approved on the basis of statements the conspirators knew to be false. They misrepresented or concealed, among other things, each of the following during the course of their scheme: (1) the buyers’ income; (2) available funds in buyers’ bank accounts; (3) buyers’ resources; (4) the buyers’ then-current employment and employment histories; (5) the buyers’ intent to occupy the home as their primary residence; and (6) the source or nature of the buyers’ down-payment for the properties.

Trial testimony and court filings show that McDowell recruited straw buyers and brought them to his co-conspirators in order to facilitate the fraudulent transactions. Profits ultimately realized by the group, represented by the difference between appraisal amounts and loan amounts, were shared among the group and the various straw buyers. McDowell and his coconspirators utilized the personal information of the straw buyers to engage in the fraudulent real estate transactions. Generally the transactions involved preparing and submitting fraudulent loan applications and false supporting documents such as bogus employment information and account statements for fictitious bank and brokerage accounts. Trial evidence showed that in one instance, McDowell himself began residing in one of the homes fraudulently purchased by using the personal information of one of the buyers he had recruited. That home was located in Charlotte, North Carolina’s Piper Glen community. McDowell received thousands of dollars in kickbacks from his participation in the scheme. These illegal kickback payments were concealed by falsely classifying the payment as an “assignment fee” on the HUD-1 statement. Trial evidence showed that most of the homes involved in the mortgage fraud scheme went into foreclosure.

McDowell, charged in the indictment with a total of 4 counts, including mortgage fraud conspiracy, mail fraud, and money laundering conspiracy, was placed in federal custody at the time of his conviction on all counts on June 3, 2008. McDowell’s three co-defendants (listed below), all of whom have pled guilty, currently await sentencing. McDowell’s additional named co-conspirators, Gordon George and Duane Montgomery, have been charged, convicted and sentenced in U.S. District Court in Charlotte. On September 14, 2005, George pled guilty to conspiracy, mail fraud, and money laundering charges set forth in a separate Bill of Information (Western District of North Carolina Docket No. 3:05CR326) against him. On August 16, 2005, Montgomery pled guilty to mail fraud conspiracy set forth in a separate Bill of Information (Western District of North Carolina Docket No. 3:05CR292) against him.

The announcement is made by Acting U.S. Attorney Edward R. Ryan for the Western District of North Carolina, joined by Kenneth Moore, Acting Special Agent in Charge of the Federal Bureau of Investigation (FBI) in North Carolina. The sentence was handed down by U.S. District Judge Frank D. Whitney.

“William McDowell sought to corrupt and exploit the American dream of home ownership by engaging in this complex mortgage fraud scheme,” said Acting U.S. Attorney Ryan. “These types of mortgage fraud schemes have devastating effects on our communities, and as most of us have learned, have a profoundly negative impact on our broader economy. This nine-year sentence sends an unequivocal message that those who participate in mortgage fraud will be severely punished for their conduct,” he added.

Acting U.S. Attorney Edward Ryan said, “This result also highlights the long standing commitment of Charlotte’s Mortgage Fraud Task Force to identify, investigate, and bring to justice those individuals engaged in mortgage fraud schemes.”

This conviction and sentence is part of Operation “Clean Deed,” an undercover investigation initiated by the FBI’s Charlotte Division in 2002. Operation “Clean Deed” has
resulted in over 30 convictions and has identified over $70 million in fraudulent mortgages.

Those convicted include many licensed real estate professionals, including mortgage brokers, attorneys, appraisers, underwriters, and loan brokers, as well as other participants such as home builders and straw buyers.

In addition, Acting U.S. Attorney Ryan announced today that the United States recently turned over more than $400,000 to the clerk of court for distribution to mortgage lenders victimized due to the crimes committed within this mortgage fraud scheme. As set forth in the indictment against William A. McDowell and his co-defendants, Gordon George was a coconspirator of McDowell and the others in their scheme to obtain inflated loans on overvalued Charlotte properties.

As indicated in the bill of information against George, approximately $7 million in proceeds of fraudulent loan applications were diverted to George and his co-conspirators. While white collar criminals often dissipate much of the proceeds of their crimes, in this case the United States was ultimately able to locate and forfeit the roughly $400,000 from George’s accounts.

Forfeiture is the process whereby a criminal defendant is divested of his interest in property and the United States obtains title to the property. Federal statutes authorize forfeiture of assets that are the proceeds of crime, that facilitate crime, and that are involved in crime. The Department of Justice prioritizes the use forfeited assets to provide recompense to all victims, including businesses, government agencies, and individuals. Accordingly, in the case against George, the United States has requested that the clerk of court distribute the forfeited funds to mortgage companies defrauded due to the actions of George and identified as victims due $1,202,961.42 restitution in the Judgment against George.

The convictions of Young, McDowell, Johnson, Griffin, Montgomery, and George, and the subsequent forfeiture of George’s assets and return of the assets to victims resulted from efforts by the United States Attorney’s Office, the Federal Bureau of Investigation, and the United States Marshals Service. Assistant United States Attorney Craig Randall prosecuted George, Assistant United States Attorney Mark T. Odulio prosecuted Young, McDowell, Johnson, and Griffin, and Assistant United States Attorney William Brafford oversaw the forfeiture action.

Anthony Young, 54, Huntersville, NC, Awaiting sentencing;
William A. McDowell, 30, Charlotte, NC, Sentenced Wednesday, March 18, 2009;
Oliver W. Johnson, Jr., 46, Okolona, MS, Awaiting sentencing;
Carla Griffin, 40, Charlotte, NC, Awaiting sentencing.

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