Fraud and Prevention

Mortgage Scheme Leader Who Targeted Victims Through TV Ads Sentenced

By James Comtois
September 16, 2009

After pleading guilty to conspiracy and bankruptcy fraud stemming from operating a mortgage scheme that targeted financially vulnerable victims facing foreclosure through local television ads, Michael K. Lewis of Takoma Park, Md., has been sentenced.

According to Rod J. Rosenstein, U.S. attorney for the District of Maryland, Lewis was sentenced to 78 months in prison, followed by three years of supervised release. Lewis previously agreed to the entry of a forfeiture judgment of $2.23 million, generated as proceeds of the criminal activity.

U.S. District Judge Deborah K. Chasanow will rule on the restitution amount at a later date.

According to the U.S. attorney's office, from at least 2004 until May 2008, Lewis aired television advertisements that targeted financially vulnerable individuals, representing that he could improve their credit, save their homes from foreclosure and assist them with bankruptcy. Viewers who called the toll-free number were scheduled to meet with Lewis, for a fee.

At the meetings, Lewis solicited individuals to become MKL Associates and to purchase a variety of for-fee services, such as the Michael K. Lewis Financial Diet for reducing debt, as well as a prepaid legal plan, income tax return preparation services and bankruptcy petition preparation.

Lewis specifically targeted individuals who owned and had equity in their homes, but were facing foreclosure on their homes because of their inability to make monthly mortgage payments. The goal of Lewis and his co-conspirators was to steal the homeowners' equity out of their property by inducing the homeowners to sell their property to Earnest Lewis and converting sale proceeds to the use of the conspirators.

Lewis and his co-conspirators did this by fraudulently representing to the homeowners that their "lease/buyback program" would help the homeowners to keep their homes.

Lewis and Winston Thomas, a senior loan officer with a mortgage lender, told the homeowners that the "good credit" of Earnest Lewis would be used to temporarily refinance their homes, that they had to sign their homes over to Earnest Lewis and that they could repurchase the homes in roughly one year, or once they regained their financial footing.

During the interim, they could remain in their homes only by paying inflated "rent" and fees by having their bank accounts directly debited to an account belonging to co-conspirator Cheryl Brooke's company, "In the House Technologies." Brooke then made payments to Earnest Lewis and Thomas, with the remaining funds being used by Michael K. Lewis and Brooke for their personal benefit.

Lewis, Earnest Lewis and Thomas lied to the homeowners or omitted details as to the amount of money that the homeowners would receive at settlement, what would be done with any equity in the homes and the need to file for bankruptcy protection and failed to inform the homeowners of the particulars of how the lease/buyback program worked.

Lewis met with several homeowners facing foreclosure and provided them with information about bankruptcy. He referred several homeowners to Brooke to file bankruptcy-related paperwork as a way to postpone foreclosure proceedings in order to give them time to participate in the lease/buyback program.

In January 2004, Lewis was permanently barred from acting as a bankruptcy petition preparer in Virginia and was ordered to return the fees he had obtained, after a judge found that he had filed skeletal bankruptcy cases that provided no benefits to his clients.

Earnest Lewis was sentenced to 54 months in prison for his role in the scheme. Thomas and Brooke pleaded guilty to their participation in the scheme and are scheduled for sentencing on Sept. 21 and 23, respectively.