A Washington state man has been sentenced to 25 months in prison for orchestrating a foreclosure rescue scheme that defrauded distressed homeowners more than $55 million.
Jeff McGrue told Southern California homeowners that he could prevent foreclosure by paying off their mortgages by sending lenders fake notes that were backed by Treasury bonds. However, the defendant did not own any bonds and did not have a Treasury Department account.
The scheme started in the fall of 2007 and lasted one year. Co-conspirators Gerald Guidry, who owned a company called My Debt Solutions, and Ronald Morgan, the owner of Omnipoint, defrauded 250 homeowners who were “upside-down” on their mortgages or facing foreclosure.
The fraudsters promised to delay or stop foreclosures and to pay off delinquent mortgages. In exchange for this action, the homeowners had to make payments and transfer title to Gateway International, a company run by the defendant.
Real estate agents helped the defendant recruit homeowners who were told that if they paid an enrollment fee and monthly rent and signed over title of their homes to Gateway, McGrue would use “bonded promissory notes” purportedly drawn on a U.S. Treasury Department account to pay off their mortgages, thereby stopping foreclosure proceedings.
As part of the scheme, the homeowners were told that the lenders were legally required to accept these notes and then buy their home back from Gateway at a discount. Even if they chose not to repurchase their property, the homeowners were told that they would still receive $25,000.
United States District Judge Otis Wright III called the defendant’s action “heartless” and that he tried to “bilk the financial institutions out of at least $55 million.”
McGrue collected nearly $1 million in enrollment fees and rent from all the victims. Court documents said the defendant signed fake documents to make it seem like the victims’ outstanding mortgages had been paid off so he could resell the properties titled to Gateway to unsuspecting buyers.
McGrue was charged with four counts of mail fraud and four counts of passing fictitious government instruments to lenders and loan servicers.
The other conspirators have already pleaded guilty to this crime and await sentencing. “Schemes targeting homeowners who are losing, or are in danger of losing, their homes to foreclosure prey upon the most vulnerable among us,” said Andre Birotte Jr., attorney for the United States. “This sentence will send a strong message of deterrence to scam artists and other schemers who think they can steal from desperate, distressed homeowners and get away with it.”
