A California loan broker who defrauded investors of more than $17.4 million has been sentenced to five years in prison.
Mervyn Phelan Sr., 74, was sentenced by a U.S. District of Maryland judge last Friday for wire fraud conspiracy, wire fraud and obstruction of justice. Phelan was also ordered to pay restitution of $17.4 million.
Court documents revealed that Phelan operated IAG Underwriters, a business that worked with the McCloskey Group in 2009 to locate sources of financing for real estate development projects.
Phelan and Gregory Grantham, IAGU's general counsel, made false representations that persuaded lenders to make loans to the McCloskey Group in order to establish that the company had liquidity to secure funding for real estate development through IAGU, according to court documents.
Both conspirators told lenders that the funds needed to be placed in an escrow account controlled by an attorney working for the McCloskey Group. Furthermore, both Phelan and Grantham repeatedly advised escrow account lenders that funding for a particular project was imminent, even though this was not true.
The McCloskey Group immediately removed funds from the escrow accounts and used the money to repay loans that were already issued to the company to meet ongoing businesses expenses. The total losses resulting from this scam were approximately $20 million, the Federal Bureau of Investigation said.
Furthermore, from September to December 2012, Phelan and Grantham obstructed grand jury proceedings when they failed to produce email documents revealing that they worked with the McCloskey Group in relation to this fraudulent scam.
All five conspirators in this scam have now been sentenced. Grantham's sentencing was the same as Phelan. Meanwhile, Brian McCloskey, owner of the McCloskey Group, was sentenced to 41 months in jail and restitution of $15.9 million. Kevin Sniffen, the McCloskey Group's attorney, will spend three years in jail and was told to pay $15.9 million in restitution. Lastly, Patrick Belzner, a homebuilder, was sentenced to 15 years in prison and ordered to pay $19.8 million in restitution.
