CALIFORNIA MAN GETS 100 YEARS IN FEDERAL PRISON
FACTS
Richard Monroe Harkless, 65, who lived in Riverside, Calif. and was the mastermind of a Ponzi scheme that collected well over $60 million from hundreds of investors -- and caused more than $39 million in losses -- was sentenced on Sept. 28, 2009 to 100 years in federal prison.
Harkless ran the scheme through a company he called MX Factors from 2000 until late 2003, was sentenced by United States District Judge Virginia A. Phillips in federal court in Riverside. During the hearing, Judge Phillips said that Harkless cause "every kind of grief and loss imaginable" and that the defendant demonstrated that he "would commit his crimes all over again if given the chance."
In addition the prison term, Judge Phillips ordered Harkless to pay $35,479,310 in restitution to the approximately 600 victims who lost money as a result of the scam. Harkless was sentenced after being convicted in July of three counts of mail fraud, three counts of wire fraud and one count of money laundering.
Harkless and a team of salespeople at MX Factors raised funds by telling potential investors that MX Factors provided short-term loans to commercial construction companies that had guaranteed, government-backed contracts. Harkless created the company, controlled its bank accounts, hired and paid agents to solicit investors and created MX Factors promotional literature.
Investors were promised returns of up to 14% every two or three months, at which time investors could either receive their investments back or roll over their investments into the next investment period. The vast majority of MX Factors investors were "reloaded," meaning that they were convinced to invest money more than once. At trial, several victims testified that Harkless and his co-conspirators encouraged potential investors to try out the MX Factors program, investing in one 60- or 90-day cycle and then withdrawing their money to see if it worked. Once victims felt more comfortable with the program, Harkless and his co-conspirators encouraged them to invest even more and to get their families and friends to invest as well.
As the scheme began to collapse, Harkless diverted millions of dollars of investor money to Belize and Mexico. In the final months of the scheme, once Harkless knew that he was under investigation by various state regulators, he accelerated his fundraising and accelerated the transfer of funds to his own accounts in Belize. During the scheme, the bulk of the money raised from investors was used to pay off earlier investors, to pay agent commissions, to fund Harkless' crabbing business in Ensenada, Mexico and to pay for various personal expenses. Over the course of the scheme, approximately 600 victims invested and lost money with MX Factors.
At his trial, Harkless represented himself in court. Three of Harkless' sales agents -- Daniel Berardi, Thomas Hawkesworth, and Randall Harding -- pleaded guilty and received sentences of up to six years in federal prison. (usattycdca92809)
MORAL
Note the federal agents went back to events that occurred nine years ago. What is it they say? A person that represents himself has a fool for a client has an idiot for an attorney. I guess with a 100 years in federal prison he has given fodder for the old adage.
CALIFORNIA MORTGAGE BROKER PLEADS GUILTY
FACTS
In a case I reported back in February 2009 about the indictment of this mortgage broker from Redding, we now find he pleads guilty. Joshua Gervolstad pleaded guilty on Oct. 5, 2009 to one count of mail fraud in connection with a mortgage fraud scheme.
Gervolstad, who was a mortgage broker, submitted inflated appraisals and false lien documents for use in closing purchase transactions involving five different real properties located in Redding and in Lodi. The closing statement for each property contained fraudulent papers requiring the payoff of a lien to an entity called "TPG Investments." In each case, the lien did not exist. In reality, Gervolstad controlled TPG Investments and used its bank account to divert mortgage loan funds to himself and other persons. His conduct caused $1,798,888.91 in fraudulent payouts for liens that did not exist, affecting mortgages with a total value of $5,441,562. At least three of the properties were foreclosed and were sold for a combined loss of at least $1,170,000.
Gervolstad is scheduled to be sentenced by United States District Judge William B. Shubb on Dec. 14, 2009. The maximum statutory penalty for a violation of mail fraud is 20 years in prison, a $250,000 fine, and restitution of the full amount of the loss. (usattyedca10509)
MORAL
He is looking forward to about two-to-four years in actual prison time without any possibility of parole.
CALIFORNIA WOMAN INDICTED FOR TAX FRAUD AND BANKRUPTCY FRAUD RELATED TO MORTGAGE FRAUD
FACTS
Vallejo, Calif., resident Myra Holmes was indicted by a federal grand jury with concealment of assets and bank fraud, The indictment, which was issued on Sept. 23, remained under seal until Oct. 6, 2009 when Holmes was arrested in Vallejo. The indictment accuses Holmes of enriching herself by convincing her father -- who had previously filed for Chapter 11 bankruptcy -- to convey to her, without consideration and without notifying or obtaining the permission of the bankruptcy court or the bankruptcy trustee, his interest in the Vallejo property where she lived. The indictment further alleges that after Holmes obtained her father's interest in the property she withdrew the equity from the property through refinancing a mortgage loan, which she procured with a fraudulent application.
According to the indictment, as a result of her fraudulent refinancing application, Holmes received a mortgage, which increased the outstanding mortgage on the Vallejo property from approximately $180,000 to approximately $338,000; received approximately $130,000 wired to her personal bank account; and arranged for a title company to write several checks out of escrow funds to settle personal debts that Holmes owed -- including payments to Neiman Marcus, Lord & Taylor, Macy's and Spiegel. By the end of April 2006, Holmes had spent on personal expenses virtually all of the approximately $130,000 that she had fraudulently received as a result of the November 2005 refinancing of the Vallejo property.
Holmes was released after executing a co-signed bond of $50,000. The maximum statutory penalty for a conviction under 18 U.S.C. § 152(5) -- concealment of assets -- is five years' imprisonment, a $250,000 fine and restitution. The maximum statutory penalty for a conviction under for 18 U.S.C. 1344 -- bank fraud -- is 30 years' imprisonment, a $1,000,000 fine and restitution. (Case #: 09-00930 JF)(usattyndca10709)
MORAL
Forgive the ignorance of the few over the many, but where is the bankruptcy fraud? The asset was an asset of the estate, the debtor spent it without consent of the trustee, a violation of the court's orders, but a felony and fraud I have a problem with.
PROMISE TO HELP PEOPLE IN FORECLOSURE IN MARYLAND (OR ELSEWHERE) AND GO TO FEDERAL PRISON FOR FOUR YEARS
FACTS
U.S. District Judge Roger W. Titus sentenced Clifford McCall of Lanham, Md., on Oct. 5, 2009 to four years in prison followed by five years of supervised release and his daughter, Chandra Jones of Lanham, to 33 months in prison followed by five years of supervised release for conspiracy to commit mail and wire fraud in connection with a mortgage fraud scheme that falsely promised to help homeowners facing foreclosure keep their homes and repair their damaged credit. Judge Titus also entered judgments ordering McCall to pay restitution of $2,462,107.85 and ordering Jones to pay restitution of $3,879,093.58.
McCall was president of Burroughs & Smythe Financial Services, Inc., based in Lanham, and a director of the Fordham & Fordham Investment Group, Ltd., a foreclosure consulting and credit servicing business based in Lanham and Greenbelt, Md. These companies, which McCall and others incorporated, assisted the Metropolitan Money Store, located in Lanham, in offering foreclosure consultation and credit services to financially distressed homeowners.
Beginning in September 2004, McCall conspired with others in a scheme to fraudulently promise to help homeowners, who had substantial equity in their homes but were facing foreclosure because of their inability to make monthly mortgage payments, avoid foreclosure and repair their damaged credit. The homeowners were directed to allow title to their homes to be put in the names of third party purchasers (the straw buyers) for a year, during which time Metropolitan Money Store promised to improve the homeowners' credit ratings, help them obtain more favorable mortgages, and eventually return title to their homes to them. The homeowners were told that the equity withdrawn from the properties would be used to pay the mortgage and expenses on their homes and to repair their credit. The straw buyers were paid $10,000 to participate in the scheme.
Using the homeowners' properties, the conspirators applied for mortgages to extract the maximum available equity from the homes. They prepared and submitted fraudulent loan applications to mortgage lenders to obtain fraudulently inflated loans on the target properties in the straw buyers' names. At settlements, the conspirators imposed numerous fees and required "seller contributions" which were far in excess of industry standards; they imposed fees for services which were not performed, disclosed or explained to the homeowners; and they transferred the sale proceeds out of the escrow accounts into the conspirators' business and personal bank accounts and converted a substantial portion of those funds to their personal use.
McCall obtained voluminous cashier's checks in the names of straw buyers and MMS employees to carry out the scheme. McCall also agreed to act as a straw buyer and secure a mortgage loan in his own name for property and in return, was paid $10,000. McCall made false statements as to personal and financial information on settlement documents.
As a result of this scheme, McCall fraudulently obtained and used for his personal benefit at least $2,462,107.85 through bank and credit card accounts from 2004 to 2007.
Jones was hired in July 2005 to work as a loan processor at MMS and shortly thereafter participated in the fraud scheme. In November 2005, she also began to work at Fordham & Fordham Investment Group Ltd. Jones was responsible for paying the mortgages on foreclosure reversal program properties and assisting program participants with repairing their credit. Jones was later made vice-president of F&F and a director of Burroughs & Smythe Financial Services, Inc. Jones was not licensed to provide credit repair services and had not received any training related to the mortgage industry, credit repair, or financial services.
Jones placed $788,978.30 from F&F's bank accounts into her personal bank accounts. At the direction of co-conspirators, Jones transferred funds from the F&F accounts to pay the personal expenses of co-conspirators and observed co-conspirators using funds from the F&F accounts for their personal benefit. Jones also agreed to serve as a straw buyer for two properties, and secure mortgage loans in her own name to do so, because she had a good credit history. Jones was paid $3,600 for serving as a straw buyer for a property in Accokeek, Md. and $5,000 for serving as a straw buyer for a property in Bladensburg, Md. In purchasing the properties, Jones made false statements as to personal and financial information on settlement documents. As a result of this scheme, the total loss attributable to Jones, including the estimated losses to the mortgage lenders, is $4,189,283.86.
Ten defendants, including Jones's mother, a lawyer, mortgage broker, real estate agent, loan processor and company officers have pleaded guilty in this scheme. Kurt Fordham was sentenced on July 10, 2009 to 10 years in prison for his participation in the scheme. Fordham was personally responsible for over $13.5 million of losses to mortgage lenders and used over $800,000 of fraudulently obtained proceeds to pay for his wedding. On Sept. 14, 2009, Judge Titus sentenced Richard Allison, an attorney and employee of the U.S. Census Bureau who provided legal services to MMS, F&F and Burroughs & Smythe, to 18 months in prison; and Carlisha Dixon to five months in prison and five months home detention. Judge Titus also entered an order of restitution against Dixon of $180,000 The remaining defendants are scheduled to be sentenced within the next two months. (usattymd10509)
MORAL
Do not do it or you too can face over 10 years in a federal prison. However, if you have already done it, then I recommend you hire a good attorney now. Later (like the word) may be too late.
ANOTHER MARYLAND MORTGAGE BROKER "BITES THE DUST' FOR OVER SIX YEARS IN A FEDERAL PRISON
FACTS
U.S. District Judge J. Frederick Motz sentenced Osman Sharrieff Al-Bari of Washington, on Oct. 5, 2009 to 78 months in prison followed by five years of supervised release for mail fraud arising from the fraudulent purchase of 25 properties in Maryland, the District of Columbia, and Virginia.
Al-Bari was a leader in the scheme in which he, along with his sister Jamilah Al-Bari, Terrence White, Timothy Reed and others, paid straw purchasers $10,000 per property to purchase houses for them. Many of the loan applications for the straw buyers misrepresented the buyers' income and assets. Al-Bari and others had the straw buyers claim large account balances at banks and had Jamilah Al-Bari, who worked at one of the banks, send "verification letters" falsely confirming that the straw buyers had such assets.
Al-Bari, White and Reed also created false invoices to claim that their company, Brotherly Investment Group, performed "renovations" on some of the properties. Using these false invoices, Al-Bari and his co-conspirators were "repaid" at closing for the purported renovations.
Al-Bari and others repeated this fraud scheme with over 15 straw buyers and approximately 25 properties in Maryland, the District of Columbia and Virginia. From 2006 to 2008, Al-Bari, White, Reed and others received approximately $3,830,418 in fraudulent funds. Many of the purchased properties have been foreclosed upon. Al-Bari is responsible for $2.5 million in losses from the scheme.
Jamilah Al-Bari, Timothy Reed, Terrence White, Sabrina Weinberg and Kara McIntosh have all pleaded guilty to mail fraud in connection with their participation in this scheme and are scheduled to be sentenced in the next two months. (usattymd10509)
MORAL
He was the "leader of the scheme." Now he is the leader to the followers to federal prison.
VIRGINIA HUSBAND AND WIFE SENTENCED TO FEDERAL PRISON FOR $9 MILLION MORTGAGE FRAUD; HE GETS 10 YEARS
FACTS
Darrell Underwood and Cynthia Underwood, both of Chesterfield, Va., were sentenced on Oct. 6, 2009 for their roles in a multi-million dollar fraud scheme. Both had pled guilty to conspiracy to commit mail fraud. Darrell Underwood also pled guilty to engaging in unlawful monetary transactions. Chief United States District Judge James R. Spencer sentenced Darrell Underwood to 120 months' imprisonment and Cynthia Underwood to 36 months' imprisonment. Each defendant's prison sentence will be followed by a term of three years supervised release. The preliminary loss figure is approximately $9,000,000.
Darrell and Cynthia Underwood owned and operated Walkwood Properties, located at 4401 Stigall Drive, Midlothian, Va. Walkwood Properties was a real estate company that offered various homeowners an opportunity to save their homes from foreclosure. Through that company, the Underwoods also offered an investment program to various individuals, allowing them to invest in Walkwood's real estate purchases. The Underwoods admitted to operating a Ponzi scheme through Walkwood's investment program in 2007. The essence of the Ponzi scheme was that the Underwoods induced individuals to invest money with Walkwood Properties by representing that investors' funds would be funneled directly into investment properties targeted by Walkwood's foreclosure efforts. In exchange, the Underwoods promised that the investors would receive returns of up to 50% within 60-120 days, depending on the timing of the investments as the scheme progressed. In 2007, the Underwoods paid their investors a rate of return, but this was rarely taken from the profits of investments. Instead, the funds used to repay investors were derived from monies paid by subsequent investors, or groups of investors.
As a result of the Underwoods' ongoing Ponzi scheme, the victim investors incurred significant losses. From April through December 2007, the Underwoods received approximately $18,400,000 in investor funds. Of that amount, the bank records established that only $2,100,000 was actually paid towards any type of real estate transaction. During the same time frame, the Underwoods paid approximately $16,200,000 to investors; of that amount, approximately $13,400,000 was derived from investor funds that were simply used to repay other investors. As of Dec. 13, 2007 (the date of seizure of the investment accounts in connection with the investigation), the Underwood's investor account had a balance of $780,557.07. As of that same day, the Underwood's investment program had an outstanding balance of over $14,000,000 owed to various investors. That amount was comprised of over $9,000,000 in principal alone.
Walkwood Properties is connected to another case, United States v. Colin C. Connelly. In connection with a guilty plea entered on Dec. 2, 2008, Connelly admitted to conspiring with representatives from Walkwood Properties to skim equity in housing transactions by making false entries on HUD-1 Settlement Statements. On March 10, 2009, Judge Spencer sentenced Connelly to 24 months imprisonment and ordered him to pay $376,464.62 in restitution. (usattyweva10609)
MORAL
Anyone out there do business with Walkwood properties? You may be looking at a lawsuit or for that matter you could be a potential target.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
