| |
HOUSTON, Texas – (August 20, 2008) Four individuals have pleaded guilty to participating in a mortgage fraud scheme which netted millions in fraudulently obtained loan proceeds, United States Attorney Don DeGabrielle announced today. Carlos Paul Gonzalez and Machell Halstead each entered guilty pleas on Monday, Aug. 18, while Russell Browder previously pleaded guilty on June 9, 2008, and Jannice Bonner on April 21, 2008. They each admitted they conspired to commit mail and wire fraud during a scheme to defraud mortgage lenders. Each defendant faces a maximum of 20 years in a federal prison and a $250,000 fine.
Browder, 41, and Gonzalez, 38, operated a mortgage fraud scheme from 2002 through Nov. 1, 2005, in the Houston area under several business names including Advantage C.R. Funding Group, LLC and CG Funding Group. The scheme involved the recruitment of individuals with high credit scores to act as borrowers to obtain mortgage loans to purchase residential property. Gonzalez, Browder and other co-conspirators told these borrowers that the borrower need not invest any money but only their good credit to purchase the house. The borrowers were promised a monetary payment upon the closing of the property, which were made with loan proceeds obtained from the closing. The borrowers were further induced to participate by assurances that Gonzalez and Browder would pay the mortgage notes, preferably with rental income, until the house could be resold for a profit in the near future.
The loans, totalling more than $15 million, obtained to purchase the residences during the scheme were fraudulently-induced through various material false statements and pretenses to the mortgage lenders. During the scheme, Gonzalez managed the Houston office of Home Consultants Inc. also known as HCI Mortgage. Gonzalez, Browder and their co-conspirators would prepare loan applications which were forwarded to the lender along with various documents in support of the loan application including fabricated documents.
Gonzalez identified the residential properties used to obtain loan proceeds during the scheme and negotiated the sales contract with the sellers of the properties or their agents. The houses were located in several areas across the Houston area, including Fort Bend, Galveston, Harris and Montgomery counties. A number of the transactions during the scheme involved simultaneous closings or “flips” of the properties. Browder or Gonzalez would sign an earnest money contract with the owner of the property to purchase the property in the name of CG Funding Group or Advantage C.R. Funding Group. Browder would sign a second contract which reflected the property was being sold by the owner to the individual who applied for the mortgage loan at a significantly higher price than actually negotiated with the true owner/seller. The second contract was provided to the lender with the loan application.
With the assistance of escrow agents Bonner, 39, or Halstead, 42, two different HUD-1 settlement statements and two warranty deeds were created. One Housing and Urban Development (HUD)-1 settlement statement and warranty deed were signed by the actual owner/seller which indicated the property was being sold to CG Funding Group or Advantage C.R. Funding Group at the lower negotiated price. The second HUD-1 and warranty deed were provided to the lender which falsely represented the seller was selling the property to the borrower at the higher price. The seller’s signature was either forged or fraudulently cut and pasted on the second warranty deed with vendor’s lien and a copy was provided to the lender.
In each real estate transaction, the lender would wire transfer the fraudulently-induced loan proceeds to the title company’s escrow account in Houston. After the funding of the loans, the defendants would skim funds from the loan proceeds through disbursements made from the title company’s escrow account. In the transactions involving properties in which there were two HUD-1 settlement statements, the defendant’s would take the difference between the two selling prices.
These proceeds were wired from the title company’s escrow account to a bank account held in the name of CG Funding Group and controlled by Gonzalez and Browder. Gonzalez and Browder paid Bonner and Halstead for their assistance in the scheme.
The fraudulently-induced loans were not repaid. Most of loans obtained to purchase the residential properties fell into default and ultimately the properties were foreclosed.
On Aug. 18, 2008, Halstead also entered a guilty plea to a separate criminal information charging her with participating in another criminal mail and wire fraud conspiracy to defraud mortgage lenders. Again, Halstead utilized her position as a title company escrow agent to assist with the perpetration of the fraud. The maximum possible penalty facing Halstead based on her conviction on this charge is 20 years imprisonment and $250,000 fine.
Halstead is currently in custody, while the remaining three are out on bond with sentencing scheduled for December.
The criminal charges are the result of a joint investigation being conducted by agents of the FBI and HUD - Office of Inspector General. The case is being prosecuted by Assistant United States Attorney Melissa Annis.
SOURCE: United States Attorney's Office
Southern District of Texas
|
