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Second Conspirator Pleads Guilty in $70 Million “Dream Home” Mortgage Fraud Scheme

May 13, 2009 By Paul (Founder, WorkAtHomeTruth) 2 Comments

5/12/2009 U.S. Department of Justice Press Release via the FBI website:

GREENBELT, MD—Charlotte Melissa Josephine Hardmon, age 39, of Bowie, Maryland, pleaded guilty today to conspiracy to commit wire fraud in connection with her participation in a massive mortgage fraud scheme which promised to pay off homeowners’ mortgages on their “Dream Homes,” but left them to fend for themselves, announced United States Attorney for the District of Maryland Rod J. Rosenstein.

“Our investigation is continuing,” said U.S. Attorney Rod J. Rosenstein. “We aim to hold all perpetrators accountable and recover any remaining proceeds of the scheme.”

According to her plea agreement, beginning in 2005, co-conspirators targeted homeowners and home purchasers to participate in a purported mortgage payment program called the “Dream Homes Program.” In exchange for a minimum of $50,000 initial investment and an “administrative fee” of up to $5,000, the conspirators promised to make the homeowners’ future monthly mortgage payments, and pay off the homeowners’ mortgage within five to seven years. Dream Homes Program representatives explained to investors that the homeowners’ initial investments would be used to fund investments in automated teller machines (ATMs), flat screen televisions that would show paid business advertisements and electronic kiosks that sold goods and services. To give investors the impression that the Dream Homes Program was very successful, Metro Dream Homes spent hundreds of thousands of dollars making presentations at luxury hotels such as the Washington Plaza Hotel in Washington, D.C., the Marriott Marquis Hotel in New York, New York and the Regent Beverly Wilshire Hotel in Beverly Hills, California.

In February 2006, the Dream Homes Program added a second program called “POS Dream Homes” that offered similar promises of paying off investor mortgages in five to seven years in exchange for an upfront investment of $50,000 or more. Collectively, these programs had offices in Maryland, the District of Columbia, Virginia, North Carolina, New York, Delaware, Florida, Georgia, and California. The Dream Homes Program successfully recruited over 1,000 investors who invested over $70 million.

Hardmon was hired in December 2006 at an annual salary of $200,000 as a business consultant for digital advertising for Metro POS. Her salary was two and one-half times her prior salary as a marketing executive in Boston, Massachusetts. Hardmon received a Christmas bonus of $16,000 just two weeks after she began work.

Shortly after starting work, Hardmon saw that Metro POS had little organization. Personnel decisions as to hiring and salary were often made without consulting division heads such as Hardmon. Hardmon’s sales staff was being paid on salary, despite the fact that the sales staff had generated no material revenue.  Hardmon imposed a commission structure and laid off most of the staff in her division in an attempt to improve the disorganization.

Hardmon bought a home for $899,000 in June 2007 and enrolled her home in the Dream Homes Program.

At no time throughout her employment did Hardmon see any evidence of material revenue being generated from the digital advertising. She saw no evidence of any revenue being generated by any division of the company.

Hardmon attended a meeting of Metro Dream Homes senior executives in June 2007 in which they were told that the company was accumulating much more debt than revenue, and that the companies which Metro Dream Homes had been in “partnership” with also were generating no revenue.

After a cease and desist order was issued by a Maryland court against Metro Dream Homes, Hardmon participated in meetings in which investors were told that the company’s legal difficulties were the result of either misunderstandings or racial animus against company leaders. Hardmon knew the purpose of the meetings was to calm investor fears. She participated in these meetings, despite her knowledge that the company was generating no revenue. In a meeting on September 8, 2007, Hardmon stated that the digital advertising side of the company was viable. In addition, she stood by and gave audible support while senior Metro Dream Homes employees stated that the company was doing well.

From December 2006 to October 2007 while Hardmon was employed by Metro POS, she received approximately $167,000 in salary and one mortgage payment.

Hardmon faces a maximum sentence of 30 years in prison and a fine of $1 million or twice the value of the transaction, whichever is greater. U.S. District Judge Roger W. Titus scheduled sentencing for September 24, 2009, at 8:30 a.m. As part of her plea agreement, Hardmon has agreed to pay restitution for the full amount of the victims’ losses.

Carole Nelson, age 50, of Washington, D.C., pleaded guilty to money laundering on April 28, 2009 in connection with this scheme. Judge Titus scheduled her sentencing for August 6, 2009, at 8:30 a.m. As part of her plea agreement, Nelson has agreed to forfeit two homes in Virginia and Washington, D.C.

This prosecution is being brought jointly by the Maryland and Washington, D.C. Mortgage Fraud Task Forces, which are comprised of federal, state and local law enforcement agencies in Maryland, Washington, D.C. and Northern Virginia. The Task Forces were formed to promote the early detection, identification, prevention and prosecution of various kinds of mortgage fraud schemes. This case, as well as other cases brought by members of the Task Forces, demonstrates the commitment of law enforcement agencies to protect consumers from fraud and help to ensure the integrity of the mortgage market and other credit markets. Information about mortgage fraud prosecutions is available on the internet at http://www.usdoj.gov/usao/md/Mortgage-Fraud/index.html.

United States Attorney Rod J. Rosenstein praised the Federal Bureau of Investigation, the Internal Revenue Service – Criminal Investigation, the Maryland Attorney General’s Office – Securities Division and the Federal Deposit Insurance Corporation – Office of Inspector General for their investigative work.  Mr. Rosenstein thanked Assistant U.S. Attorneys for the District of Maryland Jonathan C. Su and Bryan E. Foreman, who are prosecuting the case.

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MORTGAGE FRAUD SCAM ‘Dream Homes’ Turns into Nightmare

April 27, 2009 By Paul (Founder, WorkAtHomeTruth) 1 Comment

4/27/2009 FBI News Release:

The company had all the trappings of success—its top
officials lived lavish lifestyles, kept a fleet of chauffeur-driven
cars, and donated generously to charities. And it used slick marketing
to sell its “Dream Homes Program,” which promised to pay homeowners’
mortgages in return for an up-front fee that would be invested in
profitable business ventures.

But the dream turned into a $70 million nightmare for more than a thousand investors—among the latest victims of mortgage fraud.

According to federal grand jury indictments unsealed today, the five
people behind Metro Dream Homes and the bogus mortgage payment program
were actually running an elaborate deception—one eventually unraveled
through the cooperative efforts of federal and state law enforcement
agencies.

“The effects of this wide-ranging mortgage fraud scheme are
particularly disturbing against the backdrop of today’s economic
environment,” said Thomas J. Harrington, Executive Assistant Director
of our Criminal, Cyber, Response, and Services Branch.

Here’s how the scam worked:

  • Between 2005 and 2007, victims were persuaded into investing at
    least $50,000 with Metro Dream Homes, either by refinancing their
    existing homes or buying new homes at inflated prices.
  • Investors
    were told not to worry about high mortgages because Metro Dream Homes
    would pay their future monthly payments and pay off their mortgages
    within five to seven years using returns on the homeowner’s original
    investment. Then the homeowner and Metro Dream Homes would own an equal
    interest in the home.
  • Victims were told that their $50,000—not
    including an administrative fee of up to $5,000—would be used to fund
    investments in automated teller machines, flat-screen TV displays that
    carried commercial advertisements, and Touch-N-Buy electronic kiosks
    that sold telephone calling cards and other items.
  • To make the
    scam seem more legitimate, the company marketed its program through
    live presentations at posh hotels in Washington, D.C.; Baltimore; and
    even Beverly Hills, California.

In the end, it was a classic Ponzi scheme: the proceeds from later investors went to pay the mortgages of earlier investors. The ATM machines, flat-screen TVs, and electronic kiosks never generated any meaningful revenue, federal prosecutors contend.

And the bulk of the money? It lined the defendants’ pockets—with
$200,000-a-year salaries, luxury cars, and travel to major sporting
events like the 2007 Super Bowl.

By the time law enforcement shut down the company, homeowners had
already invested about $70 million. When Metro Dream Homes stopped
making the mortgage payments, the homeowners were left holding the bag.
The defendants, meanwhile, are facing long prison terms for multiple
counts of fraud, conspiracy to commit money laundering, and other
charges.

At a press conference today at the Department of Justice to announce
the indictments, Harrington said that to combat the recent “exponential
rise in mortgage fraud investigations,” the FBI has increased the
number of agents who investigate mortgage fraud from 120 in 2007 to
more 250 today. We participate in 18 mortgage fraud task forces and 47
working groups across the country.

“One of the best tools the FBI has in its arsenal for combating
mortgage fraud,” he said, “is its long-standing partnerships with other
federal, state, and local law enforcement.”

If you have been the victim of a mortgage fraud scheme or have information about one, call your local FBI office or submit a tip electronically.

Resources:
- Press release 
- Mortgage fraud webpage

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Dallas Businessmen Involved in Mortgage Fraud Scheme Sentenced to Federal Prison

January 29, 2009 By Paul (Founder, WorkAtHomeTruth) 3 Comments

1/23/2009 United States Department of Justice via the F.B.I. Website:

DALLAS—Three Dallas businessmen, Mark Manners, Robert L. Loeb, and Andrew Siebert, who were involved in a massive mortgage fraud scheme that they ran in the area, were sentenced this afternoon by U.S. District Judge Barbara M.G. Lynn, announced James T. Jacks, acting U.S. Attorney for the Northern District of Texas.

Mark Manners was sentenced to 30 months in prison, followed by three years of supervised release, and ordered to pay $1,762,362.71 in restitution.

Robert L. Loeb was sentenced to 18 months in prison, followed by two years of supervised release, and ordered to pay $2,027,841,34 restitution.

Andrew Siebert was sentenced to 60 months in prison, followed by three years of supervised release, and ordered to pay $2,027,841.34 restitution.

Their co-defendant in the scheme, Charles Cooper Burgess, 53, was sentenced in March 2008 to nearly 22 years in prison and ordered to pay more than $3 million in restitution for his role in this mortgage fraud scheme and another scheme involving golf course property in Arkansas.  Burgess pled guilty in January 2006 to his involvement in two fraudulent schemes, one involving mortgage fraud and one involving defrauding individuals who invested in golf course property in Arkansas.  In November and December 2006, Burgess testified about Manners and Siebert’s extensive role in the mortgage fraud scheme.  At the conclusion of that trial, both Manners and Siebert were convicted.

Regarding the mortgage fraud scheme, Burgess admitted that he recruited 20 straw buyers with good credit but limited funds to sign loan and closing documents to purchase homes.  As part of a signed “investor management agreement,” Burgess promised to provide the down payment at closing as well as make all mortgage payments.  When Burgess’s company needed additional funds for borrower down payments, Siebert agreed to steal bank escrow funds for the borrowers’ down payment.  As part of the scheme, Siebert also falsified settlement document on at least 20 loan closings.  Siebert only agreed to steal these escrow funds if Burgess agreed to pay Siebert $5000 from each closing as a “kickback payment.”  Evidence at trial showed that Siebert stole escrow funds on 20 separate loans and then concealed the theft of these lender funds by falsifying loan closing documents.

Siebert stole lender funds held in escrow and then provided these funds to Manners prior to closing so that Manners could purchase a cashier’s check in the name of the straw buyer.  When Siebert received the cashier’s check back from Manners, Siebert falsely certified to the lender on the settlement statement that the down payment came from the borrower.  On the settlement statement, Siebert also fraudulently accounted for disbursements to Burgess’ company by falsely listing the expense as a phony lien pay off, or as a “marketing and relocation fee” due to Burgess’ company.  Eleven different lenders testified at trial that Siebert falsified the settlement statements to conceal his wrongful and fraudulent release of lender escrow funds.  Each lender testified that the loan would never have been funded if the lender had known about the fraudulent use of lender escrow funds.

From December 2002 through March 2004, Siebert stole escrow funds which resulted in the loss of $2,027,841 to 16 different lenders.  As a result of Siebert submitting false certifications on settlement statements for each of these 20 loans, Siebert and Manners fraudulently induced the disbursement of loans totaling more than $7 million.

Acting U.S. Attorney Jacks praised the investigative efforts of the Federal Bureau of Investigation and the Federal Deposit Insurance Corporation, Office of Inspector General.  The case was prosecuted by Special Assistant U.S. Attorney William M. Martin of the U.S. Department of Justice Anti-Trust Division and Assistant U.S. Attorney David Jarvis.

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