Three Charged in Mortgage Fraud Conspiracy
OKLAHOMA CITY, OK – July 22, 2010 – (RealEstateRama) — A federal grand jury has indicted DERRICK REUBEN SMITH, MICHAEL GIPSON, and TRINA TAHIR on charges of conspiracy, wire fraud, and money laundering in connection with fraudulent mortgages, announced Sanford C. Coats, United States Attorney for the Western District of Oklahoma.
According to the indictment, Smith recruited two individuals to buy two new homes in Edmond in mid-2006 and early 2007 for $425,000 and $435,000 respectively. The builder of both homes agreed that Tahir’s real estate brokerage, T&T Realty, would receive large commissions and bonuses totaling $51,950 and $77,950 respectively. The indictment alleges that after the closings, Tahir caused T&T Realty to write checks to Gipson, an agent at T&T Realty, for $27,059.86 and $58,000 respectively. Gipson then bought cashier’s checks in those same amounts payable to “MP Services,” a business that Smith operated. Smith paid $20,000 to the person who served as the buyer of the first house and used the rest of the money for his own purposes. In short, the defendants are charged with inducing lenders to fund mortgages based on inflated real estate prices and misrepresenting the distribution of excessive loan proceeds to Smith as commissions and bonuses paid to Tahir.
The indictment also charges Gipson and Tahir with fraudulently misrepresenting the source of funds used as a down payment on a house that Gipson bought in Midwest City and charges Tahir with fraudulently disguising the payment of $9,295.52 to a buyer of a house in Oklahoma City as a real estate bonus.
The four wire fraud counts are based on interstate wires from lenders to fund the purchases of the four properties. In addition to the conspiracy count and the four wire-fraud counts, the indictment includes nine counts of money laundering. In each of these, one of the defendants is charged with engaging in a financial transaction designed to conceal and disguise the nature, source, and ownership of the proceeds of the mortgages.
On each of the conspiracy and wire fraud counts, each defendant faces a potential penalty of 20 years in prison and a fine of $250,000. With respect to each of the money laundering counts, each defendant faces a potential penalty of 20 years in prison and a fine of $500,000 or twice the amount of the laundered proceeds. Under federal law, each defendant would be required to pay restitution to victims. Furthermore, the indictment seeks forfeiture from each of the defendants in the amount of the proceeds of the fraudulent schemes and in the amount of the property involved in the money laundering offenses.
These charges are the result of an investigation conducted by the Criminal Investigation Division of the Internal Revenue Service and the Federal Bureau of Investigation. The case is being prosecuted by Assistant U.S. Attorneys Scott E. Williams and Chris M. Stephens.
Reference is made to the Indictment and other public filings for further information. An indictment is only a charge and is not evidence of guilt. A defendant is presumed innnocent and is entitled to a fair trial at which the government must prove guilt beyond a reasonable doubt.
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The homebuilding industry played a large part in the economic mess this country is in. The media often downplays their role, to the point that normally well educated people are sometimes still unaware of things like:
Builders operating in-house mortgage firms and engaging in predatory and illegal lending practices.
HUD has fined builders millions for predatory lending but fines don’t work; they’re treated as a cost of doing business and this business of fraud and cheating is very profitable.
Beazer Homes settled a criminal mortgage fraud investigation with the govt in 2009. They have only paid a fraction of the agreed on amount so far. Again, this operates as a fine and that doesn’t work as a deterrent when proportionately it’s like you or I getting a $10 parking ticket.
Builders hawk new houses with ‘incentives’ like a ‘free’ car or whatever; these only serve to keep prices artificially inflated. Nothing is free!
The builders lobby for all sorts of law changes that are good for builders’ profits, and generally bad for American consumers. E.g., right now the builders are lobbying for HR 5409, the Residential Construction Lending Act which would force the US Treasury Dept (i.e. taxpayers) to guarantee their construction and development loans. So if it passes, we taxpayers will be on the hook for many millions/billions in loans taken out by builders, including many who pay their CEO’s multi million dollar salaries. Builders default on developments and have taken out small banks. Will banks be careful who they lend to if the taxpayers assume all the risk? I doubt it.
Builders engaged in artificial price inflation by coercing appraisers to meet the number. Appraisers including one from OK were quoted in news during the bubble saying builders pressed them to inflate values.
Everyone invovled in a house sale wants the number to be higher and gets a bigger commission–everyone except the buyer. And no one in the deal is really representing the buyer because if a deal falls thru or the price goes down, all those professionals get less money (or none).