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Apr-28-2009Five Are Named in Ponzi Scheme(topic overview)
CONTENTS:
- Victims in the scam had properties in 31 states and Washington, DC, with the majority in Maryland, said Amy Jo Lyons, the special agent in charge of the Federal Bureau of Investigation's Baltimore office, in an interview. (More...)
- According to the indictment, "The initial investment of at least $50,000 would fund three revenue-generating ventures, automated teller machines in high-traffic areas, touch-n-buy electronic kiosks to sell telephone calling cards and flat screen televisions showing video advertisements in various businesses." (More...)
- Cash was also spent on sending employees to the 2007 NBA All-Star Game and the 2007 Super Bowl. (More...)
- Mortgage Fraud Task Forces, which are comprised of federal, state and local law enforcement agencies in Maryland, Washington, D.C. and Northern Virginia. (More...)
- The program was marketed in live presentations at luxury hotels in Maryland, Washington, D.C., and Beverly Hills, Calif. However, the ATMs and other marketing devices didn't generate any significant revenue, prosecutors said. (More...)
- In exchange, the program promised to make the homeowner's future monthly mortgage payments, and pay off the homeowner's mortgage within five to seven years. (More...)
- Authorities say the conspirators operated under several corporate names, including Metro Dream Homes, Metropolitan Grapevine LLC and POS Dream Homes. (More...)
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Victims in the scam had properties in 31 states and Washington, DC, with the majority in Maryland, said Amy Jo Lyons, the special agent in charge of the Federal Bureau of Investigation's Baltimore office, in an interview. Authorities weren't certain how many people lost their homes after the company failed to cover the mortgage payments. "The alleged criminal conduct in this indictment was nothing more than a Ponzi scheme where the defendants took the money from new investors in Dream Homes and used that money to pay earlier investors as well as finance the defendants' luxury lifestyle," said Rebecca Sparkman, a deputy director of the Internal Revenue Service criminal division, at the news conference. "Those individuals indicted today used the investors' money as a collective piggy bank." [1] 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. 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.[2] A federal grand jury indicted four defendants and information has been filed against a fifth in what the Justice Department described as a Ponzi scheme whereby existing and aspiring homeowners were lured into dishing out at least 50,000 dollars to make mortgage payments. The five individuals allegedly promoted their plans under a program known as "Dream Homes." On top of the 50,000 dollars paid by refinancing their existing homes or buying new homes at inflated prices, investors had to pay an administrative fee of up to 5,000 dollars. In return, "Dream Homes" promised to meet the homeowner's future monthly mortgage payments and pay off their mortgage within five to seven years using revenue from profitable business.[3]
WASHINGTON, April 27 (UPI) -- The U.S. Justice Department said it charged five people in a $70 million mortgage scheme that promised mortgage pay-offs but left homeowners high and dry. A grand jury indicted four defendants and an information was filed against the fifth for their participation in the alleged massive mortgage fraud scheme, Justice Department officials said Monday in a news release.[4] Four people have been indicted for running a $70 million mortgage fraud Ponzi scheme through Maryland companies and spending the stolen money on big salaries, a fleet of chauffeured luxury cars and trips to the NBA All-Star game and Super Bowl in 2007. A federal grand jury indicted them on Wednesday; the indictment was unsealed Monday, according to a statement from Rod J. Rosenstein, U.S. attorney for Maryland.[5] "The conspirators used some of the investors' money to repay earlier investors in the Ponzi scheme and spent the remainder on themselves," U.S. attorney Rod Rosenstein said in a statement. The architects of the scheme allegedly paid themselves salaries of up to 200,000 dollars a year and made payments on their own mortgages, maintained a fleet of luxury cars complete with chauffeurs and stayed at luxury hotels. They also traveled to see major basketball and American football games, the Justice Department said. It said that the more than 1,000 investors were defrauded of approximately 70 million dollars as a result of the scheme.[3]
"In return for an investment of fifty thousand dollars or more and an administrative fee of five thousand dollars, Metro Dream Homes promised to pay investors mortgage payments for up to seven years," said Rod Rosenstein, U.S. Attorney for the District of Maryland. "After seven years Metro Dream Homes promised that it would pay off their mortgage in return for a one half interest in the home".[6] The indictment, unsealed Monday, alleged the defendants used "slick marketing to conceal empty promises," U.S. Attorney for the District of Maryland Rod Rosenstein said. The defendants convinced their alleged victims to invest at least $50,000 in a so-called Dream Home Program by refinancing their existing homes or buying new homes at inflated prices, claiming their business would repay the mortgages with revenue from profitable businesses.[4] Information also was filed against a fifth defendant, a D.C. resident, the government said. Prosecutors contend the five defendants ran a mortgage scam between 2005 and 2007 that convinced victims to invest at least $50,000 by refinancing their existing homes or buying new homes at inflated prices, while claiming that their business, Metro Dream Homes, would repay the mortgages within 5 to 7 years with revenue from profitable businesses.[7]
Investigators are now trying to recover the remaining cash for the victims. Metro Dream Homes was founded by 58-year-old Andrew Hamilton Williams Jr., who used some of the $50,000 minimum payments provided by homeowners to cover the losses of an automated teller machine scheme he was ordered to shut down in 2001, according to the indictment unsealed Monday. Williams and four of his top-ranked employees were charged Monday with wire fraud and money laundering. Prosecutors want the five to turn over the $70 million they're accused of stealing.[8] BALTIMORE (AP) — More than 1,000 people were defrauded out of about $70 million by a group advertising the dream of homeownership in what turned out to be a nightmare Ponzi scheme, federal and Maryland officials said Monday. Five officers for Laurel, Md. -based Metro Dream Homes company are accused of tricking homeowners into pouring money into the business with the promise that the revenue would be used to pay off their mortgages.[9] Maryland prosecutors say it was a complicated Ponzi scheme run by a company called Metro Dream Homes. Company officers are charged with tricking homeowners into pouring money into the business with the promise that the revenue would be used to pay off their mortgages.[10]
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. It was a classic Ponzi scheme: the proceeds from later investors went to pay the mortgages of earlier investors.[2] WASHINGTON, D.C. - Four people have been indicted on charges they scammed more than a thousand people out of seventy million dollars using slick marketing to conceal empty promises. Prosecutors say Metro Dream Homes employed a mortgage Ponzi scheme to separate victims from their money.[6] Prosecutors have charged a fifth defendant, Carole Nelson, 50, of Washington, D.C., in separate charging documents known as a criminal information. According to the charging documents, the more than 1,000 individuals invested as much as $70 million, but once Metro Dream Homes stopped making the mortgage payments the homeowners were left having to make their own payments.[11] "IRS Criminal Investigation takes allegations of mortgage fraud seriously," said " Eileen Mayer, Chief, IRS Criminal Investigation. "These types of crimes drive home owners into foreclosure, erode the integrity of our tax system and threaten the financial health of our communities." According to the indictment, from 2005 to 2007 the defendants allegedly used corporate names such as "Metropolitan Grapevine LLC," "Metro Dream Homes," "POS Dream Homes," and "POS DH LLC" (collectively, MDH) to target homeowners and home purchasers to participate in a purported mortgage payment program called the "Dream Homes Program."[12]
There's little hope the majority of the cash will be returned, said Raymond Peroutka, who handles the Metro Dream Homes account for Invotex. "In addition to the fast spending, they had to keep the scheme afloat by making mortgage payments so the original investors could show new investors the success of the program," Peroutka said. The investors recruited by Metro Dream Homes were told their mortgages would be paid if they invested at least $50,000 in the company, the indictment said. Those who entered the scheme early had their mortgages covered by those who came later.[8] From 2005 to 2007, the defendants, through companies including Metropolitan Grapevine of Laurel, Metro Dream Homes, POS Dream Homes and POS DH LLC, targeted homeowner and home buyers. Their Dream Homes Program called for investors to provide at least $50,000 for each home, plus an "administrative fee" of up to $5,000, according to prosecutors.[5]
Prosecutors say the company marketed the mortgage program in seminars at luxury hotels in Maryland, Washington and Beverly Hills, Calif. An investor had to put up a minimum of $50,000 for each home. The company was then supposed to pay off their mortgages within five to seven years.[9] Thomas J. Harrington, of the FBI's Criminal Cyber services branch, said the federal government has more than doubled the number of special agents working on mortgage fraud over the past two years to more than 250 agents. The victims of the alleged scam were convinced to invest $50,000 or more to refinance their homes or buy new homes under a "Dream Homes Program," which promised to pay off their mortgages within five to seven years.[13]
In reality, the plan was nothing more than a mortgage fraud Ponzi scheme, investigators say. The accused fraudsters allegedly deceived individuals to invest in sham business ventures, claiming that the revenue would be used to make payments on their home mortgages. Authorities say that the investments weren't profitable, and instead left more than 1,000 people who had poured a minimum of $50,000 each into the alleged Ponzi scheme scrambling to make mortgage payments they believed were taken care of, while the company's executives drew six-figure salaries, were chauffeured around in luxury cars and traveled in style to 2007 NBA All-Star Game and Super Bowl.[11] Five people are facing federal charges related to an alleged mortgage fraud Ponzi scheme, the Justice Department announced today.[11] The Justice Department announced today that five people are now facing charges that they promoted complicated plans under a network of companies, known collectively as "Metro Dream Homes," an alleged scheme that targeted homeowners and those ready to purchase homes.[11] As a result of the alleged scheme, more than 1,000 investors in the Dream Homes Program invested approximately $70 million, the Justice Department said.[4] More than 1,000 victims, who attended what prosecutors describe as live presentations at luxury hotels in D.C., Maryland and Beverley Hills, Calif., invested about $70 million in the company's Dream Homes Program.[7]
A criminal information was also returned against Carole Nelson, 50, of Washington, D.C., the alleged chief financial officer of POS Dream Homes. Those charged in the case have 48 hours to turn themselves in, said Maryland U.S. Attorney Rod J. Rosenstein.[13] Assistant U.S. Attorney General Lanny A. Breuer, in his first news conference since taking over as head of the criminal division last week, announced that charges had been brought against four people in connection with the alleged Ponzi scheme, including Andrew H. Williams Jr., who was enjoined by Maryland authorities in 2007 when they froze his "Metro Dream Homes" operation.[13]
The scheme ran from 2005 until October 2007, authorities said. Newly confirmed Assistant U.S. Attorney General Lanny Breuer said the charges should send a message to those engaging in mortgage fraud. "Our resolve as a group is great," he said at a news conference in Washington.[9] Newly confirmed Assistant U.S. Attorney General Lanny Breuer said the charges should send a message. If you're in the mortgage fraud business, he said, the Justice Department will find you, charge you and put you in prison.[10] Information about mortgage fraud prosecutions is available on the internet at http://www.usdoj.gov/usao/md/Mortgage-Fraud/index.html. Assistant Attorney General Lanny A. Breuer and U.S. Attorney Rod J. Rosenstein praised the FBI, IRS - CI, the Maryland Attorney General's Office, Securities Division and the Federal Deposit Insurance Corporation, Office of Inspector General for their investigative work; and thanked Assistant U.S. Attorneys for the District of Maryland Jonathan C. Su and Bryan E. Foreman, who are prosecuting the case.[12]
Maryland Attorney General Douglas Gansler said, "What we are looking at today is a mortgage fraud a securities scam and a Ponzi scheme all rolled up into one."[6] … Instead, the conspirators used some of the investors' money to repay earlier investors in the Ponzi scheme and spent the remainder on themselves." "The effects of this wide-ranging mortgage fraud scheme are particularly disturbing within the backdrop of today's economic environment, said Thomas J. Harrington of the FBI's criminal, cyber, response and services branch.[5] The indictment alleges there was no revenue to repay the mortgages, and the conspirators used some of the investors' money to repay earlier investors and spent the remainder on themselves. "The effects of this wide ranging mortgage fraud scheme are particularly disturbing within the backdrop of today's economic environment," said Thomas Harrington, director of the FBI's criminal, cyber, response and services branch.[7]
A federal indictment unsealed Monday in federal district court in Maryland said that Williams and three other defendants used the money invested by homeowners to pay for luxury trips to the 2007 NBA All-Star Game and the 2007 Super Bowl and to pay off investors in an earlier failed venture.[13] Investors' money was used by the defendants to employ a staff of 10 chauffeurs, maintain a fleet of luxury cars and pay for trips to the 2007 Super Bowl and National Basketball Association's All-Star game, the Justice department said.[1]
The government said the scam, which involved victims from Maryland to California, financed a lifestyle for the defendants that included chauffeurs and trips to the Super Bowl. The FBI has been investigating an increasing number of mortgage fraud cases, and the Justice Department warned those who are responsible that authorities are stepping up their efforts.[1]
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.[2]
According to the indictment, "The initial investment of at least $50,000 would fund three revenue-generating ventures, automated teller machines in high-traffic areas, touch-n-buy electronic kiosks to sell telephone calling cards and flat screen televisions showing video advertisements in various businesses." At a late morning new conference Monday, Rosenstein said, "The victims were all told these were profitable businesses with sufficient revenue to make the mortgage payments as promised." [6] More than half the victims were from the Washington suburbs of Prince George's County in Maryland, said John McLane, a Maryland assistant attorney general. Other victims were in California, Delaware, the District of Columbia, Georgia, New York, North Carolina and Virginia. Investors were told they were investing in ATM machines, television advertising and calling card kiosks that would raise money for the mortgage payments. Prosecutors say those businesses never made any money.[9] Maryland officials issued a cease-and-desist order to Williams and the companies in August 2007, but the defendants continued to misrepresent themselves, prosecutors said. In challenging the order the following month in federal court, Hickson testified that the companies' success did not rely on new investor funds; prosecutors say he knew the only revenue source was, indeed, new investments.[5]
The indictment alleges that at a hearing on Sept. 12, 2007, Hickson testified that the financial success of the Dream Homes Program did not rely upon new investor funds, when in fact Hickson knew that the sole source of meaningful revenue for MDH was new investor funds.[12] The indictment further alleges that Dream Homes Program representatives explained to investors that the homeowners' initial payments would be used to fund investments in automated teller machines (ATMs), flat-screen televisions that would show paid business advertisements, and "Touch-N-Buy" electronic kiosks that sold telephone calling cards and other items.[12]
Dream Home representatives also encouraged investors to enroll more than one home in the program, with an additional $50,000 investment fee required for each home. Investors who put $100,000 or more into the program were told they would receive a seat on a "Junior Board of Directors." Associated Press writer Matt Apuzzo contributed to this report in Washington.[9]
The alleged scheme purported to be a mortgage payment plan and required investors to pony up $50,000 per home involved in the program, plus fees of up to $5,000.[11] Investigators said the scheme was elaborate — early investors whose monthly mortgage payments had been paid by money provided by later investors assured potential recruits that the program worked.[9]
Federal authorities say a District-based company promising to pay off the mortgages of its investors was actually a Ponzi scheme that robbed more than 1,000 homeowners of $70 million.[8] Four people were indicted in an alleged $US70 million Ponzi scheme that promised more than 1000 homeowners their mortgages would be paid off within seven years, authorities said.[1] Four people have been indicted in an alleged mortgage ponzi scheme, including one from Virginia and another from Maryland, according to the Department of Justice.[7]
In a Ponzi scheme, investors are promised high returns and are paid off with money from new investors. Those indicted were Andrew Hamilton Williams Jr, 58, of Hollywood, Florida; Michael Anthony Hickson, 46, of Commack, New York; Isaac Jerome Smith, 46, of Spotsylvania, Virginia; and Alvita Karen Gunn, 31, of Hanover, Maryland.[1] "Instead, the conspirators used some of the investors' money to repay earlier investors in the Ponzi scheme and spent the remainder on themselves."[4]
Cash was also spent on sending employees to the 2007 NBA All-Star Game and the 2007 Super Bowl. Peroutka said, many of the investors lost their homes to foreclosure. Potential investors went to luxury hotels in Maryland, Virginia, California, Delaware, Florida, Georgia, New York and North Carolina where they attended lavish parties designed to make Metro Dream Homes appear legitimate, Peroutka said. [8] The indictment also claims Metro Dream Homes told investors it owned businesses generating tens of thousands of dollars a month.[6] We're going to put you in prison." Those indicted worked for a company based in Maryland that went by names including Metro Dream Homes, according to the indictment, unsealed today in U.S. District Court in Maryland.[1] Indicted was Metro Dream Homes founder and owner Andrew Hamilton Williams, 58, of Hollywood, Fla.; company chief financial officer Michael Anthony Hickson, 46, of Commack, N.Y.; company president Jerome Smith, 46, of Spotsylvania, Pa.; and vice president of operations Alvita Karen Gunn, 31, of Hanover, Md.[7] We will prosecute you, and we're going to put you in prison." The indictment names company founder Andrew Hamilton Williams Jr., 58, of Hollywood, Fla.; financial officer Michael Anthony Hickson, 46, of Commack, N.Y.; president Isaac Jerome Smith, 46, of Spotsylvania, Va.; and vice president Alvita Karen Gunn, 31, of Hanover, Md. They had 48 hours to turn themselves in. Gunn had an initial appearance Monday afternoon in U.S. District Court in Greenbelt, Md. Her attorney, Elita C. Amato, did not immediately return a call seeking comment. Other attorneys in the case also could not be reached for comment.[9]
The indictment was returned on April 22, 2009, and unsealed today. "The Criminal Division and the U.S. Attorneys' Offices are jointly committed to redoubling our efforts to uncover and prosecute fraud and abuse in all facets of the housing market - a market upon which so many American families have pinned their hopes and their futures for so many years," said Assistant Attorney General of the Criminal Division Lanny A. Breuer. "I want to assure the American public that we will not rest until the tide of this criminal activity is turned."[12]
With our federal, state and local partners working on 18 mortgage fraud task forces and 47 mortgage fraud working groups across the country, the FBI is committed to combating mortgage fraud and other financial crimes nationwide to protect the American homeowner and the national economy," said Executive Assistant Director Thomas J. Harrington, FBI Criminal, Cyber, Response, and Services Branch.[12] Breuer said that "rampant financial fraud," including a sharp increase in mortgage scams, is among the factors behind the mounting rate of home foreclosures nationwide. He said he could not estimate how many of the millions of homeowners now facing foreclosure may have been victims of mortgage fraud.[13] The dream turned into a $70 million nightmare for more than a thousand investors'''among the latest victims of mortgage fraud.[2]
The four defendants face up to 20 years in prison for the fraud conspiracy; 20 years on each of the 15 counts of wire fraud; and 20 years for conspiracy to commit money laundering. Smith also faces up to 30 years for bank fraud for allegedly misrepresenting his income to get a car loan on a new Bentley. Prosecutors also want them to forfeit the $70 million.[5] WASHINGTON (AP) — Five people face charges in what prosecutors say was a mortgage scheme that defrauded more than 1,000 people of more than $70 million.[10]
Afterward, the homeowner and the company would each own a half interest in the home. Prosecutors say representatives of the program told investors that their payments would fund investments in automated teller machines, flat-screen televisions that would show paid business advertisements, and "Touch-N-Buy" electronic kiosks that sold telephone calling cards.[5] Victims were told that the initial payments would be used to fund investments in automated teller machines and flat-screen televisions that would display business advertising, according to the Justice Department. Some victims refinanced their houses to participate in the program, while others entered the program at the time of their initial purchase, according to prosecutors.[1] The program was marketed through presentations at hotels in locations including Maryland, Washington and Beverly Hills, California, according to the Justice Department.[1] "We will find you," said Lanny Breuer, an assistant attorney general who oversees the Justice Department's criminal division, at a news conference today in Washington.[1]
Authorities said the suspects hadn't been arrested and were being allowed to turn themselves in. They face a maximum sentence of 20 years in prison for the alleged fraud conspiracy, 20 years for each of 15 counts of wire fraud and 20 years for conspiracy to commit money laundering, according to a Justice Department statement.[1] Hickson also faces a maximum sentence of five years in prison for making false statements. Smith also faces a maximum sentence of 30 years in prison for bank fraud arising out of his alleged misrepresentation of his income in order to obtain a bank loan to purchase a new Bentley automobile.[12]
Mortgage Fraud Task Forces, which are comprised of federal, state and local law enforcement agencies in Maryland, Washington, D.C. and Northern Virginia. [12] 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.'''[2]
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.[12] "The allure of the scheme was to purchase property that one might not otherwise be able to afford," said Adam Lee, a supervisory special agent with the FBI's Washington Field Office, who coordinates a regional mortgage fraud task force.[1]
The Obama administration official called the Maryland case, which was investigated by the FBI's Baltimore field office, an example of stepped-up activity to combat mortgage fraud by state and federal authorities working together on 18 mortgage fraud task forces around the country.[13] The prosecution is being brought jointly by the Maryland and D.C. mortgage fraud task forces.[7]
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.[2] WASHINGTON (AFP) — More than a thousand people who took part in a U.S. program to buy their "Dream Homes" were victims of a massive 70-million-dollar fraud scheme, investigators have said.[3]
They were presented as investment opportunities, with live marketing pitches at luxury hotels in Beverly Hills, Calif., and Washington, D.C., for a plan that claimed to return enough money to pay off the mortgage on a dream home.[11] The information alleges that Carole Nelson, age 50, of Washington, D.C. , was the chief financial officer of POS Dream Homes.[12] Carole Nelson, 50, of Washington was also named as the chief financial officer of POS Dream Homes, a company in the MDH network.[3]
The federal government alleges that D.C. resident Carole Nelson, 50, was the chief financial officer of POS Dream Homes.[7]
Between 2005 and 2007, Metro Dream Homes 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.[2] When Metro Dream Homes stopped making the mortgage payments, the homeowners were left holding the bag.[2] The company that ran the scheme, Metro Dream Homes (MDH), and the homeowner would then own equal interest in the home.[3]
In October 2007, Maryland's securities commissioner obtained a court order shutting down Metro Dream Homes and 30 other companies operated by Williams.[8] Metro Dream Homes was shut down in 2007 after Maryland officials filed a lawsuit in Prince George's County.[6]
"The name Dream Homes was truly a nightmare for so many people in the state of Maryland," said Douglas F. Gansler, the state's attorney general.[9]
"Some people hope to get rich quickly just by dreaming, without the hard work," said Rod Rosenstein, the U.S. attorney for Maryland.[9] The parties were part of what Maryland's U.S. Attorney Rod Rosenstein called "slick marketing to conceal empty promises."[8]
The program was marketed in live presentations at luxury hotels in Maryland, Washington, D.C., and Beverly Hills, Calif. However, the ATMs and other marketing devices didn't generate any significant revenue, prosecutors said. [5] The ATM machines, flat-screen TVs, and electronic kiosks never generated any meaningful revenue, federal prosecutors contend. 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.[2]
Prosecutors say the investments were used to pay company salaries of up to $200,000 and maintain a fleet of luxury cars and a staff of 10 chauffeurs.[9] The defendants used the proceeds to pay themselves salaries of up to $200,000 a year; hire 10 chauffeurs to drive a fleet of luxury cars; and stay in luxury accommodations at the NBA and NFL games.[5]
The money also helped pay off investors from a previous failed ATM investment venture by one of the defendants, call Bankcard Group.[5]
To participate, an investor had to provide at least $50,000 for each home enrolled in the program, and an additional "administrative fee" of up to $5,000, the indictment said.[4] Gansler says the combined schemes involved 2,000 properties in Maryland alone. The indictment says the investors were lured into the schemes primarily by word of mouth, impressing them with sales seminars held at luxury hotels.[6] The victims, most of who lived in Maryland, were lured to fancy hotels where salesmen convinced investors to enter into a partnership. The indictment against the four claims they all worked together to convince investors they had real assets with real returns.[6]
An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceeding. This prosecution is being brought jointly by the Maryland and Washington, D.C.[12]
The money never materialized, with the indictment alleging that the company had no revenue to make the mortgage payments.[3] The indictment alleges that there was no revenue to pay the mortgage payments.[12]
"The indictment alleges that there was no revenue to pay the mortgage payments," Rosenstein said.[4]
In exchange, the program promised to make the homeowner's future monthly mortgage payments, and pay off the homeowner's mortgage within five to seven years. [4] When the defendants stopped making the mortgage payments, the homeowners were left to attempt to make the mortgage payments MDH had promised to make in full.[12]
The defendants' company was to co-own the homes after the mortgages were paid off.[1] 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. 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.[2]
Homeowners were solicited to buy for-fee services for reducing debt and a legal plan, income tax return preparation services and bankruptcy petition preparation. Thomas, then a senior loan officer with a mortgage lender, and Brooke targeted individuals who owned and had equity in their homes, but were facing foreclosure, prosecutors said.[5]
Prosecutors filed the criminal information against Carole Nelson, 50, of Washington. She was charged with money laundering, which carries a maximum sentence of 10 years.[1]
A federal grand jury indicted Andrew Hamilton Williams Jr., 58, or Hollywood, Fla., Michael Anthony Hickson, 46, of Commack, N.Y., Isaac Jerome Smith, 46, of Spotsylvania, Va. and Alvita Karen Gunn, 31, of Hanover, Md., who served as executives in the company. They face conspiracy, wire fraud, bank fraud aiding and abetting and money laundering charges.[11] The defendants, meanwhile, are facing long prison terms for multiple counts of fraud, conspiracy to commit money laundering, and other charges.[2]
The indictment seeks forfeiture of the fraud proceeds, including $70 million.[12] All told, more than 1,000 investors pumped about $70 million into the scheme.[5] By the time law enforcement shut down the company, homeowners had already invested about $70 million.[2]
Homeowners paid at least $50,000 for each property in the program and an administrative fee of up to $US5,000, the government said.[1]
The indictments come on the heels of the conviction of two Prince George's residents who pleaded guilty to defrauding mortgage lenders and struggling homeowners.[5] The FBI says mortgage fraud investigations have soared from 881 just a few years ago to over 2,000 now nationwide.[6]
Authorities say the conspirators operated under several corporate names, including Metro Dream Homes, Metropolitan Grapevine LLC and POS Dream Homes. [9]
SOURCES
1. Four indicted in $US70 million mortgage Ponzi scheme
2. FBI Unearths Metro Dream Homes 70M Mortgage Scam
3. AFP: US 'dream homes' dashed in 70 mln fraud scheme
4. Five charged in $70M mortgage fraud scheme - UPI.com
5. Busted: Alleged $70M mortgage fraud Ponzi scheme
6. Indictment Filed Against Md. Company
7. Indictments in local mortgage scam - Washington Business Journal:
8. www.washingtonexaminer.com >> Local >> Local News - Washington DC News - Feds: Area firm'''s mortgage scam cost investors $70M
9. The Associated Press: 5 charged in 'nightmare' $70M mortgage scheme
10. The Associated Press: 5 charged in $70M mortgage Ponzi scheme
11. 'Ponzi Scheme' Turned Dream Homes to Nightmares - ABC News
12. Five Charged in $70 Million 'Dream Home' Mortgage Fraud Scheme
13. Mortgage fraud scheme: Feds bring charges in alleged mortgage fraud scheme -- baltimoresun.com
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