Charlotte NC Jan 25 2012 Federal prosecutors have filed charges against six Charlotte-area defendants over mortgage fraud-related offenses and a “builder kickback” scheme, the latest fallout from the housing market bust.
The defendants are accused of working with Charlotte homebuilder Tara Properties to sell houses by offering kickbacks to straw buyers. The kickbacks weren’t disclosed to lenders or included on loan applications, according to documents filed last week in federal court.
The scheme resulted in hundreds of sales between January 2005 and February 2008, with Tara paying more than $5 million in kickbacks, the filings say. The conspirators fraudulently caused lenders to provide more than $42 million in loans, prosecutors allege.
Tara specialized in building homes priced between $100,000 and $200,000 and the company offered kickbacks of 15 percent of the sales price.
Here is how prosecutors say the scheme worked: Organizers recruited straw buyers by promising kickbacks. “Word spread quickly. The promoters and mortgage brokers … heard about the scheme and joined the conspiracy,” prosecutors wrote.
Defendants lied on mortgage applications about income and assets, employment, debts and anticipated debts, and intent to occupy the home as a primary residence, court documents say. Some applications also contained false or forged documents such as bogus payroll stubs and bank statements.
Majority end in foreclosure
The straw buyers recruited by the promoters and mortgage brokers generally were unqualified to obtain the loans, and the “vast majority” of homes lapsed into foreclosure, according to prosecutors.
More mortgage-fraud cases have surfaced since the once-high-flying real estate market started to fizzle in the mid-2000s. Fraud helped fuel the nation’s foreclosure crisis, artificially inflating demand and home prices. Defendants convicted in recent cases include attorneys, loan officers, bankers, builders, appraisers and real estate agents.
In a separate mortgage fraud investigation called Operation Wax House, prosecutors have charged more than three dozen defendants and expect the number to reach 70. Carried out mostly in 2006 and 2007, the crimes targeted in Operation Wax House involved some 80 homes and $100 million in loans in pricey subdivisions in south Charlotte and Waxhaw.
In Operation Wax House, the people involved agreed to buy homes at their true price and then arranged buyers who would pretend to have the assets to buy the homes at an inflated value, generally $200,000 to $500,000 higher than the actual price. At closing, the participants would split the difference.
The six defendants indicted last week in connection with the builder-kickback scheme are charged with mortgage fraud conspiracy and money laundering conspiracy.
According to court filings, defendants include:
Sean Dalton Williams, a certified public accountant, who prosecutors say served as a promoter recruiting buyers and was a mortgage broker. Williams owned SW Mortgage Group, LLC, which processed fraudulent loans.
Roderick D. Williams, a licensed real estate agent who served as a promoter and recruited buyers by promising a kickback, prosecutors say. Roderick Williams is not related to Sean Williams.
Alfred Samuels, a licensed real estate agent and licensed mortgage broker who served as a promoter and mortgage broker. Samuels owned Infinity Acquisitions, a property management business that was used to manage some kickbacks, court papers say.
Channing Holit, a former licensed loan officer who served as a promoter. Holit’s license lapsed while he was serving a jail term on state drug charges, prosecutors say. Holit owned 1st Priority Group Consultants, which prosecutors say managed kickbacks for the conspiracy.
Licensed loan officer Elena Z. Karadzhova, an employee of SW Mortgage Group who served the conspiracy as a promoter and buyer.
Licensed loan officer William Chad Hadden, who served as a buyer.
Tara Properties’ owner, Duve W. “D.W.” Miles, is mentioned in the indictment as the source of the kickback payments and named as an unindicted co-conspirator.
Two real estate agents are also named as unindicted co-conspirators, according to court documents. They are Michael J. Foley, owner of Mike Foley, Inc., doing business as “Builder’s Resource Group,” and Foley’s son, Brandon Stewart Foley, who operated Smart Choice Realty, LLC.
Prosecutors allege the two men facilitated sales of Tara homes through the payment of hidden kickbacks.
Mike Foley of Mint Hill was charged in August 2010 by prosecutors in connection with a mortgage fraud conspiracy that involved a “builder kickback” scheme and a home that later entered foreclosure. Prosecutors did not name the homebuilder.
Attorneys for the defendants either declined to comment or were unavailable. A message left for Holit was not returned. Efforts to reach the other defendants and Miles, Mike Foley and Brandon Foley were unsuccessful.