Here is another example of a recent legal case involving mortgage fraud. I try to post case summaries in order to provide timely updates to real estate professionals on important issues.
On Thursday, January 21, 20101, Bonnie Helt (real estate agent) and Dennis G. Sartain (accountant) plead guilty to conspiring to commit mortgage fraud, money laundering and obstruction of justice. Mr. Sartain, the accountant for co-defendant Thomas Parenteau (home builder), plead guilty to one count of conspiring to defraud the United States by impeding and impairing the IRS, one count of conspiring to commit money laundering and one count of conspiring to obstruct justice. Ms. Helt, a real estate agent for co-defendant Mr. Parenteau, plead guilty to one count of conspiring to commit bank and wire fraud and one count of conspiring to obstruct justice. Mr. Parenteau is scheduled to begin trial on March 8, 2010.
In April 2009, the defendants were charged with tax fraud, bank and wire fraud, money laundering, and obstruction of justice in a superseding indictment. According to the indictment and statements made at the plea hearing, Mr. Sartain conspired with Mr. Parenteau and others to file false individual income tax returns for Pamela McCarty with the IRS for the tax years 2000 through 2003. Those four tax returns falsely reported substantial losses and generated tax refunds from the IRS and State of Ohio of over $800,000 in total. Ms. McCarty, who was Mr. Parenteau’s mistress, gave a substantial portion of the fraudulent tax refunds to Mr. Parenteau or his nominees.
According to the indictment and statements made at the plea hearing, Mr. Sartain conspired with Mr. Parenteau, Ms. McCarty and others to prepare a $4.5 million fictitious loan application to refinance to improve a 30,000 square foot home. As a result of the fraudulent loan documents, Ms. McCarty obtained nearly $4.5 million from one bank and an additional $1.5 million from a second bank, and she transferred the money to Mr. Parenteau. From March 2004 through September 2006, Mr. Parenteau and Mr. Sartain dispersed in excess of $1 million of the loan proceeds back Ms. to McCarty by disguising the payments as payroll checks from Your Home Source (“YHS”) and JSS Investments, rental payments and consulting payments from YHS and other miscellaneous payments. On January 31, 2007, Mr. Parenteau and his wife refinanced the 30,000 square foot property and received a $12 million loan, which was used in part to pay off Ms. McCarty's existing obligations at the two banks.
Ms. Helt (the real estate agent) admitted that from 2005 through 2007, she, Mr. Parenteau, and others negotiated and participated in real estate deals in which they sold luxury homes for a falsely inflated purchase price from the builder in exchange for an undisclosed or disguised kickback. In many of the transactions, the buyers misrepresented their income and assets in order to obtain financing of the inflated purchase price. The buyers and sellers in the transactions attempted to justify the inflated purchase prices by creating false work change orders and addendums which created the appearance that the inflated price represented additional substantial work to be completed on the homes. No such agreement was actually intended by any party. Further, those documents were not disclosed to the lenders. The object of each transaction was to use the loan proceeds in excess of the actual purchase price in order to fund hundreds of thousands of dollars in kickback payments to the buyers. The loans associated with several of the real estate purchases have gone into default.
Both Mr. Sartain and Ms. Helt admitted to conspiring with Mr. Parenteau and others to obstruct the IRS criminal investigations of Mr. Sartain, Mr. Parenteau and others. Mr. Sartain and Ms. Helt admitted to altering or destroying records as well as lying to federal and local law enforcement agents.
The sentencing dates have not been set yet. Mr. Sartain faces a maximum sentence of 30 years in prison and a maximum fine of $1 million or twice the monetary loss or gain from the offense. Ms. Helt faces a maximum sentence of 35 years in prison and a maximum fine of $1.25 million or twice the monetary loss or gain from the offense.
Source: U.S. Department of Justice press release (portions of press release used with permission); Internal Revenue Service press release (portions of press release used with permission)
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