During the heyday of the real estate boom, “flipping” was a common occurrence, and money was flowing to people and entities that never actually owned a property, but instead owned the right to purchase the property at a price lower than someone else was willing to buy it for. Often, the flips were not entirely above board. Here are some recent cases where the legal system caught up to fraudsters from the past.
A property manager and his conspirators located oceanfront condominiums overbuilt by financially distressed developers and negotiated a buyout price with the sellers. They then sold the properties to straw buyers who helped conceal the fraud through inflated sales contracts and finder’s fee agreements. In order to qualify the straw buyers, the property manager and his conspirators created false W-2s and other certifications of employment.
Ten defendants were charged with 43 counts of conspiracy, wire fraud, false statements, false representation of Social Security numbers and aggravated identity theft. Between June 2001 and May 2012, these ten individuals allegedly conspired to obtain mortgage loans with false information, used the illegally obtain mortgage loans to refinance and obtain “cash back” before defaulting on the loans and sell fraudulent properties to other members within the group at drastically reduced prices through short sales.
Several individuals conspired to commit mortgage fraud by using unqualified straw buyers to purchase properties and submit fraudulent mortgage loan applications and altered documents to misrepresent the straw buyers’ assets, income, and employment status, liabilities and other debts, sources of earnest money and down payments, and their intent to make the property a primary residence. Once the funds were obtained from the lenders, kick backs were directed to bank accounts controlled by one of the individuals.
These are only a few of the cases currently being prosecuted. And the number of cases is sure to grow as authorities continue a relentless investigation into the past. In our area, mortgage fraud is being investigated by the Northwest Florida Mortgage Fraud Task Force, a partnership between the Federal Bureau of Investigation, the Okaloosa County Sheriff’s Office and the Florida Department of Law Enforcement. According to Pamela C. Marsh, U.S. Attorney for the Northern District of Florida, the Task Force is doing “an excellent job in unraveling some very complicated real estate financial transactions.” The fraud may be in the past, but the indictments and prosecutions may continue well into the future.
Bill Martin is a former B-52 and B-1 pilot and Senior Attorney for the Federal Deposit Insurance Corporation. He is currently a partner in the law firm of Keefe, Anchors & Gordon in Fort Walton Beach, Fla.