First Defendant Pleads Guilty in $70 Million “Dream Home” Mortgage Fraud Scheme
|U.S. Attorney’s Office April 28, 2009|
GREENBELT, MD—Carole Nelson, age 50, of Washington, D.C., pleaded guilty today to money laundering in connection with her participation in a massive mortgage fraud scheme which promised to pay off homeowners’ mortgages on their “Dream Homes,” but left them to fend for themselves, announced United States Attorney for the District of Maryland Rod J. Rosenstein.
“Our investigation is continuing,” said U.S. Attorney Rod J. Rosenstein. “We aim to hold all perpetrators accountable and recover any remaining proceeds of the scheme.”
“Ponzi schemes involve taking money from later investors and using it to pay earlier ones. As a result, the earlier investor would appear to be successful; but if it sounds too good to be true it probably is," stated C. Andre' Martin, Internal Revenue Service-Criminal Investigation Special Agent in Charge. "The IRS-Criminal Investigation is united with the rest of the law enforcement community in our resolve to financially disrupt these type of schemes that harm our economy.
According to her plea agreement, beginning in 2005, co-conspirators targeted homeowners and home purchasers to participate in a purported mortgage payment program called the “Dream Homes Program.” In exchange for a minimum of $50,000 initial investment and an “administrative fee” of up to $5,000, conspirators promised to make the homeowner’s future monthly mortgage payments, and pay off the homeowner’s mortgage within five to seven years. Dream Homes Program representatives explained to investors that the homeowners’ initial investments would be used to fund investments in automated teller machines (ATMs), flat screen televisions that would show paid business advertisements and electronic kiosks that sold goods and services. To give investors the impression that the Dream Homes Program was very successful, Metro Dream Homes spent hundreds of thousands of dollars making presentations at luxury hotels such as the Washington Plaza Hotel in Washington, D.C., the Marriott Marquis Hotel in New York, New York and the Regent Beverly Wilshire Hotel in Beverly Hills, California.
In February 2006, the Dream Homes Program added a second program called “POS Dream Homes” that offered similar promises of paying off investor mortgages in five to seven years in exchange for an upfront investment of $50,000 or more. Collectively, these programs had offices in Maryland, the District of Columbia, Virginia, North Carolina, New York, Delaware, Florida, Georgia and California. The Dream Homes Program successfully recruited over 1,000 investors who invested approximately $70 million.
Nelson was hired in December 2006 at an annual salary of $200,000 to get investor contracts in order, including the creation of investor files. In March 2007, Nelson was named the chief financial officer of POS Dream Homes. At no time did Nelson see any evidence of revenue being generated from investments in ATMs and electronic billboards to pay off the investors’ mortgages. Nelson also saw no evidence that what was being explained to new investors, that Metro Dream Homes was generating income from various investments in ATMs and electronic billboards to pay off their mortgages, was actually happening.
Nelson profited significantly during her time with Metro Dream Homes. For example, in May 2007, to document that she had a certain amount of assets in order to qualify for a home mortgage, Nelson and another conspirator agreed that Nelson would obtain a check from the company for $75,000 marked as an annual bonus. Nelson wrote herself a $75,000 check, drawn on the POS DH LLC” bank account, and deposited the check into a personal account controlled by her. In fact, Nelson was not entitled to any bonus. In May 2007, a related Metro Dream Homes company allocated $150,000 to Nelson and her spouse to open “Ambassador Dream Homes,” which was supposed to be an affiliate of Metro Dream Homes. “Ambassador Dream Homes” did not commence operations prior to it being assumed by the receiver appointed by the Maryland state courts.
In July 2007, Nelson and a conspirator decided they wanted to purchase new Bentley automobiles costing $200,000 each. In order to qualify for financing, Nelson falsely represented in a vehicle financing application that she had been the chief financial officer of POS Dream Homes for 18 years and that her annual income was $700,000.
In all, during her 20 months of employment with Metro Dream Homes, Nelson received $413,075 in compensation.
Nelson faces a maximum sentence of 10 years in prison and a fine of $250,000 or twice the value of the transaction, whichever is greater. U.S. District Judge Roger W. Titus scheduled sentencing for August 6, 2009, at 8:30 a.m. As part of her plea agreement, Nelson has agreed to forfeit two homes in Virginia and Washington, D.C.
This prosecution is being brought jointly by the Maryland and Washington, D.C. Mortgage Fraud Task Forces, which are comprised of federal, state and local law enforcement agencies in Maryland, Washington, D.C. and Northern Virginia. 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. Information about mortgage fraud prosecutions is available on the internet at http://www.usdoj.gov/usao/md/Mortgage-Fraud/index.html.
United States Attorney Rod J. Rosenstein praised the Federal Bureau of Investigation, the Internal Revenue Service - Criminal Investigation, the Maryland Attorney General’s Office - Securities Division and the Federal Deposit Insurance Corporation - Office of Inspector General for their investigative work. Mr. Rosenstein thanked Assistant U.S. Attorneys for the District of Maryland Jonathan C. Su and Bryan E. Foreman, who are prosecuting the case.