Leader of Mortgage Fraud Ring Sentenced to More Than Six Years in Prison and Ordered to Forfeit $2.5 Million
|U.S. Attorney’s Office December 08, 2010|
BIRMINGHAM—A federal judge today sentenced the leader of a mortgage fraud ring in Jefferson County to six-and-a-half years in prison, announced U.S. Attorney Joyce White Vance, FBI Special Agent in Charge Patrick Maley and Department of Housing and Urban Development Acting Inspector General Michael Stephens.
U.S. District Judge Inge P. Johnson sentenced TIMOTHY WAYNE JOHNSON, 45, of Bessemer, on two counts of making false statements on a loan application, two counts of mail fraud against a financial institution, and one count of false statements to federal agents. Judge Johnson also ordered the defendant to forfeit $2.5 million to the government as proceeds of illegal activity. JOHNSON pleaded guilty to the charges and consented to the forfeiture in July.
“Mortgage fraud continues to threaten the communities and financial institutions within our district, and throughout the country,” Vance said. “This defendant is responsible for the largest mortgage fraud scheme prosecuted, thus far, in northern Alabama. This conviction should send the message that these frauds will be sought out and prosecuted to the fullest extent of the law. Fraud in loan applications will not be tolerated. We are pleased with the result of this prosecution, but there is much more to accomplish,” she said.
“Mortgage fraud and white collar crimes strike at the economic heart of the American system,” Stephens said. “The Inspector General’s Offices of HUD and the Social Security Administration work collaboratively with the FBI to investigate these crimes. We use a variety of investigative and analytical techniques to identify those who engage in mortgage fraud. To the extent that we can uncover and prosecute these activities, it is to everyone’s benefit,” he said. “This joint prosecutorial effort by the U.S. Attorney’s Office and law enforcement agencies has helped send a strong message that those who seek to unlawfully profit by committing acts of mortgage fraud will be vigorously prosecuted.”
“Mortgage fraud has a direct negative impact on property values, potentially making all of us victims,” Maley said. “I encourage anyone with information on possible fraud to report it to the FBI, so it can be investigated and rooted out.”
JOHNSON’S mortgage fraud scheme involved more than 40 real estate transactions that caused financial institutions to approve $2.5 million in loans that were fraudulently obtained through false statements and documents made by JOHNSON. The loans were on properties in Fairfield, East Lake, inner-city Birmingham and Bessemer, and about 75 percent of those mortgages have been foreclosed. JOHNSON created and controlled nearly every aspect of the mortgage fraud scheme and enlisted the participation of at least 10 other individuals who have been convicted for their conduct in the scheme, according to the government’s sentencing memorandum.
Government documents in the case outline JOHNSON’S illegal scheme as follows: As the center of the fraud, JOHNSON would approach people attempting to sell their homes and discover what price they wanted. He would do minimal work on the homes, have them appraised, and then attach a “mechanics lien” against the property for the difference between the appraised value and what the owner wanted for the house. Johnson would then proceed to find buyers, spreading the word that he could help individuals improve their credit or get approved for a mortgage loan.
His means of helping people secure loans often involved the creation of fraudulent letters purporting to show that the loan applicant received monthly disability payments from the Social Security Administration. Once loans were issued, based on false credit or disability income claims, Johnson would be paid the amount of the liens he placed on the properties.
This case was investigated by the FBI, and the Inspector General’s Offices of HUD and the Social Security Administration. Assistant U.S. Attorney Patrick Carney prosecuted the case.
This prosecution is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency task force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.