Charlotte Attorney Victoria Sprouse Convicted by Federal Jury
Jury Convinced Regarding Attorney’s Role in Mortgage Fraud Schemes
|U.S. Attorney’s Office April 01, 2009|
CHARLOTTE, NC—A federal jury in the Western District of North Carolina, Charlotte Division, convicted Victoria L. Sprouse, 38, of Charlotte, following an eight—day trial which ended on Wednesday, April 1, 2009 with the finding of guilty on 18 individual criminal counts. The return of the guilty verdict is the latest step in an ongoing investigation of mortgage fraud schemes carried out around the Charlotte area, which led to the charging of eight individuals, six by indictment, on mail, wire and bank fraud conspiracy, money laundering conspiracy, and related charges in March 2008. The jury deliberated today for approximately five hours and were asked to consider guilt or innocence on counts of mortgage fraud conspiracy (mail, wire, and bank fraud conspiracy), mail fraud, bank fraud, one count of promotion of money laundering, and one count of money laundering. The jury found Sprouse guilty on 18 of 19 various criminal counts on which they deliberated. She was found not guilty as to one count of mail fraud. Sprouse’s five co—defendants earlier entered guilty pleas in U.S. District Court to various counts of fraud and conspiracy.
Today’s announcement of the guilty verdict is made by Acting U.S. Attorney Edward R. Ryan of the Western District of North Carolina. Joining Ryan in making today’s announcement are Acting Special Agent in Charge of North Carolina FBI Operations, Kenneth L. Moore; Inspector In Charge of U.S. Postal Inspection Service, Keith Fixel; Special Agent in Charge of IRS—Criminal Investigations Division, Jeannine Hammett, and North Carolina Insurance Commissioner Wayne Goodwin.
A federal indictment charging Victoria L. Sprouse, along with five other individuals was filed in March 2008 in U.S. District Court. To date all six of those defendants have been either convicted at trial or have entered pleas of guilty. The charges represent the results of a local investigation which stemmed from the detection of an original mortgage fraud scheme in September 2002, and focused on a group operating in and around the Charlotte area. The indictment alleged, and the evidence presented at the trial of Victoria L. Sprouse, showed that all the defendants participated in a series of mortgage fraud schemes involving more than $20 million in mortgage loans and hundreds of houses in Charlotte—area neighborhoods. The defendants included Sprouse who served as the attorney, a real estate appraiser, two mortgage brokers, and two realtors. The indictment also identified two other attorneys, three home builders (including one national homebuilder), and several real estate investors as co—conspirators in these schemes. One of the banks victimized by the schemes closed its doors in mid—2007 after 103 years of business.
The indictment alleged, and the evidence presented at this week’s criminal trial of Charlotte attorney Victoria L. Sprouse showed, that Sprouse participated in three separate mortgage fraud schemes where houses were purchased through fraudulent mortgage applications and use of other false documents. Sprouse and mortgage broker Michael D. Pahutski were originally charged in this case in connection with a scheme involving real estate investor Stephen Hawfield, in which approximately 210 houses were purchased in a “flip scheme” through fraudulent mortgage applications to nBank for more than $15 million. In a second superseding indictment, filed in March 2008 and adding four additional defendants, Sprouse is alleged to have performed legal work in connection with purchases in additional and different mortgage fraud schemes. According to evidence presented at trial, Sprouse, working with a local real estate investor and several builders, perpetrated a mortgage fraud scheme in 2000/2001 in which builders supplied purported “decorator allowances” to investors, who used the disbursements to fund the down payments for house purchases. Sprouse facilitated this scheme, according to trial testimony and evidence, by failing to deposit the investor’s down payment checks into her law firm’s trust account until after the supposed “decorator disbursement” checks were issued and deposited into the investor’s checking account from which the down payment checks had been written.
Further according to trial evidence and testimony, from 2002 through 2004 Sprouse, working with co—conspirators who served as realtors, a mortgage broker, and a local home builder, perpetrated another mortgage fraud scheme in which mortgage loan applications were falsified by the mortgage broker for investors purchasing multiple properties but stating that each was their “primary residence.” The home builder agreed to kickback a portion of the supposed purchase price of the house to the buyer through payments funneled through the realtors. Sprouse performed legal work in connection with these closings, trial evidence revealed. Acting U.S. Attorney Edward Ryan, along with his Assistants, Matthew T. Martens and Kurt W. Meyers, who prosecuted the case at trial, highly commended the FBI, US Postal Inspection Service, IRS—CI, and NC Insurance Commission for their leadership and initiative in this complicated investigation, which included detailed paper trails and false insurance documents.
Following Wednesday’s conviction, U.S. District Judge Martin Reidinger announced that sentencing of Victoria L. Sprouse would take place on a later date. Sprouse was allowed by Judge Reidinger to go free in lieu of a $100,000 bond pending sentencing. Each of Sprouse’s codefendants have already entered guilty pleas and two of them have been sentenced. Sprouse currently faces a maximum statutory sentence of 20 years’ imprisonment on the one count of money laundering alone. Sprouse was convicted by a federal jury today of
- Mortgage fraud conspiracy
- Mail Fraud
- Bank Fraud
- Promoting money laundering
- Money laundering
The case was investigated by Special Agents of FBI, Charlotte, Special Agents of the IRS—CI, U.S. Postal Inspectors, and criminal investigative personnel of the NC Insurance Commission. The case was prosecuted by Assistant U.S. Attorneys Matthew T. Martens and Kurt W.Meyers of the U.S. Attorney’s Office, Criminal Division, Charlotte, NC.
The indictment includes a notice of forfeiture and finding of probable cause that the defendants forfeit to the United States all of the property involved in the offenses charged in the
indictment, and all property traceable to such offenses.
United States v. Pahutski, et al
Docket Number: 3:07CR211
Michael D. Pahutski, 46
Guilty plea entered 3/3/09
Victoria L. Sprouse, 38
Jury trial 3/23/09—4/1/09*
Guilty verdict by jury 4/1/09*
Gregory A. Mascaro, 42
Guilty plea entered 6/9/08
Sentenced 2/27/09 to 24 months imprisonment to be followed by a three—year term of
supervised release and ordered to pay $62,361.21 in restitution
Gregory D. Rankin, 34
Guilty plea entered 6/25/08
Sentenced 2/27/09 to five years probation, first 23 months under home confinement
Jules Springs, 41
Guilty plea entered 7/7/08