Real Estate Developer Charles P. Gahan Sentenced to 70 Months for Eight-Million-Dollar Title Insurance Fraud Scheme
GRAND RAPIDS, MI—U.S. Attorney Patrick A. Miles, Jr., announced today that Charles P. Gahan, currently a resident of New Smyrna Beach, Florida, and formerly of Grand Rapids, Michigan, was sentenced today in U.S. District Court to 70 months’ imprisonment for his role in a conspiracy to commit wire fraud affecting financial institutions. Gahan was also ordered to pay restitution of $8,205,405.71. The Honorable Robert Holmes Bell noted the significant impact that his fraud scheme had upon numerous homeowners in the Western District of Michigan, as well as the victim title insurance companies, and remanded Gahan to the custody of the U.S. Marshal at the conclusion of the sentencing hearing.
“This was a very sophisticated and long-running title insurance fraud scheme that involved numerous residential developments,” said U.S. Attorney Miles. “Innocent homeowners arrived home to find foreclosure notices on their doors, from banks they had never heard of, solely because Gahan fraudulently diverted closing funds from those banks to his own pocket. The Court’s sentence today reflects the seriousness of this financial crime.”
From 2002 to 2006, Gahan operated as a real estate developer under the name GBW Development. Gahan conspired with Scott Hoeft, then the owner of Prime Title Services, to divert real estate closing proceeds to his own pocket. The essence of the fraud was that Hoeft assisted Gahan in obtaining construction loan financing by agreeing to provide the prospective lenders with fraudulent title commitments that purposefully failed to disclose the existence of prior liens against the property on which new homes would be constructed. After a home was constructed and sold, Hoeft would fail to disclose these prior liens to the buyer’s lender or, if he did disclose such liens, he did not pay off the liens with the loan proceeds deposited to his escrow account. Instead, those funds were transferred to Gahan, who used them to support his lifestyle or to build the next home in his development. The two title insurance companies that Hoeft used to issue the title insurance policies suffered over $8,000,000.00 in losses to provide clear title to the homeowners. Hoeft was previously sentenced to 63 months’ imprisonment for his role in the scheme, which was reduced to 45 months’ imprisonment for his cooperation in the prosecution of Gahan.
The case was investigated by the Grand Rapids Office of the FBI and the U.S. Postal Inspection Service. Assistant U.S. Attorney Ronald M. Stella prosecuted the case.