Denver Man Sentenced to Prison in Multi-Million-Dollar Real Estate Fraud Scheme
|U.S. Attorney’s Office February 13, 2014|
DENVER—Roger K. Howard, age 51, of Englewood, Colorado, was sentenced on Tuesday by U.S. District Court Judge R. Brooke Jackson to serve 108 months in federal prison for wire fraud and money laundering, the United States Attorney’s Office, IRS-Criminal Investigation, and the Federal Bureau of Investigation announced. Following his prison sentence, Howard was ordered to serve three years on supervised release. He also has to pay $8.9 million in restitution to the victims of his crime. The defendant, who appeared at the sentencing hearing free on bond, was ordered to report to a facility designated by the U.S. Bureau of Prison within 15 days from the date of designation.
Howard, along with a co-defendant, Oai Quang Luong, age 45, was indicted by a federal grand jury in Denver on January 25, 2012. Howard pled guilty on June 21, 2013. He was sentenced on February 11, 2014. Howard’s co-defendant, Oai Quang Luong, pled guilty to wire fraud on May 22, 2013, and was sentenced by Judge Jackson on August 15, 2013, to serve 18 months in prison. Luong was ordered to pay restitution totaling $3.2 million joint and several with Howard.
According to the facts contained in the indictment as well as the stipulated facts contained in the plea agreement, in 2006 and 2007, Howard devised and participated in three similar but separate mortgage fraud schemes. The first and larger scheme involved the sales of 26 townhomes in a development known as Oliveglen Villas on East Princeton Place, Aurora, Colorado. The second scheme involved the sale of a residence in Castle Rock, Colorado, and the third a house in Denver, Colorado. During the relevant times, Howard operated under the business names of Spring Creek Mortgage Real Estate Services and Open Range Development LLC. Howard controlled bank accounts in the names of both companies. Also at the relevant time, Howard’s co-defendant, Oai Luong, worked for a company that processed mortgage loan applications on behalf of potential home buyers. Both Howard and Luong had offices in the same building in Centennial, Colorado.
By the middle of 2006, the developer of Oliveglen Villas had accumulated an inventory of unsold town homes. At that time, two real estate agents attempted to obtain the right to buy some of the town homes, but they were unsuccessful. The agents then were referred to Howard, who told them that he could arrange for individuals, whom he described as investors, to purchase the properties. In August 2006, Howard asked Luong to obtain the $250,000, and Luong did so using funds loaned by another individual. Howard persuaded 17 individuals, his so-called investors, to purchase the townhomes.
Howard arranged for the individuals to obtain the mortgage loans, and in doing so, he knowingly caused the applications for those mortgages to include false or misleading information or omit material information. Many of the applications overstated borrowers’ monthly incomes, often claiming incomes were more than double the actual amounts. Loan applications also contained false information about borrowers’ assets, usually bank account balances. As part of the mortgage application process, a borrower obtained from his or her bank a form known as a Request for Verification of Deposit (VOD), which verified the balance of an account. In this case, VODs were misleading because Howard and others working at his direction arranged for bank account balances to be inflated temporarily; that is, money was deposited into the accounts and, after the balances were verified and the VODs were completed, the money was withdrawn. All of the townhome sales prices were supported by appraisals, most of which were done by an associate of Howard’s who told the appraiser the amount he wanted.
For each closing, the closing agent prepared a settlement statement reflecting that the disbursements of loan proceeds included a payment “from Seller’s Funds at Settlement” to Open Range Development. These payments were the “service fees” mentioned in the contract with the developer; they ranged from $85,700 to $117,204. After the closings, Howard used some of that money to make payments to all but one of the buyers, but those payments were not disclosed to the lenders or their underwriters. Howard for a time wrote checks payable to the borrowers to cover the differences between rental incomes and mortgage payments, but he stopped doing so on April 19, 2007. A few borrowers thereafter used their own money to make mortgage payments, but eventually all the mortgages went into default and the lenders foreclosed. Ultimately, there were 20 different victim lenders for the three fraudulent schemes, causing a $8.9 million loss.
“Real estate fraud hurts both individual home buyers, and as the events of 2007 and 2008 so clearly showed, the entire economy as well,” said U.S. Attorney John Walsh. “This lengthy sentence reflects the harm this defendant caused to his 20 victim lenders.”
“The FBI is committed to aggressively pursuing those who commit mortgage fraud. Falsifying information on a loan application and lying to a lender to facilitate approval for a loan is a felony,” said FBI Denver Special Agent in Charge Thomas Ravenelle. “We hope the results of this investigation will deter others who engage in these types of fraud schemes.”
“This sentencing is a strong reminder how serious law enforcement and our courts deal with mortgage fraud,” said Stephen Boyd, Special Agent in Charge, IRS-Criminal Investigation, Denver Field Office. “IRS-Criminal Investigation is committed to identifying and pursuing individuals who commit such callous fraud.”
This case was investigated by agents with Internal Revenue Service Criminal Investigation (IRS-CI) and the Federal Bureau of Investigation (FBI).
The case was prosecuted by Assistant United States Attorney Suneeta Hazra.