Trio Pleads Guilty to Defrauding Mortgage Lenders Out of Millions

LEXINGTON—An owner of a real estate company and two other Eastern Kentuckians admitted in federal court today that they fraudulently obtained millions in mortgage loans from 2006 to 2009.

John Howard, 43, of Richmond, Ky.; Brenda C. Stone, 55, of Versailles, Ky.; and Kevin Mullins, 40, also of Richmond, pleaded guilty to wire fraud charges that involved false mortgage applications.

Howard, a former mortgage loan officer and broker and current owner of Campus Downs Real Estate, admitted to fraudulently obtaining $2.9 million in mortgage loans.

Howard said he lied on loan applications and manipulated the filing of liens. He used these tactics in order to prevent lenders from finding out that he had already borrowed money from other lenders on the very same properties. Howard admitted getting 11 such loans for five Lexington properties.

Mullins, who formerly headed Republic State Mortgage’s Central Kentucky lending operations, pleaded guilty to conspiring with Howard to create a series of mortgage loans that were obtained by lies on the borrowers’ applications.

Specifically, Mullins admitted that he permitted Howard, whose license had been revoked by mortgage regulators in Kentucky, to generate mortgage business under Mullins’ name.

Mullins further admitted that he knew several of the loans Howard created for clients contained lies about the borrowers’ incomes, net worth, and home purchase prices. Mullins’ plea specified he knowingly participated with Howard in four loans totaling more than $900,000.

Stone, a former processor at Republic State Mortgage, admitted that she processed loan documents for a friend, even though she knew the documents contained fraudulent statements about the friend’s income and intention to occupy the property as a primary residence; As a result, a $225,000 fraudulent loan was issued.

Howard, Stone, and Mullins waived their right to be indicted by a federal grand jury and directly pleaded guilty to the charges.

Kerry B. Harvey, United States Attorney for the Eastern District of Kentucky, and Elizabeth A. Fries, Special Agent in Charge, Federal Bureau of Investigation, jointly made the announcement today after Howard, Stone, and Mullins entered their guilty pleas.

The investigation, which spanned several years, was conducted by the Federal Bureau of Investigation and the Kentucky Department of Financial Institutions. The United States was represented in the case by Assistant United States Attorney Brandon W. Marshall.

Howard, Stone, and Mullins are currently scheduled to appear for sentencing before Senior United States District Court Judge Karl S. Forester in Lexington on August 5, 2011 at 9:15 a.m.

Stone and Mullins face maximum prison sentences of 30 years and Howard faces up to 20 years. However, any sentence following conviction would be imposed by the court after consideration of the United States Sentencing Guidelines and the federal statute governing the imposition of sentences.