U.S. Attorney Klinefeldt Announces Local Achievements in Combating Mortgage Fraud
|U.S. Attorney’s Office June 18, 2010|
DES MOINES, IA—U.S. Attorney Nicholas A. Klinefeldt provided details today regarding the Southern District of Iowa’s contributions toward a national mortgage fraud initiative known as “Operation Stolen Dreams.”
Klinefeldt announced that five defendants in the Southern District of Iowa have pled guilty in recent months to mortgage fraud schemes. The defendants in these five cases have included an experienced real estate agent and a former branch manager for U.S. Bank.
“Mortgage fraud has had a devastating effect on communities and families,” Klinefeldt said. “These recent cases are only the beginning of our efforts to combat the problem.”
Four of the guilty pleas involved a fraudulent scheme in the Davenport, Iowa area. Robert Edward Herdrich and Darryl Lee Hanneken admitted to buying dozens of Davenport-area rental properties at inflated prices and receiving kickbacks from the sellers of the properties. In each instance, Herdrich and Hannekan would agree to a “real” purchase price with the seller but report an “inflated” price to the lender, which would then provide a loan on the basis of that inflated price. The seller would give a kickback to Herdrich and Hanneken in the amount of the difference between the “inflated” and “real” prices.
Mary Pat Harper, a real estate agent, and Mary Lee Reinking, a mortgage broker, admitted to participating in the fraudulent scheme with respect to several of the properties purchased by Herdrich and Hanneken. Harper also admitted to participating in a similar scheme with two other buyers. Many of the properties were in the same neighborhood.
“The problem with a scheme like the one in Davenport is not just that it enriches the people committing the fraud,” Klinefeldt said. “It also artificially inflates property values throughout the neighborhood, thus causing honest and innocent homebuyers to pay more for property than it is actually worth.”
Des Moines-area cases include the recent guilty plea of Christopher Sean Van Horn, a former U.S. Bank Branch Manager who pled guilty to bank fraud. Through the use of false statements on loan applications, Van Horn obtained approximately $800,000 in mortgage loans on a property assessed at only $265,400.
In addition to the cases already resulting in guilty pleas, four more individuals have been indicted on charges relating to mortgage fraud, including the Clarke County Attorney. The United States Attorney reminds the public that an indictment is merely an allegation that the defendants have engaged in criminal activity. Defendants are presumed innocent until and unless proven guilty beyond a reasonable doubt.
The penalties associated with mortgage fraud vary according to the particular charge, but the most common charges (bank fraud, wire fraud, mail fraud, and false statements to a bank) carry maximum terms of imprisonment of 30 years and fines of up to $1,000,000.
Klinefeldt said the FBI has been instrumental in investigating mortgage fraud cases in the Southern District of Iowa and that other federal agencies also have played, and will continue to play, a role. He encouraged people who believe they have been victims of mortgage fraud to visit www.stopfraud.gov for contact information for investigative agencies.