Two Maryland Men Sentenced for Wire Fraud Conspiracy
|U.S. Attorney’s Office March 08, 2013|
ALEXANDRIA, VA—Two Maryland men have been sentenced for engaging in a scheme to steal nearly $16 million from Vienna-based Southern Management Corporation’s (SMC) employee pension plan.
Neil H. MacBride, United States Attorney for the Eastern District of Virginia, and Valerie Parlave, Assistant Director in Charge of the FBI’s Washington Field Office, made the announcement.
Robert Fulton Rood IV, 44, of Potomac, Maryland, was sentenced to 120 months in prison and Nikolaos M. Hepler, 31, of Gaithersburg, Maryland, was sentenced to 30 months in prison by U.S. District Judge Claude M. Hilton in Alexandria, Virginia. Both men pled guilty on October 23, 2012.
Rood conceived and led a scheme to defraud Southern Management Corporation Retirement Trust (SMCRT), a pension plan established by SMC for its employees. As of December 31, 2012, the plan’s assets were more than $30 million, and prior to April 2006, SMCRT generally managed its own investments, which included short-term, high-interest loans to real estate developers.
In April 2006, Rood persuaded SMC’s president and CEO to let Rood locate borrowers; negotiate loans to them; prepare the loan agreements, promissory notes, and trust deeds; and present loan application packages to the SMCRT loan committee, which would decide whether to purchase the proposed loans. If the committee decided to do so, it would wire the money to purchase the loan to a settlement company designated by Rood. Rood would use the money from SMCRT to fund the loan and would obtain from the borrower an executed loan agreement, promissory note, and trust deed, which he would assign to SMCRT. In most cases, the borrowers were not aware of SMCRT’s involvement in the process.
Rood represented to both SMCRT and the borrowers that he would set up escrow accounts for the payment of interest to SMCRT and for construction payments to the borrowers. Instead, the money from all the loans were co-mingled into Rood’s principal bank account. When the project was finished and sold, the borrower was to pay back the amount borrowed to SMCRT.
From April 2006 to around October 2007, Rood sold to SMCRT approximately 32 mortgage loans that he had originated, of which 24 went into default after they were funded by SMCRT. One loan, referred to as the “K Street” loan, never closed because the title company was unable to clear title to the property, and Rood simply kept the money that SMCRT paid him to purchase the loan. Two other loans—the “Eastern Shore” and “Accom” loans—involved SMCRT loans that the borrowers refinanced with different lenders and sent their payoffs to Rood, who kept the payoff money. In each case, Rood, assisted by Hepler, his employee, misrepresented to SMCRT that the loans were in place and performing satisfactorily, including Rood’s making of the monthly interest payments to SMCRT on the nonexistent loans.
When SMCRT requested an independent review of Rood’s accounts, Rood engaged Lloyd M. Mallory, a Maryland certified public accountant, to perform a review of the loans, loans, disbursements, and escrows. The accountant issued a report, which was actually prepared by Rood and Hepler, that falsely showed the status of the loans and the funds held by Rood. Mallory was sentenced to 24 months in prison on August 2, 2012, following his plea of guilty to the conspiracy.
This case was investigated by the FBI’s Washington Field Office. Assistant United States Attorneys Michael E. Rich and Uzo E. Asonye prosecuted the case on behalf of the United States.
A copy of this press release may be found on the website of the United States Attorney’s Office for the Eastern District of Virginia at http://www.justice.gov/usao/vae.