Two Indianapolis Police Department patrolmen were suspended Wednesday after they were indicted in a mortgage fraud scheme involving 43 homes in three cities and $2 million, the Indianapolis Star reported today.

The news report cited a 66-page federal indictment released by the U.S. Attorney’s office for the Southern District of Indiana that named Michael C. Smith, 44, Officer James McClung, 34, and eight other people for their role in the fraud ring.

Smith is a 19-year veteran of the Indianapolis Police Dept., and McClung is a six-year officer and police helicopter operator. The two were placed indefinitely on unpaid suspension.

U.S. Attorney Susan W. Brooks reportedly said she had no proof the officers’ perpetrated the scheme while on duty. None of the 10 accused in the scheme were arrested and all must appear in federal court on Feb. 8.

The scheme allegedly took place in 2002. Participants would purchase inexpensive homes, obtain a fraudulent appraisal and alter loan applications to persuade banks to lend more money than the homes were worth, investigators told news sources.

The fraud perpetrators kept the profits, and banks were left with bad loans. Many houses went into foreclosure.

According to the news report, investigators said Smith used his real estate appraiser license to work the scheme, while McClung was listed as the buyer or borrower on 13 properties.


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