Six individuals in North Carolina were charged last week for their roles in a mortgage fraud ring that cost lenders up to $130 million in potential losses, according to the FBI. The Bureau in 2002 began sending undercover agents into seven organizations involved in the fraud ring, which led to the identification of the fraudulent loans.

The investigation was one of several the FBI highlighted to show progress made by its ongoing initiative to crack down on financial institution fraud. FBI investigators target a variety of financial fraud schemes, including mortgage and loan fraud, insider fraud, financial institution failure investigations, identity theft, check fraud and check kiting.

Mortgage fraud is a growing problem in the real estate industry, with more cases coming to the surface in recent years. Perpetrators often are professional real estate agents, mortgage brokers, title agents, appraisers and attorneys, and the complex crimes can cost financial companies millions of dollars in losses and litigation expenses.

The Internal Revenue Service reported the number of mortgage fraud case initiations increased from 107 in 2001 to 215 in 2003 and the number of indictments increased from 67 in 2001 to 94 in 2003. The number of convictions decreased from 85 in 2001 to 81 in 2003 and the number of sentencings fell from 103 in 2001 to 65 in 2003. For the partial fiscal year 2004, there have been 159 case initiations, 69 indictments, 67 convictions and 64 sentencings.

While there is a perception that sentencing is typically light for white-collar crimes, the average months to serve for real estate-related fraud has climbed from 24 months in fiscal year 2001 to 46 months in fiscal year 2003, the IRS reported, and the number of prosecution recommendations has climbed from 69 in fiscal year 2001 to 117 in fiscal year 2003.

The FBI has ramped up its efforts to dismantle a variety of financial crimes, which include mortgage and loan fraud, insider fraud, financial institution failure investigations, identity theft, check fraud and check kiting. Since 2000, FBI financial fraud investigations have resulted in more than 11,466 indictments, 11,362 convictions and approximately $8.1 billion in restitution orders.

FBI investigators have identified more than 245 subjects in 158 investigations since the FBI launched “Operation Continued Action” in August. More than 151 indictments, informations and complaints have been filed to date, and charges have led to more than 144 arrests, convictions, sentences and millions of dollars in forfeiture and restitution.

The FBI said Operation Continued Action reflects the Bureau’s effort to “identify, target, disrupt and dismantle” crime rings that target financial companies. The Bureau last week gave updates on recent investigations.

Additional mortgage fraud cases:

In Jacksonville, Fla., the FBI last week made two arrests related to a mortgage fraud investigation. Mortgage broker J.R. Parker and closing attorney Dale Beardsley were charged with bank fraud for their alleged roles in the scheme. The FBI did not disclose an estimated loss amount related to the fraud.

In Chicago, two men–Jeffrey Grossman and Donald Grauer–doing business as The Churchill Group pleaded guilty in federal court for their roles in a in a real estate development scheme. Defendants allegedly submitted fraudulent vouchers to banks while constructing two condo complexes, leading to losses of more than $15 million.

In Denver, five individuals doing business as Amerifunding in August were arraigned in federal court. Gerald Small, Kelli Burkhalter-Small, Charles Winnett, Chad Heinrich and Robert Sigg were charged with bank fraud stemming from their alleged roles in a scheme that used stolen identities to obtain loans to buy substandard houses used to continue the scheme.” Losses exceeded $19 million.

Three people in Kansas City, Mo., were arraigned in federal court for their alleged roles in a mortgage fraud ring that caused more than $15 million in losses. Chauncey Joseph Calvert, Aronda Lynn Nicodemus and Roderick Neil Criss, doing business as Midtowne Restoration, allegedly used straw buyers to purchase property, which then went into foreclosure. Defendants repeated the scenario about 300 times, the FBI said. The alleged ringleader, Brent Barber, was arrested.

Identity theft cases:

In what the FBI says is the largest identity theft case to date, Philip J. Cummings, a former technical support representative for Telecommunications Data, pled guilty in a New York federal court for his participation in a massive scheme to steal people’s identities to defraud financial institutions of more than $11 million.

Cummings allegedly stole the passwords and access codes of Ford Motor Credit and other financial companies to access Equifax, Trans Union and Experian credit report records and downloaded credit information on 30,000 people. The credit reports allegedly were sold to a group of co-conspirators.

In a separate case in Detroit, four men known as “Cash Money Boys” were charged with bank fraud and conspiracy for their alleged roles in an identity theft ring that made profits of more than $2 million. Richard Burley, Timothy Clark, Khary Lawson and Theodore Washington were charged in federal court this month.


While the FBI has had success in dismantling a number of financial fraud rings, many real estate fraud perpetrators managed to escape investigators and are now living a life on the lam.

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