A Kansas City, Mo., real estate investor on Thursday pleaded guilty in federal court to a $17.5 million mortgage fraud scheme that involved 280 residential properties, officials said.
Jeffrey Tyler Wine, 28, waived his right to indictment and pleaded guilty before U.S. Chief District Judge Dean Whipple to charges of mortgage fraud conspiracy and money laundering, according to U.S. Attorney Bradley J. Schlozman.
Wine admitted that, from November 2001 to May 2005, he conspired with others to defraud mortgage lenders by causing them to loan investor victims more than $17.5 million to purchase 280 residential properties.
Wine was in the business of purchasing, rehabilitating, managing and selling residential properties in the Kansas City metropolitan area through various business entities that he created and operated, including Sunrise Equities Inc.; Sunrise Assets LLC; Sunrise Investments Holdings LLC; Brooklyn Properties LLC; Arsenal Investments LLC; Sunrise St. Louis LLC; Woodland Properties; and Larch Investments, officials said.
According to the U.S. attorney’s office, Wine acquired residential properties at reduced rates at foreclosure sales, tax sales and bankruptcy sales.
After rehabbing the properties — often with poor-quality work — Wine advertised them for sale as investment properties with no money down. Investors were told that Sunrise Equities would provide the down payment and closing costs for the sale, secure renters for the property and manage the properties for the first year after purchase, including all maintenance costs and tenant contracts, according to officials. Investors also were told that Sunrise Equities would ensure that mortgage payments were paid even if the properties were not rented, and that a positive cash flow from the properties was guaranteed.
Co-conspirators, who included mortgage brokers, prepared false and fraudulent loan applications and supporting documents to submit to mortgage lenders in the names of investors. Sometimes Wine and co-conspirators provided money to the investors to deposit into their bank accounts to mislead the lenders regarding the buyers’ assets. They also furnished money for the investors to take to closing to pay the buyers’ closing costs.
While Wine and co-conspirators managed the rental properties, they submitted false monthly reports to investors of rent received, expenses incurred, and income earned, and paid to the investors the amount of income reflected. This induced investors to purchase additional properties.
Wine also pleaded guilty to money laundering, admitting that he engaged in a monetary transaction involving criminally derived property by drawing upon the funds he obtained through fraud to purchase a 400-ounce gold bar for $177,000 on May 24, 2005.
Wine faces up to 15 years in federal prison without parole and a fine of up to $500,000 and an order of restitution. Sentencing will take place after an investigation from the U.S. Probation Office ends.