A crackdown on bankruptcy fraud has resulted in federal charges against 12 people in the Chicago area, several for their alleged role in mortgage fraud schemes in which homeowners facing foreclosure were convinced to sign over title of their homes and declare bankruptcy.
The cases are part of Operation Truth or Consequences, in which U.S. Justice Department officials announced bankruptcy fraud-related charges against 78 defendants in three dozen judicial districts nationwide.
In Chicago, bankruptcy attorneys Norton Helton, Edward Varga and Lori Westerfield allegedly engaged in separate schemes in which clients facing foreclosure were “swindled out of the equity in their homes,” the U.S. Attorney’s Office for the Northern District of Illinois said in a press release.
Varga, 47, of Aurora, Ill., was charged in an eight-count indictment with bankruptcy fraud, mail fraud, and falsifying documents in bankruptcy cases. The indictment alleges that Varga and Charlotte M. Schuett, 46, convinced homeowners to sell their homes to “investors” while in bankruptcy or just before entering bankruptcy. Varga and Schuett, who is also known by the names “Charlotte Prill” and “Charlotte Stark,” allegedly used false statements and documents to facilitate the sales, concealing $500,000 in proceeds from the Bankruptcy Court and creditors.
Helton, 45, is a bankruptcy and real estate lawyer. He is charged with bankruptcy fraud for his alleged involvement in fraudulent mortgage bailouts offered by two companies, including Diamond Management of Chicago Inc. Victims were convinced to transfer their property to “investors” who would supposedly hold them while the former homeowners attempted to improve their financial position. Homeowners were told they would be able to repurchase their homes from the investors at the end of a set period of time. Helton allegedly filed bankruptcy petitions for at least nine clients who concealed these property transfers, keeping approximately $400,000 in proceeds from becoming part of the debtors’ bankruptcy estates.
Westerfield, 41, was indicted on three counts of allegedly filing false documents in bankruptcy cases. Prosecutors said Westerfield purchased a residence from a client for $153,000 and then failed to disclose the property transfer or the sale proceeds she and her client received in a bankruptcy petition filed on the client’s behalf. Westerfield also allegedly omitted information from that bankruptcy petition and from a subsequent petition regarding prior bankruptcy petitions she had filed on behalf of the client.
Others facing bankruptcy fraud charges involving real estate include William Ramon Jackson, 62, of Chicago, a disbarred attorney charged with bankruptcy fraud, illegally receiving bankruptcy estate property and converting bankruptcy estate property to himself. Jackson, representing a debtor corporation, allegedly lied to the Bankruptcy Court about $28,000 in attorney fees the court had ordered him to return to the bankruptcy trustee. Jackson also allegedly received and kept for himself a $6,098 check payable to the debtor corporation.
Craig D. McKinley, 46, of Sauk Village, Ill., is charged with engaging in serial filing of bankruptcy cases to prevent creditors from collecting debts and foreclosing on property he owned. McKinley allegedly falsified his bankruptcy papers as well as real estate and automobile loan applications. He pleaded not guilty after being charged Aug. 29 in a six-count indictment accusing him of bankruptcy fraud, concealing assets and mail fraud.
Brian Hughes, 34, of Chicago was charged with bankruptcy fraud and making false statements in bankruptcy cases. Hughes allegedly filed multiple fraudulent bankruptcy cases to avoid foreclosure of his residence and repossession of his Mercedes-Benz. He also allegedly acted as a bankruptcy petition preparer without disclosing his role, and filed a fraudulent bankruptcy case for an individual.