The elected official who ran Jackson County, Mo., for more than a decade and her husband were among 11 people indicted by a federal grand jury Thursday for their roles in an alleged mortgage fraud scheme.

Katheryn J. Shields, 60, and her husband Phillip F. Cardarella, 59, both of Kansas City, deny participating in a scheme to fraudulently inflate the purchase price of a home they were attempting to sell in order to generate additional loan proceeds.

According to the indictment, members of an alleged mortgage fraud ring approached Shields and Cardarella in September, after their Kansas City home had been on the market for 18 months.

Although the house was listed for $699,950 — more than $150,000 less than the original asking price — members of the ring drew up a contract that falsely stated a $1.4 million purchase price, prosecutors said.

According to the indictment, Shields and Cardarella were to receive $707,000 from the sale, while car dealer Raymond Walter Zwego Jr., 58, and other defendants — including a real estate agent, loan officer, appraiser and a couple acting as straw buyers — would pocket the remaining loan proceeds.

The alleged straw buyers, Larry E. Barshaw, 56, and Linda M. Thompson-Barshaw, 57, both of Kansas City, signed loan applications for a $1 million first mortgage and a $400,000 second mortgage prepared by Monty J. Kinman, 25, the regional manager and a loan officer at Soldi Financial in Overland Park, Kan.

The appraiser employed by the group, Jeremy A. Plagman, 29, of Lee’s Summit, Mo., refused to value the home at $1.4 million, “but agreed to provide an appraisal for $1.2 million, although in his opinion the property was worth significantly less,” U.S. Attorney Bradley J. Schlozman said in a statement.

Zwego allegedly arranged for Rick A. Peterson, 32, a closer at Freedom Title LLC, to draw up a fraudulent settlement statement showing the purchase price for the Cardarella’s home at $1.2 million, with a management fee of $414,580. Prosecutors say Shields, Cardarella and the Barshaws signed the closing documents, including the settlement agreement falsely stating the purchase price of the home as $1.2 million.

Shields and Cardarella are both attorneys, and prosecutors said Cardarella assured Zwego that he and his wife understood the nature of the transaction.

“Cardarella allegedly assured Zwego that he understood, that he wanted the $707,000 and hoped Zwego made tens of millions of dollars from the transaction, and that he understood there would be an invoice falsely reflecting that Zwego or his company was entitled to loan proceeds,” Schlozman said. The FBI became aware of the scheme and intervened before Fieldstone Mortgage Corp. issued a loan to the Barshaws.

Shields, Cardarella, Zwego, the Barshaws, Kinman, Peterson and Plagman were charged in a 12-count indictment alleging conspiracy and wire fraud. Other defendants include accountant James Elliott Coleman, 58; Zwego’s assistant, James R. Rhoades, 48; and Michael Rodd, 52, of Olathe, Kan., a real estate agent doing business as Heartland of America Inc.

Shields — who held the elected position of Jackson County executive for 12 years, and has been planning to run for mayor of Kansas City — denied the charges.

“I look forward to the trial,” she said in a video of a press conference posted on the Web by the Kansas City Star. “I wish we could call the jury on Monday. Because I know that when the facts are out, it’s going to demonstrate that neither my husband nor myself have done anything wrong, and that this is the continuation of a political witch hunt.”

The Star reported that Shields has been the subject of two prior federal investigations, one focusing on contracts she issued as Jackson County executive, and one on whether she used her staff for political and personal purposes.

Cardarella also denies any wrongdoing, saying he was not allowed to tell his side of the story to the grand jury. A lawyer representing the couple, Curtis Woods, said they were not involved in any scheme to defraud lenders.

“All (Phil Cardarella) said was, ‘If you can sell the house, be my guest. We want $700,000.’ The guy said, ‘We can get more for it’ … and that’s apparently what the guy did,” Woods said.

In an unrelated case, a grand jury Wednesday indicted Kansas City Councilwoman Saundra McFadden-Weaver and two others in another alleged mortgage fraud scheme.

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