Lawyer accused in investment fraud

The son of prominent Charlotte civil rights lawyer James Ferguson II is charged in connection with a $2 million investment scheme. James “Jay” Ferguson III, also a lawyer, faces charges of mail fraud, money laundering, conspiracy and making false statements to the FBI, according to an indictment unsealed Monday.

Ferguson promoted a fraudulent investment business run by clients who used investor money for their own purposes, the indictment says. It describes acts of lavish living, drug sales and counterfeiting by others in the case — not Ferguson.

According to the indictment Ferguson conspired with clients, also charged in the case, to promote a fraudulent business called Alexis Enterprises, being run by those clients. From 2000 to 2002, Alexis recruited investors and promised to buy undervalued real estate. But the company never purchased any property.

Instead, Alexis chief Maurice Bethea used investor funds to “finance his extravagant lifestyle, paying for illicit acts, exotic dancers, tailor-made suits, expensive dinners, vacations, cigars and lavish parties,” the indictment says.

Jay Ferguson provided legal services for Alexis.


Springfield (IL) DOJ announces arrest of flip scam artists

Decatur Man and Associate Charged in $8 Million Real Estate Scheme

Springfield, IL - Jan Paul Miller, United States Attorney for the Central District of Illinois, announced that a Decatur man and his business associate have been charged with participating in a broad real estate scheme involving properties in Springfield and Decatur, Illinois, and totaling more than $8 million dollars.

Gary Knox, age 59, of 2630 South Forest Green Drive, Decatur, Illinois, and Dennis Wiese, Jr., age 37, of 6908 Osage Drive, Belleville, Illinois, were charged in an indictment returned by the federal grand jury in Springfield late Friday afternoon, July 8, 2005. The indictment had remained sealed pending Knox’s arrest.

Knox was arrested Saturday, July 9, 2005, in Decatur, by federal law enforcement agents, and made his initial appearance today before U.S. Magistrate Judge David G. Bernthal in Urbana. A detention hearing has been scheduled for 2:30 p.m. on Friday, July 15, 2005. Knox entered a plea of not guilty during his court appearance today and trial was scheduled for August 29, 2005. Wiese will be issued a summons by the U.S. District Clerk to appear in federal court in Urbana .

The indictment alleges that from at least 1999 or before, and continuing into 2005, Knox and Wiese engaged in a real estate “flipping” scheme to defraud lenders, buyers and sellers. As alleged in the indictment, the scheme involved more than 150 fraudulent real estate sales and financing transactions, totaling more than $8 million dollars, and resulted in Knox obtaining more than $3 million for his personal use and to promote the ongoing scheme.

According to the indictment, Knox allegedly represented himself and his business, Central Illinois Management and Development Company, to be in the business of buying, selling and managing real estate; however, he was not a licensed real estate broker or salesperson.

Wiese, at the time of the alleged scheme, was a licensed Illinois real estate appraiser who allegedly performed numerous appraisals for Knox in which he falsely inflated, usually significantly, the value of the real estate. The indictment alleges Knox used the fraudulent appraisals prepared by Wiese to buy, sell, and finance properties at prices which they fraudulently inflated to substantially higher prices than their reasonable value. The defendants then allegedly reaped the benefits of the scheme as Wiese was paid appraisal fees of $350 to $450 per appraisal, and Knox used the profits from the fraudulent transactions for his personal use and to promote the ongoing scheme.

The indictment alleges Wiese performed more than 100 fraudulent appraisals for Knox rendering values that were identical to or exceeded Knox’s inflated sales prices. Knox also allegedly secured a buyer-investor to purchase Wiese’s home which allowed Wiese to continue living in his rented home.

To carry out the scheme, Knox allegedly recruited buyers, typically of modest means with little or no experience in real estate investment. To entice buyers, Knox allegedly made one or more representations to them: they would be paid as much as $5,000 for each property purchased; they could purchase properties for no money down; the properties were worth the appraised amounts; Knox would assist them in making loan applications to mortgage lenders; that Knox would act as the buyers’ property manager; that he would locate tenants and collect the rents; that he would make the loan payments directly to the mortgage lenders; and, that he would buy back the properties on a contract for deed. As a result of the scheme, the indictment alleges various mortgage lenders, and real estate buyers and sellers often incurred significant financial losses.

Nine counts of the ten-count indictment charge both Knox and Wiese with either bank fraud, wire fraud or mail fraud related to the transactions between various buyers and sellers for properties for which Wiese allegedly prepared fraudulent appraisals for Knox:

418 S. Siegal St., Decatur, IL
1145 N. Pine St., Decatur, IL
467 S. Boyd St. Decatur, IL
1039 N. Church St., Decatur, IL
830 S. 12th St., Springfield, IL
1320 S. 13th St., Springfield, IL
1305 S. Grand Ave. East, Springfield, IL
821 S. 14th St. Springfield, IL
1414 S. Grand Ave. East. Springfield, IL

Count ten of the indictment charges only Knox with mail fraud related to the illegal “flip” of his former Decatur residence, at 8 Montgomery Place, in 2004. The indictment alleges that Knox negotiated an actual sale price for the property of $110,000 with the owner, a Decatur businessman. Knox allegedly established an inflated sale price of $210,000 for the property, obtained a falsely-inflated appraisal and converted approximately $79,000 in profit to his personal use. To obtain the false appraisal, Knox allegedly obtained comparable sales information for three other Decatur properties and forged the sale prices to make it appear they had sold for $70,000 more than their actual sales price. The indictment alleges Knox faxed the forged sale prices to the appraiser who used them as comparable sales information to support the appraisal.

Members of the public are reminded that an indictment is merely an accusation; the defendants are presumed innocent unless proven guilty.

U.S. Attorney Miller
said, “Financial fraud schemes, such as the one alleged in this indictment, burden our financial system and leave many victims in desperate financial straits. The investigative agencies have devoted substantial resources to this investigation and the U.S. Attorney’s Office remains committed to working together with them to aggressively prosecute those who would seek to exploit the system for financial gain.”
Click here for the full DOJ Press Release


Georgia DBF revokers broker license for misreps in loan files

On June 1, 2005, the Georgia Department of Banking and Finance (“Department”) revoked the Mortgage Broker’s License issued to Preferred Mortgage Services, Inc. (“Preferred”), license number 15063, after finding that Preferred had violated provisions of the Georgia Residential Mortgage and Georgia Fair Lending Acts.

Specifically, Preferred was cited by the Department for making numerous misrepresentations in loan files submitted to mortgage lenders. Preferred was also cited for the employment of a convicted felon, transacting mortgage business with an unlicensed entity, and failing to comply with those procedures set forth for high cost loans under the Georgia Fair Lending Act.

“Our department is aggressively seeking to revoke the privilege to do business as a Georgia residential mortgage licensee for anyone consistently violating Georgia laws,” said Commissioner David Sorrell. “Preferred Mortgage Services, Inc.’s numerous and serious violations do not meet the licensing requirement that activities and operations be in compliance with the laws of the State of Georgia and be conducted in a manner that protects the contractual and property rights of the citizens of Georgia.”

The Department issued a Notice of Intent to Revoke Annual License to Preferred on May 11, 2005. Preferred failed to contest the notice. Preferred’s license was revoked on June 1, 2005.


DA Scott Storey Indicts Three in Mortgage Scheme

District Attorney Scott Storey announced today that the First Judicial District Grand Jury in Jefferson and Gilpin Counties has returned an indictment charging Ricardo Medina, Nancy Rios, and Perla Alvarado with violations of the Colorado Organized Crime Control Act, a class 2 felony. 

According to the indictment, Medina, DOB: 9-26-73, of Lakewood, is a realtor who conducted his business from offices located in Lakewood, Colorado. Rios, DOB: 11-19-65, of Thornton, and Alvarado, DOB: 9-4-80, are Denver-area loan officers. The indictment alleges that it was the regular practice of Medina, aided by Rios and Alvarado, to sell single-family homes to persons who, because of their citizenship or financial circumstances, were not qualified for home loans. 

According to the indictment, the defendants were able to obtain loans for the unqualified buyers by creating false documents concerning the homebuyer’s identity, employment and credit history, and then submitting these false documents to legitimate mortgage lenders. 

Transactions in the initial indictment involved loans for 33 homes, totaling 6.5 million dollars.

The investigation that led to the indictments was conducted by the Gaming Unit of the Colorado Bureau of Investigation. The Gaming Unit began its investigation after receiving complaints from a Colorado casino that unknown persons had forged documents which stated that the homebuyers were employed by the casino. 

The investigation is expected to go on to other realtors and loan officers who are alleged to be involved in conduct similar to that described in the July 7 indictment. 

The investigation to date has demonstrated that the number of individual homebuyers across Colorado who have obtained properties in this manner is likely to be in the thousands, far exceeding the scope of state and local criminal justice resources. As their identities are established, the information will be forwarded to both the appropriate federal authorities and to the mortgage lenders for such further action as they deem appropriate. 

All three were arrested today and are scheduled to have a first appearance before a judge tomorrow, July 12, 2005, at 10:00 a.m. in courtroom 1B of the Jefferson County Courthouse. Medina is being held on $40,000 bond and for Rios and Alvarado bond was set at $250,000. 

Jefferson County District Attorney Scott Storey praised the CBI’s Gaming Unit for the successful completion of the initial indictments, calling the agents’ work in the case “a model of complex crime investigation.”


Pair Indicted by Grand Jury for Theft from Elderly Parent

District Attorney Scott Storey announced today that the First Judicial District Grand Jury returned an indictment charging Kelly Anne McGarry, DOB: 2-21-60, and David E. Bohn, Jr., DOB: 7-3-63, with theft of over $15,000 and conspiracy to commit theft. The victim is McGarry’s 67-year-old mother. 

The grand jury’s investigation arose from a complaint that McGarry and Bohl had stolen the home owned by McGarry’s mother. McGarry and Bohl are married and now live in the home. The home, which was originally owned jointly by the mother and McGarry, is located on W. Hamilton Drive in Lakewood

Lakewood Police Department investigators learned that McGarry, acting under her mother’s power of attorney, had signed a series of quitclaim deeds which made McGarry and Bohl, and later Bohl, the only owners of the home. McGarry and Bohl then obtained several loans using the home as collateral. Loans against the home, which was owned free and clear by the mother, now total over $300,000.

McGarry’s mother is presently in a nursing home. In April, 2004, McGarry sent her a letter stating that, if her mother ever returned to the home on W. Hamilton Drive, she would have her mother arrested. 

During his 2004 campaign, District Attorney Scott Storey pledged to make crimes against the elderly one of the priorities of his administration. “A power of attorney form is not a license to take someone else’s property,” said Storey. “Persons who exercise control over property belonging to the elderly should be held to a strict standard of conduct.” 

Arrest warrants have been issued for both McGarry and Bohl. Theft of over $15,000 is a class three felony and carries with it a potential penalty of up to a $750,000 fine and up to 12 years in prison. Conspiracy to commit theft is a class four felony and carries a fine of up to $500,000 and up to six years in prison.


Real Estate Investor indicted in Ohio 'flip' inquiry

Mike Boyer of the Cincinnati Enquirer reports on the indictment of Larry D. Hensley of Cincinnati, owner of a real estate investment firm Creekview Investments Inc on 21 counts in a mortgage flipping scheme. The 29-page indictment handed down on July 6, 2005 includes counts of bank fraud, conspiracy, wire fraud, money laundering, attempted conspiracy, mail fraud and income-tax evasion.

Click here to read the indictment.

The indictment said Hensley and unnamed conspirators recruited buyers for a number of properties in Greater Cincinnati using newspaper ads stating “Why Rent? When you can own a home! 100 percent financing.” In addition, the closing statements indicated the buyers had provided down payments when in fact Hensley provided the down payments.

The properties named in the indictment are:
1. 5205 Banker Drive, Fairfield, Ohio
2. 4128 Chambers Street, Cincinnati, Ohio
3. 7084 East U.S. Route 22 & 3,  Morrow, Ohio
4. 896 Laurel Avenue, Hamilton, Ohio
5. 3616 Vine Street, Cincinnati, Ohio


Lawyer Charged With Misusing Client Funds

Josh Kovner and Alaine Griffin of Hartford Courant report that the Office of the Chief Disciplinary Counselin Connecticut has charged that Stephen T. Gionfriddo misappropriated more than $98,000 in client funds between January 2004 and this past June 17.

Read the details of Connecticut Superior Court case number CV-05-4003206-S here

Gionfriddo, 54, a city councilman and former mayor, had represented Jason and Tara Connelly in the sale of their home on Farm Hill Road. Instead of paying off the mortgage with the proceeds of the sale, Gionfriddo deposited the funds in a trustee account then changed the mailing address on the loan to his own post office box. He continued making the monthly mortgage and home-insurance payments, according to the complaint filed in Superior Court.

It would be 18 months before Gionfriddo would pay off the more than $93,000 remaining on the mortgage. He did so only after the Connelly’s learned while undergoing a credit check that a mortgage on the Farm Hill Road property still existed and that between Jan. 6, 2004, and June 17, 2005, [Gionfriddo] misappropriated his clients’ funds in the approximate amount of $98,233.82,” the complaint states.

The counsel office investigates complaints and pursues discipline against lawyers in cases where evidence exists that rules governing lawyer conduct have been broken. A hearing on the interim suspension of Gionfriddo’s law license is set for Monday in Superior Court in Middletown. The complaint was filed June 22.


Two men accused of defrauding two victims out of $450,000

Nassau County District Attorney Denis Dillon announced today that the DA’s Criminal Frauds Bureau has arrested Ryan Gosin, 31,of 1010 Washington Avenue, Plainview and Michael McEnroe,34, of 26 Arleigh Road, E. Northport, both of The Able Group, 2151 Marion Place in Baldwin. Gosin and McEnroe are accused of defrauding two victims out of $450,000, which was to be used for real estate investments but instead was used to pay the personal and unrelated business expenses of Gosin and McEnroe. The money one of the victims used to pay the investment was part of her finanical settlement as a result of her son’s death at the World Trade Center on September 11th.

According to Dillon, "The Able Group, which is owned by Gosin and McEnroe, is involved with mortgages, real estate and property repairs and is based out of Baldwin, New York. The defendants in this case defrauded an investor from Florida and a woman from Baldwin out of $450,000.

"Gosin and McEnroe met an investor from Florida through a mutual friend. The victim was looking to invest in real estate and had several meetings with the defendants. In February of 2005, Gosin and McEnroe came up with an investment idea for the Florida investor. The Able Group had their eye on a six family residential building located in Ridgewood, Queens. The Florida investor than gave the defendants $150,000 as an investment on the property. After numerous negotiations with the property owner, Gosin and McEnroe had told the Florida investor that they had closed on the house and that the deal was final. However, there was never a closing on the Ridgewood property and the defendants never returned the $150,000 to the victim in Florida."


"Also through a mutual acquantaince, the Baldwin victim had heard about the investment opportunities available through The Able Group. The victim in this case invested in two separate properties in Seaford and Levittown at $150,000 each, totaling $300,000. One of the $150,000 investments was for a ‘vacant waterfront property’ in Seaford, which did not exist. The defendants in this case even went as far as to issue the victim a phony contract for the sale of the nonexistent property. The defendants used the money for personal expenses and to this day have not returned the money taken from the victim."