Three men indicted in Tennessee mortgage fraud allegations

In the following press release on November 16, 2007, the Office of U.S. Attorney for the Middle District of Tennessee, announced that Harold Stafford, Miles Jackson Black and Jeffrey Dunn Hathcock were indicted by a federal grand jury on Wednesday for conspiracy, wire fraud and bank fraud. In addition, Harold Stafford was charged with money laundering.

The fifty-one count indictment alleges that from January 2005 through October 21, 2005, Stafford, Black and Hathcock engaged in a mortgage fraud scheme that involved the purchase of approximately twenty-two luxury homes in Hendersonville and Gallatin by unqualified straw buyers. Stafford, Black and Hathcock caused the submission to mortgage lenders of false mortgage loan applications that overstated the straw buyers’ income, falsely stated that the homes would be the straw buyers’ primary residences, and failed to disclose other recent home purchases by the same straw buyers.

If convicted, Stafford, Black and Hathcock each face up to 30 years in prison, a $1,000,000 fine, and supervision for up to five years. However, any sentence following conviction will be imposed by the Court after consideration of the U.S. Sentencing Guidelines and applicable federal statutes.

This case is being investigated by the United States Secret Service, the Internal Revenue Service Criminal Investigation Division and the 18th Judicial District Drug Task Force. The prosecution of this case is being supervised by Amul R. Thapar, United States Attorney for the Eastern District of Kentucky. Edward M. Yarbrough, United States Attorney for the Middle District of Tennessee has recused himself from this case due to his prior representation of an individual in matters related to this prosecution. The United States is represented in the case by Assistant United States Attorney Byron Jones.

The Tennessean further reports that the allegations are that the mortgage applications (1003):

1.     Overstated the straw buyers’ income

2.     Falsely stated that the homes would be their primary residences

3.     Failed to disclose recent home purchases by the same people.

According to the indictment, Stafford, the owner of Stafford Lease Group, Stafford Holding Group and Keys to Success, agreed with the builders and sellers of the 22 luxury homes to find buyers who would purchase the homes at prices that were $10,000-$165,000 more than their original asking prices. The builders and sellers agreed to pay Stafford any amount of the sale that exceeded the original asking prices of the homes, federal court records show.

Stafford recruited seven unqualified straw buyers with good credit histories to apply for first and second mortgages on multiple properties where the purchase price was greater than the seller’s original asking price, according to the indictment. He then instructed them to apply for mortgage loans through an office of Allied Mortgage Co., managed by Black and Hathcock.

Black and Hathcock reportedly required the straw buyers to fill out “Buyers Authorization Forms,” giving the company permission to check their credit reports. The pair and an unnamed employee then forged the buyers’ signatures on loan applications.

At Stafford’s request, some of the builders of the homes provided Allied Mortgage Co. with addenda to the real estate sales contract, describing the costs of additional improvements to the property to justify the increases in the contract sales prices, federal court records show. After closing, he informed the builders the buyers no longer wanted the improvements and instructed them to refund the costs of the work to the buyers or to himself, according to the indictment.

The builders and sellers paid Stafford kickbacks between $10,000 and $165,000 in the names of his three companies. He in turn paid the straw buyers some of that money, federal court records show.

Black and Hathcock received commissions on the mortgage loans they arranged for the straw buyers, based on false and misleading qualifying information and property valuations, and, on one occasion, they were paid a fee by one of the home sellers, according to the indictment.

Resources:
US DOJ Press Release
The Tennessean article

Update on Thursday, February 5, 2009 at 1:28PM by The Editor - Ian Shuter - ACFE, DMS

On February 5, 2009 the Office of U.S. Attorney for the Middle District of Tennessee, Sarah Beth Pulliam, Special Agent in Charge of the United States Secret Service’s Nashville Office, and Christopher Pikelis, Special Agent in Charge, Criminal Investigation, Internal Revenue Service, announced that Harold Stafford was found guilty by a federal court jury yesterday on all fifty-one counts of an indictment charging him with conspiracy, wire fraud, bank fraud and money laundering. A sentencing hearing has been scheduled for May 11, 2009.

According to testimony at the six day trial, Stafford engaged in a mortgage fraud scheme that involved the purchase of twenty-two luxury homes in Hendersonville, Gallatin and Goodlettsville by unqualified straw buyers. Two other men involved in the scheme [Miles Jackson Black and Jeffrey Dunn Hathcock] previously pled guilty and testified at the trial of Stafford. Stafford and those two co-conspirators caused the submission to mortgage lenders of false mortgage loan applications that overstated the straw buyers’ income, falsely stated that the homes would be the straw buyers’ primary residences, and failed to disclose other recent home purchases by the same straw buyers. All of these mortgage loans ended in default and foreclosure, resulting in losses to mortgage lenders after foreclosure totaling approximately $2,214,700.Miles Jackson Black and Jeffrey Dunn Hathcock

Click here for the full press release.

Update on Monday, July 6, 2009 at 1:00PM by The Editor - Ian Shuter - ACFE, DMS

The Office of the United States Attorney for the Middle District of Tennessee, and Sarah Beth Pulliam, Special Agent in Charge of the United States Secret Service’s Nashville Office, and Christopher Pikelis, Special Agent in Charge, Internal Revenue Service - Criminal Investigations, announced that Harold Stafford, 43, of Sumner County, Tennessee was sentenced today to serve eight years of imprisonment for conviction on fifty-one counts of conspiracy, wire fraud, bank fraud and money laundering.

Press Release

Stafford was convicted in February 2009, after a six-day jury trial. According to testimony at the trial, Stafford engaged in a mortgage fraud scheme that involved the purchase of twenty-two luxury homes in Hendersonville, Gallatin and Goodlettsville by unqualified straw buyers. Two other men involved in the scheme, Miles Black and Jeffrey Hathcock, previously pleaded guilty, testified at the trial of Stafford, and are scheduled for sentencing tomorrow. Stafford and those two co-conspirators caused the submission to mortgage lenders of false mortgage loan applications that overstated the straw buyers’ income, falsely stated that the homes would be the straw buyers’ primary residences, and failed to disclose other recent home purchases by the same straw buyers. All of these mortgage loans ended in default and foreclosure, resulting in losses to mortgage lenders, after foreclosure, totaling approximately $2,214,700.

Stafford also was ordered to pay restitution in the amount of $1,000,773.49 to mortgage lenders who were the victims of this scheme and a special assessment of $5,100. Mr. Stafford also was ordered to serve a three-year period of supervised release following his imprisonment.

This case was investigated by the Internal Revenue Service - Criminal Investigations, the United States Secret Service, and the 18th Judicial District Drug Task Force. The prosecution of this case is being supervised by James A. Zerhusen, United States Attorney for the Eastern District of Kentucky. The United States is represented in the case by Assistant United States Attorneys Byron Jones and John Webb.