Mortgage executives, bank managers and individuals outside the lending business are being indicted, prosecuted and sent to jail for their roles in financial institution failures. Also facing time behind bars are defendants accused of deceiving investors.
On Nov. 8, Charles Chesterfield was sentenced by a federal judge in Seattle to 40 months in prison. Chesterfield, who was the sole owner of Chesterfield Mortgage Investors Inc., solicited money from investors for high-risk mortgages. But the defendant, who was registered as a mortgage broker dealer with the Washington State Department of Financial Institutions, began keeping proceeds from paid off loans for his own use in March 2009.
Chesterfield’s crimes were uncovered when the Washington State Department of Financial Institutions was conducting an audit in August 2010 then subsequently shut down the company. The scheme, which continued until September 2010, was kept afloat by sending the 150 defrauded investors fake monthly statements. In all, $3 million was stolen from 19 different loans.
The owner of Hoss Mortgage Investors, Todd Hoss, was handed down an eight-year sentence on Oct. 26, an announcement from the U.S. Attorney for the Western District of Washington indicated. Hoss, who was convicted in April, was also ordered to pay $4.2 million in restitution.
Hoss gained investors’ trust because they had invested with his father. From 2007 until 2009, he allegedly told investors — including many who were elderly — that their money would be used in a variety of commercial development projects and be secured by property liens even though the funds were actually being used to pay for unauthorized business, personal expenses and prior investors in what turned out to be a Ponzi scheme.
Robert Fulton Rood IV had an arrangement with Southern Management Corporation Retirement Trust to broker real estate loans that the pension plan would fund. But when the loans were repaid, Rood and co-conspirators Nikolaos M. Hepler and Lloyd Mallory Jr. would re-route the funds into Rood’s bank accounts. The pension fund was then provided with bogus reports to conceal the crime. Around $9.574,853 was lost as a result of the conspiracy. Rood and Hepler pled guilty on Oct. 23.
Victims of Aneal Maharaj were persuaded to invest $1.4 million in an investment fraud and marketing scheme, according to the U.S. Attorney’s Office for the District of Nevada. Maharaj operated a multi-level marketing program and the Systematic Mortgage Amortization Reduction Technology — or SMART — which promised to pay off clients’ mortgages early even though that never happened. When he was originally indicted, Maharag fled to Fiji but was extradited in November 2011. He agreed to plea guilty on Oct. 18.
The Securities and Exchange Commission announced that Joseph M. Braas was sentenced on Sept. 11 by a judge in the U.S. District Court for the Eastern District of Pennsylvania to 15 years in prison, and Michael J. Schlager was sentenced to 20 years on Sept. 12. Braas and Schlager were senior officers at Equipment Finance LLC, a subsidiary of Sterling Financial Corp. As alleged in a civil lawsuit filed by the SEC on Jan. 6, 2011, the defendants “orchestrated a pervasive and wide-ranging scheme using fraudulent underwriting and reporting practices to hide mounting losses and defaults within EFI’s commercial loan portfolio from Sterling’s senior management and auditors.”
The owner of Standerson Mortgage and Financial Corp., Stanley Fenton Anderson, was sentenced by the District Court of Adams County, Colorado, to serve an 11-year prison sentence for securities fraud. Colorado’s attorney general said that Anderson allegedly scammed $1.6 million from 17 individuals by promising high rates of return on investments that would be used to offer high-interest loans, purchase investor properties and acquire vehicles as working capital for his trucking company. But he never purchased the properties or the vehicles and instead used the money for personal expenses and to pay off investors.
A 14-year sentence was handed down on Oct. 15 to George P. Hranowskyj. By threatening to expose a massive scheme being operated by senior executives at Bank of the Commonwealth, Hranowskyj was able to force the bank to cover bank accounts that were overdrawn by as much as $600,000, pay payroll checks even though there were insufficient funds, and lower his loan rates. Bank of the Commonwealth, which failed in September 2011, had applied for $28 million in funds from the Troubled Asset Relief Program — drawing the Special Inspector General for the Troubled Asset Relief Program into the investigation.
Hranowskyj’s business partner, Eric H. Menden, pled guilty in April and was sentenced to 138 months in prison on Sept. 26. Losses from the pair’s scheme were around $12.5 million.
On Aug. 24, Thomas E. Arney admitted his role in the failure of the Bank of the Commonwealth. He pled guilty to a three-count criminal information charging him with conspiracy to commit bank fraud, unlawful monetary transactions and making false statements. Arney helped bank insiders with favors such as acting as a straw buyer on bogus loans in return for preferential lending treatment.
In August, The Virginia-Pilot reported that the fired vice president of a Bank of the Commonwealth subsidiary, T. Brandon Woodard, claims the federal government has yet to present any evidence directly linking him to the crimes.
The president and chief executive officer of Park Avenue Bank, Charles Antonucci, was convicted in 2010 of trying to steal $11 million from the New York bank. Last month, the U.S. Attorney’s Office for the Southern District of New York announced that former Park Avenue senior vice president Matthew L. Morris was indicted along with Wilbur Anthony Huff. The pair are charged with attempting to commit bank bribery and fraud and stealing $2.3 million.
When Sterling Financial Corp. acquired Equipment Finance LLC in March 2002, the Lancaster, Pa.-based bank-holding company had no idea that Equipment Finance executives were looting customer accounts and preparing fraudulent financial statements to cover it up, according to the U.S. Attorney for the Eastern District of Pennsylvania. By the time the scheme ran its course in 2007, Equipment Finance had suffered $53 million in losses.
On Sept. 11, Joseph M. Braas, former chief operating officer at Equipment Finance, was sentenced to 180 months in prison. Co-defendants Michael J. Schlager, John Wiley Spann and Mary C. Stankiewicz were all scheduled for sentencing hearings in September, while co-defendants Misty L. Kroesen and Curtis A. Kroesen have sentencing hearings scheduled for October. A sentencing hearing is set for Jan. 21, 2013, for Harold W. Young, and John S. Tomberlin is scheduled for sentencing on March 25, 2013.
The former president, chief executive officer and chairman of FirstCity Bank of Stockbridge, Mark A. Conner, was sentenced on Aug. 9 to 12 years in prison, according to the U.S. Attorney for the Northern District of Georgia. He was also ordered to pay $19.5 million in restitution. Conner and co-conspirators conspired to deceive the bank’s loan committee and board of directors into approving multiple multi-million dollar commercial loans to borrowers who were secretly purchasing properties personally owned by Conner or his co-conspirators.
