OIG News
Disbarred attorney sentenced to federal prison for lying on mortgage application
By AISLING SWIFT
marconews.com
January 4, 2012
A disbarred Lee County attorney indicted on mortgage fraud and tax evasion charges has been sentenced to 1½ years in federal prison for lying on a mortgage application to obtain an inflated loan.
U.S. District Judge John Steele on Tuesday also ordered John E. Evans III, 32, to serve three years of supervised release for wire fraud and to pay $325,318 in restitution with other defendants involved in a scheme that involved fake cashier's checks, bank statements and W2 forms used to con lenders and funnel money to companies they controlled.
Also responsible for restitution are: Troy Bossert, who operated Alpha Omega Appraisal Co.; Tyler Forrey, who operated Douglas Holdings and Development; Ryan O'Brien, who owned O'Brien & Associates Mortgage Services; former Cape Coral Police Officer Stephen Petrovich, and Steven Reese.
Evans, who pleaded guilty in October, was among several Lee County attorneys, deputies and police officers investigated as part of a statewide mortgage-fraud probe. Some were unindicted co-conspirators who were never prosecuted.
Evans, who faced up to 30 years, was suspended in June 2010 and disbarred by the Florida Supreme Court last May, three months after he was indicted by a federal grand jury. The case was investigated by the IRS, Secret Service and the FBI.
When he pleaded guilty, he admitted his mortgage loan application for a Cape Coral home listed false information, including a $17,500 monthly income, well under his 2008 earnings of $51,334; a $108,750 bogus deposit (he'd altered an $18.75 cashier's check); and $315,752 in liquid assets that were inflated due to the fake check.
As a result, $616,250.00 was wire transferred by GBC Funding in Georgia to a SunTrust Bank account held by Oxford Title and Escrow Inc., a Cape Coral company operated by another attorney.
Evans' defense attorney, David J. Joffe, couldn't immediately be reached for comment. The case was prosecuted by Assistant U.S. Attorney Yolande Viacava.
The plea agreement shows that Southpoint Financial Services in Georgia relied on the fraudulent financial information and wire transferred the money. A HUD-1 Settlement Statement was prepared that reflected an inflated $725,000 sales price and a false payoff amount of $166,700 to Douglas Holdings.
However, it wasn't a payoff. Forrey, the company's president, and an unnamed Fort Myers mortgage broker gave Evans a $117,200 cashier's check, calling it a "loan repayment." He used the money to pay off credit card bills and other debts.
Although Evans claimed the Cobalt Court house would be his primary residence, the plea agreement shows there was a renter living there and Evans extended the lease at closing. He then stopped making loan payments after three months and the house was sold for $100,100 last year, well under its $205,749 appraised value.
A tax evasion charge for not filing a 2008 tax return was dropped under the plea deal.
Evans, who began practicing law in 2005, was fired by Fort Myers defense attorney David Brener after working on a Cash Feenz death-penalty case. He then wrote a newspaper editorial that went against Brener's trial strategy.
That complaint was among 14 The Florida Bar investigated when it asked the state Supreme Court for an emergency suspension after clients complained Evans took their money, failed to properly represent them, misled and neglected them and abandoned their cases.
County Housing Authority Investigating Allegation Of Section 8 Fraud
The Santa Cruz (CA) Sentinel (10/25, Gumz) reports that "Ken Cole, who heads the Housing Authority of Santa Cruz County, said Monday he is beginning an immediate investigation into an anonymous allegation of fraud involving rental subsidy assistance." Cole is quoted saying, "We're here to serve low-income people and we do it fairly. ... If there is any fraud, we root it out." The allegation was mailed in letter form to HUD's office of the Inspector General in San Francisco. The "writer claims to have overheard a conversation...in which an employee of the Housing Authority...boasted about moving her friend's cousin up higher on the voucher applicant list, putting Section 8 rents on hold for landlords facing foreclosure or seeking a loan modification, and contending her supervisors would not notice."
House Financial Services Committee Takes Aim At HUD Programs To Reduce Deficit
The Reverse Mortgage Daily (10/19, Ecker, 15K) reports that "a recent House Financial Services Committee letter of recommendation says that many of HUD's programs are duplicative or inefficient, and the programs are a good place to cut expenditures." The committee is quoted saying in a report, "The Federal housing programs administered by HUD have historically been characterized by a high degree of inefficiency and duplication, and government watchdog organizations like HUD's Office of Inspector General and the Government Accountability Office have issued multiple reports over the years exposing waste, fraud and abuse at the agency. Yet HUD's annual budget has increased steadily in recent years, rising from $31.92 billion in FY 2005 to $46.99 billion in FY 2010." The committee also "recommends eliminating the FHA Refinance Program, Home Affordable Modification Program and Neighborhood Stabilization Program, among others."
Bank Of America's Countrywide May Face Fraud Suit After US Housing Audit
Bloomberg News (10/5, Son) reports that "Bank of America Corp., should face fraud claims after its Countrywide unit submitted faulty borrower data for federally insured mortgages, according to an audit by" the Office of the Inspector General for HUD. The audit found that "half of 14 loans reviewed had 'material underwriting deficiencies' that resulted in more than $720,000 in losses." HUD's Kelly Anderson recommends in the audit report that HUD's "lawyers pursue legal remedies against" the bank. Anderson is quoted saying, "Countrywide did not properly verify, analyze, or support borrowers' employment and income, source of funds to close, liabilities and credit information. ... This noncompliance occurred because Countrywide's underwriters did not exercise due diligence in underwriting the loans."
HUD May Ban Executives With Outstanding FHA Obligations
American Banker (10/3, Collins , 10K) says, "The HUD inspector general wants the Federal Housing Administration to ban corporate officers from the FHA program if they have left a company that has not met its obligations to indemnify the government for delinquent loans." AmBank quotes a HUD Office of Inspector General report, "We recommend that FHA seek legislative and program rule changes to prevent lenders and corporate officers with unsatisfied indemnification agreements from reentering the FHA program as the same or a new lender." AmBank adds, "FHA acting deputy assistant secretary Deborah Holston acknowledges that the agency cannot block such executives unless it can prove the individual is personally responsible for the loan losses. In response to the OIG's findings, FHA is seeking a legal opinion from the HUD general counsel to see if new legislation can be enacted that does not require such a high standard of proof."
Federal Review of OECD Could Require Money To Be Paid Back
The Scranton (PA) Times Tribune (9/20, Mrozinski, 52K) reports that "a continuing federal review of Scranton's Office of Economic and Community Development could result in money being paid back to the agency's accounts." The Tribune says that a recent HUD report showed that the agency "identified 11 findings and one concern, including that $59,500 be paid back to the city's CDBG accounts because the money was spent on ineligible costs." HUD "also said it has requested a legal opinion from HUD's general counsel on an inspector general finding that there was a potential conflict of interest involving former SRA Executive Director William Schoen."
Legg Asks for Review of Pasco Housing Board
In ongoing coverage, the St. Petersburg (FL) Times (8/23, 260K) says that "State Representative John Legg...called on Gov. Rick Scott on Monday to review and possibly replace the Pasco County Housing Authority's governing board." Legg "expressed concern that low-income families are not receiving adequate assistance with public housing."
WTSP-TV Tampa, FL (8/23, Deeson) notes that Legg said "he was not surprised by the allegations we uncovered at the Pasco Housing Authority" and that "We've seen some questionable things with the Housing Authority for years." The report adds that "last week, US Representative Richard Nugent...is calling for on the FBI, the Justice Department," HUD, "and the Inspector General to investigate the agency."
Loss Of HUD Contract Could Cost TN 50 Jobs
The Tennessean (8/9, Marsteller, 129K) reports, "A switch in who administers the federal rental-assistance program in Tennessee could cost more than four dozen state workers their jobs - unless an outside group succeeds in challenging the change." The Tennessee Housing Development Agency has lost its contract with HUD, the article states, and when the contract expires September 30, up to 50 workers could be laid off. An Atlanta-based nonprofit, the National Housing Compliance, "is challenging HUD's decision, contending the agency didn't follow federal procurement procedures" when it awarded the contract to an Alabama "nonprofit joint venture," the Jefferson County Assisted Housing Corp. HUD "rebid all 53 of its Section 8 compliance monitoring contracts this year, after its inspector general found they weren't cost-effective nor were they adequately supervised. The agency hopes to save $100 million a year under the new contracts, spokesman Brian Sullivan said Monday," the Tennessean reports.
Modesto Puts Breaks On Neighborhood Program
The Central Valley Business Times (CA) (8/4) says that "no new property acquisitions or new rehabilitation work will be authorized for at least the next 90 days under Modesto's 'Neighborhood Stabilization Program' (NSP)" following an accusation from HUD's Office of the Inspector General that there are "apparent conflicts of interest." Trinity Ventures RE II was issued a Notice of Conflict of Interest Violation when it was "discovered that that a real estate sales commission was paid by the seller to Benchmark Commercial Real Estate Services, a company that is co-owned by Ryan Swehla and Joe Muratore. Mr. Swehla is a principal in Trinity Ventures... and Mr. Muratore is a member of Modesto City Council."
Harleysville Couple Found Not Guilty Of Fraud
The Pottstown (PA) Mercury (7/28, Phucas, 25K) reports, "A Harleysville couple accused of fraudulently accepting federal housing subsidies for a Norristown apartment they rented to Hurricane Katrina victims was found not guilty in federal court Tuesday." Lee and Gayland Ridley in 2010 "were charged with making false statements to" HUD and FEMA "and fraudulently accepting subsidies for monthly rent for the apartment they leased," but in court, a judge ruled it was a mistake. In 2006, the couple completed a contract with the local housing authority to earn a HUD subsidy for the apartment, agreeing to accept no more than $651 in monthly rent, but they accepted a FEMA subsidy of $900 per month, which the attorney states went to pay for back rent. Both HUD's Inspector General and the Department of Homeland Security Office of Inspector General conducted the investigation.
Federal Officials Wonders Whether To Punish The PHA For Carl R. Greene's Sins
The Philadelphia Inquirer (7/26, Lin, Fazlollah, 357K) reports, "The Carl Greene era at the Philadelphia Housing Authority is history, but federal officials are now debating whether to punish PHA for Greene's actions or give its new leaders leeway to reform the agency." Sen. Charles Grassley (R-IA) is calling for punishment, an opinion shared by HUD deputy inspector general Michael Stephens, who wants the authority to be reined in. Stephens "accused the PHA of violating its contract by engaging in 'a long-standing pattern' of obstructing audits, mismanaging low-income rental vouchers, and misusing federal grant money," the Inquirer notes, adding assistant HUD secretary Peter Kovar responded to Grassley to state the agency is under HUD's control. HUD spokesman Jereon Brown said "We're seeking to fix, not punish," emphasizing the importance of Greene's replacement, Michael Kelly; with Kelly's leadership, Brown "said HUD was 'on track' to return PHA to local control within a year."
The online versions of nearly all OIG documents are presented in Adobe's Portable Document Format (PDF). To view documents, you can download Adobe Reader for free.