Federal authorities have filed mortgage fraud charges against seven local residents, including the owner of Charter Homes, the subject of an IBJ investigation last year.
The U.S. Attorney’s Office for the Southern District of Indiana today charged Jerry J. Jaquess and six others with crimes connected with 149 fraudulent loan transactions totaling $19.7 million between 2003 and 2005.
The charges follow an investigation by special agents of the IRS Criminal Investigation Division, the U.S. Attorney’s Office and the FBI.
Mark Roth, Timothy A. Brown and Jaquess have been charged with one count each of wire fraud and money laundering. Tamara E. Scott, Donald T. Brown, Stephen Scott Brown, and Aaron J. Warren face conspiracy to commit wire fraud and money-laundering charges.
The first three defendants could face 30 years in jail and $1 million in fines each. The last four face a maximum prison sentence of 15 years and fines of $1 million each.
Of the fraudulent loans, 52 were for homes listed by their owners. The other 97 relate to the sale of duplexes in the Charter-managed Windsor Village neighborhood near Arlington Avenue and 21st Street.
Scheme participants bought the homes for $50,000 each, the U.S. Attorney’s Office said. Then, with the help of inflated appraisals, they recruited investors to take out $96,000 loans to purchase the homes for $120,000 each. Lenders included Argent Mortgage and an affiliate of Countrywide Home Loans.
No payments were made on the mortgages and the lenders lost the entire loan amounts, the U.S. Attorney’s Office said. Many of the duplexes were later resold for between $3,500 and $15,000.
A statement from the U.S. Attorney’s Office says Jaquess used his company, Homevestors LLC, to negotiate the purchase and sale of the first 11 properties in Windsor Village. He listed three of the properties as having sold for $120,000 each on the Multiple Listing Service, allowing the sales to be considered as comparable on appraisals of the remaining properties.
After each closing, Homevestors issued a check of about $42,000 to Jaquess personally or to a family member, a check to the person “fronting” the down payments and a $4,000 check to the investor.
The U.S. Attorney’s Office statement does not mention other Charter neighborhoods, including downtown’s King Park, Fishers Creek on the east side and The Reserve at Royal Oaks in Greenwood. But current and former Charter business partners who spoke to IBJ for stories in August and October 2008 described a similar scheme in which the company recruited and paid buyers to take out inflated mortgages on homes it built, promising to manage the properties as rentals and make payments for the owners.
Indianapolis carpenter Michael P. Thompson said he bought six Charter homes. His wife signed for another 11.
Thompson just had to lend his credit history, and show up and sign the mortgage paperwork, which he said required no documentation of his income or employment history. In return, he got $4,000 in cash for each closing.
“I didn’t put any cash into them,” Thompson said in an interview. “I walked to closing with a check from Charter for 20 percent down.”
The U.S. Attorney’s Office said many of the buyers were unwitting participants in the fraud, having agreed to join a so-called investing club in which they allowed properties to be purchased using their credit in exchange for a $4,000 reward for each property.
The scheme participants also persuaded other individuals to put up money for down payments, and they were paid $1,000 to $3,000 bonuses per property. The rest of the mortgage proceeds were pocketed by the scheme participants, the U.S. Attorney’s Office said.