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Mortgage loan officer found guilty in fraud scheme that cost lenders millions of dollars in foreclosed D.C. properties

Washington, D.C. - Charles E. Hall, Sr., a former loan officer, was found guilty today by a federal jury of all eight counts of an Indictment charging him with conspiracy, bank fraud, wire fraud, and money laundering, announced U.S. Attorney Kenneth L. Wainstein and Joseph Persichini, Jr., Acting Assistant Director in Charge of the FBI's Washington Field Office. The trial was conducted before the Honorable Sterling Johnson, Jr., sitting by designation from the Eastern District of New York. Hall, 37, of Accokeek, Maryland, is facing approximately 15 to 20 years in prison under the federal sentencing guidelines. He is scheduled to be sentenced on October 26, 2006.

The government's evidence at trial established that between 2002 and 2003, Hall and other co-conspirators identified approximately 32 District of Columbia homes that would be targeted for "flip sales" or quick resales at fraudulently inflated prices. Hall recruited people to act as the "straw buyers," people who would have the property in their names, but not have to pay the downpayments or the mortgages. Hall, who at the time was a loan officer for a mortgage company, submitted loan applications for these straw buyers seeking approximately $14 million in loans to purchase the properties; these loan applications falsely listed the straw buyers' assets (such as real estate owned and earnest money deposits) and falsely stated other information (such as marital status and intention to live in the properties).

The evidence at trial established that Hall paid co-conspirator Robbie Colwell to write false appraisals inaccurately reporting the conditions of the properties and stating that the properties were renovated when, in fact, they were not. Through the use of these fraudulently inflated appraisals, which dramatically overstated the value of the properties, the lenders paid a much higher mortgage based on a much higher price. Hall obtained approval for these mortgage loans by paying money bribes to co-conspirator underwriters to approve loan applications which did not meet the requirements of the lenders' loan programs and to approve loans quickly.

By using the false loan applications, the fraudulently inflated appraisals, and the fraudulently obtained underwriting, Hall caused the lenders to issue loans to the straw buyers in amounts that were more than the properties were actually worth, thus creating a large amount of illegal proceeds when the properties were "flipped" to the buyers. Co-conspirator Alan R. Davis and others purchased the properties, and, at times on the same day, quickly resold the "flipped" properties to the straw buyers at the price of the inflated appraisals. The proceeds for each "flip" sale, which represented the difference between the amount co-conspirator Davis and others paid for the property and the amount that the straw buyer "agreed" to pay for the property (which was supported by the fraudulently inflated appraisal), ranged anywhere from approximately $150,000 to $400,000 per property.

Hall also paid a co-conspirator settlement agent to assist in the crime. The settlement agent disbursed the loan money to Hall and co-conspirator Davis without first receiving the "cash from borrower." Hall and Davis used a portion of the loan money to pay the "cash from borrower" by purchasing cashiers' checks so it would appear as though the straw buyers paid their own money as part of the purchase price. A co-conspirator real estate agent also assisted in the crime by obtaining documents and prices.

Hall received about $5.2 million of the loan proceeds. This $5.2 million was largely identified as money for "rehab construction," when in truth, little if any renovations were performed on the properties; instead, according to the evidence, Hall used the money to live a lavish lifestyle, to pay off the co-conspirators, and to fund the continuation of the scheme. The mortgages on all but one of those properties have been defaulted and foreclosed or sold before foreclosure for a loss. The lenders have resold the properties for less than the mortgage loans, and, as a result, have lost in excess of $5 million.

Both co-conspirators, Robbie Colwell and Alan Davis, previously pled guilty and are awaiting sentencing.

In announcing the guilty verdict, U.S. Attorney Wainstein and Assistant Director in Charge Persichini, commended Special Agent Joseph Gordon of the Federal Bureau of Investigation. In addition, he commended Legal Assistants April Peeler and Lisa Robinson, Paralegal Specialists Jeanie Latimore-Brown and Paula Pagano, Auditor Nicholas Novak, Litigation Support Supervisor Deborah Dunn and Litigation Support Specialist Thomas Royal, and Assistant U.S. Attorney Virginia Cheatham.