U.S. Department of Justice Jeffrey A. Taylor United States Attorney for the District of Columbia Judiciary Center 555 4th Street, N.W. Washington, D.C. 20530 PRESS RELEASE   FOR IMMEDIATE RELEASE   For Information, Contact Public Affairs Channing Phillips (202) 514-6933 Friday, December 8, 2006

Mortgage loan officer sentenced to a maximum term of 293 months in prison for a fraud scheme that cost lenders millions of dollars in foreclosed District properties

Washington, D.C. - A federal judge has ordered 293 months of prison time -- more than 24 years -- for a former loan officer who was found guilty by a jury of all eight counts of an Indictment charging conspiracy, bank fraud, wire fraud, and money laundering, U.S. Attorney Jeffrey A. Taylor and Joseph Persichini, Jr., Assistant Director in Charge of the FBI’s Washington Field Office, announced today.

Charles E. Hall, Sr., 37, most recently of Accokeek, Maryland, was sentenced today in the U.S. District Court for the District of Columbia before the Honorable Sterling Johnson, Jr., sitting by designation from the Eastern District of New York. Judge Johnson, finding that “the community must be protected from Mr. Hall, who is a predator,” sentenced the defendant to 293 months in prison, restitution of $5,045,460, a money judgment of $1.6 million, and three years of supervised release following imprisonment.

The government’s evidence at trial established that Charles Hall organized a conspiracy to "flip" over 30 residential properties in the District of Columbia; a scheme which netted $5.2 million for Charles Hall and caused a loss to the banks of over $5 million. From 2002 to 2003, Hall and others targeted Washington, D.C. homes 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 would not pay the down payments or the mortgages. Hall worked as a loan officer for Guaranty Residential Lending (GRL), and through this position he 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, income, and other information.

Hall paid co-defendant Robbie Colwell to write dishonest appraisals falsely reporting the conditions of the properties and stating that the properties were renovated when, in fact, they were not. Colwell, who was not even a licensed appraiser, stole actual appraisers' names and licenses to write completely fabricated reports on the value of the houses. The appraisals almost uniformly claimed an "overall complete rehabilitation and remodeling of entire home" and that "the subject property has a new roof, windows, new kitchen, bathrooms, new floor," or "the subject property has been recently renovated and has a modern kitchen." In reality, the properties were in terrible shape – none had renovated kitchens or bathrooms; many had crumbling walls and ceilings; and one was merely a shell, with no interior walls or floors at all. These fraudulently inflated appraisals, which dramatically overstated the value of the properties, caused the banks to loan out a much higher mortgage based on a much higher sales price. Colwell pleaded guilty to conspiracy to commit bank fraud and is facing sentencing on December 13, 2006.

The banks' underwriters approved the loans. In the beginning of the scheme, co-conspirators Marcus Wiseman and Susan Conner worked as underwriters at GRL, the same bank which employed Charles Hall. The underwriters' job was to safeguard the bank's money. They were to review the loan applications, the appraisals, and the title histories to ensure that the collateral supported the loan and that the borrowers were able to repay the mortgage. If they approved the loan, they would put conditions on the sales such as requiring that the buyers make a down payment, that is, a financial interest, in the properties to secure the mortgage.

The underwriters failed to do their job. Susan Conner approved loans which did not meet the banks' requirements; she approved the inappropriate loans because Charles Hall paid her money to do so. Marcus Wiseman accepted payments from Charles Hall in exchange for reviewing the loans more quickly than other loans. Later, Wiseman and Conner both left GRL and went to a competitor, National City Mortgage (NCM). Instead of turning to another GRL-employed underwriter to approve his loans, Hall took his business away from his employer (through a loan broker) and to the competitor NCM where Wiseman and Conner again approved his loans and again; in return, Hall paid them money. Wiseman or Conner approved every one of the 32 loans listed in the Indictment. Marcus Wiseman and Susan Conner both pleaded guilty and are facing sentencing on December 11, 2006 and December 20, 2006, respectively. Wiseman pleaded guilty to a misdemeanor of improperly accepting payments as a bank officer and Conner pleaded guilty to bank bribery.

By using the false loan applications, the inflated appraisals, and the fraudulently obtained underwriting, Charles Hall and the co-conspirators caused the banks to issue loans to the straw buyers in amounts that were much 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 later another person doing business under the name "Network Venture Capital") purchased the properties, and, many times on the same day, quickly resold the "flipped" properties to the straw buyers at the price of the inflated appraisals. In this manner, a huge amount of money was generated for the co-conspirators. In one day, a single property could produce between $150,000 and $400,000 of cash for the conspiracy; these amounts are based on the difference between the sales price Davis or Network Venture Capital paid for the property and the sales price created when the property was resold to the straw purchaser and justified by the false appraisal. Alan Davis pleaded guilty to conspiracy to commit bank fraud and is scheduled to be sentenced later today, December 8, 2006.

Co-conspirator Vicki Robinson was the settlement agent on all or virtually all of 32 loans financed by GRL or NCM. As the settlement agent, Robinson's job was to comply with the banks' instructions, collect money, and disburse the proceeds. However, Vicki Robinson followed Hall's directions on how to conduct the closings and settlements of the property sales. Even though Hall was not the seller and not the one entitled to the profit, Robinson allowed Hall to decide who should get paid from the loan money (in fact, she even signed over $45,000 of the banks' loan money to Passport BMW to buy a car for Hall). After each sale, Robinson gave a portion of the bank's loan money to either Davis or (more often) Hall with the instructions that they convert the money into a cashier's check in the exact amount that the straw purchaser was to bring as "cash from borrower" to the settlement table, in order to support the fiction that the buyer was bringing his/her own money to the table as a "down payment." Using this scheme, the co-conspirators tricked the banks into loaning enormous mortgages grossly in excess of the actual value of the properties. Vicki Robinson pleaded guilty to conspiracy to commit bank fraud and is scheduled to be sentenced on December 15, 2006.

Charles Hall received the majority of the ill-gotten gains, that is, $5.2 million of the loan proceeds. At times this money to Hall or his company was identified on the settlement statements as reimbursement for "rehab construction," when in truth, no renovations had been performed and little if any rehab was ever performed on the properties. Instead, Hall used the money to live a lavish lifestyle, to pay off the co-conspirators, and to fund the continuation of the conspiracy. The mortgages on all but one of the 32 properties defaulted and foreclosed or sold before foreclosure for a loss. The banks resold the properties (in a strong real estate market) but still sold the properties for less than the amount of the mortgage loans. After reselling the properties, the banks were left holding mortgage loans in excess of the value of the properties. After resale, the banks were still left with a loss in excess of $5 million.

In announcing the sentence, U.S. Attorney Taylor and Assistant Director in Charge Persichini commended Special Agent Joseph Gordon of the Federal Bureau of Investigation for his work in the investigation and prosecution of the case. In addition, they gave special commendation to a Special Agent from Department of Housing and Urban Development’s Office of Inspector General — Ronnyne Bannister, who testified as an “expert” witness, and they commended Legal Assistant April Peeler, Paralegal Specialist Jeanie Latimore-Brown and former Paralegal Specialist Paula Pagano, former Auditor Nicholas Novak, former Litigation Support Supervisor Deborah Dunn and Litigation Support Specialist Thomas Royal, and Assistant U.S. Attorney Virginia Cheatham.