Chad Evans, mastermind of a $6.9 million scheme using straw buyers to inflate dozens of home mortgages, has been sentenced to five years and 10 months in federal prison.
U.S. District Judge James Moody also ordered Evans to pay $12.8 million in restitution for money laundering and wire, bank and mail fraud. Evans entered a guilty plea in a deal last month.
The scheme to pocket the difference between a home's sale price and an inflated mortgage amount was first uncovered in a 2006 investigation by The Tampa Tribune.
A co-defendant, Chris Malcom, was sentenced last month to four years and three months in prison and ordered to pay $6.9 million in restitution.
Some key players in the scheme never were charged, but Evans and Malcom received more prison time than is typical in such cases — highlighting what some legal observers call a lack of consistency in punishment for mortgage fraud.
Sentencing is a "roll of the dice," said John Fitzgibbons, a criminal defense lawyer in Tampa and a former federal prosecutor.
The federal government has put an emphasis on mortgage fraud in recent years, Fitzgibbons said, but he expects the momentum to dwindle.
"These cases are very complicated investigations, very labor-intensive," Fitzgibbons said. "You could hire 1,000 more FBI agents and prosecutors in Florida, and they would still be overworked."
Evans and Malcom lured straw buyers — people who buy property on another's behalf — to participate in 50 fraudulent mortgage transactions, according to charges filed by Assistant U.S. Attorney Thomas Palermo.
They inflated home prices and diverted equity that didn't exist back to their Clearwater companies, Shorefront Ventures LLC and Tye Funding LLC, according to court documents. The companies provided straw buyers with down payments and homes to buy.
Evans and Malcom used money they pocketed to provide down payments on other homes, lying to financial institutions about where it came from, court documents say.
To make the scheme work, they partnered with real estate professionals such as Dawn Molen, who persuaded sellers' agents to inflate asking prices, the documents state. Molen presented them offers of, on average, $60,000 more than the asking prices, and the mortgage covered much of it, according to the documents.
This was during the housing boom, when mortgage fraud in Florida was rampant and largely fell beneath the radar of law enforcement. Authorities began to investigate Evans and Malcom after the Tribune reported their scheme.
After the story broke, Evans moved home to Cincinnati, and he took the mortgage scheme with him. He created a new company there, TC Funding Group, purchased properties and then arranged for resale at an inflated amount to buyers he recruited.
The government estimates the losses in the Ohio cases at about $900,000. Some of the equity skimmed in Ohio was used to make payments on properties that had been purchased in the Florida scheme, the government said.
The cases were investigated by the FBI in Florida and the Internal Revenue Service in Ohio.
Molen, the real estate agent, was not charged with a crime. Neither was the appraiser, Ricardo Pride, who submitted appraisals on most of the homes in the scheme. Pride turned over his license in the midst of an investigation by state regulators.
Factors such as the judge, the prosecutor and co-conspirators' participation with authorities come into play in sentencing decisions, said Fitzgibbons, the former prosecutor.
Still, he said, tens of thousands of people who participated in some way in mortgage fraud will go unscathed.
Sam Garcia of Mortgage Daily, which tracks mortgage fraud sentences across the country, analyzed recent fraud sentences for The Tampa Tribune and found that during the past four months the average nationwide was 43.2 months. In Florida, it was 44.7 months — less than the sentences handed down to Evans and Malcom.
A woman in Texas, however, was found guilty by a jury in Navarro County, south of Dallas, and sentenced to 99 years in prison for her role in a mortgage fraud scheme, Garcia said.
The loss in that case was $3 million. The woman, Kandace Yancy Marriott, is appealing the March 2009 decision, Garcia said.