Appraiser in $41M Georgia Fraud Explains US Mortgage Meltdown
A real estate appraiser who pleaded guilty to helping defraud mortgage lenders of at least $41 million in a Georgia “flipping” scheme to inflate home values details in his recent testimony against co-defendants the industry problems that led to a nationwide mortgage meltdown.
Faced, like other appraisers, with a choice between losing work and putting unduly high values on homes he was evaluating for mortgage loans, Julian “Tony” Perez admittedly took the low road. He not only reported that homes he appraised were worth more than they could have been sold for on the open market, but grossly inflated their value, reports Bloomberg in a lengthy article about U.S. mortgage fraud problems. In April of 2001, for instance, Perez said that eight unfinished condominiums in one Atlanta area development were worth almost double what they had been purchased for the week before.
Testimony by Perez during an eight-week federal trial helped win guilty verdicts Monday against Phillip Hill, a ringleader who reportedly took home $14 million, and nine other defendants in a $41 million Atlanta-area mortgage fraud case, according to the news agency and a Department of Justice press release (PDF) issued by the U.S. Attorney’s Office for the Northern District of Georgia.
Perez was among 13 additional defendants in the case who pleaded guilty before trial in the scheme, which took placed between 2000 and 2003. (Those who pleaded guilty included two lawyers, Christopher Halcomb and Andrew Wolf, who participated in the conspiracy by submitting fraudulent documents at real estate closings and facilitating the transfer of funds to other defendants.)
The so-called property flipping scheme involved the purchase of 300 Atlanta-area homes by Hill and companies he controlled. They were then reportedly resold at much higher prices to straw buyers recruited by runners to which Hill paid kickbacks, with the help of fraudulent lending practices participated in by appraisers, loan officers and closing attorneys involved in the transactions.
The case is portrayed by Bloomberg as a microcosm of what has been happening, albeit perhaps at a lesser level, nationwide, resulting in a record-breaking amount of foreclosures and a worldwide credit crunch.
U.S. Attorney David Nahmias says in the DOJ’s release that authorities expect the $41 million in losses to mortgage lenders that currently have been calculated as a result of the scheme to go “significantly higher” before the case is concluded.
As detailed in earlier ABAJournal.com posts, Monday’s jury verdict is the latest in a series of multimilllion-dollar mortgage fraud prosecutions in federal court in Georgia, and Halcomb and Wolf are not the only attorneys who have been convicted of involvement in such schemes.
For example, another Georgia real estate lawyer, James F. Stovall III, pleaded guilty earlier to involvement in a similar $20 million mortgage fraud unrelated to Hill’s, and at last report faced a potential prison sentence of up to five years. Another Georgia attorney, Chalana McFarland, who has been disbarred, received a 30-year federal sentence in 2005 for participating in an $11.5 million mortgage fraud, according to the Fulton County Daily Report.
An earlier Daily Report article details the accusations against Hill and other participants in several interlocking mortgage fraud schemes. It says the case against him is the largest mortgage fraud prosecution ever pursued in Georgia.
The defendants convicted Monday have not yet been sentenced.
