Real Estate Investor Pleads Guilty to Making False Statements Causing Financial Losses in Connection with Mortgage Loans

Recently, a real estate investor charged with bank fraud and making a false statement to a financial institution pled guilty to the latter charge in a plea agreement approved by the U.S. District Court for the Northern District of Illinois. The defendant continues to contest the federal government’s total loss calculation and the length of her sentence.  The sentencing hearing is scheduled for December 16, 2019.

The specific charge at issue involves the defendant (who controlled a construction management company during the activity at issue) knowingly causing a false statement (regarding the balance in her bank statement) to be made to a financial institution lender in order to influence that institution’s action on a mortgage loan to purchase a property in Chicago, Illinois.  Specifically, in 2008, the defendant worked with two other individuals (a loan originator and a loan processor) to create false and fraudulent documents (e.g., regarding employment history, bank accounts, wages evidenced by falsified W-2s and paystubs, and earnest money deposits) so that the defendant would qualify for a mortgage loan from the FDIC-insured financial institution, which the institution closed and funded.  The underlying property ultimately went into foreclosure, and the institution suffered a financial loss as a result of the fraud.  As part of the defendant’s larger scheme, she worked with those two individuals to create and submit falsified documents (e.g., regarding employment histories, financial condition, income, assets, etc.) to accompany loan applications so that certain borrowers she recruited would fraudulently qualify for mortgage loans from various mortgage lenders.  Additional documents containing false information produced in the process included HUD-1 settlement statements and verifications of deposits (produced by a third participating individual).  Once the loans were approved and closed, the defendant, through her construction management company, received some of the loan proceeds, and the defendant paid some of the proceeds to certain borrowers buying the properties that secured the loans at issue.  According to the plea agreement, the defendant acknowledged that her actions resulted in issuance of these loans that caused financial losses for the lenders since the borrowers did not repay the loans.

Under federal law, making false statements in this context can result, for example, in up to 30 years of imprisonment without the option of probation, as well as a maximum fine of the greater of $1 million or twice the scheme’s resulting gross gain or gross loss.  The court can also award restitution to the victims.