CHARLESTON, WV—A Utah man was sentenced
today to two years and three months in federal prison on charges connected to a
multi-million-dollar mortgage fraud scheme involving properties at a Hurricane,
West Virginia subdivision, announced U.S. Attorney Booth Goodwin. Michael S.
Hurd, 37, of Salt Lake City, Utah, previously pleaded guilty in November 2011
to conspiracy to commit wire fraud and bank fraud. The defendant also
previously pleaded guilty to mail fraud arising out of his involvement in a
similar fraud scheme in Modesto, California.
Hurd admitted that during the early and
mid-2000s, he operated a company called “The Gift Program,” which he described
as a “seller-funded down payment assistance program” used to provide home
buyers’ money to make the down payment and initial mortgage payments on real
estate purchases. Hurd further admitted that he used The Gift Program to create
an elaborate scheme to defraud lenders by concealing the transfer of loan funds
to the borrower from the lender. In essence, through the use of The Gift
Program, lenders unwittingly funded their own down payment and made the initial
mortgage payments.
Hurd admitted that in 2006 he became
involved with Deborah and Todd Joyce of Hurricane, West Virginia, in the
“flipping” of homes in the Stonegate subdivision in Hurricane. Deborah Joyce
obtained inflated appraisals from two local appraisers, James Thornton and Mark
Greenlee, and subsequently sent the appraisals on to another co-conspirator
Raymond Morris in Salt Lake City, Utah.
Morris admitted that he identified
investors to purchase those properties at fraudulently inflated prices. Morris
then got those investors in contact with Hurd, who then used The Gift Program
to conceal the transfer of a portion of the loan proceeds to the investor from
the lender. Hurd admitted that he paid Morris an undisclosed “commission” for
this referral.
Hurd also admitted that during the
scheme, he wired additional loan funds to the investor to make initial mortgage
payments. Once those funds ran out, the investors defaulted on the loans, and
the properties went into foreclosure. All told, Hurd, Joyce, and Morris
illegally flipped six properties in the Stonegate subdivision. The respective
lender losses total almost $2 million.
At the same time, Morris and Hurd
orchestrated a similar investment-type scheme in Modesto, California. Hurd
acknowledged that he was involved in illegally flipping 20 properties with
losses in excess of $5.5 million. As part of his plea agreement, Hurd agreed to
transfer those charges from the Eastern District of California to the Southern
District of West Virginia so the matters could be disposed of jointly.
During the sentencing, Judge Johnston
noted that “this is the sort of activity that contributed to the financial
collapse.” Further, the judge stated that “hopefully a prosecution like this
will serve to deter others.” In rendering the 27 month sentence, the court
noted that Hurd faced significantly more time in prison but received a
reduction at the government’s request as a result of his early and expansive
cooperation against Morris and others, which has ultimately led to further
prosecutions in West Virginia, California and Utah.
Morris, 51, of South Weber, Utah,
previously pleaded guilty in July to wire fraud and bank fraud as part of his
involvement in the multi-million-dollar mortgage fraud scheme. Morris faces up
to 30 years in prison and a $1 million fine when he is sentenced on October 29,
2012, by United States District Judge Thomas E. Johnston.
James R. Thornton, 48, of Wilmington,
NC, previously pleaded guilty to aiding and abetting wire for his involvement
in the scheme. Thornton received a reduced sentence earlier this week of
five-years’ probation as a result of his early cooperation in the federal
investigation.
Deborah L. Joyce was sentenced in April
2011 to three years and 10 months in prison and five years of supervised
release for her involvement in the Stonegate subdivision mortgage fraud scheme.
Joyce’s husband, Todd Joyce, 38, of Hurricane, Putnam County, West Virginia,
was also sentenced in April 2011 to one year and six months in prison on
mortgage fraud and tax evasion charges.
This case is being investigated by the
Federal Bureau of Investigation and the Internal Revenue Service-Criminal
Investigative Division. Assistant United States Attorney Thomas Ryan is in
charge of the prosecution. The sentence was imposed by United States District
Judge Thomas E. Johnston.
This case was prosecuted as part of
President Obama’s Financial Fraud Enforcement Task Force to wage an aggressive,
coordinated, and proactive effort to investigate and prosecute financial
crimes. The task force includes representatives from a broad range of federal
agencies, regulatory authorities, inspectors general, and state and local law
enforcement who, working together, bring to bear a powerful array of criminal
and civil enforcement resources. The task force is working to improve efforts
across the federal executive branch and, with state and local partners, to
investigate and prosecute significant financial crimes, ensure just and
effective punishment for those who perpetrate financial crimes, combat
discrimination in the lending and financial markets, and recover proceeds for
victims of financial crimes.
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