Criminal Justice News

Saturday, August 11, 2012

Utah Man Sentenced to More Than Two Years in Federal Prison on Charges Connected to Multi-Million-Dollar Mortgage Fraud Scheme

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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