FOR IMMEDIATE RELEASE CIV TUESDAY, FEBRUARY 4, 1997 (202) 616-2765 TDD (202) 514-1888 U.S. GETS $650,000 FRAUD JUDGMENT AGAINST MISSISSIPPI DEVELOPER WASHINGTON, D.C. -- The United States has obtained a consent judgment of $650,000 against Samuel Magee Milton Jr., a former Clinton, Mississippi, real estate developer who defrauded the Department of Housing and Urban Development by securing federally-insured mortgages for residential properties that later went into default, the Department of Justice announced today. Assistant Attorney General Frank Hunger of the Civil Division and U.S. Attorney Brad Pigott of Jackson, Mississippi, said the judgment, signed by a judge in U.S. District Court in Jackson, resolves a False Claims Act action filed in 1993 by the Department against Milton. Milton is the eighth defendant to settle with the government in the scheme. "This settlement indicates the United States will aggressively prosecute abuses of federal programs," said Pigott. Hunger said, "This is a substantial step forward in the Department's effort to root out and penalize those who participate in fraud schemes perpetrated against federal programs." In its suit, the government alleged that Milton recruited loan applicants--so-called straw buyers--to apply for HUD-insured loans on single-family homes in Clinton, Mississippi. They posed as legitimate buyers for at least 13 residential properties by falsely claiming to HUD they were making down payments on the properties. In fact, they made no down payments. The straw buyers also submitted personal financial data that represented their credit and income history rather than that of Milton. Relying on these false loan applications, HUD insured the properties, which quickly went into default and foreclosure. Milton used the straw buyers so he could convert short term, high interest construction loans into HUD-insured loans and take as cash the difference between the balances of the construction loans and the HUD-insured loans. The straw buyers, who got the HUD insured loans from 1984 through 1986, never made any mortgage payments. Rather, they transferred the property titles to others who ultimately defaulted on the loans, forcing HUD to pay the mortgage insurance claims and take title to the properties. From 1993 through January 1997, the United States has settled allegations in the same case with the closing attorneys, Bob McHann Jr. and Don McLemore; one of the lenders, Troy & Nichols; Leon Ghetti; Mississippi Valley Title; Jerry Brocato: and Patricia Strain. The government said they violated the False Claims Act by knowingly taking part in the fraud scheme. 97-048 #####