News and Press Releases

FOR IMMEDIATE RELEASE


Nov. 10, 2010

JOHNSON COUNTY MEN INDICTED ON BANK FRAUD CHARGES

KANSAS CITY, KAN. – Four Johnson County men have been indicted on bank fraud charges in connection with a scheme to swindle lenders that made loans for the purchase and rehabilitation of depressed properties, U.S. Attorney Barry Grissom said today.

Paul R. Hartfield, 54, Overland Park, Kan.; John T. Bradfield, 53, Overland Park, Kan.; Brian D. Jaimes, 41, Overland Park, Kan.; and Kevin M. Mahoney, 41, Stilwell, Kan., appeared Tuesday in U.S. District Court in Kansas City, Kan.

The indictment alleges Hartfield fraudulently obtained $4.9 million worth of loans to purchase and rehabilitate 42 homes in the Kansas City metropolitan area. Hartfield owned Hart Investments, Inc., which purchased depressed properties in order to rehabilitate them and sell them at a profit, a practice known as “flipping.” Bradfield was director of operations for Hart Investments.

Hartfield obtained loans from various lenders based upon a “subject to” appraisal in which the lenders loaned up to a certain percentage of the value of the property assuming that agreed upon renovations would be completed by the borrower. The borrower was allowed to withdraw money by presenting evidence that work was completed and payment was made to contractors.

Initially, Hartfield rehabilitated some of the homes and made a profit on the sale. Starting in October 2006, Hartfield stopped rehabilitating homes and began submitting fraudulent contractors invoices, checks from closed bank accounts and checks that were never cashed to fraudulently obtain a total of $2.2 million. The work that was purported to have been done was never completed.

Properties identified in the indictment include:10806 Ewing, Kansas City, Mo.; 7004 E. 113th Terrace, Kansas City, Mo; 3409 Holmes, Kansas City, Mo.; 4445 Harrison, Kansas City, Mo.; 30 East Linwood, Kansas City, Mo.; 222 North 18th Street, Kansas City, Kan.; 72 South 19th Street, Kansas City, Kan.; 708 North 9th, Kansas City, Kan.; 4138 Troost Avenue, Kansas City, Mo.; 2415 South Sterling, Independence, Mo.; and 4228 Troost Avenue, Kansas City, Mo.; 11339 Sycamore, Kansas City, Mo.; 610 Orient Drive, Kansas City, Kan.; 4716 Liberty Street, Kansas City, Mo.; 58 T Lake Shore Drive, Lake Lotawana, Mo; 721 N. Hamilton , Olathe, Kan.; 1111 Sandusky Avenue, Kansas City, Kan.; 4039 Oak Street, Kansas City, Mo.; 48 Z Lake Shore Drive, Lake Lotawana, Mo.; 6032 Everett Avenue, Kansas City, Kan.; 5643 Paseo Boulevard, Kansas City, Mo.; 3932 Clark Avenue, Kansas City, Mo; 116 E. 78th Terrace, Kansas City, Mo.; 3019 N. 69th Street, Kansas City, Kan.; and 1727 N. 47th Street, Kansas City, Kan.

In order to reduce the debt of Hart Investments, Hartfield recruited friends and family to purchase some of the purported rehabilitated properties as investment properties. In most cases the borrower would not have qualified for a loan to purchase the properties. Hartfield used Diamond Mortgage as the mortgage broker with Brian Jaimes and Kevin Mahoney falsifying loan applications and supporting documents by inflating the borrowers’ income and assets. Hartfield provided down payments at closing, which was not disclosed to the lenders. More than 50 purported investor loans were made totaling more than $6.6 million. Hartfield and others received net proceeds at closing of more than $713,800.

Hartfield and Bradfield are charged with one count of conspiracy to commit bank fraud and money laundering, 14 counts of bank fraud, three counts of money laundering related to bank fraud; one count of wire fraud and money laundering conspiracy; and five counts of wire fraud. In addition, Hartfield is charged with six counts of money laundering related to wire fraud.

Jaimes and Mahoney are charged with one count of one count of wire fraud and money laundering conspiracy. In addition Mahoney is charged with two counts of wire fraud, and Jaimes is charged with two counts of wire fraud.

Upon conviction the crimes carry the following penalties:
Conspiracy to commit bank fraud and money laundering: A maximum penalty of 30 years in federal prison and a fine up to $350,000.
Bank fraud: A maximum penalty of 30 years and a fine up to $250,000 on each count.
Money laundering: A maximum penalty of 10 years and a fine up to $250,000 on each count.
Wire fraud: A maximum penalty of 30 years and a fine up to $250,000 on each count.
Money laundering: A maximum penalty of 10 years and a fine up to $250,000 on each count.

“The Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG) is pleased to join the United States Attorney’s Office for the District of Kansas and our law enforcement colleagues in announcing this indictment,” said Jon T. Rymer, Inspector General, Federal Deposit Insurance Corporation. “The American people need to be assured their government is working to ensure integrity in the financial services and housing industries and that individuals and entities involved in mortgage and commercial loan fraud will be prosecuted.”

The Federal Bureau of Investigation, the Internal Revenue Service and the FDIC- Office of Inspector General investigated. Assistant U.S. Attorney David Smith is prosecuting.

In all cases, defendants are presumed innocent until and unless proven guilty. The indictments merely contain allegations of criminal conduct.

 


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