Leader of Mortgage Fraud Scheme Confesses and Agrees to Forfeit $2 Million for Targeting Victims with Tv Ads
U.S. Attorney Warns Maryland Residents to Avoid Foreclosure Prevention Schemes;
Federal Website Provides Reliable Advice for Homeowners
Greenbelt, Maryland - Michael K. Lewis, age 57, of Takoma Park, Maryland pleaded guilty today to conspiracy and bankruptcy fraud arising from a scheme in which he and his conspirators offered to help financially vulnerable individuals save their homes from foreclosure, and instead defrauded homeowners and mortgage lenders, announced United States Attorney for the District of Maryland Rod J. Rosenstein.
“Michael Lewis led a group of conspirators who stole the homeowners’ equity by inducing financially vulnerable homeowners to sell their properties and convert the sale proceeds to the use of the conspirators,” said U.S. Attorney Rod J. Rosenstein. “The mortgage fraud conspiracy cases that we are prosecuting in Maryland should serve both to hold criminals accountable and to warn homeowners about the many smooth-talking con artists who take advantage of people who fall behind on their mortgage payments.”
Mr. Rosenstein added, “Homeowners in financial distress should avoid smooth-talking con artists and seek reliable and independent advice, such as this government website: www.hud.gov/local/index.cfm?state=md
“IRS-Criminal Investigation has the financial investigators and expertise that is critical to locating the money and prosecuting the offenders,” stated C. Andre' Martin, Internal Revenue Service - Criminal Investigation Special Agent in Charge. “These types of crimes create a significant loss of tax revenue, drive buyers into foreclosure, leave lenders burdened with bad loans and neighborhoods with abandoned and deteriorating properties.”
According to his plea agreement, from at least 2004 until May 2008, Lewis aired television advertisements that targeted financially vulnerable individuals, representing that he could improve their credit, save their homes from foreclosure and assist them with bankruptcy. Viewers who called the toll-free number were scheduled to meet with Lewis, for a fee. At the meetings, Lewis solicited individuals to become MKL Associates and to purchase a variety of for-fee services, such as the Michael K. Lewis Financial Diet for reducing debt, as well as a pre-paid legal plan, income tax return preparation services and bankruptcy petition preparation.
Lewis specifically targeted individuals who owned and had equity in their homes, but were facing foreclosure on their homes because of their inability to make monthly mortgage payments. Lewis and co-conspirators fraudulently represented to the homeowners that their “lease/buy-back program” would help the homeowners to keep their homes. Lewis and Winston Thomas, a senior loan officer with a mortgage lender, told the homeowners that the “good credit” of another co-conspirator would be used to temporarily refinance their homes, that they had to sign their homes over to such co-conspirator and that they could repurchase the homes in roughly one year, or once they regained their financial footing. During the interim, they could remain in their homes by paying “rent” and fees to the co-conspirator by having their bank accounts directly debited by an account belonging to co-conspirator Cheryl Brooke’s company “In the House Technologies.”
Lewis and Thomas misrepresented the amount of money that the homeowners would receive at settlement, what would be done with any equity in the homes and the need to file for bankruptcy protection and failed to inform the homeowners of the particulars of how the lease/buy-back program worked.
Lewis met with several homeowners facing foreclosure and provided them with information about bankruptcy. He referred several homeowners to Brooke for bankruptcy-related assistance.
Lewis faces a maximum sentence of 20 years in prison for the conspiracy and five years in prison for bankruptcy fraud. U.S. District Judge Deborah K. Chasanow has scheduled sentencing for August 17, 2009 at 9:00 a.m. As part of his plea agreement, Lewis agrees to the entry of a forfeiture order of $2,228,878 and further agrees that at least this amount was generated as proceeds of the criminal activity.
Yesterday, Cheryl Brooke, age 52, of Upper Marlboro, Maryland, and Winston Thomas, age 43, of New Carrollton, Maryland pleaded guilty to their participation in the scheme. Brooke and Thomas face a maximum sentence of 20 years in prison for the conspiracy to commit wire fraud. Brooke also faces a maximum of five years in prison for bankruptcy fraud and Thomas faces a maximum sentence of one year in prison for failure to file a federal income tax return. U.S. District Judge Deborah K. Chasanow has scheduled sentencing for Brooke and Thomas on July 31, 2009 at 10:00 a.m. and 2:00 p.m., respectively.
United States Attorney Rod J. Rosenstein thanked the U.S. Postal Inspection Service, the Federal Bureau of Investigation, the Internal Revenue Service- Criminal Investigation and the U.S. Trustee’s Office for their investigative work. Mr. Rosenstein commended Assistant United States Attorneys Gina L. Simms, Stacy Dawson Belf and Jonathan Su, who are prosecuting the case.