Mortgage Originator and Modular Home Wholesaler Indicted in Mortgage Fraud Scheme
Baltimore, Maryland - A federal grand jury in Baltimore indicted John Stewart Morrison IV, age 55, of Columbia, Maryland on two counts of mail fraud and indicted Clifford Michael Seibert, age 57, of Berlin, Maryland; and Seibert’s company, Modular Homes Wholesaler, Inc. on two counts of wire fraud in connection with a mortgage fraud scheme. Each indictment also seeks the forfeiture of the proceeds of the scheme, alleged to be $431,317 for Morrison and $363,808 for Seibert. The indictments were returned on August 19, 2010 and unsealed today.
The indictments were announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation; and Special Agent in Charge Ken Taylor of the Housing and Urban Development Office of Inspector General - Office of Investigations.
According to their indictments, Morrison was a mortgage originator and Seibert owned and operated Modular Homes Wholesaler, Inc., located in Berlin, Maryland. Modular Homes arranged the construction and delivery of pre-fabricated modular homes.
According to Morrison’s indictment, on November 17, 2005 Morrison contracted to buy Lot #1, Rexwood Dr. in Glen Rock Borough, Pennsylvania from the original owner which disclosed to Morrison at least two documents detailing significant problems with the steeply graded parcel of land. In order for a home to be built on Lot #1, extensive soil and engineering work had to be done. The indictment alleges that Morrison failed to follow through on his purchase of Lot #1 and instead recruited P.H., who wanted to have a modular home installed on the site, to purchase the lot. Morrison allegedly failed to disclose the problems with the lot to P.H.
The indictment alleges that Morrison and another individual prepared a loan package in P.H.’s name to apply for a loan from a mortgage lender in the amount of $431,377, to finance the purchase of Lot #1 and construction of a home on the land. The package falsely represented P.H.’s monthly income. Morrison allegedly failed to disclose the problems with Lot #1 to the appraiser, thereby causing the lender to rely on a materially deficient appraisal. Still believing that the land could be built-upon without additional preparatory work, P.H. paid $115,500 for the purchase of the lot at the closing held on June 14, 2006. Morrison allegedly received $36,800 as a result of P.H.’s purchase, which amount was actually paid to the “Atlantic Group,” an entity that Morrison created and used to ensure that his name did not appear on the closing documents.
According to Seibert’s indictment, he arranged for the construction and delivery of a modular home to Lot #1 on P.H.’s behalf. Seibert prepared a draw schedule in which the lender was to pay Modular Homes a percentage of the loan funds as various stages of completion were reached in the construction and delivery of P.H.’s home. Seibert listed the total price of all services related to the modular home as $363,808. After the closing, the title company mailed a check to Seibert for $35,380 payable to Modular Homes, in accordance with the draw schedule, to begin work on P.H.’s project, including preparing the lot for construction and delivery of the home. The indictment alleges that Seibert did little work, if any, on P.H.’s behalf during this time.
The indictment alleges that on or about August 7, 2006, Seibert requested that funds from the construction escrow account be wired directly to Modular Homes, rather than to P.H. Shortly thereafter, in order to persuade the lender to exempt him from the company’s general policy of paying for construction work only after receiving proof of an approved building permit, Seibert is alleged to have falsely advised the lender that Glen Rock Borough would not issue a building permit until after the foundation for the home was poured. Soon thereafter, in early August 2006, Seibert allegedly submitted his first draw request which falsely represented that the clearing and filling of the lot was complete, when in fact, no work had been done. Seibert then falsely advised the lender that the construction project had overrun in costs because the lot’s community development association was demanding that substantial engineering work be done. The indictment alleges that on August 30,2006,
Seibert requested an advance payment of $18,575 for additional costs that would be incurred to meet the demands of the lot’s community development association, when in fact, the development association had made no such demands. Seibert’s request resulted in the lender agreeing in late October 2006 to fund $16,675 of this request.
Morrison and Seibert each face a maximum sentence of 20 years in prison on each of two counts of mail fraud and wire fraud, respectively. Morrison was arrested today and had an initial appearance in U.S. District Court in Baltimore. Seibert is expected to have an initial appearance on Monday, August 23, 2010.
An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.
The Maryland Mortgage Fraud Task Force was established to unify the agencies that regulate and investigate mortgage fraud and promote the early detection, identification, prevention and prosecution of mortgage fraud schemes. This case, as well as other cases brought by members of the Task Force, demonstrates the commitment of law enforcement agencies to protect consumers from fraud and promote the integrity of the credit markets. Information about mortgage fraud prosecutions is available www.justice.gov/usao/md/Mortgage-Fraud/index.html.
This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency 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.
United States Attorney Rod J. Rosenstein thanked the Maryland Department of Labor, Licensing and Regulation’s Division of Financial Regulation for its assistance in the investigation and commended Assistant U.S. Attorney Sujit Raman, who is prosecuting the case.