Remarks of U.S. Attorney Bradley J. Schlozman
Thursday, Jan. 4, 2007
GOOD AFTERNOON. I’M HERE TODAY TO ANNOUNCE THE INDICTMENT OF ELEVEN INDIVIDUALS — INCLUDING OUTGOING JACKSON COUNTY EXECUTIVE KATHERYN SHIELDS, AND HER HUSBAND, KANSAS CITY ATTORNEY PHILIP CARDARELLA — ON 12 COUNTS OF CONSPIRACY AND WIRE FRAUD FOR THEIR ROLE IN A SCHEME TO ENGAGE IN MORTGAGE FRAUD. IN ADDITION TO MS. SHIELDS AND MR. CARDARELLA, THE OTHER INDIVIDUALS INDICTED TODAY ARE RAYMOND ZWEGO; LARRY BARSHAW; LINDA THOMPSON-BARSHAW; MONTY KINMAN; RICK PETERSON; JEREMY PLAGMAN; MICHAEL RODD; JAMES COLEMAN; AND JAMES RHOADES.
AS ALLEGED IN THE INDICTMENT, THIS CONSPIRACY WAS HATCHED IN SEPTEMBER 2006 WHEN RAY ZWEGO AND MICHAEL RODD IDENTIFIED A PROPERTY AT 5034 SUNSET DRIVE, WHICH WAS OWNED BY KATHERYN SHIELDS AND PHIL CARDARELLA, AND WHICH HAD BEEN ON THE MARKET FOR ABOUT 18 MONTHS. ZWEGO AND RODD PLANNED TO USE THEIR KNOWLEDGE OF REAL ESTATE MARKET MECHANICS AND A STABLE OF ACQUAINTANCES IN
THE FIELD TO FRAUDULENTLY INFLATE THE VALUE OF THE HOME IN ORDER TO OBTAIN LOAN PROCEEDS FAR IN EXCESS OF THE ACTUAL SALES PRICE. THE PLAN WAS FOR ZWEGO TO THEN POCKET THE EXCESS, i.e., THE DIFFERENCE BETWEEN THE LOAN AMOUNT AND THE TRUE SALES PRICE.
HOW DID THEY ACCOMPLISH THIS? AS WE SET OUT IN THE INDICTMENT, ZWEGO AND RODD FIRST CONSPIRED WITH TWO CONFEDERATES WHO ENJOYED GOOD CREDIT RATINGS — IN THIS CASE, LARRY AND LINDA BARSHAW — AND GOT THEM TO AGREE — IN RETURN FOR A HEFTY SUM OF MONEY — TO SERVE AS “STRAW BUYERS” FOR THE PURCHASE OF THE SHIELDS/CARDARELLA RESIDENCE. THE BARSHAWS, WHO KNEW OF THE ILLEGALITY OF THE ARRANGEMENT, WOULD NOT LIVE IN THE HOME NOR WOULD THEY HAVE ANY FINANCIAL OBLIGATIONS FOR IT; THEY SIMPLY WOULD SERVE AS STRAW BUYERS.
NOW THE HOUSE HAD BEEN LISTED BY THE CARDARELLAS FOR $699,950 IN LATE SEPTEMBER, A PRICE INCIDENTALLY THAT REFLECTED A DROP OF MORE THAN $150,000 FROM THE PRICE AT THE TIME CARDARELLAS HAD FIRST PUT IT ON THE MARKET 18 MONTHS EARLIER. BUT NOT MORE THAN A WEEK AFTER THAT LISTING, ZWEGO AND HIS ASSISTANT, JAMES RHOADES, PREPARED A FRAUDULENT REAL ESTATE SALES CONTRACT PURPORTING TO SHOW A SALE OF THE RESIDENCE FROM THE CADARELLAS TO THE BARSHAWS FOR MORE THAN $1.4 MILLION.
TO CONVINCE THE LENDER THAT THE HOME WAS REALLY WORTH $1.4 MILLION AND NOT THE APPROXIMATELY $700,000 THAT IT HAD BEEN LISTED FOR, ZWEGO AND CO-CONSPIRATOR MONTY KINMAN CONCOCTED AN ELABORATE (ALTHOUGH ULTIMATELY UNSUCCESSFUL) SCHEME OF DECEPTION. FIRST, KINMAN TOLD THE LENDER THAT THE CARDARELLAS PREVIOUSLY PLANNED TO SELL THEIR HOME TO A PARTICULAR BUYER AT A DEEPLY DISCOUNTED PRICE BUT IT DIDN’T GO THROUGH FOR SOME REASON. SO NOW THEY WANTED TO SELL IT FOR ITS SUPPOSED “TRUE” VALUE TO THE BARSHAWS, WHO – HE FALSELY STATED – WOULD LIVE IN THE HOME AS THEIR PRIMARY RESIDENCE. IN ADDITION, ZWEGO AND KINMAN SOUGHT OUT APPRAISERS WHO WOULD FRAUDULENTLY INFLATE THE VALUE OF THE HOME. ONE SUCH APPRAISER WAS JEREMY PLAGMAN. PLAGMAN SAID THAT THERE WAS NO WAY HE COULD APPRAISE THE PROPERTY AT $1.4 MILLION, BUT HE AGREED TO GIVE A $1.2 MILLION APPRAISAL EVEN THOUGH HE BELIEVED IN HIS PROFESSIONAL JUDGMENT THAT THE PROPERTY WAS WORTH SIGNIFICANTLY LESS THAN THAT.
MEANWHILE, TO CONVINCE THE LENDER THAT THE BARSHAWS WERE AN ACCEPTABLE CREDIT RISK TO RECEIVE A MORE THAN $1 MILLION LOAN, ZWEGO, KINMAN, AND RHOADES ARRANGED FOR A SERIES OF FALSE AND FRAUDULENT FINANCIAL STATEMENTS REGARDING THE BARSHAWS’ FINANCES TO BE SENT TO THE LENDER. ALL OF THESE DOCUMENTS MISREPRESENTED THE BARSHAWS’ ASSETS AND LIABILITIES. THE BARSHAWS ALSO SIGNED — UNDER PENALTY OF PERJURY — VERIFICATIONS OF THE ACCURACY OF THIS INFORMATION
IN ADDITION, ZWEGO AND KINMAN ARRANGED FOR CO-CONSPIRATOR JAMES COLEMAN, A LOCAL CERTIFIED PUBLIC ACCOUNTANT, TO PROVIDE A NUMBER OF FRAUDULENT LETTERS ATTESTING TO THE BARSHAWS’ CREDITWORTHINESS. COLEMAN WILLINGLY AGREED TO DRAFT LETTERS FALSELY STATING THAT HE HAD PREPARED THE BARSHAWS’ TAXES IN 2 SEPARATE YEARS, AND FALSELY CLAIMING THAT THE BARSHAWS HAD ASKED HIM TO DRAFT A LETTER VERIFYING THAT THEY HAD OWNED A REMODELING BUSINESS FOR MORE THAN 2 YEARS.
TURNING TO THE CARDARELLAS’ ROLE IN THIS CONSPIRACY, PHIL CARDARELLA MET WITH ZWEGO AND RODD ON OCTOBER 26. AT THIS MEETING, WHICH OCCURRED IN CARDARELLA’S LAW OFFICE, ZWEGO AND RODD EXPLAINED TO HIM THAT THE SALES PRICE OF THE HOME SHOWN ON THE DOCUMENTS SUBMITTED TO THE LENDER WOULD FALSELY LIST THE PRICE AS MUCH HIGHER THAN THE ASKING PRICE AND TRUE VALUE OF THE HOME. ZWEGO NOTED THAT CARDARELLA AND HIS WIFE WOULD STILL RECEIVE THEIR ASKING PRICE OF $707,000, BUT THE DIFFERENCE BETWEEN THE ASKING PRICE AND THE BORROWER LOAN AMOUNT WOULD GO TO ZWEGO. THE DIFFERENCE WOULD BE CHARACTERIZED ON THE SETTLEMENT AGREEMENT AS A “MANAGEMENT FEE.”
CARDARELLA TOLD ZWEGO THAT HE UNDERSTOOD AND WAS FINE WITH THE FRAUDULENT ARRANGEMENT. CARDARELLA ADVISED THAT HE SIMPLY WANTED HIS $707,000 AND HE DIDN’T CARE WHAT KIND OF MACHINATIONS — INCLUDING FALSE INVOICES — WERE NECESSARY TO GET THERE. IN FACT, CARDARELLA STATED THAT HE HOPED ZWEGO MADE TENS OF MILLIONS OF DOLLARS FROM THE TRANSACTION.
AT ONE POINT, ZWEGO EXPRESSED HIS CONCERN TO CARDARELLA WHETHER CARDARELLA’S WIFE, KATHERYN SHIELDS, UNDERSTAND THE NATURE OF THE TRANSACTION SO THAT EVERYTHING WOULD GO SMOOTHLY AT CLOSING. CARDARELLA INDICATED IT WAS NOT A PROBLEM, THAT HE WOULD TAKE CARE OF IT, AND THAT MS. SHIELDS WOULD AGREE TO SIGN THE DOCUMENTS NOTWITHSTANDING THE FRAUDULENT NATURE OF THE DEAL.
IN THE DAYS LEADING UP TO THE CLOSING, ZWEGO AND HIS CONFEDERATES ARRANGED WITH CO-CONSPIRATOR RICK PETERSON, WHO SERVED AS A CLOSER AT FREEDOM TITLE, TO HAVE A FALSE AND FRAUDULENT SETTLEMENT STATEMENT SHOWING THE PURCHASE PRICE OF THE CARDARELLA’S HOME AT $1.2 MILLION, WITH A MANAGEMENT FEE OF $414,580.
ON NOVEMBER 16, PETERSON FAXED THIS DOCUMENT TO CARDARELLA’S HOME WITH A COVER SHEET STATING THAT APPROVAL WAS BEING SOUGHT, AND CARDARELLA SHOULD CONTACT HIM IF THERE WERE ANY PROBLEMS. THAT SAME DAY, PETERSON ALSO SECURED SIGNATURES FROM THE BARSHAWS ON THE CLOSING DOCUMENTS.
THE NEXT DAY, NOVEMBER 17, SHIELDS AND CARDARELLA WENT TO THE OFFICES OF FREEDOM TITLE FOR THE CLOSING. CARDARELLA ARRIVED FIRST, REVIEWED THE DOCUMENTS, MADE SOME CHANGES, AND THEN SIGNED. SHIELDS ARRIVED SHORTLY THEREAFTER AND SIGNED ALL THE DOCUMENTS, INCLUDING: (i) THE SETTLEMENT AGREEMENT FALSELY STATING THAT THE PURCHASE PRICE OF THE HOME WAS $1.2 MILLION, AND (ii) AN ASSIGNMENT OF PROCEEDS FALSELY AND FRAUDULENTLY ASSIGNING $414,580 TO ZWEGO’S COMPANY, WHICH ALSO MATERIALLY MISREPRESENTED THE PAYMENT AS A “MANAGEMENT FEE”. IN SO DOING, SHIELDS AND CARDARELLA BOTH KNOWINGLY SIGNED FALSE AND FRAUDULENT DOCUMENTS RELATING TO THE SALE OF THEIR HOME.
BY THIS TIME, THE FBI WAS FULLY COGNIZANT OF THIS MORTGAGE FRAUD SCHEME, AND IT THUS TOOK EFFORTS TO ENSURE THAT THE LOAN BEING SOUGHT BY THE BARSHAWS DID NOT FUND.
TWO FINAL COMMENTS. FIRST, OF COURSE, IS THE STANDARD CAVEAT THAT ALL DEFENDANTS ARE PRESUMED INNOCENT UNTIL PROVEN OTHERWISE.
SECOND, THIS CASE REPRESENTS ANOTHER TRAGIC EXAMPLE OF INTELLIGENT INDIVIDUALS — INCLUDING LAWYERS AND PROMINENT ELECTED OFFICIALS — THUMBING THEIR NOSES AT THE LAW IN THE PURSUIT OF QUICK AND EASY CASH. YOU KNOW, EVERY DAY WE PROSECUTE DRUG DEALERS AND VIOLENT CRIMINALS. ALTHOUGH I DON’T FOR A MINUTE EXCUSE THEIR CONDUCT, THEIR BACKGROUNDS OFTEN REPRESENT TALES OF WOE IN AND OF THEMSELVES.
BUT WHITE COLLAR CRIME IS IN MANY WAYS MORE INSIDIOUS. WHITE COLLAR CRIMINALS ARE TYPICALLY BRIGHT, SOPHISTICATED, AND WELL EDUCATED. THEIR OFFENSES ARE ALL ABOUT PURE, UNADULTERATED GREED. THIS OFFICE HAS AGGRESSIVELY PURSUED SUCH CRIMINALS IN THE PAST, AND WE WILL CONTINUE DO SO WITH A RELENTLESS VIGILANCE. THE GOOD CITIZENS OF THIS COMMUNITY DESERVE NOTHING LESS.