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NEWS RELEASE

OFFICE OF THE UNITED STATES ATTORNEY

WESTERN DISTRICT OF MISSOURI


JOHN F. WOOD


Contact Don Ledford, Public Affairs ● (816) 426-4220 ● 400 East Ninth Street, Room 5510 ● Kansas City, MO 64106

www.usdoj.gov/usao/mow/index.html


NOVEMBER 14, 2008

FOR IMMEDIATE RELEASE


FORMER CHARTER SCHOOL PRESIDENT SENTENCED

FOR STEALING FROM SCHOOL,

MORTGAGE AND INVESTMENT SCHEMES


            KANSAS CITY, Mo. – John F. Wood, United States Attorney for the Western District of Missouri, announced that the former president of a Kansas City, Mo., charter school’s board of directors was sentenced in federal court today for embezzling from the school and for his role in mortgage and investment fraud schemes.


            James Elliott Coleman, 60, of Raytown, Mo., was sentenced by U.S. District Judge Howard F. Sachs this afternoon to 36 months in federal prison without parole. The court also ordered Coleman to pay $867,470 in restitution. Coleman is a Certified Public Accountant who formerly served as president of the board of Westport Allen Village School, a Kansas City charter school.


            On Sept. 25, 2006, Coleman pleaded guilty to his role in a $778,336 mortgage fraud scheme and a $40,000 investment fraud scheme that were perpetrated against an older widow and her daughter. Coleman admitted that he used some of the proceeds of the investment fraud to repay money he had embezzled from the charter school, for which he was charged in a separate indictment.


            On May 21, 2007, Coleman pleaded guilty to his role in a $16.9 million mortgage fraud conspiracy and to four counts of wire fraud; those charges were contained in a third federal indictment. Coleman’s criminal conduct in that mortgage fraud scheme occurred while he was on bond, after pleading guilty to the prior fraud schemes. As a result, Coleman’s bond was revoked and he has been in federal custody since January 2007.


Westport Allen Village School


            Coleman held various positions with Westport Allen Village School between 1999 and May 6, 2003, including business manager, treasurer, and president and member of the board of directors. Coleman admitted that, between Feb. 11 and April 7, 2003, he stole $47,368 from the school’s bank account, using the funds for personal purposes.


            After being confronted with the charter school embezzlement, Coleman repaid the school. In order to come up with the money to replace the embezzled funds, Coleman defrauded an elderly widow and her daughter.


$818,000 Investment & Mortgage Fraud


            Coleman pleaded guilty to participating in a conspiracy from December 2001 to July 29, 2004, to defraud mortgage lenders and individual victims.


            Coleman solicited two victims, an elderly widow on a fixed income and her daughter, to invest in real estate. Coleman told the victims they could make money by owning rental properties, which could be rented to people who qualified for Section 8 rent subsidies. Coleman told the women that they would not have to pay any money to buy the properties, that he would manage and maintain the properties, and that the real estate would produce income.


            Between Feb. 4, 2002, and May 21, 2003, Coleman arranged for the victims to purchase and obtain loans for 10 properties. The loans totaled $778,336. Coleman and co-defendant James Lynn Woolard, 58, of Gladstone, Mo., submitted false and fraudulent loan applications and supporting documentation to mortgage lenders and caused inflated appraisals to be prepared for the properties. Coleman personally obtained about $148,214 and Woolard personally obtained about $30,200. Woolard pleaded guilty to his role in the conspiracy and was sentenced on Sept. 16, 2008, to five years of probation and ordered to pay restitution to the victims.


            Coleman and Woolard also admitted that they participated in an investment scheme to defraud those victim-investors of $40,000 for a non-existent housing development. They approached the same older widow in May 2003 and solicited her investment in a new, low-income housing development called Allen Village. They persuaded her to cash in her two life insurance annuities and use the proceeds to purchase cashier’s checks payable to “Allen Village.” Coleman used those checks to repay the money he had embezzled from Westport Allen Village School.


            Coleman and Woolard assured the victim that she would make money on her investment, that her money would be used to buy lots and build houses, and that she would be paid her principal and a profit when the houses sold in the near future. They drove her by a housing development that they falsely represented was Allen Village.


            Altogether, these two victims were defrauded of $818,336; their losses were approximately $272,980.


$16.9 Million Mortgage Fraud Scheme


             Coleman, in his capacity as a CPA, provided letters fraudulently representing that co-conspirators Larry E. Barshaw, 57, and Linda M. Thompson-Barshaw, 59, of Kansas City, Kan., who were self-employed, had been in business at least two years and that he had prepared their tax returns. In reality, Coleman knew nothing about the Barshaws and never prepared their tax returns.


             Coleman furnished three false CPA letters when requested by co-conspirators; lenders relied on those false CPA letters, among other things, in making their loan determinations. Coleman worked directly with Raymond Walter Zwego, Jr., 60, of Kansas City, Mo., the leader of the mortgage fraud conspiracy. Zwego was sentenced to 10 years in federal prison without parole and ordered to pay $5,599,767 in restitution. The court also sentenced Zwego to three years in federal prison, to be served consecutively to the mortgage fraud sentence, for violating the terms of his supervised released on a prior bank fraud conviction, for a total sentence of 13 years.


             Zwego’s fraudulent real estate closings included approximately 60 properties with loans totaling approximately $16.9 million. Each of these loans was structured in such a way that Zwego received excess funds from the loan closings as a result of inflated appraisals and numerous false and fraudulent documents, as well as misrepresentations to multiple people and entities.


            These cases are being prosecuted by Assistant U.S. Attorney Linda Parker Marshall. They were investigated by the Federal Bureau of Investigation.


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This news release, as well as additional information about the office of the United States Attorney for the Western District of Missouri, is available on-line at

www.usdoj.gov/usao/mow/index.html