FOR IMMEDIATE RELEASE:
Thursday - April 21, 2005
NEW BERN - Acting United States Attorney George E. B. Holding announced that ANDRE F. BARRETT, 34, formerly of Fayetteville, N. C. (now residing in Charlotte), was sentenced in federal court in New Bern on Wednesday, April 20, 2005. He pled guilty on November 15, 2004, to one count of mail fraud and one count of theft of government property. BARRETT was charged in a Criminal Information, which was filed by the U. S. Attorney's Office on October 15, 2004, pursuant to his waiver of indictment.
Chief U. S. District Judge Louise W. Flanagan sentenced BARRETT to 76 months in prison, to be followed by a supervised release term of three years. Also, she ordered BARRETT to pay $2,084,000.00 in restitution to the numerous victims of his fraudulent scheme.
According to official documents and evidence presented in court, BARRETT, an attorney then licensed to practice in North Carolina, operated a law office in Fayetteville, N. C. His law practice concentrated in real estate. During the period of approximately January, 2001, through June 30, 2002, BARRETT acted as closing attorney for hundreds of residential real estate transactions. To assist him in this task, BARRETT employed a large staff. The residential real estate transactions included both sales of homes and refinancing of homes. As to each transaction, the lender would transmit to BARRETT the new loan proceeds, usually by wire transfer to the firm's trust account. In sales transactions, the purchaser also would transfer to BARRETT any down payment on the purchase. (It is the responsibility of the closing attorney to disburse properly the proceeds of each real estate transaction to the seller, mortgage, and lien holders, and other persons or entities lawfully entitled to be paid out of the closing proceeds.) BARRETT made the decisions as to disbursements of closing proceeds. He, and others acting at his direction, failed to disburse closing proceeds to those persons and entities entitled to be paid out of the proceeds.
With respect to numerous transactions, disbursements were not made to those entitled to them, and those persons and entities were thus defrauded of thousands of dollars. As a result, many buyers and new lenders were defrauded by receiving clouded title and devalued security interests. BARRETT certified to title insurance companies the title of the new owners of the real estate and/or the security interests of the new lenders. When it was discovered that proper disbursements had not been made, a title insurance company had to pay at least 48 claims, totaling about 1.66 million dollars, that were caused by BARRETT'S failure to disburse closing proceeds. Together, sellers, prior lenders, lien holders, and others entitled to payment out of closing proceeds, and title insurance companies, lost more than $2,000,000 because of BARRETT'S failure to disburse closing proceeds.
It was also part of BARRETT's scheme that instead of properly disbursing closing proceeds, he converted to his own use, and to the use of others, closing proceeds far in excess of the lawful attorney's fees to which he was entitled. This was done by writing checks on BARRETT's trust account payable to BARRETT, or by transferring funds out of the trust account into the operating account of BARRETT's law office and then to BARRETT or his designee, which was usually a family member. These transfers violated BARRETT'S fiduciary duties to his clients and the parties to the closings.
Investigation of the case was conducted by the N. C. State Bureau of Investigation and the Office of Inspector General for the U. S. Department of Veterans Affairs. Mr. Holding and Executive Assistant U. S. Attorney John Stuart Bruce prosecuted the case for the United States.
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