Three Indicted for Loan Fraud Scheme
Las Vegas, Nev. - Three men who allegedly induced persons to pay large advance fees for loans the men knew they would never obtain, have been indicted in U.S. District Court on wire fraud and money laundering charges, announced Daniel G. Bogden, United States Attorney for the District of Nevada.
JAMES D. PAYNE, age 58, of Indianapolis, Indiana, and MICHAEL McMUNN, age 45, of Horse Cave, Kentucky, are charged with 36 counts of Wire Fraud, one count of Money Laundering Conspiracy, 10 counts of International Money Laundering, and five counts of Money Laundering. PAYNE is also charged with one count of Making a False Statement to the FBI and four counts of Failure to File a Tax Return, three of which involved his alleged failure to file tax returns for the corporation involved in the fraud. STEPHEN D. RYAN, age 53, of Pound Ridge, New York, is charged with 36 counts of Wire Fraud, one count of Money Laundering Conspiracy, and one count of Money Laundering. RYAN, a former lawyer, was disbarred by the State Bar of New York in 1999 for misuse of client funds.
The Indictment was returned by the Grand Jury on January 27, 2004, but was not announced until today to permit agents to execute arrest warrants.
According to the court records, between April 1996 and August 2000, defendant JAMES PAYNE owned and operated Stateline Capital Corporation ("Stateline") at 3885 South Decatur Boulevard, in Las Vegas. Defendants McMUNN and RYAN were also associated with Stateline, and used a number of different titles to describe their work.
The Indictment alleges that from approximately December 1998 to August 2000, the defendants advised individuals that in return for the payment of an advance fee, Stateline could assist them in obtaining multi-million dollar loans through overseas financial institutions. The defendants knew they could never obtain the loans, and knew they would never refund their fees.
To convince the victims that they could obtain the loans, the defendants controlled and operated an offshore organization in Antigua, the British West Indies, and London, England, known as Lonestar Leasing Ltd., which they said would fund projects through its banks Royal Bank of Canada, Union Bank of Switzerland, or Swiss American Bank.
The defendants allegedly took a number of actions to convince the victims that they could obtain the loans, including:
• Sending the victims reference lists with the names of others who had purportedly closed million-dollar loans with Stateline;
• Contractually obtaining a financial interest in some of the victims' projects for which the victims sought funding;
• Providing the victims with documentation that Stateline would guarantee the loans in case of a default;
• Advising the victims that their advance fees would be held in escrow with an attorney;
• Representing that there had been unexpected delays in the sources of funding or that Stateline had located other funding sources;
• Advising the victims that they had to keep the terms of their agreements with Stateline confidential, and that they were not to contact the sources of funding directly for fear of jeopardizing the closing of the loans;
• Creating a false paper trail to make it appear they were actually attempting to obtain the funds for the victims.
The defendants knew that no potential borrowers had ever received a loan through Stateline. They also failed to disclose that PAYNE and McMUNN controlled Lonestar Leasing, Ltd., and that the attorney who would be holding their escrow funds had been disbarred for misuse of client funds.
A substantial portion of the advance fees were moved from Stateline's bank accounts in Las Vegas to the personal bank accounts of the defendants. Some of the monies were wired to sources in London, England, Dublin, Ireland, and Riga, Latvia.
Some of Stateline's victims were referred by United Capital Mortgage, which served as a broker and was located in Lee's Summit, Missouri. The defendants used Shona Clark, the President of United Capital to disseminate false information to the victims through the brokerage. Clark was also prosecuted by the U.S. Attorney's Office in Las Vegas, and on September 15, 2003, she pleaded guilty to obstruction of justice for concealing documents from the Grand Jury related to this case. Clark is scheduled to be sentenced on April 5, 2004.
Arrest warrants were issued for defendants PAYNE and RYAN. PAYNE was arrested on February 5, 2004, without incident in Indianapolis, Indiana. RYAN has not yet been arrested.
A Summons was issued for defendant McMUNN requiring him to appear in court on February 13, 2004, at 8:30 a.m. for an Initial Appearance and Arraignment before United States Magistrate Judge Peggy A. Leen.
"Prosecuting individuals who commit white collar offenses such as wire fraud, mortgage fraud, identity theft, and money laundering, etc. is a high priority in the District of Nevada," said U.S. Attorney Bogden. This Indictment should send a strong message that we are committed to using the full force of federal law to identify, arrest and prosecute anyone who commits this type of crime."
If convicted, the defendants are facing up to five years in prison and a $250,000 fine on the wire fraud counts; up to 20 years in prison and a $500,000 fine on the International Money Laundering and Money Laundering Conspiracy counts; up to 10 years in prison and a $250,000 fine on the Money Laundering count; up to five years in prison and a $250,000 fine on the False Statement count; and up to one year in prison and a $100,000 fine on the Failure to File counts.
This case is being investigated by Special Agents with the Federal Bureau of Investigation and IRS Criminal Investigation, and is being prosecuted by Assistant United States Attorney Justin J. Roberts.
The public is reminded that an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.