Wickersham Pleads to $45 Million Mortgage Fraud Conspiracy and Tax Crimes
Contact Person: Dean Secor (843) 727-4381
Columbia, South Carolina ---- United States Attorney Bill Nettles stated today that Scott M. Wickersham, age 33, of Summerville, pled guilty today in federal court in Charleston, to one count of Conspiracy to Commit Mail, Wire, and Bank Fraud, a violation of Title 18, United States Code, Section 1349, and two counts of Willfully Making and Subscribing a False Tax Return, in violation of Title 26, United States Code, Section 7206(1). Senior United States District Judge Sol Blatt, Jr. of Charleston accepted the plea and will impose sentence after he has reviewed the presentence report which will be prepared by the U.S. Probation Office.
According to court documents in the case, from about April 2006 through at least November 2007, Scott Wickersham and others orchestrated a mortgage fraud scheme utilizing real estate and mortgage businesses operated at 1940 Trolley Road, Summerville, SC under the names North American Mortgage Group, LLC (a loan origination business), New Freedom Enterprises, LLC (a property management company), and Realty Executives of Coastal Carolina (a real estate company).
Wickersham was a real estate agent and part-owner franchisee of Realty Executives of Coastal Carolina, a loan officer for North American Mortgage Group, LLC, and a partner in New Freedom Enterprises, LLC. Wickersham was also a partner in Wickersham Holdings.
Wickersham enlisted straw purchasers, who were referred to as “investors,” to purchase more than 70 properties at inflated appraised prices. The properties were mostly located in the areas of Lake Keowee, Myrtle Beach, Charleston, Edisto Beach, St. Helena Island, and Tybee Island, Georgia. In order to qualify the investors for the purchases, Wickersham provided false information to mortgage lenders, including the investors’ income, the investors’ available funds in bank accounts, the investors’ resources, the investors’ liabilities, the investors’ then-current employment, and the investors’ employment history.
The real estate company received large commissions or signing bonuses from the sellers, which in reality were paid by the mortgage lenders as a result of the inflated appraisals. The rental company placed renters in the properties, and the investors signed agreements with the conspirators agreeing to pay the rental company any appreciation in the value of the properties when they were sold. The investors were paid fees for their participation as were others involved in the scheme. The bulk of the sales commissions, however, landed in bank accounts controlled by Wickersham.
Wickersham used the commission money to promote and further the ongoing criminal conspiracy by making some mortgage, utility, and homeowners’ association payments for the subject properties, by paying the investors for participating in the scheme, and by providing substantial down payments for investors on fraudulent purchases. He also utilized significant portions of the commissions for his own personal gain.
In or about August 2007, Wickersham had depleted most of the reserves needed to continue the ongoing fraudulent scheme. Without those funds, and in the slumping housing market, he could no longer fund all of the mortgages of the investors and he could not sell the properties for the amount of the mortgage payoffs on the properties. Therefore, Wickersham told the investors that they were on their own and that he would no longer be managing and renting the properties and would no longer be paying the monthly mortgage payments on the properties, which were in the names of the investors.
As a result, the investors were left with properties that Wickersham knew were overvalued and that the investors could not afford. Individual investors suffered damage to their credit ratings and other losses when mortgage lenders foreclosed on the properties. Mortgage lenders suffered losses when the overinflated properties were sold at then current market values, leaving substantial deficiencies on the foreclosed loans, resulting in losses to the mortgage lenders, including federally insured financial institutions, of more than $20 million.
Based upon the false information in the loan applications, Wickersham and others obtained more than $45 million in loan funds from mortgage lenders, including federally insured financial institutions, to which they would not otherwise have been entitled.
In addition to his role in the mortgage fraud scheme, Wickersham also willfully made and filed false joint U.S. Individual Income Tax Returns, Forms 1040, for calendar years 2006 and 2007. Both of those returns, which he filed late on January 27, 2009, were materially false because he willfully failed to report income he received from the real estate/mortgage scheme. Specifically, on line 22 of the 2006 tax return, he claimed $103,205 of total income when he knew he had at least $965,402 of total income. On line 22 of the 2007 tax return, he claimed $13,383 of total income when he knew he had at least $256,119 of total income. This under reporting resulted in a tax loss of $206,100 for 2006 and $50,762 for 2007, for a total tax loss of $256,862. Each return was verified by a written declaration that it was made under the penalties of perjury.
In addition to pleading to the charges, Wickersham agreed to pay restitution for the mortgage fraud scheme as well as for the tax charges. He also consented to the entry of a personal money judgment against him and in favor of the United States in the amount of $23,977,151, with interest. He also agreed to not contest forfeiture in his case.
Mr. Nettles stated the maximum penalty Wickersham can receive on the conspiracy charge is a fine of $1,000,000 and/or imprisonment for 30 years, plus a special assessment of $100. And the maximum penalty Wickersham can receive on each of the false tax return charges is a fine of $250,000 and/or imprisonment for 3 years, plus a special assessment of $100.
The case was investigated by agents of the Federal Bureau of Investigation (FBI) and Internal Revenue Service-Criminal Investigation (IRS-CI). Assistant United States Attorney Dean H. Secor of the Charleston office handled the case.
Mr. Nettles stated that the case is an ongoing investigation and prosecution.