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Wednesday, December 22, 2010

Department of Justice

United States Attorney William C. Killian Eastern District of Tennessee


SEVIERVILLE MAN INDICTED FOR WIRE FRAUD CONSPIRACY AND MONEY LAUNDERING IN $2.4 MILLION MORTGAGE FRAUD SCHEME

KNOXVILLE, Tenn.--A federal grand jury has returned an indictment against Jeffrey Whaley, 46, of Sevierville, Tenn.

The indictment, which was unsealed this morning, charges Whaley with conspiring to defraud SunTrust Mortgage, Inc. through a mortgage fraud scheme. The indictment alleges that the conspiracy involved property flips in which a propertywould be identified and placed under contract by a straw, or nominee, buyer, who then, a short time later in a subsequent real estate transaction, would become a straw, or nominee, seller and “flip” the same property at a substantially higher price to an unsuspecting straw borrower who had been promised if he agreed to acquire the property, then he would not have to make a down payment or mortgage payments for the property, would receive cash at closing, and would share in the profit following a resale of the property. The indictment further alleges that it was part of the conspiracy that materially false representations were made to SunTrust Mortgage, which, among other things, included false representations related to the straw borrowers’ source of funds for down payments and amounts recorded as "cash from borrower" on HUD-1 Settlement Statements, for the purpose of inducing SunTrust Mortgage to disburse the mortgage loan proceeds it had wired to and entrusted with its closing agents. The indictment specificallyalleges four real estate transactions in which Whaleyconcealed from SunTrust Mortgage that he, rather than the borrower, was providing the money identified as the "cash from borrower" on the HUD-1 Settlement Statement. According to the indictment, in those four transactions, SunTrust Mortgage, in total, wired more than $2.4 million in loan proceeds to its closing agents for disbursement.

The indictment also alleges that Whaley committed money laundering offenses by engaging in financial transactions that involved proceeds from the mortgage fraud scheme. The indictment further alleges that as a result of the conspiracy, the real properties involved in the scheme to defraud have gone into default and foreclosure, and SunTrust Mortgage has sustained substantial monetary loss.

The trial, which will occur in the U.S. District Court, in Knoxville, Tenn., has been scheduled for March 2, 2011. Each wire fraud count carries a maximum punishment of 30 years in prison, while each money laundering count carries a maximum punishment of 10 years in prison.

Members of the public are reminded that indictments contain only charges. A defendant is presumed innocent of the charges and it will be the government's burden to prove a defendant's guilt beyond a reasonable doubt at trial.

This investigation is being conducted jointly by the Internal Revenue Service, Criminal Investigations, and the Federal Bureau of Investigation. Assistant U.S. Attorney F. M. (Trey) Hamilton III is representing the United States.

(Indictment Adobe Icon)

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