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Monday, April 27, 2009

Five Charged in $70 Million “Dream Home” Mortgage Fraud Scheme

WASHINGTON - A federal grand jury has indicted four defendants, and an information has been filed against a fifth defendant, for their participation in a massive mortgage fraud scheme that allegedly promised to pay off homeowners’ mortgages on their "Dream Homes," but left them to fend for themselves, Assistant Attorney General of the Criminal Division Lanny A. Breuer and U.S. Attorney for the District of Maryland Rod J. Rosenstein announced today.

The indictment was returned on April 22, 2009, and unsealed today.

"The Criminal Division and the U.S. Attorneys’ Offices are jointly committed to redoubling our efforts to uncover and prosecute fraud and abuse in all facets of the housing market – a market upon which so many American families have pinned their hopes and their futures for so many years," said Assistant Attorney General of the Criminal Division Lanny A. Breuer. "I want to assure the American public that we will not rest until the tide of this criminal activity is turned."

"The indictment alleges that the defendants used slick marketing to conceal empty promises," said U.S. Attorney Rod J. Rosenstein. "They convinced many victims to invest at least $50,000 by refinancing their existing homes or buying new homes at inflated prices, while claiming that Metro Dream Homes would repay the mortgages with revenue from profitable businesses. The indictment alleges that there was no revenue to pay the mortgage payments. Instead, the conspirators used some of the investors' money to repay earlier investors in the Ponzi scheme and spent the remainder on themselves."

"The effects of this wide-ranging mortgage fraud scheme are particularly disturbing within the backdrop of today’s economic environment. With our federal, state and local partners working on 18 mortgage fraud task forces and 47 mortgage fraud working groups across the country, the FBI is committed to combating mortgage fraud and other financial crimes nationwide to protect the American homeowner and the national economy," said Executive Assistant Director Thomas J. Harrington, FBI Criminal, Cyber, Response, and Services Branch.

"IRS Criminal Investigation takes allegations of mortgage fraud seriously," said "Eileen Mayer, Chief, IRS Criminal Investigation. "These types of crimes drive home owners into foreclosure, erode the integrity of our tax system and threaten the financial health of our communities."

According to the indictment, from 2005 to 2007 the defendants allegedly used corporate names such as "Metropolitan Grapevine LLC," "Metro Dream Homes," "POS Dream Homes," and "POS DH LLC" (collectively, MDH) to target homeowners and home purchasers to participate in a purported mortgage payment program called the "Dream Homes Program." To participate, an investor had to provide a minimum of $50,000 for each home enrolled in the program, in addition to an "administrative fee" of up to $5,000. In exchange, the program promised to make the homeowner’s future monthly mortgage payments, and pay off the homeowner’s mortgage within five to seven years. Thereafter, the homeowner and MDH would own an equal interest in the home.

The indictment alleges that Andrew Hamilton Williams, Jr., 58, of Hollywood, Fla., was the founder and owner of MDH; Michael Anthony Hickson, 46, of Commack, N.Y., was the chief financial officer; Isaac Jerome Smith, 46, of Spotsylvania, Va., was the president; and Alvita Karen Gunn, 31, of Hanover, Md., was the vice president of operations. The information alleges that Carole Nelson, age 50, of Washington, D.C., was the chief financial officer of POS Dream Homes.

The indictment further alleges that Dream Homes Program representatives explained to investors that the homeowners’ initial payments would be used to fund investments in automated teller machines (ATMs), flat-screen televisions that would show paid business advertisements, and "Touch-N-Buy" electronic kiosks that sold telephone calling cards and other items. To give the Dream Homes Program a veneer of legitimacy and financial success, the defendants marketed the program through live presentations at luxury hotels in Maryland, Washington, D.C., and Beverly Hills, Calif., among other locations. The defendants allegedly told some of the investors that they should not worry about the price of the homes or monthly mortgage payments because MDH would make mortgage payments on their behalf.

The indictment alleges that the defendants failed to advise investors that: the ATMs, flat-screen televisions and kiosks never generated any meaningful revenue; the defendants used the funds from later investors to pay the mortgages of earlier investors; and MDH had not filed any federal income tax returns throughout its existence. The defendants also allegedly failed to advise investors that their investments were being used for the personal enrichment of select MDH employees, including the defendants, to: pay salaries of up to $200,000 a year as well as their mortgages; employ a staff of 10 chauffeurs and maintain a fleet of luxury cars; and travel to and attend the 2007 National Basketball Association All-Star game and the 2007 National Football League Super Bowl, staying in luxury accommodations in both instances. Nor were investors told that investor funds were allegedly used to: pay off investors in a prior failed ATM investment venture that Williams had founded called Bankcard Group; make multiple donations of up to $50,000 each to charitable organizations to allegedly give MDH the appearance of being financially successful; and fund investments in third-party businesses that had not been disclosed to investors.

On Aug. 15, 2007, the Maryland Securities Commissioner issued a cease-and-desist order to Williams, MDH and other related companies directing them to immediately cease the offering and sale of unregistered securities in connection with their promotion of the Dream Homes Program. However, the defendants thereafter allegedly called additional meetings in which they made additional misrepresentations about the financial success of MDH’s operations. On Sept. 4, 2007, the defendants filed a legal challenge in federal court in Maryland to the cease-and-desist order. The indictment alleges that at a hearing on Sept. 12, 2007, Hickson testified that the financial success of the Dream Homes Program did not rely upon new investor funds, when in fact Hickson knew that the sole source of meaningful revenue for MDH was new investor funds.

As a result of the scheme, more than 1,000 investors in the Dream Homes Program invested approximately $70 million. When the defendants stopped making the mortgage payments, the homeowners were left to attempt to make the mortgage payments MDH had promised to make in full.

The four indicted defendants face a maximum sentence of 20 years in prison for the fraud conspiracy; 20 years in prison on each of the 15 counts of wire fraud; and 20 years in prison for conspiracy to commit money laundering. Hickson also faces a maximum sentence of five years in prison for making false statements. Smith also faces a maximum sentence of 30 years in prison for bank fraud arising out of his alleged misrepresentation of his income in order to obtain a bank loan to purchase a new Bentley automobile. Nelson was charged by information with money laundering, which carries a maximum penalty of ten years in prison. The indictment seeks forfeiture of the fraud proceeds, including $70 million.

An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceeding.

This prosecution is being brought jointly by the Maryland and Washington, D.C. Mortgage Fraud Task Forces, which are comprised of federal, state and local law enforcement agencies in Maryland, Washington, D.C. and Northern Virginia. The Task Forces were formed to promote the early detection, identification, prevention and prosecution of various kinds of mortgage fraud schemes. This case, as well as other cases brought by members of the Task Forces, demonstrates the commitment of law enforcement agencies to protect consumers from fraud and help to ensure the integrity of the mortgage market and other credit markets. Information about mortgage fraud prosecutions is available on the internet at http://www.usdoj.gov/usao/md/Mortgage-Fraud/index.html

Assistant Attorney General Lanny A. Breuer and U.S. Attorney Rod J. Rosenstein praised the FBI, IRS - CI, the Maryland Attorney General’s Office, Securities Division and the Federal Deposit Insurance Corporation, Office of Inspector General for their investigative work; and thanked Assistant U.S. Attorneys for the District of Maryland Jonathan C. Su and Bryan E. Foreman, who are prosecuting the case.

Press Release Number: 
Updated September 15, 2014