HSBC Agrees To Pay $765 Million In Connection With Its Sale Of Residential Mortgage-Backed Securities
DENVER – United States Attorney Jason R. Dunn announced today that Michael Scott Leslie, age 57, of Boulder, Colorado, pleaded guilty to federal bank fraud and aggravated identity theft charges. Leslie appeared remotely on a $50,000 unsecured bond, which was continued at the hearing’s conclusion. The Denver office of the FBI, and the Offices of the Inspector General for both the Department of Housing and Urban Development (HUD) and the Federal Deposit Insurance Corporation (FDIC) joined in today’s announcement.
According to the stipulated facts contained in Leslie’s plea agreement, Leslie owned, operated, or otherwise had an interest in several business entities, some of which were operated out of Colorado. These entities were involved in or affiliated with financing or originating residential mortgage loans. Through these business entities, Leslie sold residential mortgage loans to investors, including an FDIC-insured bank in Texas (“the victim bank”).
Between October 2015 and October 2017, Leslie devised and executed a scheme to defraud the victim bank by selling it 144 fraudulent residential mortgage loans valued at $31,908,806.88. These loans were purportedly originated by one of Leslie’s companies, Montage Mortgage, and “closed” by Snowberry, which earned fees for the closing. The loans were then presented and sold to the victim bank until Montage identified a final investor. For these 144 fraudulent loans, that final investor was Mortgage Capital Management (MCM).
Leslie never disclosed to the victim bank that he operated MCM and Snowberry, or the fact that sales to investor MCM, even if they had been real, were not arms-length transactions.
The 144 residential mortgage loans sold to the victim bank were not, in fact, real loans. The borrowers listed on these 144 fraudulent loans were real individuals, but they had no idea that their identities had been used as part of the sale of the fraudulent loans. The defendant had access to their personal identifying information in one of two primary ways: (1) the borrowers had used Montage for legitimate residential real estate transactions which were properly executed and closed, or (2) the borrowers had been solicited by Montage about refinancing their existing loans. In the case of refinance transactions, Montage secured permission from the borrowers to request credit scores and history from the major credit agencies. After receipt of those credit scores, Montage often told these would-be refinance borrowers that they did not qualify for a refinance. Leslie then recycled the borrowers’ information, obtained through prior legitimate transactions or attempted refinances, to create and sell nearly $32 million of fraudulent loan packages.
To execute this scheme, Leslie forged signatures on closing documents and fabricated and altered credit reports as well as title documents, often by using the names of legitimate companies. The fraudulent real estate transactions were never filed with the respective counties in which the properties were located, there were no closings, and no liens were ever recorded. Through numerous bank accounts for the various business entities and his personal accounts, the defendant used money in a Ponzi-like fashion from prior fraudulent loans sold to the victim bank to fund future fraudulent loans. This complex flow of money continued until the defendant’s fraud was detected. When the fraud was discovered, the victim bank still had 12 fraudulent loans, valued at $3,887,505.93, on its books that it could not, given that the loans did not exist, sell to any other legitimate third-party investor.
Chief U.S. District Court Judge Philip A. Brimmer presided over the change of plea hearing today, July 31, 2020. Leslie was first charged by information on June 5, 2020. This case was investigated by the Denver office of the FBI, and the Offices of the Inspector General for both the Housing and Urban Development and the Federal Deposit Insurance Corporation. The defendant was prosecuted by Assistant U.S. Attorneys Hetal J. Doshi and Jeremy Sibert.
A copy of this press release is located on the website of the U.S. Attorney’s Office for the District of Colorado. Related court documents can be found on PACER by searching for Case Number 20-cr-171.
The year 2020 marks the 150th anniversary of the Department of Justice. Learn more about the history of our agency at www.Justice.gov/Celebrating150Years.
Spokesman, Public Affairs Officer
U.S. Attorney's Office, District of Colorado
303-454-0243 direct; 303-489-2047 cell