Houston-based fraudsters Plead Guilty
HOUSTON – Two fraud conspirators have entered guilty pleas to participating in a mortgage fraud conspiracy that fraudulently obtained mortgage loans to purchase homes in Houston and Surfside, announced U.S. Attorney Ryan K. Patrick.
David Lee Morris, 55, and Derwin Jerome Blackshear, 50, pleaded guilty to one count each of conspiracy to commit wire fraud and bank fraud, while Blackshear pleaded to bank fraud and also admitted to operating a tax preparation business at various locations throughout the Houston area that prepared fraudulent tax returns.
The mortgage fraud scheme ran from 2005 to 2009. Morris, Blackshear and others associated with the A. Cole Realty Group in Houston caused mortgage lenders to loan excessive amounts of money for the purchase of residential real estate in the Houston and Surfside areas. The scheme focused primarily on the purchase of Beach homes in Surfside. Mortgage lenders were induced to loan far more money than the properties were actually worth. The conspirators then skimmed the excess loan funds from the real estate transactions.
Morris and Blackshear’s primary role in the scheme was to recruit and pay individuals known as “straw buyers” to sign mortgage loan documents. However, the loan applications contained numerous misrepresentations about the straw buyers’ financial status and ability to repay the loans. Co-conspirators obtained inflated appraisals of the properties to be purchased that supported the excessive lending. Once the loans funded, Morris and Blackshear pocketed a portion of the fraudulently obtained loan funds themselves and then distributed the rest of the funds to other participants in the scheme, including the straw buyers. Ultimately, all the homes purchased through the scheme went into foreclosure, resulting in millions of dollars of losses to the mortgage lenders.
In addition to the mortgage fraud scheme, Blackshear engaged in tax fraud. He owned and operated a tax return preparation business under the name “Level One Tax Services” during 2012 through 2015. Blackshear admitted he willfully placed numerous false items on his clients’ income tax returns in an attempt to generate excessive refunds. As part of his plea, Blackshear admitted he prepared dozens of fraudulent tax returns, causing a loss of $251,323.
Sentencing has been set before Chief U.S. District Judge Lee Rosenthal for May 17, 2018. At that time, each faces up to 30 years in prison as well as a $1 million maximum fine. Blackshear also faces another three years for the tax fraud and a $250,000 fine.
As part of their plea agreements, both have agreed to pay restitution and forfeiture. Morris agreed to pay $4,468,151 in restitution to the defrauded banks and agreed to forfeit $1,460,170.51 in proceeds he earned from the scheme. Blackshear agreed to pay $251,323 in restitution to the U.S. Treasury, $1,995,273 restitution to the defrauded banks and $629,774 in forfeiture of illegal proceeds.
The FBI and the Texas Department of Public Safety conducted the mortgage fraud investigation. Assistant U.S. Attorney (AUSA) Robert S. Johnson is prosecuting the case. IRS – Criminal Investigation conducted the criminal tax investigation. AUSA Attorney Jimmy Sledge Jr. is prosecuting that case.