Waynesville Apartments Owner Pleads Guilty to $18.2 Million Fraud Scheme
SPRINGFIELD, Mo. – Tammy Dickinson, United States Attorney for the Western District of Missouri, announced today that the owner of apartment complexes in Pulaski County, Mo., pleaded guilty in federal court to an $18.2 million fraud scheme.
James J. Laughlin, 74, of Waynesville, Mo., waived his right to a grand jury and pleaded guilty before U.S. Magistrate Judge David P. Rush on Thursday, May 26, 2016, to a federal information that charges him with making false statements and reports on a loan application.
Laughlin, one of the operators of 4-J Apartments, admitted that he provided false information to the Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) in order to obtain an $18,219,400 loan in 2012 for the operation and maintenance of 232 apartments and complexes in Pulaski County.
Laughlin involved Richard Newman DeLong, 50, of Newburg, Mo., an employee of Brookshire Concrete, in the fraud scheme. Delong, who was fired by the company for his role in the scheme, worked with Laughlin to make it appear that Brookshire Concrete was renting apartments from 4-J. This would allow 4-J to artificially inflate its occupancy levels in order to qualify for the FHA loan.
Delong, while employed by Brookshire Concrete, issued numerous checks that were made payable to 4J Apartments. These checks contained the forged signature of the company’s owner.
Laughlin submitted rent roll documents to FHA and HUD that indicated Brookshire Concrete was renting 20 apartments from 4-J to house some of its workers. Laughlin admitted, however, that none of Brookshire’s employees ever lived in any of 4-J’s apartments. Laughlin repaid the monies received from Brookshire Concrete by issuing checks from 4-J to Brookshire Concrete, ostensibly for concrete work. These gave the appearance that rent was being paid by Brookshire Concrete while 4-J was paying for concrete work in return.
According to the plea agreement, Laughlin had been denied funding by HUD in 2010 and again in 2012 because the occupancy rates at 4-J’s apartments were below 95 percent. HUD noted that the loan would not be approved because there would be insufficient rental income to repay the loan, creating a high risk of default. By inflating occupancy rates with the fraudulent rental roll documents, it appeared that 4-J’s occupancy rate was 95.7 percent; HUD reversed itself and approved Laughlin’s request for funding. The actual occupancy rate was only approximately 86 percent – below the level HUD and FHA set as a condition for approving the loan.
DeLong pleaded guilty to his role in the fraud scheme and is scheduled to be sentenced on June 15, 2016.
Laughlin must forfeit to the government $18,219,400. Under federal statutes, Laughlin is subject to a sentence of up to 30 years in federal prison without parole. The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes, as the sentencing of the defendant will be determined by the court based on the advisory sentencing guidelines and other statutory factors. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.
This case is being prosecuted by Assistant U.S. Attorney Patrick Carney. It was investigated by the FBI and the Department of Housing and Urban Development, Office of Inspector General.