Four Men Sentenced For Multi-Million Dollar Mortgage And Consumer Fraud Scheme
United States Attorney Anne M. Tompkins Western District Of North Carolina
STATESVILLE, N.C. – On Wednesday, February 4, 2015, U.S. District Judge Richard L. Voorhees sentenced four defendants involved in a consumer and mortgage fraud conspiracy which resulted in multi-million dollar losses for consumers and federal agencies, announced Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina.
Today’s sentences are the result of an investigation into a fraudulent mortgage and consumer fraud scheme committed by executives and employees of Phoenix Housing Group (“PHG”) and related lenders. The scheme caused multi-million dollar losses for consumers and federal agencies, including home buyers, the lenders that financed the home sales, and the U.S. Department of Housing and Urban Development (“HUD”) and U.S. Department of Agriculture (“USDA”), which guaranteed the loans.
Joseph (“Joey”) Klakulak, 36, of Charlotte, was sentenced to 30 months in prison, two years of supervised release and was ordered to pay $5,635,384.81 as restitution. Dennis Parris Wayne, 57, of Pinehurst, N.C. was sentenced to 24 months in prison, two years of supervised release and was ordered to pay $24,087,187.34 as restitution. Isaac “Ike” Vinson, IV, 47, of Murrells Inlet, S.C. was sentenced to 24 months in prison, two years of supervised release and was ordered to pay $6,625,841.24 as restitution. And, Andrew B. McKeown, 40, of Asheboro, N.C. was sentenced to a two year probationary term, with the first six months to be served in home confinement. McKeown was also ordered to pay $4,333,076.87 as restitution.
According to filed documents and statements made in court today, Parris was a former PHG Senior Vice President. Vinson was a former loan officer and manager for W.R. Starkey Mortgage (“WRSM”), McKeown was a former Sales Manager, and Klakulak was a Charlotte-based former loan officer for numerous lenders, including WRSM.
Court records indicate that from approximately 2004 to 2010, Parris, Vinson, McKeown, Klakulak, and related conspirators Roger Bailey, Marina McCuen and Fabian Sparrow originated hundreds of fraudulent HUD/FHA-insured and USDA-insured mortgage loans totaling more than $150 million and resulting in net losses of over $21 million to the United States and more than $3.3 million to consumers.
According to court records, the defendants convinced customers to purchase manufactured homes which they could not afford by misrepresenting the financing terms of the loans. Court records show that the conspirators secured loans for the unqualified consumers by providing lenders with documents that contained fraudulent customer information, such as false income, assets, and credit. According to court records, in some instances defendants also obtained inflated appraisals, misrepresented the source of down payment funds, and coerced consumers to sign closing documents. At times, the defendants also collected down payment money for which borrowers received no credit.
In handing down the defendants’ sentencings, Judge Voorhees noted the exceptional losses families “suffered as a result of unrealistic and ill-motivated procedures foisted on them.”
Klakulak pleaded guilty in August 2013 to conspiracy to make false statements to a federal agency and submit false statements to HUD. Parris and Vinson pleaded guilty in April 2014 and November 2014, respectively, to conspiracy to make false statements to a federal agency, submit false statements to HUD and destroy records in a federal investigation. McKeown pleaded guilty in January 2014 to concealing the conspiracy to defraud the government and consumers.
In August 2014, Marina McCuen, 51, of Asheville, N.C., and Roger Bailey, 42, of Hickory, were sentenced to 50 months and 30 months in prison, respectively. McCuen was a WRSM loan officer and Bailey was a sales manager of PHG’s sales center in Granite Falls. In addition to their prison terms, all defendants are barred from participating in mortgage lending.
The last conspirator charged in connection with this case, Fabian Sparrow, 36, of Burlington, N.C. has pleaded guilty to conspiracy to make false statements to a federal agency and submit false statements to HUD and is currently awaiting sentencing. Sparrow was a sales manager at PHG’s sales center in Burlington. In January 2011, PHG ceased business operations as part of a settlement with the Consumer Protection Division of the North Carolina Attorney General’s office.
Following the sentencing hearings, the defendants were ordered to self-report to the Federal Bureau of Prisons upon designation of a federal facility. All federal sentences are served without the possibility of parole.
In making today’s announcement, U.S. Attorney Tompkins thanked the multiple agencies involved in the investigation:
Office of the Inspector General, Office of Investigation of the Department of Housing and Urban Development (HUD-OIG); Office of the Inspector General, Office of Investigation of the U.S. Department of Agriculture (USDA-OIG); Inspector in Charge of the Charlotte Division of the U.S. Postal Inspection Service (USPIS); North Carolina Attorney General’s Office; and North Carolina Commissioner of Banks (NCCOB). U.S. Attorney Tompkins also thanked the United States Marshals Service for their substantial assistance in financial analysis and the Department of State for their assistance in the apprehension of Sparrow when he fled the United States for Doha, Qatar.
The prosecution for the case was handled by Assistant United States Attorneys Michael Savage and Benjamin Bain-Creed, of the U.S. Attorney’s Office in Charlotte.