Trio Indicted on Bank Fraud Charges - 8 News NOW

Trio Indicted on Bank Fraud Charges

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LAS VEGAS -- A federal grand jury Wednesday indicted three individuals on conspiracy and bank fraud charges related to an alleged $83 million mortgage fraud scheme, Nevada's U.S. Attorney Daniel Bogden said.

Derrick Phelps, 44, former owner of Investors Realty and Enterprise Mortgage Services in Henderson, his wife, Cynthia Phelps, 34, both of Katy, Texas, and Linda Mack, 49, of North Las Vegas, were charged with one count of conspiracy to commit bank fraud, mail fraud and wire fraud and seven counts of bank fraud.

They are scheduled to make an initial appearance before U.S. Magistrate Judge Foley on March 22 to answer the charges. If convicted, they face up to 30 years in prison and $1 million in fines for each count.

"We continue to work with our law enforcement partners on the investigation and prosecution of mortgage fraud in Nevada," Bogden said.

He said 213 individuals were charged with federal mortgage fraud crimes in Nevada from early 2008 through last year, and most were sent to prison.

According to the indictment, the defendants devised a scheme from January 2003 through November 2006 to defraud federally insured financial institutions through the use of straw buyers, inflated housing values and false mortgage applications. The defendants allegedly solicited straw buyers with good credit ratings to purchase homes in the Las Vegas area. The defendants made offers to purchase the homes above the sellers' asking prices.

The indictment stated that in some instances, the defendants caused straw buyers to purchase multiple houses about the same time so that the transactions would not show up on their credit reports and the lenders would not be aware of the other purchases. The defendants then allegedly caused false information to be placed in the straw buyer's mortgage loan application and other documents regarding the buyer's income and intent to occupy the home.

Once the loans were approved, according to the indictment, the defendants caused the sellers to agree that part of the excess funds would be redirected to the buyers under the pretense of making upgrades and repairs to the properties. The defendants allegedly concealed from the financial institutions the fact that they were receiving part of the loan disbursements for their own benefit.

The indictment also stated that the defendants defaulted on the mortgage loans, which caused the properties to go into foreclosure. The defendants allegedly purchased 233 properties and caused losses to the financial institutions exceeding $30 million.

The case is being investigated by the United States Postal Inspection Service and prosecuted by Assistant U.S. Attorneys Sarah Griswold and Brian Pugh.

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