A federal superseding indictment unsealed in U.S. District Court charged nine additional defendants in Charlotte and elsewhere with racketeering, investment fraud, mortgage fraud, bank bribery and money laundering, announced the U.S. Attorney’s Office for the Western District of North Carolina. This latest round of criminal charges resulting from Operation Wax House, a mortgage fraud investigation which began in the Western District of North Carolina in 2007, brings the total number of defendants charged to date to 92, of which 66 have pleaded guilty.
John Strong, special agent in charge of the Federal Bureau of Investigation, Charlotte Division, Jeannine Hammett, special agent in charge of the Internal Revenue Service, Criminal Investigation (IRS-CI) and Elaine Marshall, North Carolina Secretary of State joined the U.S. Attorney’s Office in making the announcement.
The superseding federal racketeering indictment was returned by a federal grand jury sitting in Charlotte on April 18. The superseding indictment adds nine defendants to the existing charges, bringing to 26 the total number of individuals currently charged as part of a criminal organization (the Enterprise) that operated principally in the cities of Charlotte and Waxhaw, N.C., and stole more than $75 million from investors and mortgage lenders.
According to allegations contained in the unsealed indictment:
The Enterprise, which operated from about 2005 through 2012, engaged in an extensive pattern of racketeering activities, consisting of investment fraud, mortgage fraud, bank fraud, money laundering and distribution of illegal drugs. Members of the Enterprise also bribed bank officials. In the investment fraud portion of the racketeering activities, the co-conspirators targeted professional athletes and doctors as well as their personal and professional acquaintances and convinced them to invest in a series of sham corporations controlled by the Enterprise. For example, members of the Enterprise told potential investors that one of the sham corporations, PEI, was a commodities trading company that would broker deals for the supposed export-import of various commodities like rice-trading and gold and diamond mining in Africa. In truth and fact, instead of investing the victims’ money as promised, the Enterprise used the funds obtained through PEI to support its members’ lifestyles and to make Ponzi-style payments to other victims. The co-conspirators stole over $27 million from more than 50 investor victims, including monies that the investor victims were induced to obtain as loans from financial institutions.
The Enterprise’s mortgage fraud operations involved acquiring luxury homes in neighborhoods in Charlotte and Waxhaw. One member of the Enterprise would agree with a builder to purchase a property at the true price. The Enterprise would then arrange for a buyer to purchase the property at an inflated price. In most circumstances, the buyer would agree to purchase the property in his or her own name and sign whatever documents were necessary, in exchange for a hidden monetary kickback. The builder would sell the property at the inflated price, the lender would make a mortgage loan on the basis of that inflated price, and the difference between the inflated price and the true price would be extracted at closing by the Enterprise.
The vast majority of the houses purchased as part of the Enterprise’s mortgage fraud operations subsequently fell into foreclosure, resulting in losses of hundreds of thousands of dollars in most instances. Over the course of the conspiracy, members of the Enterprise purchased four condos in one building for inflated prices, resulting in an aggregate loss on those units of approximately $2 million.
Members of the Enterprise also engaged in bank bribery conspiracies, by bribing bank employees to cash checks received from fraudulent mortgage transactions carried out by the Enterprise, and to deposit checks in a manner designed to further conceal the true distribution of the proceeds, and to supply false letters of credit in the names of local banks in an attempt to obtain financing from other financial institutions. In one instance a bank employee was paid a $55,000 bribe for preparing and providing a false letter of credit.
The racketeering activities of the Enterprise also included distribution of illegal drugs. For example, members of the Enterprise transported truckloads of marijuana from Texas and elsewhere to North Carolina, using companies utilized in both the drug trafficking and mortgage fraud operations and trucks controlled by members of the Enterprise and others.
Defendants added in this superseding indictment are:
- William Brown, 34, of Matthews, N.C. is charged with racketeering conspiracy and mortgage fraud. Role: Promoter and buyer. Status: In custody, pending release on conditions, following arrest and initial appearance.
- Benjamin Clarke, 40, of Smyrna, Ga. is charged with mortgage fraud. Role: Buyer. Status: Released following arrest and initial appearance.
- Frank DeSimone, 40, of Charlotte is charged with racketeering conspiracy, securities fraud, wire fraud to defraud investors and money laundering. Role: Promoter. Status: To appear for an initial appearance pursuant to a summons.
- Lorie Dooley, 48, of Washington, D.C. is charged with racketeering conspiracy, mortgage fraud and bank bribery. Role: Promoter. Status: To appear for an initial appearance pursuant to a summons.
- James E. Fink, 43, of Waxhaw is charged with racketeering conspiracy and mortgage fraud. Role: Builder. Status: To appear for an initial appearance pursuant to a summons.
- Ralph Johnson, 35, of Charlotte is charged with racketeering conspiracy and mortgage fraud. Role: Promoter. Status: In custody.
- Denetria Myles, 41, of Charlotte is charged with racketeering conspiracy and mortgage fraud. Role: Promoter. Status: To appear for an initial appearance pursuant to a summons.
- Matthew Newland, 39, of Coralville, Iowa is charged with racketeering conspiracy and mortgage fraud. Role: Promoter and seller. Status: Released following arrest and initial appearance.
- Nazeere Saddig, 40, formerly of Charlotte is charged with racketeering conspiracy and mortgage fraud. Role: Promoter and buyer. Status: Fugitive.
- Additionally, Steve Jones, 44, of Waxhaw, previously charged with securities fraud, wire fraud to defraud investors and money laundering conspiracy has now also been charged with racketeering conspiracy. Role: Promoter. Status: To appear pursuant to a summons.
The U.S. Attorney’s Office also announced charges filed against two additional promoters in the mortgage and investment fraud scheme. They acknowledge taking part in the conspiracy and have agreed to plead guilty. They are:
- Waylon Long, 40, of Texas is charged with mortgage fraud conspiracy and money laundering conspiracy. Role: Promoter. Status: To appear for initial appearance upon a summons.
- Melvin Moye, 34, of Charlotte is charged with investment or securities and mortgage or bank fraud conspiracy. Role: Promoter. Status: Pleaded guilty and is awaiting sentencing.
Additionally, the U.S. Attorney’s Office announced that three of the original 17 defendants who were charged with racketeering conspiracy have pleaded guilty to those racketeering charges. They are:
- Travis Bumpers, 36, of Charlotte pleaded guilty to racketeering conspiracy to commit securities fraud, mortgage fraud, wire fraud and money laundering conspiracy. Role: Promoter. Status: In custody pending sentencing.
- Victoria Hunt, 36, of Rockville, Maryland, pleaded guilty to racketeering conspiracy, securities fraud, mortgage fraud, wire fraud to defraud investors, and money laundering. Role: Leader and promoter. Status: On house arrest pending sentencing.
- Purnell Wood, 41, of Holly Springs, N.C. pleaded guilty to racketeering conspiracy to commit mortgage fraud and money laundering. Role: Promoter. Status: Released pending sentencing.
The conspiracy to participate in the racketeering activities charge carries a maximum term of 20 years in prison and a $250,000 fine or twice the gross profits or other proceeds. The securities fraud charge carries a maximum term of 20 years in prison and a $250,000 fine. The bank fraud charge carries a maximum term of 30 years in prison and a $1 million fine. The wire fraud charge carries a maximum term of 20 years in prison and a $250,000 fine. The money laundering conspiracy charge carries a maximum term of 20 years in prison and a $500,000 fine or twice the amount of criminally derived proceeds. And, the bank bribery conspiracy charge carries a maximum term of five years in prison and a $250,000 fine.