An Atlanta business owner was sentenced to three years in prison last week for running a home equity loan fraud scheme that led to losses of nearly $3 million for the $82 billion Navy Federal Credit Union.
U. S. District Judge Claude M. Hilton also ordered Thomas Scott Brown, 47, to pay $2.7 million in restitution and to serve five years of supervised released following his prison term. He pleaded guilty in May to one felony count of bank fraud and one felony count to making a false statement to a financial institution.
Federal prosecutors said Brown ran an investment properties company in Macon, Ga.
Starting in June 2006 Brown purchased properties for buyers with his own money, used a law firm that specialized in real estate transactions to transfer ownership to the buyers and claimed they paid him in full for the properties. However, the properties, some of them foreclosed, were still owned by Brown, prosecutors said in court documents.
He then directed buyers to apply for home equity loans with the Vienna,Va.-based Navy Federal Credit Union. In some instances, these individuals were not members. To consistently abuse the credit union's loan process, Brown instructed buyers to falsify information to become members. He also told buyers to fraudulently misrepresent to NFCU that they purchased and owned the properties free of any liens.
The credit union approved these loans, based on the representations of the buyers and the false statements contained in the paperwork, which Brown and the buyers signed.
Brown then directed buyers to use money from the approved home equity loans to repay him. He exercised more control over the scheme by telling buyers what specific amounts to give him, as well as when these payments should be made, according to prosecutors.
Brown used this process on more than 50 properties and pocketed profits of $1.4 million generated from the difference he paid for the properties and what he charged the buyers from their home equity loan disbursements.
NFCU, however, did not receive repayments on these home equity loans. Instead, after the loans were distributed to the fake buyers, fifty-one properties fell into foreclosure, causing the credit union more than $2.7 million in losses.
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