BY KATRINA CORNWELL • GANNETT TENNESSEE • June 18, 2008
GALLATIN -- Miles Jackson Black and Jeffrey Dunn Hathcock, both of Gallatin, have entered guilty pleas in federal court to conspiracy to commit wire fraud and bank fraud as part of an elaborate mortgage-fraud scheme.
The alleged fraud involved the purchase of 22 luxury homes in Gallatin and Hendersonville by unqualified "straw" buyers, officials said.
The trial of a third defendant in the case, Harold Stafford, of Hendersonville, was rescheduled for Sept. 16, according to a press release issued by the office of the U.S. Attorney for the Middle District of Tennessee.
Comments were unavailable from Black¹s attorney, David Baker, and Hathcock¹s attorney, James Cartwright. Attempts to reach Stafford¹s attorney, Newton Holiday, were unsuccessful.
According to the federal indictment, the three men assisted in the filing of false loan applications to mortgage lenders. The applications are alleged to
have: Overstated the straw buyers¹ income; falsely stated that the homes would be their primary residences; and failed to disclose recent home purchases by the same people.
All of these mortgage loans ended in default and foreclosure, resulting in losses to mortgage lenders after foreclosure totaling approximately $2.2 million.
The scheme
According to the indictment, Stafford, the owner of Stafford Lease Group, Stafford Holding Group and Keys to Success, agreed with the builders and sellers of the 22 luxury homes to find buyers who would purchase the homes at prices that were $10,000 to $165,000 more than their original asking prices.
The builders and sellers agreed to pay Stafford any amount of the sale that exceeded the original asking prices of the homes, federal court records show.
Authorities said Stafford recruited seven unqualified straw buyers with good credit histories to apply for first and second mortgages on multiple properties where the purchase price was greater than the seller's original asking price, according to the indictment.
He then instructed them to apply for mortgage loans through an office of Allied Mortgage Co., managed by Black and Hathcock.
Black and Hathcock reportedly required the straw buyers to fill out "Buyers Authorization Forms," giving the company permission to check their credit reports. The pair and an unnamed employee then forged the buyers' signatures on loan applications, the indictment says.
At Stafford¹s request, some of the builders of the homes provided Allied Mortgage Co. with addenda to the real estate sales contracts, describing the costs of additional improvements to the property to justify increases in the contract sales prices, federal court records show.
After closing, he informed the builders the buyers no longer wanted the improvements and instructed them to refund the costs of the work to the buyers or to himself, according to the indictment.
The builders and sellers paid Stafford kickbacks between $10,000 and $165,000 in the names of his three companies, federal officials allege. He, in turn, paid the straw buyers some of that money, federal court records state.
Black and Hathcock received commissions on the mortgage loans they arranged for the straw buyers, based on false and misleading qualifying information and property valuations, and, on one occasion, they were paid a fee by one of the home sellers, according to the indictment.
Consequences
Black and Hathcock are scheduled to be sentenced on Oct. 27. They each face up to 30 years in prison, a $1 million fine and supervision for up to five years.
This case is being investigated by the Internal Revenue Service Criminal Investigation Division, the United States Secret Service and the 18th Judicial District Drug Task Force.