Written by Nathan Thomas on April 6, 2004
Written by Nathan Thomas on April 6, 2004
The Internal Revenue Service (IRS) has more than 4,000 returns under audit involving individuals and entities associated with the real estate business, everyone's favorite agency announced.
Audits, federal tax fraud investigations and money laundering charges are mechanisms the IRS is using to play a key role in the fight against mortgage fraud. The number of real estate fraud investigations initiated by IRS Criminal Investigation doubled in two years, from 107 during the 2001 Federal Fiscal Year to 215 during FY 2003. Similarly, the average prison term handed out by federal judges to defendants in these schemes nearly doubled over the same period, from 24 months to 46 months.
Last year, Paul A. Dailey, owner of Platinum Mortgage Brokerage Firm of Indianapolis, was sentenced to 105 months in prison, followed by three years supervised release, and ordered to pay $3.7 million in restitution. Dailey pled guilty to conspiracy to commit mail fraud and money laundering. He operated Platinum Mortgage in Indianapolis from 1998 until May 2001, during which time the company brokered more than 100 fraudulent residential mortgages on properties principally in Center Township in Indianapolis.
Dailey and other members of the conspiracy, 13 of whom have been convicted, recruited several real estate appraisers and closing agents to assist in the fraudulent scheme. Generally, the properties were appraised for two to three times their true value. Straw purchasers obtained loans on the property well in excess of their true value, the members of the conspiracy shared the profits and the purchasers defaulted on the loans, leaving the properties abandoned and boarded up.
After mortgage lending companies refused to lend money to the Platinum Mortgage customers, Dailey moved to Detroit and opened another mortgage brokerage company, Monumental Mortgage, and continued the scheme there. The total amount of loss attributed to the schemes is more than $8 million.
The IRS says its antennae are particularly up for property flipping schemes involving false statements or inflated appraisals to lenders, two sets of settlement statements - one true one provided to the purchaser and one much higher one provided to the lender; and fraudulent loan qualifications, essentially, identity fraud.