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3rd Fraud Perpetrator Sentenced

Final participant in $1 million mortgage St. Louis fraud scheme sentenced

St. Louis, Mo. -- (Nov. 22, 2006) -- James McMullen was sentenced to 38 months in prison for his participation in a mortgage fraud scheme involving dozens of properties in south St. Louis and over one million dollars in losses. The developer of this scheme, Rodney Tate, was sentenced to almost five years in prison in October, United States Attorney Catherine L. Hanaway announced today.

“This office is committed to prosecuting mortgage fraud in any area, but this case is especially significant because it involved a “Weed and Seed” area of the city, where residents have been working hard to revitalize their community,” said Hanaway. “Weed and Seed is a Department of Justice initiative designed to “weed” out violent crime, drug use and gang activity from selected neighborhoods and to help prevent crime from recurring by “seeding” those sites with a wide variety of public and private efforts to develop them. The strategy integrates federal, state and local law enforcement and criminal justice efforts with human service, private and community resources all designed to maximize the impact of existing programs. The key element of the Weed and Seed strategy depends on improved coordination by police, community groups and social service agencies to work together to revitalize neighborhoods.”

Between January 1, 2004 and February 2006, McMullen and co-defendants Rodney Tate and Reginald Mays devised a scheme to purchase properties in St. Louis City for fair market value. McMullen would obtain a false appraisal inflating the value of the property from Mays, in exchange for a cash payment, then identify a "straw buyer" or nominal buyer of the property who would allow his or her name and information to be submitted as the buyer of these properties in exchange for cash payments, and purport to sell the properties to the straw buyers at inflated prices by preparing false loan applications which misstated the straw buyers' salary, employment history and financial assets and, usually the intention to occupy the property as a primary residence. In reliance upon these misrepresentations various financial institutions and mortgage brokers loaned them millions of dollars.

In one example, Tate had a person purchase a property at 3430 South Jefferson in the City of St. Louis for $300,000, which he had purchased for $95,000 only weeks earlier. This $300,000 purchase price was in excess of the fair market value of the property and was supported only by the false appraisal report prepared for a fee by Reginald Mays. Tate instructed the buyer to overstate her income and assets and claim the property as a primary residence on her loan application. As a result of these illegal activities, Jefferson Bank and Trust made a $210,000 loan secured only by property worth less than half that amount.

Over the course of the scheme, Tate pocketed hundreds of thousands of dollars in proceeds from these fraudulently obtained loans.

JAMES McMULLEN, St. Louis, was sentenced today to 38 months in prison and ordered to pay restitution.

Tate was sentenced to 57 months in prison and ordered to pay restitution of more than $1 million on October 20; and Mays was sentenced to three years probation in early November. All defendants appeared before Chief United States District Judge Carol E. Jackson.

Hanaway commended the work performed on the case by the Federal Bureau of Investigation, Internal Revenue Service-Criminal Investigation and Assistant United States Attorney Thomas Albus, who handled the case for the U.S. Attorney’s Office.

SOURCE: U.S. Attorney's Office Eastern District of Missouri

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