Richard Scott Spady, 40, Bloomington, Minnesota, was sentenced for his role in defrauding financial institutions and homeowners under the guise of a program to rescue homes from foreclosure.
On July 31, 2013, United States District Court Judge John R. Tunheim sentenced the defendant to 24 months in federal prison and two years of supervised release on one count of conspiracy to commit wire and mail fraud and one count of filing a false income tax return. On April 4, 2012, Spady was charged in a superseding indictment, and he pleaded guilty on September 5, 2012.
On April 22, 2013, Spady’s co-defendant, Michele Denise Sengstock, 50, Bloomington, was sentenced to 14 months in federal prison on one count of wire fraud. Spady and Sengstock were ordered to pay $1,127,129.31 in restitution.
In his plea agreement, Spady admitted operating his scheme between 2005 and 2007. According to the charges in the case, Spady operated a company called Unified Home Solutions, or UHS, which identified homeowners who were facing mortgage foreclosure or already in foreclosure proceedings. UHS then found third party investors to purchase the homes, planning to sell them back to the original homeowners within one to two years. In the meantime, according to the Indictment in the case, the distressed homeowners could live in their homes.
Though in foreclosure because they could not make mortgage payments, the homeowners still had some equity in their homes. When the properties were sold, checks were issued to the original homeowners for their equity. The homeowners then signed over the equity checks and the proceeds were used to pay expenses and divided among the investors, UHS, and others. In some cases, equity from one sale was used to purchase other distressed properties.
In his guilty plea, Spady admitted that false and mortgage loan applications and loan closing documents were prepared and that lenders were not told about the distribution of equity from the sales, including rolling one homeowner’s equity into the purchase of a subsequent home for an investor. According to the charges in the case, fewer than 10 percent of the homeowners who used UHS were able to retain their homes, and all the homeowners lost their equity in the process.
Spady also admitted that for the tax years 2006 and 2007, he filed federal income tax returns that failed to report over $100,000 in income, resulting in an underpayment of taxes of more than $30,000.
In her plea agreement, Sengstock admitted assisting in the fraudulent operations of UHS by preparing false mortgage loan applications and closing documents.
This case was the result of an investigation by the U.S. Postal Inspection Service and the Internal Revenue Service-Criminal Investigations. It was prosecuted by Assistant U.S. Attorney Robert M. Lewis.