Former Head Of Mortgage Company Charged With Defrauding Lenders

admin —  July 28, 2009 — Leave a comment

Gary T. Johnson, 59, Groton, Connecticut, has been indicted by a federal grandy jury in New Haven, Connecticut, on four counts of wire fraud and two counts of engaging in illegal monetary transactions while operating his former mortgage lending business. The Indictment was returned on July 22, 2009, and and ordered unsealed July 28, 2009, by United States Magistrate Judge Thomas P. Smith during Johnson’s arraignment.

According to the Indictment, Johnson operated a family-run business known as Matrix Investment Corp. (“Matrix“), which was based in Groton. Matrix provided mortgage loans to interested borrowers either as a broker for other lenders or as a loan originator itself. Johnson was the Chairman of Matrix and oversaw lending activity at the Company.

The Indictment alleges that, during 2004 and 2005, Matrix and Johnson began to use monies disbursed for the benefit of borrowers for purposes other than the payoffs set forth in the relevant HUD settlement statements, including to pay Matrix’s ongoing operating expenses or to make payoffs to other lenders on unrelated refinancings.

The Indictment further alleges that, in the summer of 2004, Johnson informed some of his employees that he was seeking to refinance certain of his personal properties to put money into the business to fund Matrix. As part of that process, a Matrix employee began to explore refinancing options for Johnson from various lenders, including Greenpoint Mortgage Funding Inc., for approximately $640,000 and a line of credit for $80,000, both to be secured by Johnson’s personal residence. Several months later, Johnson sought refinancing for $563,500 with Flagstar Bank, to be secured by another house he purportedly owned in New London.

The Indictment alleges that Johnson caused fraudulent personal loan applications to be submitted to Greenpoint, Flagstar Bank, and other lenders. Johnson had input on the content of the applications, and he reviewed and signed preliminary applications and final applications, on or about the date of closing, and prior to any receipt of funds. The Indictment further alleges that, on the applications, Johnson misrepresented his ownership interest in his primary residence, misrepresented the occupancy status of the second residence, overstated his monthly income, and falsely represented that the monies would be used, in part, to repay preexisting debts, including existing liens on the relevant properties. The debts were not ultimately repaid.

Both the $640,000 and the $80,000 loans with Greenpoint closed on August 9, 2004. The Flagstar loan for $563,500 closed on October 9, 2004. The Indictment alleges that in the fall of 2005, Johnson ceased making payments on both the Greenpoint and Flagstar loans. The loans went into default, and the lenders have suffered substantial loss.

If convicted, Johnson faces a maximum term of imprisonment of 20 years on each of the first two wire fraud counts, a maximum term of imprisonment of 30 years on each of the next two counts of wire fraud, and a maximum term of imprisonment of 10 years on each of the two counts of engaging in an illegal monetary transaction.

Nora R. Dannehy, Acting United States Attorney for the District of Connecticut, announced the indictment. Acting U.S. Attorney Dannehy stressed that an indictment is only a charge and is not evidence of guilt. The defendant is entitled to a fair trial at which it is the Government’s burden to prove guilt beyond a reasonable doubt.

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