Former Head Of Mortgage Company Convicted of Defrauding Lenders

admin —  March 29, 2010 — Leave a comment

Gary T. Johnson, 60, Groton, Connecticut, has been found guilty of four counts of wire fraud and two counts of engaging in illegal monetary transactions while operating his former mortgage lending business.

As previously reported on Mortgage Fraud Blog and according to the evidence presented during the trial, Johnson owned and operated a business known as Matrix Investment Corp. (“Matrix”), which was based in Groton, Connecticut. 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.

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 payroll and other expenses, or to make payoffs to other lenders on unrelated refinancings. 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 in Groton, Connecticut. Several months later, Johnson sought refinancing for $575,000 with Flagstar Bank, to be secured by another house he owned in New London, Connecticut.

During the refinancing process, Johnson caused fraudulent personal mortgage loan applications to be submitted to Greenpoint, Flagstar Bank, and other lenders. On the applications, Johnson misrepresented to Greenpoint that he owned his primary residence in Groton, Connecticut when the residence was actually held in his wife’s name. Johnson also overstated his monthly employment income, listing it as much as $29,000, when his tax returns listed no employment income. Although Johnson also told Greenpoint and Flagstarthat he would use the proceeds of the refinancings to pay off preexisting liens on the properties, he instead used the monies for other purposes.

The $640,000 and the $80,000 loans with Greenpoint closed on August 9, 2004. The Flagstar loan for $575,000 closed on October 8, 2004. 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 losses in excess of $1.3 million.

Johnson is scheduled to be sentenced by United States District Judge Christopher F. Droney on June 11, 2010, at which time Johnson faces a maximum term of imprisonment of 120 years.

Nora R. Dannehy, United States Attorney for the District of Connecticut made the announcement.

This matter was investigated by Internal Revenue Service – Criminal Investigation. The Federal Bureau of Investigation assisted in the investigation. The case is being prosecuted by Senior Litigation Counsel Christopher W. Schmeisser and Assistant U.S. Attorney David J. Sheldon.

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