Fraudsters Convicted of Straw Buyer Scheme

Allison Tussey —  May 23, 2012 — Leave a comment

Jerry Kerley, 58, Kodak, Tennessee, and Jeffrey Whaley, 48, of Sevierville, Tennessee, were convicted by a jury in U.S. Distict Court, Knoxville, of all counts in the indictment, including wire fraud, bank fraud, money laundering and conspiracy to commit wire fraud and bank fraud.

The Honorable Thomas W. Phillips, U.S. District Judge, scheduled Kerley‘s and Whaley‘s sentencings for September 27, 2012. For their wire fraud, bank fraud and conspiracy convictions, Kerley and Whaley could receive sentences of up to to 30 years in prison and a $1,000,000 fine for each count of conviction. For their money laundering convictions, both could receive sentences of up to10 years in prison and a $250,000 fine. Both are also subject to the imposition of an order of forfeiture for any proceeds obtained from the fraud and an order of restitution for losses sustained by Citizens Bank and SunTrust Mortgage.

Kerley and Whaley were charged with conspiring to defraud Citizens Bank, New Tazewell, Tenn., and SunTrust Mortgage, Inc., Richmond, Va., through a mortgage fraud scheme. The conspiracy involved a straw borrower mortgage fraud scheme in which individuals were induced to obtain mortgage loans in their names based on promises that they would not have to make a down payment or mortgage payments for the property, would receive cash at closing, and would share in the profit following a resale of the property.

Part of the conspiracy involved making materially false representations to Citizens Bank and SunTrust Mortgage, which, among other things, included false representations related to the straw borrowers’ source of funds for down payments and amounts recorded as “cash from borrower” on HUD-1 Settlement Statements and loan applications, for the purpose of inducing Citizens Bank and SunTrust Mortgage to disburse the mortgage loan proceeds it had wired to and entrusted with Kerley‘s title company Guaranty Land Title.

In eight real estate transactions, Kerley and Whaley concealed from the lenders that the borrower did not provide the money at closing identified as the “cash from borrower” on the HUD-1 Settlement Statement. In those eight transactions, the lenders, in total, wired more than $6 million in loan proceeds to Guaranty Land Title Company for disbursement. Kerley and Whaley were also charged with money laundering offenses through financial transactions that involved proceeds from the mortgage fraud scheme.

Kerley, a Tennessee licensed attorney, was the owner of Guaranty Land Title Company where the fraudulent loans were closed. Whaley conducted business through a company known as GBO Enterprises which received substantial sums of money from the loan proceeds.

This investigation was conducted jointly by the Internal Revenue Service, Criminal Investigation, Federal Bureau of Investigation, and the United States Secret Service. Assistant U.S. Attorneys Trey Hamilton and Zac Bolitho represented the government.

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Allison Tussey

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