James Merrill Roberts, 41, Cedar Hills, Utah, and Christopher Ethington, 35, and Janet H. Ethington, 33, both of Riverton, Utah, have been charged with mortgage fraud in a 12-count indictment. The indictment alleges they operated a scheme to identify residential properties, recruited straw buyers, and, through false statements on loan applications, falsely inflated the apparent value of the properties to induce lenders to grant loans for amounts in excess of their fair market value . The indictment alleges three counts of mail fraud; three counts of wire fraud; one conspiracy count; four counts of money laundering; and one count of failure to file a federal tax return.
According to the indictment, Roberts formed Amerifinance Group, LLC, a company which promoted residential real estate transactions in Utah. Christopher Ethington worked for Amerifinance and recruited individuals to become involved in real estate purchases and loans arranged through the company. Janet Ethington, an unlicensed loan officer, was employed at a home loan brokerage company.
The indictment alleges that although Amerifinance was originally formed to purchase foreclosed homes, repair them, and sell them at a profit, it soon became a framework for identifying residential properties, recruiting straw buyers and, through misrepresentations on loan applications and other documents in loan packages, falsely and deceptively inflating the apparent value of the properties in order to induce lenders to grant loans for amounts in excess of their fair market value.
Although there were some variations, the plan worked in three phases. Christopher Ethington and Roberts would identify properties that could be purchased at a set price and sellers who would be willing to sign papers selling those properties even if the documents reflected prices, terms, and conditions different from their true sale agreement.
Christopher Ethington and Roberts or others would then recruit straw buyers to apply for and sign loan documents making false and deceptive statements to lenders as borrowers on residential properties. These false statements included overstatements of income; claims of non-existent assets; non-disclosure of kick-backs to the straw buyers; and the source of the down payment, among other things. The down payments, in fact, were generally made with money lent in short-term high interest loans from hard-money lenders who were immediately reimbursed through the closing/settlement process.
Straw buyers were referred to Janet Ethington to prepare and complete loan packages for presentation to mortgage lenders. The loan application packages, which included one or more false statements or omitted material facts, were prepared and sent to mortgage lenders.
As a part of the third step of the scheme,the loan closing process,an escrow officer cooperating with the defendants would receive the hard-money down payment and prepare the loan settlement documents reflecting that the straw buyer had made the down payment, which was false. The escrow officer, who is not named in the indictment, also on occasion directed the creation of false letters to lenders assuring them that the down payment had been provided by the straw buyer. These documents would go to the lender for disbursement approval. At this point, Christopher Ethington and Roberts would prepare paperwork undisclosed to the lenders which channeled loan proceeds to companies or accounts that they controlled. Settlement documents which reflected the actual disbursement of the loan proceeds were not disclosed to the mortgage lenders. Mortgage lenders instead received false disbursement documents that concealed funds being channeled to the defendants.
These transactions yielded hundreds of thousands of dollars in inflated loan proceeds, which were diverted to the defendants and their employees. Some of the loan proceeds were used to make a few loan payments on the homes to create the appearance the loans were performing well. However, the payments ceased and the loans charged in the indictment went into default.
The potential penalty for each count of conspiracy, mail fraud, and wire fraud is up to 20 years. Money laundering carries a potential penalty of up to 10 years in prison. The penalty for failure to file a tax return is up to one year in prison.
An indictment is not a finding of guilt. Individuals charged in indictments are presumed innocent unless or until proven guilty in court.
Arrest warrants have been issued for the Ethingtons. A summons has been issued for Roberts to appear for an initial appearance on the charges.