Ronald Trester waived indictment and entered a plea of guilty to a three count indictment charging bank fraud, conspiracy and income tax evasion in connection with a flipping scheme in the Cincinnati, Ohio area. The charges carry maximum combined period of imprisonment of 40 years. After pleading guilty, he was released on his own recognizance and will be sentenced at a later date. The guilty plea requires Trester to cooperate in the ongoing government investigation.

The statement of facts in Trester’s guilty plea tracks those in the other indictments, describing a flipping scheme involving low value homes in greater Cincinnati, Ohio. According to the indictment, the scheme ran like this:

1. A person would purchase a piece of real estate at a low value – for example, $20,000

2. Someone (maybe the person who bought the property on the down side of the flip) would recruit a buyer or someone interested in purchasing the property as an investment. Most of the buyers could not afford to purchase real estate.

3. Once a buyer was identified, one of the co-conspirators would create false documents, including pay stubs, W-2 forms, bank statements and employment verifications.

4. The co-conspirators would then obtain a falsely inflated appraisal for the property

5. The co-conspirators would then submit the false loan package – complete with inflated appraisal and made-up documents – to the lender and obtain an inflated loan, for, let’s say, $85,000.

According to the plea agreement, Trester acted as the mortgage broker and also as the seller of many of the flips. He would purchase properties at market value and place them in his name or in the name of one of his shell companies (Mid-West Investments of Ohio, Inc. or Crown Mortgage, Inc.) and then sold the properties at artificially inflated values. He was aware that fictitious or fraudulent appraisals were submitted to the lenders and he signed settlement statements indicating the borrower brought the down payment to closing (in fact, Trester or one of his co-conspirators brought the down payment.) As mortgage broker, Trester also created phony supporting documentation for the loans including bank statements, W-2’s, paycheck earnings statements, VOEs, VODs and leases.

The guilty plea details the following transactions:

On September 7, 2001, Trester purchased property at 955 Fairbanks Avenue, Cincinnati, Ohio for $30,000. On January 31, 2002, he sold the property to Gregory and Rebecca Luehrmann for $81,000. The Luehrmanns provided no funds toward the down payment even though the settlement statement reflected a down payment of over $10K. An appraisal completed by Zajac Appraisal Service supported the inflated sales price.

On September 25, 2001, Trester dba Crown Mortgage, Inc. purchased property at 816 Vine Street, Hamilton, Ohio for $25,000. On October 26, 2001, he sold the property to Aline Parsley for $75,000. Ms. Parsley provided no funds toward the down payment even though the settlement statement reflected a down payment of over $10K. An appraisal completed by Zajac Appraisal Service supported the inflated sales price.

On February 8, 2001, Trester purchased property at 4253 Fergus Street, Cincinnati, Ohio for $44,000. On February 28, 2001, he sold the property to Bessie Baltimore for $90,000. Ms. Baltimore provided no funds toward the down payment even though the settlement statement reflected a down payment of over $6K. An appraisal completed by Adler Appraisals supported the inflated sales price.

The guilty plea recites an agreement between the United States and Trester that “as a result of his fraud he caused an actual and/or intended loss to various financial and lending institutions of $6,474,693.75.”

In connection with the income tax evasion charge, Trester admitted to receiving payoffs from fraudulent loan proceeds to himself and shell companies he controlled including A-1 Remodeling, Diversified Construction, R&M Remodeling, Merit Services and Crown Mortgage.