Trial in the case against F. Jeffrey Miller has been postponed due to its complexity. The Judge has not yet set a new trial date. Miller, a developer, and his co-conspirators in Kansas were indicted for an alleged scheme involving the sale of homes constructed by Miller to homebuyers that would otherwise not qualify, through the use of false documents and inflated appraisals. The charges include one count of conspiracy, 52 counts of bank fraud, five counts of money laundering, and forfeiture. Angela Parenza and Elizabeth L. Hessel, both formerly loan officers with one of Miller's companies, entered guilty pleas to count one of the indictment and agreed to testify against the other defendants.

On October 16, 2006, Angela Parenza entered a guilty plea to count 1 of the indictment, stating in the petition to enter the plea that she "provided down payments to homebuyers from Jeff Miller without disclosing that to lending institutions, among other over acts." Elizabeth Hessel entered a plea of guilty as to count 1 of the indictment.

The guilty pleas of both Parenza and Hessel state that the object of the conspiracy was to enrich the conspirators by manipulating home buyers, manipulating appraisal and submitting materially false and fraudulent loan applications to obtain loan proceeds from federally insured financial institutions.

According to the pleas, as part of the scheme, the coconspirators:

Advertised in newspapers that homes would be sold to home buyers with poor credit and financial problems for little or no down payment. They established a "One Stop Shop" for home buyers by establishing Associated Capital and Associated Finance to go along with Miller's building company, Miller Enterprises. Homebuyers that went to Miller Enterprises to pick out a home could also obtain financing Miller thereby controlled the flow of information to the lender.

The One Stop Shop was turned into a fraudulent real estate machine as Miller manipulated the appraisal process. He obtained intentionally inflated appraisals by (1) refusing to pay the appraisers if his price was not met and (2) manufacturing comparables by selling homes in subdivisions to his employees at inflated prices and then agreeing to forgive the second mortgagees on the homes. Miller also falsified loan applications and accompanying documents such as tax returns, employment verifications, rental agreements, rental verifications and payment histories in order to qualify borrowers for loans that they would not have otherwise been able to obtain. He would also provide home buyers with down payments and closing costs without disclosing this to the lenders.

The homeowners would be manipulated into moving into the home before closing. The sales price would then be increased and closing - creating a situation where the homeowners were forced to chose between closing on the home with the increased sales price or facing eviction and homelessness. The increased sales price would be secured by a second mortgage with an illegal interest rate serviced through his company, Associated Finance. Miller and Earnshaw created a form called the Principal Reduction Form to reduce the second mortgage balance by permitting the homeowner a discount on the mortgage if the reduced amount was paid off in a specified time.

The conspiracy was later reconfigured to sell homes to investors in volume. The actual sales price was discounted but this was not disclosed to the lenders who continued to be provided with false documentation on the financial condition of the investors as well as false lease/purchase agreements. Miller would also pay the investors undisclosed kickbacks that were concealed as referral fees or interior design fees.

According to the guilty please, $25,042,670.39 in loan proceeds were obtained from federally insured financial institutions in connection with the conspiracy.

Click here for the original Mortgage Fraud Blog article on the indictment.