Richard Shumway, 51, Brewerton, New York, pleaded guilty on June 30, 2008 in United States District Court in Burlington, Vermont, to a federal wire fraud charge. Chief U.S. District Judge William K. Sessions III continued Shumway's release on conditions pending sentencing, which is set for November 3, 2008.
As previously reported by Mortgage Fraud Blog, on January 3, 2008, a federal grand jury in Burlington, Vermont, returned a two-count indictment charging Shumway with mail fraud and bank fraud. Both charges stem from the activities of TSC Funding, a South Burlington-based mortgage brokerage business Shumway owned and operated in the 1990s until 2005. According to the indictment, Shumway skimmed a total of nearly one million dollars from more than 200 loans he brokered by means of payments taken outside of closing, without the knowledge of the borrower. As part of the scheme, Shumway arranged for Gerald Mullaney, formerly a licensed real estate appraiser in the Albany, New York area, to prepare falsified appraisals for the homes the borrowers were purchasing. This enabled Shumway to induce the borrower to take out a larger loan than necessary to buy the home, and also enabled Shumway to divert some of the proceeds of each loan to his own benefit. Shumway misled borrowers into believing the extra fees were to be paid to the lending institution to obtain a lower interest rate. Shumway was aided in this scheme by Nazzara Bernardo of Syracuse, New York, the owner of the title company that processed the closing paperwork on each loan and served as escrow agent.
Shumway faces up to 20 years of imprisonment and a fine of up to $250,000 or twice the gross gain or loss, whichever is greater. The actual sentence will be determined with reference to federal sentencing guidelines.
Gerald Mullaney has already pled guilty to bank fraud and is awaiting sentencing. Bernardo has pled guilty to conspiracy and is also awaiting sentencing.
This case was investigated by the Burlington, Vermont office of the Federal Bureau of Investigation.
Shumway is represented by Paul Volk. The prosecutor is Assistant U.S. Attorney Gregory Waples.
Rachel Dollar, the editor of Mortgage Fraud Blog is an attorney and Certified Mortgage Banker who handles litigation for lending institutions and secondary market investors.