Restitution Paid at Sentencing
Barry Fauntleroy, 40, a former real estate investor who lived in Mendham, New Jersey, was sentenced to 21 months in federal prison and ordered to pay $524,000 in restitution for conspiring with others to commit mortgage fraud by obtaining HUD mortgage loans for unqualified buyers, enabling he and his co-defendants to earn huge profits on the sale of run-down properties. Fauntleroy paid $25,000 of the restitution order after sentencing. Fauntleroy pleaded guilty on September 19, 2006 to one count of conspiracy. Devon Bowie, 54, Malverne, New York, was also sentenced to twelve months in prison and was ordered to pay $500,000 in restitution after he plead guilty to one count of conspiracy. Bowie agreed to make the restitution payment in full within 30 days. Peter Port, 52, attorney, Roslyn, New York, was sentenced to five months in prison and was ordered to pay $500,000 in restitution and a $10,000 fine, both of which he paid in full at the time of sentencing. Port plead guilty to one count of false statements for producing false documents used in the scheme.
Fauntleroy was president of EON Institute Inc. (EON), a real estate holding company in New Jersey. On June 2, 2005, an Indictment was returned alleging that from at least June 1999, through July 2001, Fauntleroy conspired with Bowie and others to prepare falsified loan applications and supporting documents which were submitted to the FHA, and which related to loans insured by HUD. Bowie was the president of Neighborhood Mortgage Bankers Company (Neighborhood Mortgage), which maintained an office in Elmsford, New York. Neighborhood Mortgage was authorized to make HUD-insured mortgage loans. Port was a title agent on many of the properties involved and a co-investor with Fauntleroy.
At his plea hearing, Fauntleroy admitted that he, along with his co-conspirators, fraudulently induced HUD to insure certain mortgage loans made by Neighborhood Mortgage to unqualified borrowers, which enabled Fauntleroy, Bowie and their co-conspirators to earn huge profits from the sales of properties financed by the fraudulent loans.
Fauntleroy in pleading guilty acknowledged that as part of their scheme, he and others solicited and recruited individuals with relatively low income to buy homes in Essex County, New Jersey and elsewhere with the promise that the borrowers could buy homes with little or no money down.
According to the Indictment, Fauntleroy and others then located dilapidated properties in Essex, New Jersey and elsewhere, that were available for sale. The co-conspirators then showed the borrowers the properties, represented to the borrowers that they owned the properties, that they would significantly renovate them and sell the properties to the borrowers at an agreed upon price, which represented the fair market value of the properties in the significantly improved condition.
Fauntleroy admitted that he and others then arranged for the borrowers to purchase the properties by assisting the borrowers in obtaining HUD loans through Neighborhood Mortgage in the amount of the contract price.
Fauntleroy admitted that, in support of the HUD loan applications, his co-conspirators created and submitted false and fictitious bank statements, leases, IRS Forms W-2, verifications of past mortgage payments, pay stubs, attorney escrow letters, gift letters, verification of employment, real property appraisals and deposit checks.
Fauntleroy and others then purchased the properties at a reduced price, at times using the proceeds from HUD-insured loans obtained by the borrower, and re-sold the properties to the borrowers at the market, or contract, price, having done little or no work to renovate or otherwise improve the properties.