COLUMBIA, SC (WCSC) - COLUMBIA, SC (WCSC) - Five people pleaded guilt in federal court Thursday for their part in a homebuilder mortgage fraud scheme that involved false loan applications, kickbacks and duping investors.
Twin brothers Anthony B. Grant and Antonio B. Grant, 43, both of Simpsonville, and their business partner Michael D. Holmes, 37, of Lawrenceville, Ga., pleaded guilty to conspiracy to commit bank fraud. Tower Homes, Inc., a South Carolina corporation, and its President Nathan Seppala, 50, and Vice President Sandra Kinnunnen, 59, both of Greer, all pleaded guilty as well.
United States District Judge Henry F. Floyd accepted the pleas and will impose sentence after he has reviewed pre-sentence reports from the U.S. Probation Office.
According to prosecutors, the Grant brothers with Holmes operated South East Real Estate Solutions (SERES), which sought people interested in real estate investment and would locate property in upstate South Carolina for these investors to purchase.
Many of the novice investors were recruited from the congregation of Redemption World Outreach Church of Greenville, South Carolina, after the Grant brothers and Holmes made presentations to members of the congregation on investment opportunities. The men promised each investor that once an investment property was purchased, SERES would make all mortgage payments, would find individuals to rent the property, would manage the property, and that SERES would try to "flip" the property to earn a profit for themselves and the investor.
Investors were asked to provide personal financial information to SERES so that financing could be sought by the Grant brothers and Holmes on their behalf for the real estate purchases. However, the Grant brothers and Holmes falsified the investors' financial information, preparing loan applications stating that the investors had substantial assets and income to qualify for higher mortgage loans, when in fact many did not.
The men also provided investors with money required by lenders to be paid at closing by the investors. To deceive the lenders on the source of these funds, the men typically gave each investor a check prior to closing, instructing the investor to present it at closing as if it were from the investor's personal account.
Based on the false applications and the deceptive closing funds, mortgage lenders approved 33 loans in amounts far in excess of what would have been loaned had accurate information been presented.
Many of these loans are now delinquent and many of the homes are in foreclosure, said prosecutors.
Many of the properties that SERES arranged for its investors to purchase were small site-built homes constructed and sold by Tower Homes in the upstate. The Grant brothers and Holmes entered into side contracts with Tower Homes to locate buyers, then arranged for a recruited investor to purchase one of the Tower Homes' properties at a price far in excess of that typically charged by Tower Homes.
For arranging for the investor to purchase the Tower Homes property, Seppala and Kinnunnen authorized kickback payments to the Grant brothers and Holmes which were not disclosed to the lenders.
Representatives of Tower Homes provided sworn affidavits to the lenders that there were no oral or written contracts relating to or affecting the property purchased by the investor, when in fact, the representatives knew about the side contracts and the kickbacks authorized by Seppala and Kinnunnen.
Secret Service agents began investigating the case after numerous victim investors contacted the U.S. Attorney's Office to report the fraud in February 2009.
The maximum penalty the individual defendants can receive is a fine of $1,000,000 and imprisonment for 30 years. The corporate defendant Tower Homes faces a maximum possible fine of $1,000,000.