United States Attorney
Northern District of Texas
September 22, 2010
Guilty Pleas Entered and Scheduled in Mortgage Fraud Case Allegedly Involving Former Dallas Cowboy Eugene J. Lockhart, Jr.
DALLAS — Co-defendant Jermaine Frazier, charged in Count One of the indictment with various felony offenses related to a mortgage fraud scheme in the Dallas area, pleaded guilty this afternoon before U.S. District Judge Jorge A. Solis, announced U.S. Attorney James T. Jacks of the Northern District of Texas. To date, a total of four of the eleven defendants charged have entered guilty pleas, and a fifth defendant, Donna Kneeland, signed plea papers and is scheduled to enter a guilty plea on September 29, 2010. The remaining six defendants, including Eugene J. Lockhart, Jr., were set to go on trial before Judge Solis on October 18, 2010. At the request of defendant Eller, that trial date will be re-scheduled. A new trial date will likely be set at a pre-trial conference scheduled for October 6, 2010.
The following four defendants pleaded guilty have entered guilty pleas or are scheduled to enter guilty pleas this month:
- Bryan J. Moorman, 68, of Mesquite, Texas, who acted as a real estate appraiser, pleaded guilty to one count of wire fraud. If the Court accepts the terms of his plea agreement, he faces a maximum sentence of 27 months in prison and a $250,000 fine.
- Patricia Ortega Suarez, 55, of Dallas, an escrow officer, pleaded guilty to two counts of making a false statement to HUD. If the Court accepts the terms of her plea agreement, she faces a maximum sentence of 30 months in prison and a $250,000 fine.
- Jermaine Frederick Frazier, 37, of Desoto, Texas, who acted as a loan processor and Lockhart employee, pleaded guilty to one count of conspiracy to commit wire fraud. If the Court accepts the terms of his plea agreement, he faces a maximum sentence of five years in prison and a $250,000 fine.
- Donna Lois Kneeland, 45, of Grand Prairie, Texas, also an escrow officer, pleaded guilty to one count of making a false statement to HUD. She faces a maximum sentence of two years in prison and a $250,000 fine.
In February 2010, a fifth defendant, Michael Anthony Caldwell, 49, of Arlington, Texas, who was a manager for a title company, pleaded guilty to one count of making a false statement to HUD; he faces a maximum sentence of two years in prison and a $250,000 fine.
The following six defendants presently have opted for a trial:
- Eugene J. Lockhart, Jr., 48, Carrollton, Texas
- William Randolph Tisdale, Jr., 45, formerly of Dallas, but currently serving a federal sentence on unrelated charges
- Hubert Jones, III, 39, of Garland, Texas
- Lendell Beacham, 51, of Desoto, Texas
- Suzette Switzer Hinds, 45, of Dallas
- Scott David Eller, 44, of Mansfield, Texas
The indictment alleges that Eugene J. Lockhart, Jr., a former player with the Dallas Cowboys, and the other defendants, were part of a mortgage fraud scheme in the Dallas area from 2001 through 2005. The six defendants going to trial are all charged with one count of conspiracy to commit bank fraud and wire fraud. In addition, Lockhart and Beacham are each charged with one count of wire fraud; Tisdale is also charged with two counts of bank fraud; Jones is also charged with two counts of bank fraud and one count of wire fraud; and Hinds is also charged with one count of bank fraud.
According to the indictment, Lockhart was involved with several real estate entities, including America’s Team Mortgage; America’s Team Realty; America’s Team Funding Group; Ace Mortgage; Cowboys Realty; Cowboys Mortgage and KLT Properties. Tisdale was involved with Pinnacle Development and Realty Corporation; Atilla Capital Corporation; and KLT Properties. Jones was involved with Pinnacle Development and Realty Corporation and Atilla Capital Corporation. Beacham was the owner of Ace Mortgage and was involved with Cowboys Mortgage. Hinds was an escrow officer who allegedly falsely certified HUD-1 settlement statements in connection with several fraudulent residential property closings. Eller was a Certified Public Accountant (CPA) who allegedly signed several income verification letters on CPA letterhead for several borrowers which falsely represented to lenders that Eller knew the named borrower and also falsely represented that the borrower was self-employed with a consistent income from the listed business.
The indictment alleges that the defendants ran a scheme in which they located single-family residences for sale in the Dallas area, including distressed and pre-foreclosure properties, and negotiated a sales price with the seller. They created surplus loan proceeds by inflating the sales price to an arbitrary amount substantially higher than the fair market value of the residence.
Generally, the defendants recruited individuals to act as nominee or “straw purchasers” or “straw borrowers,” promising to pay them a bonus or commission of between $10,000 and $20,000 for their participation in a particular real estate transaction. The conspirators caused the loan applications for each straw borrower to include false financial information, often including inflated false income figures to conceal the borrower’s true financial condition so that the lender would more likely approve the loan. The conspirators concealed from the lenders the true status, financial condition and intentions of the named borrowers, knowing that loans would not likely be approved if the lender knew the true role, credit worthiness, and risk of each straw borrower. The conspirators falsely represented in loan documents that the straw purchaser intended to use the property as their primary residence, intentionally concealing from the lender that each straw borrower viewed himself as an “investor,” who never intended to occupy the home.
The indictment also alleges that the conspirators caused bogus and fraudulent “marketing fees” to be listed on loan closing documents to provide a means for the conspirators to receive surplus/excess loan proceeds often generated by fraudulently inflated appraisals.
The scope of the conspiracy involved approximately 54 fraudulent residential property loan closings resulting in the funding of approximately $20.5 million in fraudulent loans.
According to documents filed regarding Frazier’s September 22 guilty plea, he admitted participating in the fraudulent conduct relating to the purchase and sale of approximately 20 residential properties. Always at Lockhart’s direction, Frazier helped Lockhart deceive and defraud the lender in several fraudulent closings by using fraudulent loan applications with inflated borrower income and false representations that the borrower intended to use the residence as their primary residence; fraudulent HUD-1 settlement statements with false entries regarding the borrower’s source of funds for the down payment, HUD-1 false entries relating to the actual buyer/seller; and fraudulent occupancy affidavits.
In court filed documents, Frazier admitted that he knew he was assisting Lockhart deceive mortgage lenders and commit mortgage fraud. For several properties, Lockhart told Frazier (on behalf of Cowboys Mortgage) to sign investment assistance agreements with several recruited borrowers. In these agreements, Cowboys Mortgage promised to pay all of the borrowers’ closing costs, pay the first two mortgage payments and pay a $15,000 - $20,000 bonus to the named borrower. With Lockhart’s knowledge and at his direction, these agreements were always concealed from the lender. Although Lockhart and Frazier informed the recruited borrowers that they were only “investors,” the loan documentation submitted to the lender falsely represented that the named borrower intended to use the property as the borrower’s primary residence. In addition, Lockhart used his own funds to purchase the “down payment” check for the named borrower and often personally gave Frazier the purchased cashiers check with instructions to take the check to the closing for that property.
On September 15, Moorman pleaded guilty and admitted doing at least four fraudulent appraisals for Lockhart while Lockhart was doing business as America’s Team Mortgage and Cowboys Mortgage. Lockhart pressured Moorman and told him that he needed to “hit those numbers,” that is, the contract sales price. Lockhart suggested to Moorman that Lockhart would pay Moorman higher fees if he would submit higher property values on appraisals he did for Lockhart. Moorman refused to accept higher than normal appraisal fees, telling Lockhart it would look too obvious that Moorman was being bribed. Moorman also stated that Lockhart took him to a Dallas Cowboys football game to influence him to produce fraudulently inflated appraisals. Moorman also said he was afraid of Lockhart and felt threatened by Lockhart’s physical presence and manner.
On September 15, Suarez also pleaded guilty and admitted that she acted as the escrow officer on several fraudulent residential closings that were brought to her by Jermaine Frazier, Lockhart’s employee. Suarez referred to these closings as “Frazier deals”. These deals involved two contracts showing the same seller (Grand Homes) selling the same property to two different buyers with two different sales prices at the same time. Suarez also stated that she prepared HUD-1 Settlement Statements with false entries for these closings. On these “Frazier deals”, Suarez also stated that without the knowledge of the lender, Suarez fraudulently diverted loan proceeds to a third party that the lender thought was being used by the named borrower to purchase the property. Although Suarez knew that it was highly likely that illegal conduct would take place, she deliberately closed her eyes to what otherwise would and should have been known to her.
On September 29, licensed escrow officer co-defendant Donna Lois Kneeland is scheduled to plead guilty to a felony offense before Judge Solis. Kneeland will plead to a charge related to fraudulent conduct alleged in Count One of the indictment. In filed plea papers, Kneeland admitted that in February of 2004, she signed and falsely certified a HUD-1 settlement statement related to the sale of 10114 Riverbend Drive, Rowlett, Texas. Kneeland stated that she knew that seller Grand Homes intended to sell this property to Lockhart’s company, Cowboys Realty. However, Kneeland falsely certified a HUD-1 sent to the lender which falsely represented to the lender that Grand Homes sold this property to the named borrower listed on the loan papers.
An indictment is an accusation by a federal grand jury and a defendant is entitled to the presumption of innocence unless proven guilty. However, upon conviction: the conspiracy count carries a maximum statutory sentence of 20 years in prison, a $250,000 fine and restitution; each bank fraud count carries a maximum statutory sentence of 30 years in prison, a $1 million fine and restitution; and each wire fraud count carries a maximum statutory sentence of 20 years in prison, a $250,000 fine and restitution. In addition, the indictment includes a forfeiture allegation which would require the defendants, upon conviction, to forfeit various sums of money, totaling up to $20.4 million.
The case is being investigated by the FBI. Assistant U.S. Attorneys David L. Jarvis and Mark Penley are prosecuting.