Former NFL Player
Charged In $42mil Mortgage Fraud Scheme
Former NFL defensive end Dwight Sean Jones and four other men have been indicted on charges they allegedly collaborated in a multi- million dollar mortgage fraud scheme. Along with Jones, 44, now a sports agent, the 12-count indictment includes an attorney and real estate developer, two bank loan officers, and a real estate appraiser in the charges.
Jones who is currently living in Beverly Hills California turned himself into the FBI last week. He Jones played for the Los Angeles Raiders (1984-1987), Houston Oilers (1988-1993), and the Green Bay Packers (1994-1996). He was selected to the Pro Bowl after the 1993 season.
Jones's post NFL career has been spiked with problems. In December 2003 arbitrator Roger Kaplan ruled that he violated National Football League Players Association (NFLPA) regulations in his financial dealings with NFL player Ebenezer Ekuban, leading to Ekuban declaring bankruptcy in 2003. Former player Cris Dishman won a $396,000 judgment against Jones involving a bad investment. Jones received a two-year suspension, prohibiting him from representing NFL players until Feb. 26, 2005.
The mortgage fraud scheme allegedly reached every aspect of a real estate loan: seller, buyer/borrower, loan officer, appraiser, escrow officer, and title company.
Also included in the indictments are Jerome Karam, 44, of Friendswood, TX, a real estate developer and licensed Texas lawyer; Dwight Sean Jones, 44, of Beverly Hills, CA, a former NFL player and sports agent; Tommy Jay Trammel, 44, and David Ranostaj, 40, both of Houston and former loan officers with Southwest Bank of Texas, Bank of Houston and Whitney National Bank, and Jay Westrick, 44, of Houston, a real estate appraiser. All have surrendered to the FBI.
Each defendant is charged with 12 counts of bank fraud in connection with more than $42 million in loans funded by three different banks between 1999 and 2001. Bank fraud carries a sentence of up to 30 years in prison and a fine of up to $1 million.
The scheme was the same at each bank, according to the indictment – collusion between the seller, buyer/borrower, and lender to lend more money than the property was worth, and thereby reap personal profit. Most properties were appraised by the same appraiser and all closed at the same title company. The indictment alleges the loans to have been made between September 1, 1999 and April 5, 2001, and to have taken place at Southwest Bank of Texas, Bank of Houston, and Whitney National Bank. The value of all the loans made by the Defendants, pursuant to this alleged scheme, totaled more than $42 million.
According to the indictment, Jerome Karam was an attorney and real estate developer who specialized in converting apartments to condominiums. His alleged frequent co-investor was Defendant Sean Jones, a licensed sports agent for professional athletes. Allegedly, Defendant Jones both invested in many of Karam’s projects, and recruited additional investors from among his professional football player clients.
Defendants Karam and Jones allegedly induced the loans based on false representations as to the value of the property and the distribution of the loan funds. They did so, according to the charges, with the assistance of two former bank loan officers, Defendant Tom Trammell and Defendant David Ranostaj. The two men are accused of facilitating loans to unqualified lenders, and for amounts in excess of the properties’ values, in exchange for loan proceeds diverted to themselves at the closings. They kept their allegedly unlawful conduct a secret from their employers, who were the ultimate lenders.
In order to divert money from closings, Defendants Karam, Jones,
Trammell and Ranostaj allegedly created shell corporations, using names
that would disguise their true ownership. “Shell corporation” is a term
used to describe an entity established with legal formalities which
limits the personal liability of its owner(s). One purpose of a shell
corporation is to serve as a conduit through which assets pass so as to
conceal their true source, ownership, destination or control. For
example, the indictment alleges Defendant Karam created a company called
Jet Landscaping, which never actually did any business. But at closings
where investors or individuals bought condominium units from Karam, he
would supposedly include a line-item in the HUD-1 closing statement for
substantial fees owed to Jet Landscaping. That money would simply go
into Defendant Karam’s hands, according to the indictment. The line-item
disbursements were hidden from the lenders.
A closing statement is a document in a loan transaction which reflects the agreement between the lender and the borrower/buyer as to distribution of the loan proceeds. Closing statements are customarily on a form called HUD-1. The closing statement/HUD-1 contains an acknowledgment that it is a federal crime to knowingly make false statements thereon, and that the title company will disburse funds accordingly. Specifically, Defendant Karam allegedly directed that the signature page of the lender approved closing statement/HUD-1 be attached to a closing statement/HUD-1 with a different distribution of the seller’s funds. Thus, according to the indictment, the lenders were left to rely on the prior, fraudulently certified, closing statements/HUD-1s in deciding whether to fund the loans and in reviewing their loan portfolio.
“Mortgage fraud affects our communities and financial markets,
victimizing lenders, homeowners, and others,” said United States
Attorney DeGabrielle. “My office has dedicated significant resources to
work with our law enforcement partners to detect and prevent mortgage
fraud and to prosecute and hold accountable those responsible.”