Mortgage Fraud—DHS Employee

Last week we mentioned that a DEA agent had been indicted in Atlanta on embezzlement and money laundering charges. This week, a Department of Homeland Security employee has been arrested on mortgage fraud charges in Atlanta.^[1] Brinson Allen “allegedly used false qualifying information to buy a property … for $3.3 million” and he also allegedly “posed as an FBI agent to obtain multimillion-dollar mortgage loans.”^[2] He is specifically charged with attempting to commit bank fraud and conspiring to commit wire fraud by allegedly “using a falsely inflated income of up to $62,000 a month and [misrepresenting] that he had more than $1 million on deposit at Bank of America, SunTrust Bank and the Associated Federal Credit Union to obtain $2.5 million in mortgage loans.”^[3] (How a bank could believe that an FBI agent could possibly have an income of $62,000 a month is a mystery.)

While Mr. Allen has been charged with violations of 18 U.S.C. §§ 1343, 1344, and 371 only, he could have been charged under a number of statutes because there are two types of mortgage fraud activity alleged in this case. The first is falsifying loan applications, and the second is using inflated appraisals.

Falsifying loan applications is covered by 18 U.S.C. § 1014, and under this statute, it is a crime to knowingly make any false statement on any application for a loan for the purpose of influencing in any way the action of a federal credit union or any institution which has funds insured by the FDIC. A violation of section 1014 carries a punishment of up to $1,000,000, imprisonment for up to 30 years, or both. Many defendants who are charged with violations of both section 1344 and section 1014 challenge the charges on multiplicity grounds.^[4] However, courts have ruled that the same act can be prosecuted under both statutes: “Section 1014 contains an element not contained in § 1344, that is, proof that the statements were 'materially false.' Likewise, § 1344 encompasses a 'scheme or artifice to defraud,' which is not an element of § 1014."^[5] This is somewhat controversial, because some courts have ruled that prosecuting under both statutes is multiplicitous.^[6] The general trend, however, is to allow prosecutions under both statutes.

Inflated appraisals are also covered by section 1014, because it also applies to false statements on purchase agreements, as well as overvaluing land or property.

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[1] Metro Man Arrested in Mortgage Fraud Sting, bizjournals.com (via Yahoo!), Mar. 14, 2006.
[2] Id.
[3] Id.
[4] See, e.g., United States v. Fraza, 106 F.3d 1050 (1st Cir. 1997).
[5] Id. at 1053.
[6] See id. (citing United States v. Seda, 978 F.2d 779, 781 (2d Cir. 1992)).