Ritch will admit guilt in fraud case

Real estate developer Roger Ritch has filed a notice of intent to plead guilty in his involvement in a multi-million dollar mortgage fraud scheme.

Ritch of Shelbyville along with William McMahan, Jonathan Henderson and Carrie Snow, all of Murfreesboro, were charged in May with bank fraud and money laundering in an alleged scheme involving hundreds of homes in Shelbyville.

The scheme involved the sale of houses by Ritch's company totalling approximately $30 million, and foreclosure on the fraudulent loans has resulted in a loss to lenders totaling approximately $2.4 million, according to the Bedford County Sheriff's Department.

Ritch will plead guilty to counts one and four of the federal indictment, which states that the defendant allegedly obtained financing under false pretenses and falsely represented the employment status and income of borrowers.

The notice also states that Ritch "understands that the government will dismiss the remaining counts of the indictment."

However, the date for Ritch's change of plea hearing has not yet been set, according to federal court records.

Both McMahan and Snow have already changed their pleas to guilty. Snow is to be sentenced on Nov. 2 in Chattanooga, while McMahan is scheduled to be sentenced on Nov. 23 before District Judge Mattice.

Bradley Aydelott, who was indicted on the same charges in July, also pleaded guilty and has a change of plea hearing set for Sept. 21.

How it worked

According to federal court documents filed in relation to McMahan's guilty plea, the gist of the conspiracy was to sell houses Ritch had developed, but were not selling fast enough for a positive cash flow.

"McMahan caused false statements to be made on loan applications in order to obtain loans for non-existent or unqualified buyers," the court documents state.

"He misrepresented the amount of down payments made by the borrowers. He also falsely represented the employment status and income of borrowers."

Federal prosecutors said that the five defendants "frequently misrepresented the sales price to borrow more money than necessary to make the purchase."

"McMahan would run a credit history on the potential buyer and determine how large a cash payment would be necessary to boost the buyer's creditworthiness. He would then direct Ritch to put the money in the buyer's account and take it back out after closing."

Aydelott and Henderson acted at McMahan's direction, prosecutors said, with Aydelott entering false statements on the loan applications indicating the purchaser was employed by Focus Research Group.

"He then faxed the applications to defendant John Henderson so that Henderson could falsely verify the purchaser's employment with Focus Research."

Aydelott advised he received $400 for each of the false loans and estimated he received a total of $100,000 from the false loans, federal prosecutors say.

"McMahan paid Henderson $1000 on each deal to misuse his position at Focus Research to verify would-be buyers' employment at the firm," the documents read.

The funds were sent to the title company acting through Snow, who then wrote checks from bank accounts in amounts greater than $10,000 to Ritch, the seller.

Henderson and McMahan both purchased properties and obtained financing under false pretenses, federal authorities claim.

"On some occasions, McMahan applied for loans in an amount 5 percent over the amount needed to purchase the home," according to the documents.

The lender wired the loan proceeds to Snow, who then wrote a check payable to Aydelott in an amount 5 percent over the amount needed to purchase the home.

Aydelott endorsed and cashed the checks and delivered the cash to McMahan, who divided the cash between himself, Aydelott, and Snow.

Prosecutors say these transactions were conducted through federally insured financial institutions in Shelbyville and elsewhere.

Assistant U.S. Attorney Gary Humble said last month that the fraud count could bring a maximum sentence of 30 years and a $1 million fine and the money laundering charge could result in a maximum sentence of 10 years and a $500,000 fine.

However, Humble doubted that the defendants would receive that much time in prison.

The five are free after signing an agreement which requires a $20,000 bond that can be revoked by a federal judge if the suspects do anything to violate the terms. Even a traffic ticket could place them back in federal custody.