Ritch sentencing date set for January

Jan. 4 is the date when real estate developer Roger Ritch will learn what his punishment will be after he pleaded guilty in federal court in Chattanooga Monday to his involvement in a multi-million dollar mortgage fraud scheme.

Ritch along with William McMahan, Jonathan Henderson and Carrie Snow, was charged in May with bank fraud and money laundering in a scheme involving hundreds of homes in Shelbyville.

Bradley Aydelott, who was indicted on the same charges in July, also pleaded guilty on Monday, but his sentencing date has not been set, according to federal records.

The Bedford County Sheriff's Department says 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.

On Monday, Ritch pleaded guilty to counts one and four of the federal indictment, which states that he obtained financing under false pretenses and falsely represented the employment status and income of borrowers.

Ritch was also referred to the federal probation office for a pre-sentence investigation, court documents state.

The charges

According to documents filed in federal court in Ritch's case, the scheme to defraud home buyers began "as early as January 2004" and continued until on or about Dec. 20, 2006.

The documents state that Ritch and McMahan agreed to qualify uncreditworthy home buyers in order to obtain loans to sell Ritch's houses.

"McMahan was engaged in the business of obtaining mortgages for a fee and operated in the name of Mortgage Processing Services," the documents state, while Ritch operated in the name of American Value Homes.

Ritch also owned Value Title, which was engaged in the business of searching titles, facilitating the exchange of money and title between the buyers and sellers, "and other related services necessary to the selling of real estate," the documents state.

Value Title had previously operated under the name of Cameron Escrow and was owned by Snow, who thereafter became Ritch's employee at Value Title. Aydelott was employed by McMahan from January 2004 until January 2007 and Henderson was employed by Focus Research Group and processed loan applications for Mortgage Processing Services.

The gist of the conspiracy was to sell houses Ritch had developed that 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."

False statements

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."

One of the fraudulent applications concerned a property located on Cottonwood Drive in Shelbyville and was mailed to Ownit Mortgage Solutions Inc., of Alpharetta, Ga., documents state.

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.

Aydelott estimated he received a total of $60,000 from loan overages.

Other sentencing

Assistant U.S. Attorney Gary Humble has said 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.

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.

Henderson entered a guilty plea on Sept. 15 and will be sentenced on Dec. 21.