Documents show extent of fraud scheme

The documents also contain a list of the losses on foreclosures from American Value Home sales from November 2004 to December 2006, with many of the homes in question located on Christopher Court, Saddlewood Drive, Cottonwood Drive and Southwood Lane in Shelbyville.

According to the FD-302 forms, used by the FBI as summaries of interviews, McMahan approached Ritch in the spring of 2003 at his American Value Homes office in Shelbyville.

The FBI documents say that McMahan devised a plan for selling Ritch's houses to buyers with poor credit by submitting asset-stated income loans to various lenders.

"McMahan told Ritch the purchasers would need Ritch to make the downpayments on the houses in order to qualify for the loans," the summaries of the FBI interviews state. McMahan suggested that Ritch could also help qualify the purchasers by paying debts they owed, the documents say.

By providing the funds to the buyers for the down payments and paying their debts, Ritch knew that constituted "illegal seller concessions," but he "had a large inventory of houses, so he (Ritch) decided to go along with McMahan's plan to qualify uncreditworthy purchasers."

At first, McMahan would provide Ritch with the name of the buyer and the amount of the down payment, and Ritch would wire the money to the buyer's checking account. But after doing this about four times, Ritch told the FBI he became concerned "that the wires of the illegal payments to the purchasers could be readily traced."

Embezzlements detailed

So, in November 2004, Ritch and McMahan decided that Ritch would mail the down payments for the buyers to a company McMahan created called Mortgage Processing Services.

That same month, Ritch bought Cameron Escrow in Smyrna from Snow, renamed it Value Title and hired Snow as the sole employee of the company.

According to the FBI interview summaries, "Snow had embezzled $132,000 from Cameron Escrow, so Ritch and McMahan believed she would be likely to follow their instructions without complaint."

The documents also stated that Snow "expressed a desire to profit from the scheme and was willing to follow instructions from McMahan and Ritch."

Ritch told the FBI he began writing checks to Mortgage Processing Services for the down payments to be used at closing in January 2005, adding that Ritch's son-in-law, Zack Curry, signed a number of the checks from American Value Homes to Mortgage Processing Services, with Curry telling Ritch the amounts that McMahan had quoted.

FBI documents state that Value Title moved its offices from Smyrna to Shelbyville in October 2005, sharing a building with American Value Homes and Mortgage Processing Services.

Ritch told the FBI that sometime in 2006, McMahan suggested that a portion of the loan proceeds that went into the escrow account of Value Title could be used for the down payments.

"After the loan proceeds were deposited into the escrow account of Value Title, McMahan would instruct Snow to write a check to Mortgage Processing Services in the amount of the downpayment," the FBI summary states, with McMahan explaining that he devised this process to conceal Ritch's payments of the down payment funds to the buyers.

Snow told the FBI that she discovered in March 2006 that one of the homes Ritch sold in Southland Estates in Shelbyville had no construction loan.

"McMahan secured a loan for the buyer ... and the lender wired the $99,000 loan proceeds into the escrow account of Value Title," the FBI documents state. "Snow and McMahan sent Ritch a settlement statement showing a construction loan had been paid, and each kept approximately $45,000 of the loan proceeds."

Multiple homes involved

In December of that year, McMahan told Ritch about several investors who wanted to buy multiple homes and were willing to pay 85 percent of the sale price on each house bought.

"McMahan would secure 100 percent financing on each house and give the purchasers the extra 15 percent as a 'rebate,'" the FBI summaries said. Under this plan, John Henderson, Jeff Dotson, Mark Charlton and Molly Worrell, identified as McMahan's girlfriend, each bought multiple houses from Ritch.

Ritch told the FBI he was reviewing records of these multiple purchases on Dec. 21, 2006 when he noticed the houses were listed as "owner occupied" on the title documents.

He knew that the buyers had bought the homes as rental property, so Ritch confronted Snow about the false entries on the title documents. The FBI summaries said that Snow admitted to completing the title documents as if each property were owner occupied and to receiving $2,000 for each property she falsified as owner occupied.

The FBI summaries say that Ritch became uncomfortable with providing the down payments in early 2005 and told McMahan "we need to get out of this," but McMahan told Ritch that ending the process "would cause problems for a number of people involved in the scheme."

"McMahan told Ritch he (McMahan) had listed Focus Resource Group as a false employment for many of the purchasers on their loan application. McMahan listed John Henderson as the verifier for employment with Focus Resource Group, and McMahan paid Henderson to falsely verify the employment of several purchasers," the FBI summaries state.

Ritch also told the FBI that he had "jokingly remarked" to McMahan in late 2004 or early 2005 that if he didn't shape up "the judge would shape you up." McMahan replied to Ritch, "I've been there," explaining that he had served time in a federal prison camp in Marion, Ill. for submitting false invoices on HUD houses.

Snow told the FBI that Ritch closed American Value Homes and Value Title in December 2006 and that Ritch believed that his son-in-law had embezzled money from American Value Homes.

Snow also said that during the period she worked for Value Title, she received an annual salary of $60,000, a total of $90,000 from the loan overages McMahan embezzled and shared with her and $45,0000 from loan proceeds on the house with no construction loan that she and McMahan embezzled.