David Saks: Another Attorney Guilty of Scheme to Defraud Banks - $7.7 Million

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Another Attorney Guilty of Scheme to Defraud Banks - $7.7 Million

Biloxi Attorney Pleads Guilty to Creating a Scheme to Falsify, Conceal, and Cover Up Material Facts in Defrauding Two Banks and the Bankruptcy Court

U.S. Attorney’s Office March 20, 2014
  • Southern District of Mississippi (601) 965-4480

GULFPORT, MS—Stephen Richard Colson, 48, of Biloxi, pled guilty in federal court on March 19, 2014, to falsifying, concealing, and covering up material facts in connection with a scheme to defraud two banks and the Bankruptcy Court in violation of Title 18 Section 1001, announced U.S. Attorney Gregory K. Davis and FBI Special Agent in Charge Daniel McMullen. The government indicated at the guilty plea that it would seek restitution on behalf of the victims in the amount of $7,749,576.65.

Colson, a settlement agent and closing attorney, owned Prestige Title Inc. and Advanced Title and Escrow, both headquartered in Biloxi, Mississippi, with 18 office locations in Mississippi, Alabama, Florida, Georgia, Louisiana, and Texas. These offices handled loan closings for new mortgages and the refinancing of existing mortgages. In addition, Colson served as escrow agent for several condominium developments on the Mississippi Gulf Coast. As settlement agent on loan closings, Colson was required to establish trust accounts from which to disburse funds exclusively for activities related to each individual loan. These trust funds were not to be commingled with other personal or business accounts. However, a federal investigation into Colson’s activities revealed that Colson, through his business entities, willfully diverted funds from trust accounts for his own personal use and concealed shortfalls in those accounts by co-mingling funds from other accounts when making payments to financial institutions.

The scheme began in the summer of 2004 when Colson obtained a mortgage loan from a federally (FDIC) insured financial institution (the lender), using property he had titled in his name as collateral. Colson, as an agent for a title insurance company, issued a loan policy on the mortgage. Colson sold the property in September 2005 for cash and should have paid off the mortgage. However, he concealed the sale of the property by continuing to make payments on the loan until he filed for bankruptcy protection in September 2009. The lender then learned that it did not have a valid lien or mortgage on the property. This delay in learning that the FDIC insured institution did not have a valid lien was as a direct consequence of Colson’s scheme to conceal the fact that he had already sold and pocketed the proceeds without paying off the mortgage. The title insurance company ultimately paid $133,600 to the FDIC-insured institution to settle the claim.

The count to which he pleaded guilty was part of a larger scheme wherein Colson, through his title businesses, used funds generated in new real estate closings to pay off earlier closings. The larger scheme was discovered following the December 22, 2008 acquisition of a title insurance company for which Colson served as agent by a successor company. On February 6, 2009, the successor title insurance company initiated an audit of Colson’s business records on and discovered that Colson’s title companies had a shortage in funds for settlement of real estate closings. The successor title insurance company was forced to pay 54 claims from lenders, borrowers, and sellers and later prevailed in an adversary proceeding against Colson in Bankruptcy Court. Its claim of $4,904,627.37, plus attorneys’ fees and costs of litigation, were not discharged and must be repaid by Colson. The Bankruptcy Court also found that Colson’s use of his trust account “was akin to a Ponzi scheme in that Colson depended upon funds generated in new real estate closings to pay off earlier closings.”

In a separate adversary proceeding involving Colson, the Bankruptcy Court denied Colson’s attempt to discharge a private investor’s $2,000,000 claim.

In commenting on this case, SAC Daniel McMullen applauded the hard work and dedication of the FBI investigators, the U.S. Bankruptcy Court and Trustees, and the U.S. Attorney’s Office in unraveling this intricately woven scheme of fraud and deception. He also commended the title insurance company for bringing this matter to the attention of the FBI and assisting throughout the investigation.

The case was investigated by the Federal Bureau of Investigation and prosecuted by Assistant U.S. Attorney Jay Golden.

source: FBI

http://www.fbi.gov/jackson/press-releases/2014/biloxi-attorney-pleads-guilty-to-creating-a-scheme-to-falsify-conceal-and-cover-up-material-facts-in-defrauding-two-banks-and-the-bankruptcy-court?utm_campaign=email-Immediate&utm_medium=email&utm_source=fbi-in-the-news&utm_content=307684

 




David Saks



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Comment balloon 0 commentsDavid Saks • March 21 2014 09:59AM

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