They were presented as investment opportunities, with live marketing pitches at luxury hotels in Beverly Hills, Calif., and Washington, D.C., for a plan that claimed to return enough money to pay off the mortgage on a dream home.
But in reality, the plan was nothing more than a mortgage fraud Ponzi scheme, investigators say. The accused fraudsters allegedly deceived individuals to invest in sham business ventures, claiming that the revenue would be used to make payments on their home mortgages.
But authorities say that the investments weren't profitable, and instead left more than 1,000 people who had poured a minimum of $50,000 each into the alleged Ponzi scheme scrambling to make mortgage payments they believed were taken care of, while the company's executives drew six-figure salaries, were chauffeured around in luxury cars and traveled in style to 2007 NBA All-Star Game and Super Bowl.
The Justice Department announced today that five people are now facing charges that they promoted complicated plans under a network of companies, known collectively as "Metro Dream Homes," an alleged scheme that targeted homeowners and those ready to purchase homes.
A federal grand jury indicted Andrew Hamilton Williams Jr., 58, or Hollywood, Fla., Michael Anthony Hickson, 46, of Commack, N.Y., Isaac Jerome Smith, 46, of Spotsylvania, Va. and Alvita Karen Gunn, 31, of Hanover, Md., who served as executives in the company. They face conspiracy, wire fraud, bank fraud aiding and abetting and money laundering charges.
Prosecutors have charged a fifth defendant, Carole Nelson, 50, of Washington, D.C., in separate charging documents known as a criminal information.
According to the charging documents, the more than 1,000 individuals invested as much as $70 million, but once Metro Dream Homes stopped making the mortgage payments the homeowners were left having to make their own payments.
The alleged scheme purported to be a mortgage payment plan and required investors to pony up $50,000 per home involved in the program, plus fees of up to $5,000.
In return for the investment, "Metro Dream Homes promised to pay investors mortgage payments for up to seven years. At the end of seven years, MDH promised they would pay off the mortgage in return for one half interest in the home," Maryland U.S. attorney Rod Rosenstein said at a Justice Department press conference. "Many victims refinanced their existing homes and gave the proceeds to the defendants."
According to the indictment, the Dream Homes Program told investors that their investments would pay for ATMs, flat-screen TVs used to display paid advertisements and "Touch-N-Buy" kiosks that sold phone calling cards and business advertisements. The defendants set up seminars at luxury hotels to promote their alleged scheme, officials said.
"Metro Dream Homes business never generated any significant revenue. Metro Dream Homes made some mortgage payments but only by using money from new investors to pay mortgages of earlier investors," Rosenstein said.
"What we're looking at today is a mortgage fraud, a securities scam and a Ponzi scheme all rolled up into one," Maryland Attorney General Doug Gansler said. "The name of Dream Homes was truly a nightmare for so many people in Maryland, which resulted in so much money being lost."