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Realty owner, roommate face fraud charges

POSTED September 24, 2010 9:07 p.m.

A federal grand jury indicted two Modesto men with several counts of mail fraud on the accusations they defrauded numerous elderly home owners in the area.

James Lee Lankford, 71, was charged with 49 counts of mail fraud.  Jon Vance McDade, 46, was charged with 10 counts of mails fraud and one count of bank fraud, according to the California Department of Justice.

Both men were arrested Friday morning in Pacific Grove and were scheduled to appear before a federal judge earlier that afternoon.

 

The indictment alleges that Lankford, who is the owner/broker of Century 21-Apollo Realty in Modesto, and McDade, who is Lankford’s roommate, devised a scheme to defraud elderly property owners and lending institutions out of money and property. Specifically, the indictment alleges that Lankford and McDade would find elderly property owners who wanted to sell their property with no listing agent and would then convince the elderly property owner to sell their home to one of them and enter into a “straight note” contract for a portion of the purchase price.

Under the contract the defendants would make interest-only payments to the seller for five to 10 years, with the principal amount owed to the seller at the end of that period. According to the indictment, the defendants then obtained conventional financing to purchase the same properties in the form of a mortgage from a lending institution, but did not disclose to the lending institution the seller-backed financing.

The indictment alleges that the defendants would divert the proceeds of the mortgage loan to themselves, and would lull the elderly property owners by mailing them monthly interest-only payments.

The indictment also alleges that Lankford and McDade made material misrepresentations on the loan applications, and in some instances, submitted falsified documents regarding monthly income to the lending institutions.

The defendants allegedly caused fraudulent loan applications to be submitted Countrywide, World Savings Bank, GreenPoint, Wachovia, Seaforth Mortgage, Aegis, Sierra Pacific, and Alliance Bancorp.

The indictment alleges that in many instances Lankford and McDade subsequently sought to refinance the property with another lending institution to draw out any remaining equity in the property.

In connection with refinancing transactions, Lankford allegedly deceived some of the elderly property owners into signing documents indicating that they had been paid in full. Many of the properties were later allowed to go into foreclosure, or were sold in short sales through Lankford’s real estate business.

The indictment alleges that the defendants’ conduct caused losses to the victim elderly property owners, lending institutions, and banks of at least $10 million.

The indictment also charges McDade with one count of bank fraud for submitting a loan application for the refinancing of property in the 3300 block of Wycliffe Drive in Modesto that contained false salary information and false representations regarding his assets and debts.

According to the indictment, this bank fraud caused a loss of approximately $580,000 to Wachovia/Wells Fargo Bank.The arrests were part of a multi-agency investigation under the Financial Fraud Enforcement Task Force. President Barack Obama established the interagency FinancialFraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from federal agencies, regulatory authorities, inspectors general, and state and local law enforcement.

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