IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
UNITED STATES OF AMERICA, )INDICTMENT
)Plaintiミ、 )
)
)CASE NO
V
)
Title
18, United States Code,R.
ALLEN
SINCLAIR,
)
Section 1344(2))
Defendant.
)The Grand Jury charges:
GENERAL
ALLEGATIONS
At
all times relevant to this Indictment or other times specified:1.
Defendant R.ALLEN
SINCLAIR
(*SINCLAIR')
was the owner and operatorof
Newport Investments,LLC
C'NI)
and Newport Development, Inc.("ND")
located at 1 1Overhill
Road, Youngstown, Ohio.2.
SINCLAIR
advertisedNI
as a real estate investment companyprimarily
in the businessof
buying, renovating. and selling residential real estate properties. He maintained web siteswith
the addresses: www.NewportWeBuyHouses.com andwww.NewportWeSellHouses.com.
4.
First Place Bank, Huntington National Bank, Wachovia Bank, Wells Fargo Bank,lst
County Bank, Ohio Savings Bank,MidFirst
Bank, JP Morgan Chase,Citi
Mortgage, Sun Trust Bank, and Bankof
America, were financial institutions as definedin l8
U.S.C. $ 20, inthat their deposits were insured by the Federal Deposit Insurance Corporation
C'FDIC).
5.
Fiveofthe
mortgage loans involved in the scheme set forth below were insuredby the Federal Housing Administration
C'FHA),
which was an agencywithin
the United States Departmentof
Housing and Urban Development("HUD).
FHA
loan insurance protected lenders by guaranteeing thatifthe
borrower defaulted on a loan, the lender could foreclose on the mortgage, sell the properfy and seek reimbursement from theFHA
for any losses resulting from the default.6.
Oneofthe
mortgage loans involved in the scheme set forth below was insured bythe Veterans
Affairs
("VA"),
which was an agencywithin
the United States Departmentol
VeteransAffairs.
VA
loan insurance protected lenders by guaranteeing thatifthe
borrowerdefaulted on a loan, the lender could foreclose on the mortgage, sell the property and seek
reimbursement from the
VA
for any losses resulting from the default.7.
D.K.,
anindividual
known to the Crand Jury but not charged herein, was the managing partner at Commonwealth LandTitle
Agency("CLTA,"
a,/Va Commonwealth Suburban), located in Youngstown,Ohio.
In the scheme set forth below,D.K.
served as theprimary
title
agent for real estate transfers thatSINCLAIR
referred toCLTA.
8.
S.B.. an individual known to the Crand Jury but not charged herein, was theadministrative assistant to
SINCLAIR,
and also the treasurer forNI.
S.B. handled all of the paperwork forNI
andND,
served as the notary public on deed transfers, and communicateddirectly
with
sellers regarding payments to various lenders.う 乙
9.
SINCLAIR,
by and throughNI
andND,
solicited money frommultiple
investorswithin
the NorthemDistrict
of Ohio. EastemDivision.
SINCLAIR
enticed investors by off'ering an opportunity to eam interest rates in excessof
107o, when asSINCLAIR, NI
andND
thenwell
knew, they would not be able to pay the promised retums.10.
SINCLAIR
told investors their investments would be used for the acquisition and renovation ofmultiple
residential real estate properties in and around Youngstown, Ohio, whenas
SINCLAIR
thenwell
knew, many of the acquired properties neededlittle
or no renovation. Il.
SINCLAIR
converted a significant portionof
the solicited investor fundslbr
hisown personal benefit, and those
ofND.
12.
D.K.,
at the directionof SINCLAIR,
preparedmultiple
HUD- I 's which reflecteda "cash" lender was involved in the transactions described in paragraphs
l5
through 28 below. The amount of the "cash" loans listed on theHUD-l's
was the amount invested by each respective investor and was listed as the"[p]rincipal
amount of new loan(s)" on theHUD-l's.
SINCLAIR
failed to disclose to the financial institutions that additional mortgages were incurredfor each property.
13.
As a resultof SINCLAIR's
false and fraudulent pretenses, representations and promises, approximatelyfive
investors invested a total of approximately $147,000 in the aggregate.Statutory
Violations
14.
From on or about December 12,2005, through on or about March 16, 2007,SINCLAIR
bought houses fromindividual
sellers through land trusts he created for each specificlenders' agreement to the supposed loan assumptions.
After
makingminimal
monthly payments,SINCLAIR
stopped paying the mortgages without notifuing the sellers, who were unaware that they werestill
obligated on the loans. As a result, the mortgage loans went into default, whichcaused substantial losses to many of the lenders and federal agencies that insured the loans.
15.
SINCLAIR
generally offered as his purchase price. the balanceofthe
existingbalance on the mortgage loan or loans on the house. In most cases, the seller agreed to transfer
title
to lhe subjecl house to the respective land trusts based onSINCLAIR's
false and misleading assurances that the existing mortgage was assumed by the land trust, thereby discharging theseller
ofany
further legal responsibility for the mortgage payments.16.
SINCLAIR
solicited potential sellers ofhouses subject to existing mortgage loans through various means, including materials on theNI
website, brochures distributed or mailed to houses, media advertising, and contactswith
Realtors.
He liequently targeted persons who werelikely
to seek quick salesoftheir
house for various reasons, including but not limited to:A.
the seller's house was listed for sale, but had not sold;B.
the seller had a change in employment. suchasjob
loss, transfer, orretirement; or
C.
the seller had a recent, pending, or impending separation or divorce.17
.
SINCLAIR
crealed a separate land trust for each property that he acquired. Bythe closing of the sale transaction, the property was deeded to the land trust
with ND
as the grantor and beneficiary andNI
as the trustee.18.
For each transaction,SINCLAIR
drafted and signed a trust agreement, which listedSINCLAIR
as the grantor and trustee forNI
andND.
respeclively.I
9.
SINCLAIR
and each seller executedmultiple
agreements created bySINCLAIR
including a
limited
power of attomey; authorization to release informationtiom
existing lender;declaralion of trust; assignment
ofbeneficial
interesU appointment of trustee; and, assignmentof
escrow.
The agreements stated the amount and means by which the purchase price was payable,which included a line beginning
"'Subject
to'
the existing loan balance," followed by the lender name, loan number, interest rate, other termsol
the mortgage loan, and the loanbalance.
A
similar line provided the same inlormation for a second mortgage when applicable.
20.
SINCLAIR
generally told the sellers he would either renovate and sell theproperty, or find tenants on a rent-to-own program
until
the tenants could qualifu for a mortgage.21.
Many sellers believed they were dischargedoftheir
mortgage loan obligations. and made commitments to other housing costs and financial obligations, often including newmortgage loans on new homes.
22.
Instead ofNI
or the land trusts assuming the loans,SINCLAIR
structured the transactions to transfer thetitle
ofthe
houses to the land trusts,with
the sellersstill
liable for the mortgage balances.SINCLAIR
did notnotify,
or cause anyone tonotify,
the lenders of the purported loan assumptions because the lenders would have called the loans upon sale ortransfer.
He also made sure that anyone who handled thetitle
work or closing documents did notnotify
the lenders.23.
In all but one case, thetitle
work and closingsfor SINCLAIR
were handled byD.K.
atCLTA.
In the other case,SINCLAIR
ananged for a lawyer acquaintance to handle thetitle
work. At
each closing. the seller executed a warranty deed that transferred the subject houses to a landtrust.
CLTA
(or the attomey) provided to the seller a U.S. Departmentof
Housing&
Urban Development Settlement StatementC'HUD-l')
that purported to disclose all24.
SINCLAIR
executed aHUD-I
on behalf ofNI
for eachprope(y,
leading the sellers to believe that they sold their prope(ies toSINCLAIR's
landtrust.
TheHUD-l's
listed each land trust as the borrower, and the sales price was listed as approximately the amountofthe
seller's assumed mortgage.
25.
After acquiring the properties as described above,SINCLAIR
and S.B.tlpically
conveyed the properties to others through landcontracts. After
some period of time,typically
betweentwo
and six months,SINCLAIR
continued to collect payments on the land contracts but stopped making mortgage payments on the properties.26.
After SINCLAIR
stopped paying the mortgages, the sellers found themselves in the position of continuing to owe the mortgage loan balances to the lenders withouttitle
to theproperty.
Lenders often contacted the sellers to obtain payment of the delinquent amounts. The sellers then attempted to contactSINCLAIR
to complain and seek redress. In a numberof
circumstances,
SINCLAIR
and/or S.B. told the sellers that the lender had made a mistake and thatNI
would resolve the problem, then knowing the representation to befalse.
As the lenders' demands for payment continued, sellers often found themselves unable to reach anyone atNL
SINCLAIR
and S.B. did not answer the phone and failed to retum most phone messages.27.
From in or around December 2005, through in or around March 2007,SINCLAIR
acquired approximately I 2 properties through theNI
andND
land trusts.The Grand Jury further charges:
Counts
l-12
(Financial Institution Fraud)
28.
The allegations in paragraphsI
through 27 of this Indictment are re-alleged and incorporated by reference herein.29.
From in or around December 2005, through in or around March 2007, and on or about eachof
the dates set forth below, in the NorthemDistrict
olOhio,
Eastem Division, and elsewhere,SINCLAIR,
aided and abetted by S.B. andD.K..
knowingly executed and attemptedto execute the scheme to obtain any
of
the moneys, funds, credits, assets, securities and other property owned by and under the custody and controlofthe
financial institutions listed below by meansoffalse
and fraudulent pretenses, representations, and promises,with
each real estate transfer constituting a separate substantive count.Collnt
ProDertr
Address Ci●
&Statc
Date
of
Transfer
Lender
LossAmount
l
371l Tylcr
Drlve
Canfleld,
OH
12/12/05 Wells Fargo Bank$161,06800
つ
ι 4523 Alderwood
Drive
Cantield,
OH
12/23/05 ChaseIlome
FinanceS77,32700
つ
, 796 0rio Lanc
Youngstown,
OH
02/02/06 Wells Fargo BankS71,57000
4 y b e h S
36︲5
M
Youngstown,OH 04/18/06 Wells Fargo Bank S48,091 00
く ′ 7880 Hitchcock
Rd
YoungstOwn,
OH
05/26/06 Huntington National$47.88300
6 591 5 Stillson Place Youngstown,OH
05/30/06 MidFirst BankS106,44000
7 485 7th Strcct Struthers, OH 08/04/06Citi
MortgageS26,77500
0 0 4866 Darbyshire Court Austintown, OH 08/04/06 Wachovia BankS61.50000
9 64 Walnut Street Slruthers,
OH 09/01/06 Wells Fargo Bank
$78,13073
10
6154 Glenwood
AveYoungstown,
4564 Woodridge Drive Austintown, OH 09/25/06 Bank
of
America $55,700.00 つ 4 119 S. Main Street Austintown,OH 03/16/07 Sun Trust Mortgage $71 .500.00
All
in violationolTitle
18, United States Code, Section 1344(2).A TRUE BILL
Original document - Signatures on
file with
the Clerk of Courts, pursuant to the E-GovemmentUnited States v. R.
Allen
SinclairA TRUE BILL
FOREPERSON
STEVEN M DETTELBACH
Unitcd Staes Attomcy