Manager of Mortgage Finance Company Convicted in Federal Court of 28 Counts of Fraud

A manager of a company that provided short-term mortgage loans was convicted of 28 counts of fraud, including mail, wire, and securities fraud. U.S. v. Alexander, et al, No. 5:10-cr-00730, verdict (N.D. Cal., Sept. 3, 2013). The alleged scheme involved soliciting investors through one or more companies to invest money for use in making mortgage loans. The government accused the defendant, along with two co-defendants, of appropriating investors’ funds for personal use.

The defendant, Michael Swanson, according to the indictment filed on October 10, 2010, was the vice president of APS Funding, Inc., a company established to act as a “hard money” lender that made “short-term, high-interest, fixed-rate mortgage” loans. Alexander, indictment at 2. The other two defendants also held executive positions. All three defendants established an investment fund called Greenlight after an earlier fund created by the co-defendants reached its $4 million funding cap. The defendants solicited investors to purchase “Class A units,” with the promise that they would invest the funds in “hard money” loans through APS and pay “preferred returns” to the investors. Id. at 3-4.

Prosecutors accused the defendants of failing to “make efforts to locate borrowers,” or to take other actions to further the business of APS. Id. at 5. The defendants allegedly appropriated up to ninety percent of the invested funds for themselves, and paid preferred returns out of money received from new investors rather than income generated from loans. Id. at 6. About sixty investors had given the defendants more than $7.9 million by December 2009. Id. at 8.

The indictment states that the defendants defrauded investors by misrepresenting information about loans made by APS, failing to invest funds as promised, submitting misleading accounting statements to investors, appropriating investor funds for personal use, making material misrepresentations to tax preparers, and concealing the actual use of the funds. The three defendants were charged with:
– One count of conspiracy to commit mail and wire fraud, 18 U.S.C. § 1349;
– Thirteen counts of mail fraud, 18 U.S.C. § 1341;
– Fourteen counts of wire fraud, 18 U.S.C. § 1343;
– Two counts of securities fraud, 15 U.S.C. §§ 78j(b) and 78ff and 17 C.F.R. §§ 240.10b-5 and 204.10b5-2; and – Thirteen counts of “engaging in monetary transactions in property derived from specified unlawful activity,” 18 U.S.C. § 1957(a).

Swanson went to trial on the mail, wire, and securities fraud charges. A jury returned guilty verdicts on all but two of the counts. It found him not guilty of mail fraud in Count Two of the indictment, which involved a “welcome letter” sent by the investment fund that preceded Greenlight in April 2008. Alexander, indictment at 10. The jury also found him not guilty of securities fraud in Count Twenty-Nine, which involved a sale of securities to an investor in March 2008. Id. at 13. The indictment states that Swanson joined the other defendants’ business in 2008, so these two counts may have involved incidents that allegedly occurred before his involvement.

Defendants in criminal cases should consult with an experienced criminal defense attorney in order to ensure that their constitutional and procedural rights are recognized and protected. Michael J. Brown has worked in law enforcement and as a prosecutor, and he has fought for west Texas defendants for more than twenty years. Contact us today online or at (432) 687-5157 to schedule a confidential consultation to discuss your case.

Web Resources:

U.S. v. Alexander, et al (PACER registration required), No. 5:10-cr-00730, U.S. District Court, Northern District of California
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