33 Months For Midwest Man In Scam Targeting Homeowners In Foreclosure; Filed Phony Liens To Pilfer Proceeds From Fraudulently Financed Sales, Say Feds

In St. Louis, Missouri, the St. Louis Business Journal reports:

• [S]t. Louis real estate broker [Randall Penberthy Jr.] was sentenced to 33 months in prison Wednesday for a $500,000 bank fraud scam, the U.S. attorney’s office said.

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• Between late 2006 and October 2007, Penberthy recruited investors to buy residential real estate directly from distressed property sellers whose homes were in danger of foreclosure, prosecutors said.(1) With Penberthy’s assistance, investors would finance the purchases through bank loans.

• Penberthy would fraudulently place and record a second or third deed of trust on the property, typically in the name of First Choice or some other entity he controlled,(2) in order to make it appear that a legitimate second or third mortgage had been placed against the property, according to the U.S. attorney’s office.

• Bank loan funds were used to pay the sales price of the property as well as to pay off the fraudulent second or third mortgage, prosecutors said. Funds used to pay off the fraudulent second or third mortgage were paid to entities controlled by Penberthy, including First Choice and Midwest.

Source: St. Louis real estate broker gets 3 years jail time.

(1) Although the story is silent on this point, it is not unreasonable to suspect that Penberthy peddled bogus sale leaseback programs to dupe his financially strapped victims into doing business with him.

(2) Reportedly, Penberthy operated and controlled several business entities, including Covenant Financial LLC, First Choice Investment and Loan LLC and Midwest Management LLC.