Saturday, March 26, 2011

Duo Cop Pleas To Income Tax Charges; Dodge Fraud Convictions In Alleged Sale Buyback Rental Flipping Scam That Left Unwitting Investors Holding Bag

In Fort Wayne, Indiana, The Journal Gazette reports:
  • A Fort Wayne man was sentenced to 2 1/2 years in federal prison Monday for tax charges stemming from a mortgage fraud scheme. Jeffery Radabaugh pleaded guilty in November, the day he was charged with failing to report income he collected from the scheme, which operated from 2005 to 2007.

  • He and Tobby Steele were both charged with felony charges of filing false tax returns. Radabaugh and two other people were also charged with misdemeanor charges of failure to file a tax return. [...] In his plea agreement, Radabaugh acknowledged being part of a mortgage fraud scheme that involved more than 100 distressed rental properties.

***

  • Radabaugh, an unlicensed real estate broker, admitted to paying mortgage brokers kickbacks to process the loans connected to the properties. Through his own real estate investment company, Radabaugh would locate rental homes for sale, negotiate a price representing the fair market value of the property, obtain an option on the property and then obtain an appraisal that was between 60 percent and 100 percent above the fair market price, court records said.

  • Radabaugh would then find a third-party buyer who would purchase the property at the inflated price. Much of the difference would be pocketed by Radabaugh and his company, to the tune of $20,000 to $35,000 per transaction, according to court documents.

  • Radabaugh promised the buyers he would find renters for the houses, manage the properties and then buy them back in three years. [...] Throughout the process, Radabaugh pocketed more than $2 million – money he failed to report as taxable income. Radabaugh also lied about the amount of money he made on his 2005 return, misreporting about $60,000 in income, according to court documents.

  • Steele, a Churubusco resident, admitted to filing a false tax return, misreporting more than $95,000 in income on his 2006 return, according to court documents. Springmann sentenced Steele to 15 months in prison in February, as well as a year on supervised release.

For the story, see Two sentenced in mortgage plot (Scheme involved more than 100 rental properties).

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