$27M Mortgage Fraud Scheme Unfolds in North Dakota

$27M Mortgage Fraud Scheme Unfolds in North Dakota

Washington – In a shocking turn of events, two former officers of Arizona-based residential mortgage loan originator American Mortgage Specialists Inc. (AMS) pleaded guilty to their roles in a $27 million scheme to defraud North Dakota-based BNC National Bank.

Scott N. Powers, the CEO of AMS, and David E. McMaster, an AMS vice president, pleaded guilty to one count of conspiracy to commit bank fraud and wire fraud affecting a financial institution before U.S. District Judge Daniel L. Hovland in the District of North Dakota.

According to court documents, Powers and McMaster conspired from October 2007 to April 2010 to defraud BNC by making false representations regarding the financial and operational well being of AMS in order to obtain funding from BNC and personal benefits for themselves.

At the height of the financial crisis, Powers, McMaster and their alleged co-conspirators enacted a scheme to systematically defraud BNC Bank, said Assistant Attorney General Lanny A. Breuer. By deliberately misleading BNC about its assets and activities, Powers and McMaster threatened the viability of BNC and put its employees and customers at risk.

“When their mortgage lending company became unsustainable, they turned to fraud,” said Breuer. “By deliberately misleading BNC about its assets and activities, Powers and McMaster threatened the viability of BNC and put its employees and customers at risk.”

The scheme involved making false representations regarding the financial and operational well being of AMS in order to obtain funding from BNC and personal benefits for themselves. Powers and McMaster pleaded guilty to causing AMS to delay sending “pay down” emails, which would notify BNC when specific loans were sold.

“This prosecution is proof that illegal conduct related to the mortgage crisis impacted banks all across the country and even here in North Dakota,” said U.S. Attorney Timothy Q. Purdon. “Through close collaboration with our federal investigative partners and the Justice Department’s Criminal Division, we were able to secure today’s guilty pleas and begin to correct this wrongdoing.”

Powers and McMaster are scheduled to be sentenced on a later date. Their co-conspirators, Lauretta Horton, the former director of accounting at AMS, and David Kaufman, an outside auditor, are also facing charges for their roles in this scheme.