David Lee Morris, 55, and Derwin Jerome Blackshear, 50, both of Houston, have pleaded guilty to orchestrating a sprawling mortgage fraud scheme that bled millions from lenders across Texas. The duo admitted to one count each of conspiracy to commit wire fraud and bank fraud, with Blackshear additionally copping to bank fraud and running a fraudulent tax preparation business. Their crimes spanned nearly a decade, leaving a trail of foreclosures and financial wreckage in their wake.
The scheme ran from 2005 to 2009, centered on the A. Cole Realty Group in Houston, where Morris, Blackshear, and associates manipulated lenders into approving inflated mortgage loans for homes in Houston and Surfside. The focus? Overpriced beachfront properties. By using straw buyers—individuals paid to pose as legitimate homebuyers—they submitted loan applications riddled with lies about income, employment, and repayment ability. Inflated appraisals sealed the deception, allowing loans to sail through with ease.
Once funds cleared, the conspirators siphoned off excess cash. Morris and Blackshear kept a cut and dished out payoffs to other players, including the straw buyers. Every home bought through the scam eventually collapsed into foreclosure. Lenders were left holding empty deeds and a $4.4 million tab. The fallout was predictable: massive losses, shattered trust, and a federal investigation that wouldn’t let up.
But Blackshear’s fraud didn’t end in 2009. From 2012 to 2015, he ran a tax prep shop called Level One Tax Services across Houston, weaponizing it to file dozens of fake tax returns. False deductions, phantom dependents, and fabricated credits padded refunds that never should have been issued. The IRS says he caused a $251,323 loss to the U.S. Treasury—another grift added to the pile.
Sentencing looms on May 17, 2018, before Chief U.S. District Judge Lee Rosenthal. Both face up to 30 years in prison and a $1 million fine for the mortgage conspiracy. Blackshear faces an additional three years and a $250,000 fine for tax fraud. The hammer is coming down, and no amount of ill-gotten cash will buy them mercy.
As part of their plea deals, Morris agreed to pay $4,468,151 in restitution to defrauded banks and forfeit $1,460,170.51. Blackshear must repay $1,995,273 to the banks, $251,323 to the U.S. Treasury, and forfeit $629,774 in illegal proceeds. The FBI and Texas Department of Public Safety led the mortgage probe; IRS-Criminal Investigation handled the tax case. Prosecution is led by AUSA Robert S. Johnson and AUSA Jimmy Sledge Jr.—and they’re not done counting the damage.
Related Federal Cases
- Pierce Co. Hard Money Lender Emiel Kandi Facing Major Mortgage Fraud Charges · Washington
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- Former Dallas Mortgage Broker Pleads Guilty to Fraud · Texas
- Edinburg Woman Pleads Guilty in $4M Mortgage Fraud Plot · Pennsylvania
- Harvills Guilty in Fraud Scheme · Texas
Key Facts
- State: Texas
- Agency: DOJ USAO
- Category: Fraud & Financial Crimes
- Source: Official Source ↗
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