Ken Paxton

Monday, August 11, 2008

Four Arrested in NE Texas Probe Involving Broad Mortgage Fraud Scheme

KAUFMAN Three previously indicted defendants operating a Navarro County mortgage scam were arrested Thursday by Texas Attorney General Greg Abbott’s investigators and other authorities. The arrests tie to new but related charges stemming from their more recent Kaufman County operations.

Kandace Marriott, 52, and Darrell L. Marriott, 55, of Gun Barrel City in Henderson County, as well as their daughter, Kally Marriott, 22, of Dallas County who has not been indicted, were arrested at their residences. They are being held on $5 million bond each in Kaufman County. Another defendant indicted in February, Karen Hayes, 57, of Kemp in Kaufman County surrendered to authorities Thursday and is also under $5 million bond.

The Office of the Attorney General received assistance from the Kaufman County Criminal District Attorney’s Office, the FBI and the U.S. Department of Housing and Urban Development’s (HUD) Office of Inspector General. Attorney General Abbott’s Criminal Prosecutions Division is leading the prosecution of the four defendants with the cooperation of district attorneys’ offices in Navarro, Henderson and Ellis counties.

The four, three of whom were previously indicted in Navarro County in February on separate but related felonies, were arrested and charged with five new felony offenses in Kaufman County. They schemed to forge signatures and falsify home loan applications for prospective homeowners who would not have qualified for loans backed by HUD. They are charged with:

  • Engaging in organized criminal activity;

  • Making false statements to obtain property or credit;

  • Securing the execution of documents by deception;

  • Misapplication of fiduciary property;

  • Money laundering

The four have operated a Kaufman County real estate business since late 2005 known as Torenia Inc., doing business as Energy Homes. Because the four continued to operate this allegedly fraudulent enterprise even after the announcement of the Navarro County indictments last February and have continued to operate this business until last week Attorney General Abbott’s prosecutors sought and received a court order Friday increasing their bonds to $100,000 each in the pending Navarro County case. The four closed their previous Navarro County business, One Way Home & Land, after litigation and investigations in late 2005 and moved their enterprise to Kaufman County under a new assumed name, Torenia.

Another defendant indicted in Navarro County last March, employee Bret Harwell, 45, pleaded guilty Friday in district court to securing the execution of a document by deception, a state jail felony. He will serve two years probation. One other defendant, Debra Grace, 47, pleaded guilty to a second-degree felony charge of securing the execution of a document by deception. She was placed on eight years probation.

The alleged scheme to defraud HUD cost the federal government and taxpayers millions of dollars. According to the state’s enforcement action, the four supervised the falsification of residential loan applications to ensure that the buyers’ loans would be approved by mortgage lenders. Investigators found that the defendants repeatedly falsified supporting documents and information, including the buyers’ rent payment verification statements, proof of employment and information about Social Security Administration benefits, among other documents.

The defendants targeted lower-income purchasers whose residential loans would be guaranteed by HUD. As a result, when unqualified buyers soon defaulted on their home loans, their mortgage lenders did not suffer the losses. Rather, HUD as guarantor of the loans, had to cover these costs. In the Navarro County scheme, investigators believe the four cost the taxpayers more than $3 million.