Yet another title business owner/operator has gone down hard for his participation in a fraud that apparently garnered him nothing more than his ordinary title fees.
Jerry D. Kerley, 58, of Kodak, Tennessee, a title attorney who owned and operated Guaranty Land Title in Sevierville, Tennessee, was convicted by a jury last Friday of all 14 felony counts for which he was on trial, including wire fraud, bank fraud, conspiracy, money laundering, and making false statements, for his role in a $6 million mortgage fraud scheme.
According to a report in the Knoxville News-Sentinel, testimony at the trial indicated that the scheme originated when a developer, Kenneth Lee, approached another developer who he allegedly owed a large sum of money, Jeffrey Whaley, with a plan that would get Whaley the money he was owed. Unfortunately for all involved, the plan was an illegal straw buyer scheme, which Lee recruiting bogus buyers for a group of resort cabins that Whaley was trying to sell off. The straw buyers recruited for the scheme, in many cases friends or family of Lee's, were promised that they would not have to make a down payment or mortgage payments for the property, would receive cash at closing, and would share in the profit following a resale of the property. Lee and Whaley siphoned off large sums from the deals for themselves.
A mortgage broker, Mary Bivens, was brought into the scheme, to concoct and submit fraudulent loan applications. Kerley was brought in to close the deals-- hiding the true nature of the transactions from the lender, including the sources and destination of money before and after the closings, and the fact that purchase prices disclosed to the lender were inflated. In total, Citizens Bank and Sun Trust Mortgage made a total of over $6 million in loans over eight transactions. The loans soon went into default, and the banks were stuck with $2.2 million in losses.
When the scheme fell apart, developer Lee and mortgage broker Bivens made plea deals, agreeing to cooperate with authorities by testifying against their alleged co-conspirators Whaley and Kerley.
Kerley chose to fight the charges. His attorney tried to use the fact that Kerley had not profited from the scheme as all the others had. The developers and the mortgage broker had all pocketed "equity milk" from the fraudulent loans, according to the testimony, his lawyer argued. Kerley only collected his normal title fees.
Prosecutors countered that his normal fees were all the motivation that Kerley needed to participate in the fraud, since Whaley was a major client of Kerley-- a "cash cow" by virtue of the business he sent Kerley's way.
Kerley claimed he had no idea that banks weren't checking out the borrowers financial credentials to detect fraudulent transactions-- he assumed they were taking prudent underwriting steps to protect their interests. According to this line of Kerley's defense, Kerley was apparently assuming that if the banks weren't raising objections in vetting the loans, then he assumed the deals were legitimate. His lawyer portrayed him as being stuck between banks making risky loans and a fraud conspiracy that took advantage of those banks.
But after a two week trial and two days of deliberations, the jury did not find Kerley's defenses persuasive, and found him guilty on every count for which he was charged. Kerley is scheduled to be sentenced September 27th, and his sentence is likely to be much stiffer than fraudsters in similar conspiracies who had much more to gain from their crimes than Kerley ever did.