IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
UNITED STATES OF AMERICA,
)INDICTMENT
)
Plaintiミ、
)
)
)CASE NO
V
R. ALLEN
)
)
SINCLAIR,
Defendant.
Title
18, United States Code,
Section 1344(2)
)
)
The Grand Jury charges:
GENERAL ALLEGATIONS
At all times relevant to this Indictment or other times specified:
1.
Defendant R. ALLEN SINCLAIR (*SINCLAIR') was the owner and operator
Newport Investments, LLC C'NI) and Newport Development, Inc. ("ND") located at
of
1 1
Overhill Road, Youngstown, Ohio.
2.
SINCLAIR advertised NI
as a real estate investment company
primarily in the
business of buying, renovating. and selling residential real estate properties. He maintained web
sites with the addresses: www.NewportWeBuyHouses.com and
www.NewportWeSellHouses.com.
3.
SINCLAIR was a licensed attorney in the State of Ohio, with
practitioner law office also located at I I Overhill Road, Youngstown, Ohio.
a private sole
4.
First Place Bank, Huntington National Bank, Wachovia Bank, Wells Fargo Bank,
lst County Bank, Ohio Savings Bank, MidFirst Bank,
JP Morgan Chase,
Citi Mortgage, Sun
Trust Bank, and Bank of America, were financial institutions as defined in l8 U.S.C. $ 20, in
that their deposits were insured by the Federal Deposit Insurance Corporation C'FDIC).
5.
Five ofthe mortgage loans involved in the scheme set forth below were insured
by the Federal Housing Administration C'FHA), which was an agency within the United States
Department of Housing and Urban Development
lenders by guaranteeing that
("HUD). FHA loan insurance
protected
ifthe borrower defaulted on a loan, the lender could foreclose
on
the mortgage, sell the properfy and seek reimbursement from the FHA for any losses resulting
from the default.
6.
One
ofthe mortgage loans involved in the scheme
set forth below was insured by
the Veterans Affairs ("VA"), which was an agency within the United States Department
ol
Veterans Affairs. VA loan insurance protected lenders by guaranteeing that ifthe borrower
defaulted on a loan, the lender could foreclose on the mortgage, sell the property and seek
reimbursement from the VA for any losses resulting from the default.
7.
D.K., an individual known to the Crand Jury but not charged herein, was the
managing partner at Commonwealth Land Title Agency ("CLTA," a,/Va Commonwealth
Suburban), located in Youngstown, Ohio. In the scheme set forth below, D.K. served as the
primary title agent for real estate transfers that SINCLAIR referred to CLTA.
8.
S.B.. an individual known to the Crand Jury but not charged herein, was the
administrative assistant to SINCLAIR, and also the treasurer for
NI.
S.B. handled all of the
paperwork for NI and ND, served as the notary public on deed transfers, and communicated
directly with sellers regarding payments to various lenders.
う乙
9.
SINCLAIR, by and through NI and ND, solicited money from multiple investors
within the Northem District of Ohio. Eastem Division. SINCLAIR enticed investors by off'ering
an opportunity to eam interest rates in excess
of
107o, when as
SINCLAIR, NI and ND then well
knew, they would not be able to pay the promised retums.
10.
SINCLAIR told investors their investments would be used for the acquisition and
renovation of multiple residential real estate properties in and around Youngstown, Ohio, when
as
SINCLAIR then well knew, many of the acquired properties needed little or no renovation.
I
l.
SINCLAIR converted
a
significant portion of the solicited investor funds lbr his
own personal benefit, and those ofND.
12.
a
D.K., at the direction of SINCLAIR, prepared multiple HUD- I 's which reflected
"cash" lender was involved in the transactions described in paragraphs l5 through 28 below.
The amount of the "cash" loans listed on the HUD-l's was the amount invested by each
respective investor and was listed as the "[p]rincipal amount of new loan(s)" on the HUD-l's.
SINCLAIR failed to disclose to the financial institutions that additional mortgages were incurred
for each property.
13.
As a result of SINCLAIR's false and fraudulent pretenses, representations and
promises, approximately five investors invested a total of approximately $147,000 in the
aggregate.
Statutory Violations
14.
From on or about December 12,2005, through on or about March 16, 2007,
SINCLAIR bought houses from individual sellers through land trusts he created for each specific
transaclion. SINCLAIR lraudulently misled the sellers to believe that the land trusts had
assumed their mortgage loans, but, in fact, SINCLAIR never informed the lenders or sought the
lenders' agreement to the supposed loan assumptions. After making minimal monthly payments,
SINCLAIR stopped paying the mortgages without notifuing the sellers, who were unaware that
they were still obligated on the loans. As a result, the mortgage loans went into default, which
caused substantial losses to many of the lenders and federal agencies that insured the loans.
15.
SINCLAIR generally offered
as his purchase price. the balance
ofthe existing
balance on the mortgage loan or loans on the house. In most cases, the seller agreed to transfer
title to lhe subjecl house to the respective land trusts based on SINCLAIR's false and misleading
assurances that the existing mortgage was assumed by the land trust, thereby discharging the
seller ofany further legal responsibility for the mortgage payments.
16.
SINCLAIR solicited potential sellers ofhouses subject to existing mortgage loans
through various means, including materials on the NI website, brochures distributed or mailed to
houses, media advertising, and contacts with
Realtors. He liequently targeted persons who were
likely to seek quick sales oftheir house for various reasons, including but not limited to:
17
.
A.
the seller's house was listed for sale, but had not sold;
B.
the seller had a change in employment. such asjob loss, transfer, or
retirement; or
C.
the seller had a recent, pending, or impending separation or divorce.
SINCLAIR crealed a separate land trust for each property that he acquired. By
the closing of the sale transaction, the property was deeded to the land trust with ND as the
grantor and beneficiary and NI as the trustee.
18.
For each transaction, SINCLAIR drafted and signed a trust agreement, which
listed SINCLAIR as the grantor and trustee for NI and ND. respeclively.
I
9.
SINCLAIR and each seller executed multiple agreements created by SINCLAIR
including a limited power of attomey; authorization to release information tiom existing lender;
4
declaralion of trust; assignment ofbeneficial interesU appointment of trustee; and, assignment
of
escrow. The agreements stated the amount and means by which the purchase price was payable,
which included a line beginning "'Subject to' the existing loan balance," followed by the lender
name, loan number, interest rate, other terms ol the mortgage loan, and the loan balance.
A
similar line provided the same inlormation for a second mortgage when applicable.
20.
SINCLAIR generally told the sellers he would either renovate and sell the
property, or find tenants on a rent-to-own program until the tenants could qualifu for a mortgage.
21.
Many sellers believed they were discharged oftheir mortgage loan obligations.
and made commitments to other housing costs and financial obligations, often including new
mortgage loans on new homes.
22.
Instead of
NI or the land trusts assuming the loans, SINCLAIR structured the
transactions to transfer the title ofthe houses to the land trusts, with the sellers still liable for the
mortgage balances. SINCLAIR did not notify, or cause anyone to notify, the lenders of the
purported loan assumptions because the lenders would have called the loans upon sale or
transfer. He also made sure that anyone who handled the title work or closing documents did not
notify the lenders.
23.
In all but one case, the title work and closings for SINCLAIR were handled by
D.K. at CLTA. In the other case, SINCLAIR ananged for a lawyer acquaintance to handle the
title work. At each closing. the seller executed
houses to a land
a warranty deed that transferred the subject
trust. CLTA (or the attomey) provided to the seller a U.S. Department of
Housing & Urban Development Settlement Statement C'HUD-l') that purported to disclose all
olthe seller's and buyer's costs in the transaction, including the cost ofthe property. All but one
of the HUD-I's falsely stated that the seller's mortgage was "assumed."
24.
SINCLAIR executed
a
HUD-I on behalf of NI for
each prope(y, leading the
sellers to believe that they sold their prope(ies to SINCLAIR's land
trust. The HUD-l's listed
each land trust as the borrower, and the sales price was listed as approximately the amount
ofthe
seller's assumed mortgage.
25.
After acquiring the properties as described above, SINCLAIR and S.B. tlpically
conveyed the properties to others through land contracts. After some period of time, typically
between two and six months, SINCLAIR continued to collect payments on the land contracts but
stopped making mortgage payments on the properties.
26.
After SINCLAIR stopped paying the mortgages, the sellers found themselves in
the position of continuing to owe the mortgage loan balances to the lenders without title to the
property. Lenders often contacted the sellers to obtain payment of the delinquent amounts. The
sellers then attempted to contact SINCLAIR to complain and seek redress. In a number
of
circumstances, SINCLAIR and/or S.B. told the sellers that the lender had made a mistake and
that NI would resolve the problem, then knowing the representation to be false. As the lenders'
demands for payment continued, sellers often found themselves unable to reach anyone at NL
SINCLAIR and S.B. did not answer the phone and failed to retum most phone messages.
27.
From in or around December 2005, through in or around March 2007, SINCLAIR
acquired approximately I 2 properties through the NI and ND land trusts.
6
The Grand Jury further charges:
Counts l-12
(Financial Institution Fraud)
28.
The allegations in paragraphs I through 27 of this Indictment are re-alleged and
incorporated by reference herein.
29.
From in or around December 2005, through in or around March 2007, and on or
about each of the dates set forth below, in the Northem District
olOhio, Eastem Division, and
elsewhere, SINCLAIR, aided and abetted by S.B. and D.K.. knowingly executed and attempted
to execute the scheme to obtain any of the moneys, funds, credits, assets, securities and other
property owned by and under the custody and control ofthe financial institutions listed below by
means offalse and fraudulent pretenses, representations, and promises, with each real estate
transfer constituting a separate substantive count.
ProDertr
Address
Collnt
371l Tylcr
l
つι
4523 Alderwood
Cantield,
Drive
OH
796 0rio Lanc
Youngstown,
００
9
ｙ
ｂ
7
7880 Hitchcock
OH
Youngstown,
OH
YoungstOwn,
Date of
Transfer
Lender
Loss Amount
12/12/05
Wells Fargo Bank
$161,06800
12/23/05
Chase Ilome Finance
S77,32700
02/02/06
Wells Fargo Bank
S71,57000
04/18/06
Wells Fargo Bank
S48,091 00
05/26/06
Huntington National
$47.88300
Rd
OH
591 5 Stillson
Place
OH
05/30/06
MidFirst Bank
S106,44000
Struthers,
OH
Austintown,
OH
Slruthers,
OH
Youngstown,
OH
08/04/06
Citi Mortgage
S26,77500
08/04/06
Wachovia Bank
S61.50000
09/01/06
Wells Fargo Bank
$78,13073
09/07/06
Ohio Savings & Loan
$76,10000
485 7th Strcct
4866 Darbyshire
Court
64 Walnut Street
6154 Glenwood
10
Canfleld,
OH
ｅ
ｈ
Ｓ
く′
6
&Statc
Drlve
５Ｍ
︲
６
３
，
つ
4
Ci●
Ave
Youngstown,
7
つ４
4564 Woodridge
Drive
119 S. Main
Street
Austintown,
OH
Austintown,
OH
All in violation olTitle
09/25/06
Bank of America
$55,700.00
03/16/07
Sun Trust Mortgage
$71 .500.00
18, United States Code, Section 1344(2).
A TRUE BILL
Original document - Signatures on file with the Clerk of Courts, pursuant to the E-Govemment
Act of2002.
United States v. R. Allen Sinclair
A TRUE BILL
FOREPERSON
STEVEN M DETTELBACH
Unitcd Staes Attomcy
By/%ι
多彩ノ
Ann C. Rowland
Deputy Criminal Chief
9