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TIM GRANTThe former manager of the high-flying mortgage mill, now defunct, will plead guilty to bank and wire fraud and cooperate with authorities.
TAMPA - The former manager of GreatStone Mortgage of Tampa has agreed to plead guilty to conspiracy to commit bank fraud and wire fraud and will cooperate with a continuing federal investigation of the defunct loan mill.
Federal authorities say William Jones conspired with other GreatStone executives, who face no criminal charges so far, to generate at least 930 bogus mortgage loans. The loans allegedly cost banks $68.5-million and cost the federal Department of Housing and Urban Development $9.5-million.
Former GreatStone employees say Jones ran a high-pressure telemarketing operation where loan officers peddled high-risk mortgages to homeowners across the country. Jones reportedly rallied his sales force with calls to act like "pirates and thieves."
Top salespeople at GreatStone were indoctrinated into an elite group at the mortgage company called the "Skulls," reporting directly to Jones. They hung black banners bearing a skull and crossbones from their desks.
GreatStone's troubles were first revealed by the St. Petersburg Times in late 2000 after company executives created a stir in the Hamlet, a Carrollwood subdivision.
The GreatStone executives cruised the Hamlet's quiet streets in a fleet of black luxury cars, offering top dollar for homes in the neighborhood.
Corey Brower, the company's chief financial officer, announced an ambitious plan in February 2001 to turn the Hamlet into a GreatStone company retreat with a high security wall and a guarded entrance.
But within months of that announcement, federal housing authorities placed GreatStone on probation and accused the company of predatory lending practices.
The company, which once had 800 employees and did about $1-billion in mortgages a year, surrendered its Florida mortgage license in September 2001 rather than allow state banking authorities to audit its files.
In January 2002, the high-flying company that Brower started with his childhood friend Steven Cohn was permanently suspended from underwriting government-backed loans.
The plea agreement Jones reached with federal officials contends he did not act alone in the conspiracy to defraud government agencies and banking institutions. His attorney, Tampa lawyer Norman Cannella, said Jones will get a lighter sentence in exchange for helping the government's investigation of GreatStone.
"Mr. Jones has agreed to cooperate with the government," Cannella said. "He does not possess any of the money the banks or the government lost. He's broke."
Cannella said Jones, who is about 50 years old, no longer works because of health problems. He lives in Tampa.
In addition to the conspiracy charges, Jones pleaded guilty to making false statements to HUD.
He faces a sentence of as long as seven years in prison, up to $500,000 in fines and up to four years of probation. Jones also could be ordered to make restitution to any victims.
The joint investigation by the IRS, the FBI and HUD reveals an elaborate scheme Jones participated in starting in late 1998 or early 1999, when GreatStone began experiencing financial difficulties.
The company obtained money by submitting loan documents to banks for mortgages GreatStone had already funded with money obtained from other banks.
"The conspirators would change the date on a copy of the promissory note and forge the signature of the mortgagee," the agreement says. It became a "pyramid scheme" in which the conspirators used money from fraudulent mortgages to repay earlier loans fraudulently obtained.
Since the banks would wire loan money only to the title company that had been chosen to handle the closing of the mortgaged property, Jones and other GreatStone executives "created sham title companies in various states throughout the nation."
The plea agreement says GreatStone executives also extended a series of actual mortgage loans to non-qualified buyers or in amounts in excess of FHA underwriting guidelines. They falsely certified that the loans met FHA criteria for insurance.
"The conspirators concealed lines of credit they maintained with several of the victim financial institutions" from auditors for the Government National Mortgage Association, the plea papers say, "in order to create the illusion that GreatStone was a financially solvent entity."