Four Arrested in FBI Fraud Investigation 1/9/14
January 9, 2014
UPDATE: 10:20 P.M.
Midland - A 45 million-dollar real estate investment scheme has four Permian Basin residents facing serious felony charges. According to the indictment the scheme was on going for the last eight years and was a team effort amongst the four. Federal Agents say in eight years the group targeted 800 properties, all of which they were able to inflate the price and pocket thousands of dollars each sale.
Stephen Hilliard, Michael Cowan, Cynthia Hirsch and Berta Mcfaddin, all tied to the real estate industry and all charged with the same offenses; one count of conspiracy to commit bank fraud and one count of conspiracy to commit money laundering.
So how exactly were they able to do it? According to the indictment Hilliard and Cowan would purchase a property, that same day they would flip the property. To make the deal concrete McFaddin and Hirsch would complete paper work that would increase the property’s sale value. Hilliard and Cowan would then sale that property to themselves pocketing the cash.
In a days work the indictment alleges one sale could get the couple anywhere from 45 thousand dollars to 830 thousand dollars. With that money the two bought extravagant gifts ranging from new cars, to wave runners, to a vacation home, all of which the government is asking to be repossessed.
All but Cowan have been released on bond, but now have to follow strict rules.
They have been asked to surrender their passports, drugs, alcohol and firearms as well as let the court know if they make any purchases more than 500 dollars.
If convicted, each defendant faces up to 30 years in federal prison for bank fraud conspiracy, and up to 20 years in federal prison for money laundering.
UPDATE: 4:30 P.M.
Federal authorities have arrested three Permian Basin business owners and a title company executive charged in connection with a mortgage fraud scheme that involved approximately 800 real estate properties and about $45 million in loans announced United States Attorney Robert Pitman and Federal Bureau of Investigation Special Agent in Charge Douglas E. Lindquist, El Paso Division.
A two-count indictment, returned yesterday and unsealed this afternoon, charges 58–year-old Stephen Mark Hilliard, owner of Comeback Properties, LLC, Hilliard Properties, LLC, SMH Properties, LTD, and Katpast Enterprises, LP; 42-year-old Michael Duraine Cowan, II, owner of TLC Properties, LLC, and MCBW
Properties, LTD; 61-year-old Odessa real estate agent Cynthia Gayle Hirsch; and, 55-year-old Berta Laura McFaddin, Division Vice President of Administration for Stewart Title Company in Midland, with one count of conspiracy to commit bank fraud. Hilliard and Cowan are also charged with one count of conspiracy to commit money laundering.
The indictment alleges that from March 2003 until August 2011, the defendants were allegedly involved in a fraudulent “same-day property flip” scheme. According to the indictment, defendants Hilliard and/or Cowan would purchase a specific property utilizing one of their respective investment companies, then re-sell the same property on the same day at an “inflated” sales price to another Hilliard and/or Cowan investment company.
Hilliard and/or Cowan obtained mortgage loans by submitting to the bank fraudulent and misleading documentation created by the defendants and without disclosing to the bank the initial sale of the property.
Upon conviction, each defendant faces up to 30 years in federal prison for bank fraud conspiracy. Hilliard and Cowan also face up to 20 years in federal prison upon conviction of money laundering conspiracy. The indictment also seeks a $27 million monetary judgment against the defendants representing the alleged proceeds derived from their fraudulent scheme.
Yesterday’s arrests and indictment resulted from an investigation conducted by the Federal Bureau of Investigation together with the Texas Department of Insurance. “This investigation demonstrates our commitment to the community of Midland that this type of crime will not be tolerated and will be aggressively investigated,” stated FBI SAC Douglas E. Lindquist.
Assistant United States Attorney Austin Berry is prosecuting this case on behalf of the Government.
UPDATE: 4:00 P.M.
The four people in custody; Michael Cowan II, Stephen Hilliard, Cynthia Gayle Hirsch and Berta Laura McFaddin, are facing multiple federal charges:
All four are being charged with Conspiracy to Commit Bank Fraud, which carries a maximum of 30 years imprisonment, and Money Laundering, which brings a maximum of 20 years.
Hilliard, Hirsch and McFaddin are being held on $50,000 bond while Cowan is being held without bond.
UPDATE 2:12pm **********
The Odessa American is reporting that the fourth person arrested is Berta Laura McFaddin.
A well-known Odessa realtor is among three people arrested on fraud charges by the FBI.
One of those arrested is Cynthia Gayle Hirsch, who has been charged with fraud and will appear before a federal magistrate today at 3 pm in Midland Federal Court.
At least two others have been arrested.
Michael Cowan II and Stephen Hilliard are both being detained in the Midland County Jail on hold for the U.S. Marshall’s service.
According to CBS 7 sources, the arrests are the result of a two-year FBI investigation
Federal agents arrested the suspects yesterday, around noon.
We will have more information as it becomes available on CBS7.com.