Wall of Shame: Scott Wickersham

SCOTT M. WICKERSHAM

OF SUMMERVILLE, SC

Lauren Leung

Mortgage Fraud

• Scott W. Wickersham, age 36, operated a mortgage fraud scheme from 2006-2007 with others (Steven F. Weiss and Kelly Martin) under the names of North American Mortgage Group LLC, Realty Executives of Coastal Carolina and Freedom Enterprises LLC
• Wickersham backed out of the scheme in 2007 when he ran out money to fund the investor mortgages
• The group used straw purchasers to purchase more than 70 properties at inflated appraised prices and provided false information to financial institutions for mortgage loans. They were able to obtain approximately $45 million in mortgage loans
• The “real estate company” received commissions and signing bonuses from the mortgage lenders – most were deposited in Wickersham’s bank accounts.
• Mortgage lenders lost over $23 million when the property owners did not pay their mortgages and the homes went into foreclosure

Tax Fraud

• In 2006 and 2007, Wickersham made and filed false:
• U.S. individual tax returns
• 1040 Forms
• Both returns were filed late (1/27/2009) and did not report income from the mortgage fraud scheme
• 2006: claimed $103,205 total income when it was at least $965,402
• 2007: claimed $13,383 total income when it was at least $256,119
• Resulted in a total tax loss of $256,862 (2006- $206,100; 2007- $50,762)

CONVICTION

• Wickersham was convicted of:
• Conspiracy to commit mail fraud, wire fraud, and bank fraud
• Two counts of willfully making and submitting a false tax return
• Wickersham must serve in federal prison:
• 36 months for the conspiracy account
• 60 months for two tax fraud counts (30 months per tax fraud to run concurrently)
• 5 years of supervised release on the conspiracy count
• 2 years of supervised release on the two tax fraud counts (one year per count to run concurrently post prison release)
• He must pay:
• $23,997,151 in restitution on the conspiracy count
• $256,862 in restitution (to the Internal Revenue Service) on the two tax fraud counts

Mortgage Industry Prior to 2008

• Borrowers were not evaluated financially
• Credit scores and debt-to-income ratios were not required, they were suggestions
• Credit was available to everyone
• Mortgage lenders lent to risky borrowers – people could not afford their loans and did not understand the loan terms

Mortgage Industry Post Financial Crisis

• New regulations and guidelines for mortgage lending
• New minimum credit score must be met
• Limited debt-to-income ratio
• Employment history must be investigated
• Mortgage lenders must take mortgage education courses, minimum of 20 hours and must continue courses to stay up to date on laws and guidelines

How was he able to accomplish this?

• Perceived Opportunity- Prior to the real estate bubble burst, there were suggestions for internal controls, but none were enforced.
• If the client's financial records were investigated, he may not have been approved for so many loan mortgages
• Lack of internal controls
• Lenders extended credit to people who were not qualified and charged high interest rates
• Too many borrowers were taking on loans that they could not afford

• Rationalization
• The group had schemed for so long that they did not feel guilty for their actions. They continued on like it was their jobs
• Perceived Pressure
• Wickersham was very greedy with his funds and did not want to quit until he had amassed a fortune

Solutions to mitigate risk of another occurrence

• Internal controls (credit scores, employment history evaluation, etc.) were implemented after the housing bubble burst in 2008
• Lenders should interview potential borrowers to ensure they are accountable and are providing accurate financial information
• Borrowers should have in depth background checks to verify their integrity
• Mortgage lenders must continue education and training to stay updated on laws and regulations in their state. This should be enforced, and bi-annual tests should be passed to ensure lenders are aware of the regulations and procedures to follow
• Mortgage lending companies should implement internal audits to ensure employees are complying with laws, regulations and guidelines

• https://www.justice.gov/usao-sc/pr/summerville-man-sentenced-prison-45-million-mortgage-fraud-scheme
• https://www.contemporarystaffing.com/how-has-the-mortgage-industry-changed-since-the-2008-crisis/

SOURCES