A Hoschton man has been sentenced to 25 years in federal prison on charges of bank fraud and conspiracy involving mortgage fraud, a real estate investment “Ponzi” scheme with over a hundred victims, a check-kiting scheme and bankruptcy fraud.
Edward William Farley, 47, of Hoschton, was sentenced on Tuesday by U.S. District Judge C. Batten Sr. Farley was also ordered to pay $23 million in restitution. He plead guilty to the charges in November 2009.
Walter Julius Hermann, 41, of Dunwoody, was also sentenced by Judge Batten to serve over two years in federal prison on charge of bank fraud involving real estate appraisals he submitted in the Farley mortgage fraud scheme. Hermann was ordered to pay $2 million in restitution, as well. He also plead guilty to the charges in December 2009.
Prosecutors say Farley, a former mortgage broker, operated through “Creative Home Search,” “Southern Land Partners,” “Georgia Land Group,” and “Global Mortgage” in Dunwoody and Norcross to defraud mortgage lenders through same-day “flips” of properties located in Buford, College Park, Conyers, Cumming, Dacula, Grayson, Lawrenceville, Lithonia, Norcross, Marietta, Roswell, Snellville and Suwanee.
Farley paid Hermann, an appraiser, to fraudulently inflate the value of the properties by $50,000 to $100,000, and recruited unqualified investors/borrowers to purchase them from one of his companies, according to U.S. Attorney Sally Quillian Yates.
In a separate real estate investment/Ponzi scheme, Farley operated under the name “Alliance Resource Management” (“ARM”) in Lawrenceville to conceal his new source of income from prior victims. He falsely represented that ARM was in the business of purchasing primarily residential properties, which were being renovated and sold at a profit, when in reality ARM had insufficient equity and income to do so.
Real estate investors and lenders, including private investors, believed Farley’s false promises that their investments and loans were fully secured by a first security position in property, plus a personal guarantee, and sometimes title insurance.
Farley also provided promissory notes falsely promising those ARM lenders an interest rate between 14-60 percent. The same property was used to “fully secure” multiple investors and lenders, causing losses in excess of $20 million.
As is common in such Ponzi schemes, Farley made repayments to early victims from scheme proceeds generated from newer investors and lenders.
Farley also fraudulently obtained $1.2 million from Washington Mutual Bank in a check kiting scheme by transferring funds he did not have among several ARM bank accounts, and withdrawing scheme proceeds before the “insufficient funds” checks were returned.
A co-defendant related to Farley’s Ponzi scheme, Trent Edward Wright, 38, of Cumming, was a real estate closing attorney used by Farley in his scheme to issue title policies without paying off prior security holders.
Wright pleaded guilty to mail fraud in December 2009, and was sentenced in March by Judge Batten to serve almost 2 years in prison and ordered to pay restitution of $2.4 million.