Biloxi attorney sentenced in multimillion-dollar fraud
Stephen Richard Colson admitted to defrauding two banks and the U.S. Bankruptcy Court
Biloxi attorney sentenced in multimillion-dollar fraud Stephen Richard Colson admitted to defrauding two banks and the U.S. Bankruptcy Court Check out this story on clarionledger.com: http://on.thec-l.com/1lSWjbx
Published 8:34 a.m. CT July 2, 2014
Colson(Photo: Special to the Clarion-Ledger)
A Biloxi attorney and businessman was sentenced Tuesday to a five-year prison term and ordered to pay more than $8 million in restitution for defrauding two banks and the U.S. Bankruptcy Court, The Sun Herald newspaper reported.
U.S. District Judge Sul Ozerden also ordered Stephen Richard Colson, 48, to serve three years of post-release supervision and to pay a $100 special assessment.
Colson admitted falsifying, concealing, and covering up material facts in connection with the scheme, U.S. Attorney Gregory K. Davis and FBI Special Agent in Charge Daniel McMullen said in a news release today. Prosecutors say they're going to seek $7,749,576.65 in restitution for victims.
Colson, a settlement agent and closing attorney, owned Prestige Title Inc. and Advanced Title and Escrow, both with headquarters in Biloxi and with 18 offices in Mississippi, Alabama, Florida, Georgia, Louisiana and Texas. The offices handled loan closings for new mortgages and the refinancing of existing mortgages, prosecutors said.
In addition, Colson served as escrow agent for several condominium developments on the Mississippi Gulf Coast. As settlement agent on loan closings, Colson was required to establish trust accounts from which he disbursed funds exclusively for activities related to each individual loan.
The trust funds were not to be commingled with other personal or business accounts, prosecutors said. However, a federal investigation into Colson's activities revealed that Colson, through his business entities, "willfully diverted funds from trust accounts for his own personal use, and concealed shortfalls in those accounts by co-mingling funds from other accounts when making payments to financial institutions," prosecutors said.
The scheme began in 2004 when Colson obtained a mortgage loan from a federally insured financial institution using property he had titled in his name as collateral, prosecutors said. Colson, as an agent for a title insurance company, issued a loan policy on the mortgage. Colson sold the property in September 2005 for cash and should have paid off the mortgage, prosecutors said. However, he concealed the sale of the property by continuing to make payments on the loan until he filed for bankruptcy protection in September 2009, prosecutors said.
The lender then learned that it did not have a valid lien or mortgage on the property. This delay in learning that the FDIC insured institution did not have a valid lien was as a direct consequence of Colson's scheme to conceal the fact that he had already sold and pocketed the proceeds without paying off the mortgage, prosecutors said. The title insurance company ultimately paid $133,600 to the FDIC insured institution to settle the claim.
Colson pleaded guilty in a larger scheme where through his title businesses, Colson used funds generated in new real estate closings to pay off earlier closings, prosecutors said. The larger scheme was discovered following Colson's 2008 acquisition of a title insurance company for which Colson served as agent, by a successor company. In February 2009, the successor title insurance company initiated an audit of Colson's business records and discovered that Colson's title companies had a shortage in funds for settlement of real estate closings, prosecutors said. The successor title insurance company was forced to pay 54 claims from lenders, borrowers, and sellers, and later prevailed in an adversary proceeding against Colson in Bankruptcy Court. Its claim of $4,904,627.37, plus attorneys' fees and costs of litigation, were not discharged, and must be repaid by Colson, prosecutors said.
The Bankruptcy Court found that Colson's use of his trust account "was akin to a Ponzi scheme in that Colson depended upon funds generated in new real estate closings to pay off earlier closings."
The case was investigated by the Federal Bureau of Investigation and prosecuted by Assistant U.S. Attorney Jay Golden.
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