Mortgage Fraud Monarch Gets 10 Yrs

ADA David Lobingier & Investigator Brad Wheeler spent years working the case

The woman at the forefront of a complex, $13 million mortgage-fraud ring was sentenced to 10 years in prison on Friday, capping an investigation that led to the arrests of 20 people and a rare conviction of a corporation.

Chekeelah Phelps, 48, pleaded guilty last year to engaging in organized criminal activity and three charges of money laundering and elected to have her punishment assessed by state district Judge George Gallagher, who ordered a pre-sentence investigation.

During her punishment hearing on Friday, prosecutors Susan Linam and Jon O’Toole presented four hours worth of evidence of Phelps’ fraudulent activity. After hearing that testimony, as well as testimony from Phelps’ supporters, Gallagher sentenced her to 10 years deferred adjudication probation on two cases of money laundering and one case of engaging in organized criminal activity. He sentenced her to 10 years in prison on a third charge of money laundering.

However, the judge told Phelps that if her attorney files a “motion to impose community supervision” within 180 days of her sentencing, he will consider putting her on probation for the remainder of her sentence. This procedure is commonly referred to as “shock probation.”   

The complex scheme came to light in the fall of 2006 after Assistant District Attorney David Lobingier, who is assigned to the Economic Crimes Unit, received an anonymous letter asking authorities to look into why so many houses in Mansfield’s Twin Creek subdivision were in foreclosure, vacant or for sale.

Lobingier asked DA Investigator Brad Wheeler, a retired FBI agent who previously led a white-collar crime squad, if he would check into it. Wheeler began tracing property records, scrutinizing documents and following the money. His investigation revealed that false information from “straw buyers” was being used to buy homes at inflated prices so a group of people could pocket the illicit proceeds.

Phelps was the linchinpin of the operation.

“She was the mortgage broker in all of the deals,” said Wheeler, who was on the stand for hours on Friday during Phelps’ sentencing hearing. “She was the common thread. She was the one who connected the dots.”

In January 2010, after an intensive three-year investigation, the grand jury began returning indictments against the players in the scheme. When confronted with the evidence, many confessed and started talking.

Most straw-buyers struck deals and received five to 10 years’ probation and a $10,000 fine in exchange for their guilty pleas and cooperation. The principals in the scheme received an additional 180 days in the county jail. One woman, a former title closer, was sentenced to six years in prison, which is being served concurrently with a 78-month federal sentence she received for mortgage fraud.

Earlier this year, Sierra Developers – the Arlington development company who helped generate fraudulent loans – pleaded no contest and paid a $50,000 fine as part of a plea bargain agreement.

To be sure, the case has been long and notable for Wheeler and Lobingier, who worked years to bring the culprits to justice.

“It was just blatant,” Lobingier has said of the fraud. “It was like daytime armed robbery without a mask.”  

To learn more about the case, read this article in The Texas Prosecutor.

 

Melody McDonald, Public Information Officer

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