Swindler draws top sentence, 12 1/2 years Scheme netted millions from duped homeowners

February 08, 1997|By Scott Higham | Scott Higham,SUN STAFF

They say Michael H. Clott had it coming.

Considered by FBI agents and prosecutors to be one of the most incorrigible white-collar criminals to ever work in Maryland, Clott, 44, received the maximum penalty under federal law yesterday for swindling millions from homeowners in a crafty home-refinancing scheme -- 12 1/2 years behind bars without parole.

"I can't think of anything beyond transporting him beyond the Seven Seas," U.S. District Judge Frederic N. Smalkin said to nearly 50 of Clott's victims who crowded the benches of the third-floor Baltimore courtroom yesterday.

Even if Clott were sentenced to a deserted island, Smalkin said, the career criminal would continue to ply his trade. "He'd fleece the pigeons that landed there," the judge said.

Wearing a white T-shirt, blue slippers and ill-fitting gray cotton pants, Clott stood before the judge and tried to apologize to his victims. Most of them will be forced to pay two mortgages for years because of the scheme -- destroying their retirement plans, draining funds for their children's college educations and, in some cases, ruining their marriages, according to victim-impact statements filed in the case.

"There is no excuse for what I did," Clott said, never looking back at his victims.

"Where did you think all of those people were going to get the money to pay off the mortgages?" Smalkin asked.

"I didn't take that into account," Clott said. "I never realized what it was doing to the people behind the crime."

Nonsense, prosecutors told the judge. Even after he was arrested and pleaded guilty in the latest fraud case, they allege, Clott continued to run scams behind the walls of a federal prison in Virginia.

His latest victim: a fellow inmate, according to prosecutors, who are considering filing charges.

"It's amazing he's still alive," Smalkin said.

"I'd like to kill him," one of Clott's victims said from the back of the courtroom.

As part of Clott's sentence, Smalkin ordered that federal prison officials monitor and restrict the career criminal's telephone calls, mail and computer access to make sure he doesn't steal anymore. He also ordered Clott to pay $500,000 in restitution.

Prosecutors said Clott got what he deserved.

"It means that he will be behind bars for a very long time, and he will not be allowed to victimize more innocent people and destroy their lives," said Assistant U.S. Attorney Jane F. Barrett. "He didn't just steal money. He robbed them of their hopes and their dreams and their futures."

Clott's schemes date back more than a decade. In 1987, he was convicted of mail fraud and racketeering charges for his role in a mortgage scheme involving a company he called First American Mortgage Co.

First American made high-interest loans to high-risk homeowners. Clott resold those mortgages over and over, pocketing the cash and defrauding homeowners of nearly $15 million.

That year, Clott was convicted in another scheme for forging securities and transporting them across state lines. And in 1989, he was convicted of passing $280,000 worth of bad checks.

Within months of his release from prison in 1994, Clott was back in business with what he called a "magic" line of credit at 7.5 percent interest -- even though he was on parole and had signed a court decree pledging to stay away from the home-financing business.

He mailed fliers and left them on car windshields in parking lots, promising to provide homeowners with a 30-year line of credit. He persuaded homeowners to refinance their mortgages through a legitimate loan company.

But after closing on the first loan, the homeowners were promised that Clott would refinance the entire amount of the loan, plus an additional line of equity for 30 years at 7.5 percent interest.

Homeowners then went to a second settlement. They were told their original loans had been paid off, and the homeowners turned over checks to Clott for their "magic" line of equity.

Homeowners soon discovered there was no magic. The original loans were never paid off. Clott kept the cash, forcing the homeowners to meet two monthly mortgage payments. Prosecutors say that scheme swindled investors out of $1.3 million.

Like many of the victims in Maryland, Washington, Virginia and New York, Francis and Amelia Johnson of Hyattsville thought they had secured an $80,000 loan at 7.5 percent interest.

Now, they are stuck paying $746.79 a month for a loan they never received.

"My husband suffered a stroke because of the added stress and worry from this incident," Amelia Johnson, 75, said in a victim impact statement to the judge.

In November, Clott pleaded guilty in federal court in Baltimore to the "magic" line-of-credit case. Smalkin sent him back to prison in Petersburg, Va., to await sentencing. Once there, Clott is accused of swindling a fellow inmate out of $15,000.

"No matter what you do with this man he continues to steal money," Smalkin told the victims yesterday. "I don't have the power to send him to a deserted island."

One of his victims had an idea.

Sitting in the second row of the courtroom, she said beneath her breath: "I know what you can do with him."

Pub Date: 2/08/97

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