2 plead guilty to fraud in property flipping

Prosecutors say they will seek added prison time

September 02, 2000|By John B. O'Donnell | John B. O'Donnell,SUN STAFF

The central figure in the first federal prosecution of property flipping in Baltimore pleaded guilty yesterday, admitting that his fraud scheme cost lenders as much as $1.5 million.

Robert L. Beeman of Wilmington, Del., who flipped more than 100 Baltimore houses in the past several years, entered a guilty plea to a single count of mail fraud in a 14-count indictment.

A Baltimore man who aided Beeman's scheme also pleaded guilty yesterday to one count of mail fraud. Scott R. Shinskie, 29, was a principal in Macallan Funding Inc., a defunct mortgage brokerage firm that aided many of Beeman's deals by using and sometimes fabricating fake documents to convince lenders to finance the inflated sales.

Prosecutors said they would seek added prison time for Beeman and Shinskie "because of the destabilizing effect that property flipping has had on Baltimore City in general and the Patterson Park area of East Baltimore in particular." Attorneys for the defendants said they will oppose the move.

Both men face a maximum of five years in prison and a fine of $250,000, along with the possibility that they could be ordered to pay back the losses.

Beeman admitted the loss to lenders "attributable" to him was more than $800,000 and less than $1.5 million. Shinskie admitted to a loss of $500,000 to $800,000.

Shinskie agreed to cooperate with prosecutors in investigations of others and to provide all information he has on "improper property transfers." If he provides "substantial assistance" in these investigations, prosecutors said they would seek leniency at sentencing.

These were the third and fourth convictions obtained in the case by prosecutors Joseph L. Evans and Carmina S. Hughes in the past two weeks.

Others who pleaded guilty earlier were Michael M. Fishman, who headed Macallan Funding, and Robert L. Friedman, a settlement attorney.

Friedman, who has been cooperating with federal authorities for months, was not indicted with the other defendants in March. His sentencing has not been scheduled.

Beeman, Shinskie and Fishman are to be sentenced Dec. 8.

The trio, along with G. Samson Ugorji, an appraiser, and Robert C. Ness, another settlement attorney, were indicted after a lengthy investigation by postal inspectors. Ugorji and Ness are scheduled for trial late this month.

In separate hearings held back-to-back, Beeman and Shinskie were asked by Chief Judge J. Frederick Motz if they had done what prosecutors accused them of doing. "Yes, your honor," both men replied.

Neither they nor their attorneys would comment after the hearings.

"The evidence was overwhelming against him," said Andre Weitzman, an attorney who has sued Beeman. "The extent of the harm he has caused will be felt for many years to come particularly in those neighborhoods that can't afford further disruptions like Patterson Park."

Weitzman represents more than 80 buyers who sued Beeman and numerous other defendants, including lenders, involved in his deals. He won a settlement worth about $4.5 million.

According to prosecutors, Beeman, operating through A Home of Your Own Inc., would buy a house for $10,000 to $20,000, find a low-income, first-time homebuyer with poor credit and offer the house for $500 down.

Typically, the buyer would sign a purchase contract for about $43,000, the statement said, and Beeman would do cosmetic repairs costing $7,000 to $12,000.

In many cases Beeman would refer buyers to Macallan, where they usually dealt with Shinskie. Macallan would put together loan packages to be submitted to lenders and would often include "false information either supplied by Beeman or concocted by Macallan Funding concerning the credit-worthiness of the loan applicant," a statement submitted by prosecutors said.

"Even more significantly, Macallan Funding would submit a false contract, most often created by Scott Shinskie, which reflected that the sales price was in the $80,000 range," it said.

The inflated price was used because lenders usually would provide only about 70 percent of the sales price. "Consequently, by submitting a false contract at the $80,000 level, Beeman, Fishman and Shinskie could generate about $56,000 in mortgage proceeds," the statement said.

They also would obtain an inflated appraisal that said the property was worth the sales price stated in the fraudulent contract.

Lenders were told that the difference between the sales price and the mortgage was being covered by cash payments from the buyer and a second mortgage from Beeman. Payments were never sought on the second mortgage and no substantial cash was ever paid by the purchasers.

The count to which Beeman, Shinskie and Fishman pleaded guilty involved a 1997 deal where Beeman bought an East Baltimore house for $20,000 and signed a contract to sell it to Lolitha King for $49,900.

In the end, the sales price was listed at $75,000 and Weyerhaeuser Mortgage Corp. provided a $48,750 loan. Settlement documents said King made payments of $11,000 and that Beeman held a second mortgage of $18,750.

"Mr. Beeman participated in this scheme knowing that if the lender had known that there was a false sales contract, that the appraisal was fraudulent, that the down payment had not been made by the buyer, and that the second mortgage was a sham, it would not have authorized the disbursement of its funds," the prosecutor's statement said.

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