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The temptation of fast, easy money was at the heart of the mortgage and foreclosure crisis. Advocates for homeowners focus on the predatory lending that took place. But there was also a lot of predatory borrowing.

During the housing boom, when many firms were eager to lend money to almost anybody, organized crime rings popped up all across the country. Some found it pretty easy to scam mortgage companies out of millions of dollars.

NPR's Chris Arnold reports on one ongoing case in Ohio.

CHRIS ARNOLD: I'm standing outside an establishment in Akron, Ohio that is not in the Michelin Guide. It is a strip club on Brittain Street here in Akron. There's a bit of a commentary on just how strange and feedy things got in parts of the housing industry in recent years.

In this case, there was an alleged mortgage fraud ring that was laundering money through their strip clubs.

(Soundbite of music)

ARNOLD: Inside, women are pole dancing, some biker-type guys are drinking at the bar. The manager says he'd like to talk but can't because he's facing criminal fraud charges. That stems from his involvement with a man named David Willan.

Willan, who's 37, was allegedly at the center of the fraud ring. Those close to him say Willan was living large - driving fancy cars, partying, dating some of the dancers at this club. He owned a yacht. But prosecutors say he was scamming mortgage companies and local investors in a brazen house-flipping scheme.

(Soundbite of music)

Mr. BRAD GESSNER (Criminal Prosecutor): You're in excess of $18 million. And we're talking in a four-year period, 300 homes.

ARNOLD: Brad Gessner is a criminal prosecutor with the county. He's bringing the case against Willan. This isn't Manhattan or San Diego. Akron is a gritty manufacturing town that never had a housing boom. David Willan probably wasn't going to get rich quick buying and selling houses if he played by the rules, so Gessner says he gamed to the system and became part of an outbreak of mortgage fraud that played a role in the epidemic of forclosures.

Mr. GESSNER: A lot of those are due to greedy people. When someone looks and sees that they can leave a lifestyle that you might only dream of, when the mortgage companies were playing free and loose with these, it leads to these problems.

ARNOLD: Reports of suspected mortgage fraud to the U.S. Treasury Department rose 700 percent between 2000 and 2006. Here's how it allegedly worked in this case: First, David Willan had a company called that renovated and build houses. Gessner says he would buy a rundown house in a troubled neighborhood - and in some parts of Akron, you can do that for around $20,000. He paint it, spruce it up a bit, then sell it for a lot more, say $80,000 using a crooked appraiser to justify the price.

Mr. GESSNER: The value of the house through, again, a bogus appraisal goes up, and the money is pulled out and ultimately, you're going to find a financial institution holding an $80,000 loan on a property that probably truly isn't worth more than $20,000.

ARNOLD: In some of these scams, the buyer is in on it and takes off without ever paying the mortgage, but Willan allegedly sold the houses to unsophisticated lower-income buyers who didn't know what the houses were really worth. He allegedly got help doing that from a mortgage broker. Gessner says the broker put the buyers into loans that they couldn't afford, telling them this was their path to homeownership. But half of them quickly ended up in foreclosure.

Mr. GESSNER: We have a mortgage broker who pled guilty to his part in this conspiracy.

ARNOLD: Willan's company, Evergreen Homes, is now in bankruptcy. Willan is in jail, awaiting trial. But his lawyer, Bill Whitaker, says all this is a big misunderstanding. Whitaker says there was no fraud, rather Willan was a victim of the downturn in the housing market.

Mr. BILL WHITAKER (Lawyer): They're a housing company and, so, as a result, the downturn in the market affected all companies in the business. Anybody involved in real estate is suffering, as a result of the downturn in the economy, and Evergreen is no exception.

ARNOLD: So this allegation that he was in cahoots, Willan was in cahoots with the appraisers is just apparently false.

Mr. WHITAKER: It's nonsense. He never put any pressure on the appraisers. He never influenced the appraisers.

ARNOLD: Whitaker says the investigation itself helped to doom the company by casting doubt on it in the community. It turns out, a lot of people in the community became investors in Willan's company, Evergreen Homes.

It seems legitimate. Evergreen got on the Inc 500 list of the nation's fastest-growing business. Willan, at one point, won an award for some houses he built in inner-city Cleveland.

Mr. BERNIE WOLAK: In the office, you know, of Evergreen, there's a picture of the former mayor of Cleveland giving this award or plaque for the best builder.

ARNOLD: Retiree Bernie Wolak, who was the manager at Ford says he invested $135,000 in Evergreen Homes.

Mr. WOLAK: A large portion of my retirement money.

ARNOLD: Wolak now believes the fraud charges, that's because he's part of a bankruptcy creditors committee that's been digging through the company's books.

Mr. WOLAK: It looks like the numbers that were presented were all lies. It was a big scam that he knew about, he directed. Most people, including myself, they would like him to go to jail for an awful long time. There were friends of his family that invested, friends of his parents invested, and we are totally betrayed.

ARNOLD: And as if that doesn't sound that enough, there was the strip club Willan set up towards the end, allegedly, so he have another business after Evergreen failed.

Michael Steel is an attorney for the creditors in the ongoing bankruptcy case.

Mr. MICHAEL STEEL (Lawyer): After he had thrown himself at the mercy of the bankruptcy court, in that forum, he continued to funnel money to the strip club, which was the ultimate slap in the face as far as the creditors were concerned. Up to about $700,000 was spent, funneling into this side business that he had.

ARNOLD: Prosecutors around the country are just now figuring out how widespread these mortgage fraud rings became in recent years. In this area around Akron alone, prosecutor Brad Gessner says it's like digging up the roots to an old tree - the more they dig, the more they find it spread all over the place.

Mr. GESSNER: Pretty much anyone looking to make money quickly. You have some individuals who have been involved in the drug trade in the past that we've already prosecuted rather than looking at mandatory sentences for committing drug offenses, they have geared their efforts in that to flipping properties.

ARNOLD: In this case, David Willan stays in jail, but the strip club remains open. It turns out, he didn't want the club in his name so he set it up to be owned and run by a friend and his ex-girlfriend who is a former stripper. Towards the end, though, the ex-girlfriend said in a deposition that Willan began stealing money from them, too, taking it right out of the register, so they changed the locks and locked him out of the club.

Chris Arnold, NPR News.

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