Ex-loan officer gets prison in fraud case

One of the perpetrators in an elaborate coastal mortgage fraud that grew out the pre-recession real estate boom was sentenced to 30 months in federal prison Wednesday.

Steven F. Weiss, 67, also was ordered to pay restitution of nearly $5 million based on the losses tied to his involvement in the Summerville-based scheme.

Weiss, a former loan officer at a Trolley Road mortgage firm, had sought a punishment without prison time, according to a document filed with U.S. District Court in Charleston.

He was facing five years behind bars.

Judge Richard Gergel said he cut the prison term in half based on Weiss’ age, his failing health, his lack of a prior criminal record and his cooperation with prosecutors. He also said he balanced those factors against the “elaborate and methodical” nature of the crime.

“This is a major financial fraud. ... This is a huge fraud,” Gergel said during the sentencing hearing.

The scheme fed on loose mortgage-lending standards that were common before the last recession rocked the industry. It took place from April 2006 to November 2007 and involved nearly 90 purchases of single-family homes, condominiums and vacant lots, mostly in coastal South Carolina and Georgia. Nineteen of the sales were in the Charleston region.

Every one of the deals was a sham.

Weiss was working in the Myrtle Beach real estate business when he met Scott Wickersham, the mastermind of the fraud. They ended up working together at the now-defunct North American Mortgage in Summerville.

The two developed a “tacit understanding” with each other and “other persons known and unknown” to get rich by defrauding banks, according to court documents.

Weiss and Wickersham submitted falsified paperwork through the mortgage company to borrow a total of $45 million from government-insured banks. They duped the lenders by providing inflated property values and other bogus information. In some cases, empty lots were reported as having homes on them. Friends and relatives were paid to pose as “straw” buyers in many of the deals.

The scheme sought to exploit the difference between the size of the mortgages, which were based on fake appraisals, and the lower prices the purchasers actually paid for the properties. The extra cash either was split up or reinvested to keep the fraud afloat. Some of the money was paid as commissions and bonuses to, among others, Weiss and Wickersham.

A plan to flip the properties for a profit and pay off the loans soured in mid-2007, when the real estate industry began to falter. The pool of money quickly dried up.

“Without those funds, and in the slumping housing market, they could no longer fund all of the mortgages ... and they could not sell the properties for the amount of the mortgage payoffs of the properties,” prosecutors said in a court filing.

The bilked lenders repossessed the real estate, which turned out to be worth far less than the amount they were owed. The losses added up to about $20 million.

The government determined Weiss was directly involved in at least 13 of the fraudulent transactions with a value of $9 million. The losses on those deals came to about $4.96 million.

“We ultimately determined he did not hatch the scheme,” assistant U.S. Attorney Dean Secor said Wednesday. “He became involved in it, and it took off from there.”

Robin Lederman, Weiss’ sister, wrote the court on Jan. 12 to say she refused to sign a letter of support that was provided by his daughter.

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“I would not ask for leniency for my brother because he has done tremendous harm to me and my family both emotionally and financially,” she wrote.

Weiss said he regretted ever meeting Wickersham and acknowledged that he was “complicit” in the fraud. He told Gergel he underwent emergency open-heart surgery in 2013 and is taking several medications for his condition.

“It cost me my health, both mentally and physically,” he said of the loan scheme.

Gergel denied a request to grant him an additional 90 days before reporting to prison, saying the case has dragged on long enough. Weiss’ sentence includes three years in a supervised program after he’s released.

Through his attorney, he asked to serve his time in North Carolina to be near family members in Virginia. Gergel said he’d likely recommend the medium-security Butner Federal Correctional Complex northeast of Durham, where Bernard Madoff and local Ponzi scheme artist Al Parish are incarcerated.

As for Wickersham, he pleaded guilty three years ago and has been cooperating with government investigators. His sentencing hearing is scheduled for May.

Prosecutors have indicted three other people in the case.

Contact John McDermott at 843-937-5572.