WILMINGTON MAN PLEADS GUILTY TO MORTGAGE FRAUD SCHEME
RALEIGH – United States Attorney Thomas G. Walker announced that in federal court today DANIEL P. OSTBY, 41, pled guilty before United State District Judge Terrence W. Boyle to wire fraud, in violation of Title 18, United States Code, Section 1343, and money laundering, in violation of Title 18, United States Code, Section 1956(a)(1)((A)(i).
According to the Criminal Information filed on October 28, 2011, OSTBY and his co-defendant, Curt Vanderzee, formed DC Development of North Carolina, LLC, which held itself out as providing construction services. OSTBY and Vanderzee developed a scheme to “flip” houses, in which they would buy real property, improve the property by building on it, and then quickly sell the property for a profit. OSTBY also solicited friends and acquaintances to go into business with him by telling them they could “flip” houses and make $20,000.00 to $40,000.00 per property. Over 17 business-LLC’s were formed with family members and acquaintances.
The investigation revealed that once the businesses were established, OSTBY took the business partners to an individual who “specialized” in obtaining credit for start up businesses. Once the business credit cards were obtained, cash advances were taken and used to open a business LLC bank account. OSTBY told the business partners that they could draw a monthly salary, and pay personal expenses with the account to help build up their credit. The money used to pay for those items were either credit card withrawals or lines of credit obtained at various banks since the businesses had no source of income.
From 2007 to January, 2009, OSTBY and Vanderzee charged over $1,025,000.00 on the business credit cards, which were all linked to various businesses either owned by OSTBY and/or Vanderzee or linked to other businesses to which they had some financial interest. Once the money was received, they would funnel the money back to the businesses bank accounts and then use the money to pay their monthly salaries, personal expenses, the minimum monthly credit card payments, and in many instances fund the down payments of lots and properties being purchased. Additionally, OSTBY and Vanderzee submitted mortgage applications to purchase real estate, which had misrepresentations of their employment, monthly income, and assets. The financial institutions, relying on the information submitted, approved the applications, and either mailed or wired the funds to the closing real estate attorney’s bank account. It is estimated that OSTBY and Vanderzee committed over $3.7 million in mail and wire fraud.
Acting Special Agent in Charge Kay B. Jernigan stated, “IRS-Criminal Investigation will continue to use the full resources of our agency to expose the perpetrators and vindicate the victims of complex financial frauds.”
The maximum penalty for wire fraud is up to 30 years’ imprisonment. The maximum penalty for money laundering is up to 20 years’ imprisonment.
Vanderzee was charged in a Criminal Information on August 30, 2011. He pled guilty on September 29, 2011. Sentencing is currently set for January 3, 2012.
Investigation of this case was conducted by the Internal Revenue Service and the United States Secret Service. Assistant United States Attorney Felice MConnell Corpening is serving as prosecutor for the government.