Trio Get Multi-Year Sentences In MD-Based $78M "Dream Homes" Ponzi Scam; Home Refinancing Pitch Used To Generate Funds To Invest In Worthless Racket

From the Office of the U.S. Attorney (Greenbelt, Maryland):

• U.S. District Judge Roger W. Titus sentenced Isaac Jerome Smith, age 48, of Spotsylvania, Virginia; and Alvita Karen Gunn, age 33, of Hanover, Maryland today to 70 months and 60 months in prison, each followed by three years of supervised release, respectively, for a fraud conspiracy, wire fraud and conspiracy to commit money laundering in connection with their participation in a massive mortgage fraud scheme which promised to pay off homeowners’ mortgages on their “Dream Homes,” but left them to fend for themselves. Judge Titus also ordered that the defendants pay restitution in the full amount of the loss, with the exact amount to be determined at a later hearing.



• On February 18, 2011, a federal jury convicted Smith and Gunn, along with co-defendant Michael Anthony Hickson, age 48, of Commack, New York, after a six week trial. Hickson, chief financial officer of Metro Dream Homes (MDH), was also convicted of making a false statement in a federal court proceeding [...].(1)

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• According to evidence presented at the trial, beginning in 2005, the defendants targeted homeowners and home purchasers to participate in a purported mortgage payment program called the “Dream Homes Program.” In exchange for a minimum $50,000 initial investment and an “administrative fee” of up to $5,000, the conspirators promised to make the homeowners’ future monthly mortgage payments, and pay off the homeowners’ mortgages within five to seven years.



• Dream Homes Program representatives told investors that the homeowners’ initial investments would be used to fund investments in automated teller machines (ATMs), flat screen televisions that would show paid business advertisements and electronic kiosks that sold goods and services. To give investors the impression that the Dream Homes Program was very successful, Metro Dream Homes spent hundreds of thousands of dollars making presentations at luxury hotels in Washington, D.C., New York, New York and Beverly Hills, California.(2)

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• MDH encouraged homeowners to refinance existing mortgages on their homes in order to withdraw equity and generate the funds necessary to enroll their homes in the Dream Homes Program.

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• Trial testimony established that at a hearing on Sept. 12, 2007, Hickson testified that the financial success of the Dream Homes Program did not rely upon new investor funds, when in fact Hickson knew that the sole source of meaningful revenue for MDH was new investor funds [ie. 'Ponzi' scheme].



• As a result of the scheme, more than 1,000 investors in the Dream Homes Program invested approximately $78 million. When the defendants stopped making the mortgage payments, the homeowners were left to attempt to make the mortgage payments MDH had promised to make in full.

For the U.S. Attorney press release, see Two Conspirators Sentenced To Prison In $78 Million "Dream Home" Mortgage Fraud Scheme (Defendants Spent Investor Funds to Employ Chauffeurs and Maintain a Fleet of Luxury Cars; on Luxury Travel; to Pay Off Prior Investors as Part of a Ponzi Scheme; and Fund a Failed Investment Venture and Undisclosed Third Party Businesses).

(1) In addition, Carole Nelson, age 52, of Washington, D.C., the chief financial officer of POS Dream Homes, previously pleaded guilty to money laundering, and Charlotte Melissa Josephine Hardmon, age 39, of Bowie, Maryland, pleaded guilty to conspiracy to commit wire fraud in connection with their participation in this scheme, and are awaiting sentencing, according to the press release.

Hickson has since received a ten-year prison sentence. See Leader In $78 Million "Dream Home" Mortgage Fraud Scheme Sentenced To 10 Years In Prison.

(2) The evidence also showed that in February 2007, the Dream Homes Program added a second program called “POS Dream Homes” offering similar promises of paying off investor mortgages in five to seven years in exchange for an up-front investment of $50,000 or more, the press release states. Collectively, these programs had offices in Maryland, the District of Columbia, Virginia, North Carolina, New York, Delaware, Florida, Georgia and California.