Thursday, April 20, 2006

Three plead guilty in $8 million real estate 'flipping' scheme involving Decatur, Springfield Homes

URBANA - Gary Knox, 60, of Decatur switched his plea to guilty on Wednesday in U.S. District Court in Urbana in an $8 million real estate "flipping" scheme that involved 150 Decatur and Springfield properties.A participant in the scheme, Dennis Wiese Jr., 38, formerly of Belleville and now of Washington County, also changed his plea to guilty.

He was an appraiser who supplied Knox and his partner, Frank Kelly Ciota, 45, of Riverton with inflated appraisals they used to bilk unsuspecting sellers, buyers and lending institutions.Knox pleaded guilty to three counts of bank fraud, one count of wire fraud, six counts of mail fraud and one count of conspiracy to commit money laundering contained in a 42-page federal indictment handed down in August. Wiese pleaded guilty to two counts of bank fraud and one count each of mail fraud and wire fraud.

Ciota pleaded guilty on Monday to one count of bank fraud, one count of wire fraud, five counts of mail fraud and one count of conspiracy to commit money laundering.In the flipping scheme, Knox and Ciota made false statements about the value of properties using inflated appraisals supplied by Wiese to entice owners to sell, buyers to purchase and lenders to finance rental properties that were sold at prices they had fraudulently inflated to substantially higher than their reasonable value.

While Ciota and Knox got profits from the transactions, Wiese received only his standard appraisal fees, which totaled about $30,000.In some transactions, owners did not know their property had been sold and some people listed as buyers did not realize their names were being used by the defendants as recipients of property. Prosecutors said some people bilked in the scheme faced the possibility of bankruptcy or actually filed for bankruptcy.Chief U.S. District Judge Michael McCuskey set a sentencing hearing for Aug. 29 and 30 for all three men. He said two days may be necessary because of arguments he will have to hear by defense attorneys who seek to limit the defendants' legal liability.At sentencing, each offense of bank fraud, mail fraud and wire fraud carries a maximum penalty up to 30 years in prison and a fine up to $1 million. Conspiracy to commit money laundering carries a maximum 20-year prison term and fine up to $500,000.

Knox's attorney, Robert Alvarado of Peoria, said Knox disputes the government's statement in the plea agreement that the flipping scheme involved "more than 150 fraudulent real estate sales and financing transactions totaling more than $8 million and that the defendants obtained more than $3 million of that total for their personal use and to promote their ongoing fraudulent scheme."Knox is admitting everything the government requires to support a conviction on the 11 counts in the indictment, but those counts involved only 10 properties with a worth of far less than $8 million, Alvarado said.

Fixing the amount of loss in the scheme is important under federal sentencing guidelines because the greater the loss to victims, the more prison time the defendants would face. Defendants convicted in federal courts serve 100 percent of any prison sentence.Assistant U.S. Attorney Timothy Bass said, given the amount of loss the government contends occurred, Knox and Ciota could face 15 to 20 years in prison.

Wiese has entered a cooperation agreement with the government that could, if he fulfills its terms, earn him a reduction in prison time when he is sentenced. He faces a range of 30 to 72 months in prison.While Ciota and Knox could face consecutive sentences on each of the charges against them, McCuskey assured Knox on Wednesday that he will make the sentences concurrent. He said the prison terms set forth in the federal fraud statutes are sufficient to punish a 60-year-old man without extending them.

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