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Former Mortgage Execs Plead Guilty to $27M Bank Fraud Scheme

Two former executives of American Mortgage Specialists Inc. pled guilty Friday in a federal court in North Dakota for their part in a $27 million bank fraud scheme that put ""BNC National Bank"":https://www.bncbank.com/index.htm at risk, according to a release from the ""Justice Department"":http://www.justice.gov.


Scott N. Powers, former American Mortgage Specialists CEO, and David E. McMaster, former American Mortgage Specialists VP, were charged with one count of conspiracy to commit bank fraud and wire fraud affecting a financial institution.


The now defunct American Mortgage Specialists originated residential real estate mortgage loans and then sold the loans to institutional investors. In 2006, the company entered into an agreement with BNC for the bank to provide American Mortgage Specialists with funding for the loans.

Court documents revealed Powers and McMaster conspired from October 2007 to April 2010 to defraud North Dakota-based BNC by misrepresenting the financial health of American Mortgage Specialists to obtain funding.

According to their plea documents, Powers and McMaster sent false financial information to BNC, overstating their company's cash-on-hand. The information also disguised delinquent IRS tax payments as marketing and advertising expenses.

The DoJ also stated BNC’s holding company received about $20 million in TARP funds and used $17 million for BNC. BNC's losses were more than the received TARP funds, and the bank did not make its required TARP dividend payments to Treasury for nearly two years.

Powers and McMaster agreed to forfeit $28,564,470. Both face a maximum penalty of 30 years in prison when they are sentenced April 15, 2013.

About Author: Esther Cho


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