Texas Man Sentenced to 40 Years for Mortgage Fraud - Dude That's Over Half His Life!

There is a wonderful blog called the "Mortgage Fraud Blog" http://mortgagefraudblog.com that is a good resource for information on this specific type of fraud. On November 27, 2007 the following was reported as is quoted here:

Stevie L. Johnson, a former licensed Escrow Officer, was sentenced to 40 years in prison for his part in a multi-million dollar mortgage fraud scam in the Houston, Texas area. The case involved the fraudulent acquisition of mortgage loans associated with approximately 300 residential properties valued at nearly $40 million. The prosecution was the result of a long-term investigation by the Consumer Fraud Division of the Harris County District Attorney’s Office and the Texas Department of Insurance (TDI) Fraud Unit. TDI is the state regulatory agency responsible for licensing title insurance companies, title agents and escrow officers.

Two other defendants in the case were previously convicted for their part in the fraud scheme; Mark A. Jones was sentenced to 25 Years by the 232nd District Court and Reginald Washington was sentenced to 8 years by the 184th District Court.

Markay Stroud, the Assistant District Attorney in Harris County responsible for prosecuting Johnson‘s case, emphasized that the investigation is ongoing and additional indictments are expected.

Earlier this year, the 80th Texas Legislature took action to address mortgage fraud by creating the Texas Residential Mortgage Fraud Task Force under House Bill 716, authored by Rep. Burt Solomons (R-Carrollton) and Sen. Kip Averitt (R-Waco). The 2007 legislation was intended to reduce false or misleading information on residential home loan applications by increasing cooperation among regulators and requiring new disclosures at closing.

Now, I'll be the first to say, I don't know Mr. Johnson's age, but unless he started his mortgage/escrow career as a teenager, he'll likely either die in prison or exit as an old man. Neither is a fitting way to end one's life.

As a national business ethics speaker, I speak around the country about one primary topic: Ethics = Choices and Consequences. Every choice has a consequnce! No matter what we might think or how we might rationalize it - Every choice has a consequence.

Was Mr. Johnson just a bad, unethical man? Some, who are quick to judge might say yes - otherwise how could he have committed such a crime? My guess, however, is that he didn't start out unethical in his profession. Rather, the perfect storm existed for his crime to be committed.

The "perfect storm?" Yep...and here are the three components: Need, Opportunity and Rationalization. When those three are present, in many cases, an otherwise ethical person may make unethical decisions - under the illusion that it's really O.K.

Now, I can't speak for Mr. Johnson, but I can speak for myself. That was exactly the sequence in the fraud that sent me to Federal prison.

So how do we create a way to keep the storm from brewing? As I consult with companies I find three things to be true: (1) if you evalutate your employees for example, you can often see when the need issue arises (without a severe need there is no fuel for the fraud); (2) a good system of internal controls reduce the opportunity (and without opportunity one cannot perpetrate the fraud); and (3) keeping people focused on right behaviors - consistently - helps to eliminate or difuse "rationalization."

For information on programs that might help your organization on ethics and anti-fraud visit my web site at www.chuckgallagher.com

Comments are welcome...

Business Ethics Speaker - Chuck Gallagher signing off...