KNOXVILLE, TN – February 18, 2011 – (RealEstateRama) — A federal grand jury has returned a superseding indictment against Jerry Kerley, 57, of Kodak, Tenn., and Jeffrey Whaley, 46, of Sevierville, Tenn..
The superseding indictment, which was returned this morning, charges Kerley and Whaley with conspiring to defraud Citizens Bank, located in New Tazewell, Tenn., and SunTrust Mortgage, Inc., located in Richmond, Va., through a mortgage fraud scheme. The indictment alleges that the conspiracy involved a “straw borrower” mortgage fraud scheme in which straw borrowers were induced to obtain mortgage loans in their names based on promises that they would not have to make a down payment or mortgage payments for the property, would receive cash at closing, and would share in the profit following a resale of the property. The indictment further alleges that it was part of the conspiracy that materially false representations were made to Citizens Bank and SunTrust Mortgage, which, among other things, included false representations related to the straw borrowers’ source of funds for down payments and amounts recorded as “cash from borrower” on HUD-1 Settlement Statements and loan applications, for the purpose of inducing Citizens Bank and SunTrust Mortgage to disburse the mortgage loan proceeds it had wired to and entrusted with its closing agents. The indictment specifically alleges 10 real estate transactions in which Kerley and Whaley concealed from Citizens Bank and SunTrust Mortgage that the borrower was not going to, and in fact, did not provide at closing the money identified as the “cash from borrower” on the HUD-1 Settlement Statement. According to the indictment, in those 10 transactions, Citizens Bank and SunTrust Mortgage, in total, wired more than $6 million in loan proceeds to Guaranty Land Title Company for disbursement. The indictment alleges that Kerley, a licensed attorney, was the owner of Guaranty Land Title Company where the fraudulent loans were closed. The indictment further alleges that Whaley conducted business through a company known as GBO Enterprises which received substantial sums of money from the loan proceeds.
The indictment also alleges that Kerley and Whaley committed money laundering offenses through financial transactions that involved proceeds from the mortgage fraud scheme. The indictment further alleges that as a result of the conspiracy, the real properties involved in the scheme to defraud have gone into default and foreclosure, and caused substantial monetary loss. Finally, the indictment alleges that Kerley and Whaley are subject to the forfeiture of the proceeds from the fraudulent loans.
Kerley’s initial appearance in federal court is scheduled for Wednesday, February 16, 2011, at 11:00 a.m., before U.S. Magistrate Judge C. Clifford Shirley, at which time a trial will be scheduled. Whaley was charged in the initial indictment returned on December 21, 2010, and his trial is currently scheduled for August 9, 2011. Each wire and bank fraud count carries a maximum punishment of 30 years in prison, while each money laundering count carries a maximum punishment of 10 years in prison
Members of the public are reminded that indictments contain only charges. A defendant is presumed innocent of the charges and it will be the government’s burden to prove a defendant’s guilt beyond a reasonable doubt at trial.
This investigation is being conducted jointly by the Internal Revenue Service, Criminal Investigation Division, and the Federal Bureau of Investigation. Assistant U.S. Attorney Trey Hamilton is representing the United States.
United States Attorney’s Office
Eastern District of Tennessee
Contact: (865) 545-4167