In July of 2011 I was indicted for Conspiracy to Commit Mortgage Fraud and multiple counts of Wire Fraud surrounding the purchases of four homes I made in 2006. As it happened a friend and business associate of mine who was also on the board of directors of a software company I had founded owned a mortgage company. His company was large and employed over 100 people. In early 2006 he showed me an infomercial by Carlton Sheets that said if you purchased his DVD series he would show you how to purchase homes with no money down and receive cash at closing. My friend then showed me several episodes of Flip This House where the Montolongo Brothers in San Antonio, Texas would purchase dilapidated homes, spend a few weeks renovating them, and them would flip them for a profit. He told me what he was doing at his mortgage company was a combination of these two things only he had a "better mousetrap." He said that he was flipping homes worth hundreds of thousands of dollars and that the profits were higher as a result.
At the time my software company was on the verge of massive success. We were in negotiations with several large companies to install our software in thousands of locations worldwide, and the contracts were worth tens of millions of dollars. Despite this fact we had been limping along in terms of being able to financially cover our operating expenses. My board of directors consisted of five investors whose responsibility it was to contribute to capital calls as needed to cover these expenses until our sales were able to do so on their own.
One of my board members / investors - a guy who was my initial investor and to whom I had given a promissory note when he made his initial investment (I’ll call him Steve) – Steve and I had experienced a tumultuous business relationship due to the fact that he had had his attorney put a conversion clause into that promissory note that allowed him, without notice, to convert that “debt” to stock. Had he done so in the very beginning that would have made him sole owner of the company. As soon as I learned of its existence I had demanded that the note be replaced with one that did not have a conversion clause. That was two years earlier, in 2004. There had been a strong undertone of disdain ever since I had forced his hand that he never really got over. Despite this fact the company had moved forward.
Well in the beginning of 2006 there had been a need for several capital calls, and this had resulted in a rift in the company. The guy who owned the mortgage company (I’ll call him Greg) had promised to loan the company a large sum of money in exchange for a short-term, high-interest note in lieu of bringing in an outside investor and diluting everyone’s ownership by 5%. Only he failed to deliver on his promise, which caused the need for the capital calls. And not only did he do this but he refused to participate in the capital calls forcing Steve to pick up his percentage of the contribution. This infuriated Steve. Shortly thereafter Steve approached me and said he was going to execute his conversion clause and take 100% ownership of the company in order to get Greg out. I told him that not only would doing so not be right but that the conversion clause had been removed and no longer existed anyway. I pretty much just blew him off – but he kept bringing it up. He said he was going to do this to get rid of Greg.
The infighting had become a major distraction, and I had told Greg about Steve’s threats. So this was when Greg approached me with the idea of flipping several homes through his mortgage company as a way to generate money to be used to fund the company through to our next major contract so that there wouldn’t be a need for further capital calls. When he told me about the flipping opportunity I told him it just seemed too good to be true. I told him I was skeptical and didn’t want to get involved in something that I felt might not be legal. This is when he told me that his mortgage company was the safest mortgage company in the country and that there was absolutely NO possibility of anything illegal happening in his company. You see several years before he had started his mortgage company, while Greg was in college, he had been a DJ at many raves. This lifestyle had introduced him to Ecstasy and LSD drugs, and he had started selling them as a low-level dealer. This had landed him in the middle of a major federal drug case, and he had been convicted and had spent a few years in prison. After his release he was under the supervision of the federal probation department in what is called Post Release Supervision. He told me that the Mortgage Industry was wrought with fraud, and that when mortgage fraud occurs it is most often prosecuted in the federal justice system. Because of this he said that federal probation officers are well aware of what constitutes mortgage fraud and that his PO only allowed him to own / operate a large mortgage company with the stipulation that the federal probation office would have 100% access to every single transaction the company did. He told me that they provide access to his PO to every case file and that every single transaction was scrutinized.
This convinced me that there was no possibility that anything illegal was happening with these transactions, so I agreed to purchase five homes and to use the proceeds from those transactions to cover the operating expenses of the software company in lieu of further capital calls. I felt that this would be a good solution to the infighting and would allow me to remain focused on the massive amount of work I had on my plate to get us through to fruition.
Had I not been convinced that these transactions could not have involved anything illegal there is absolutely no way I would have agreed to do them. I would have simply insisted that my investors continue to fund the operations until one of the multimillion dollar contracts came through. At this time I had also sold 100% of my own equity in this company and had put the money I had received for doing so back into the company. I had negotiated with my partners that I would get 20% ownership back once we received contracts worth $1M. So it is totally illogical to believe I would have knowingly and intentionally committed a major felony that would have landed me in prison for decades a) knowing full well that the feds were looking closely at this mortgage company’s activities, and b) knowing that I could simply rely on my investors instead.
Moreover, there were numerous times when I was at Greg’s office when his PO would visit, and he seemed perfectly comfortable with everything that was going on. There were literally hundreds of transactions just like mine occurring every week at this company.
In the end I was the only person indicted. Even though I am the only person who could possibly NOT have known that these transactions were illegal I am the only person that has been indicted. And now the statute of limitations has lapsed, so I am the only person who ever WILL be indicted. These homes never were flipped. Instead he forced them into foreclosure leaving me in financial ruins. The multimillion dollar deals never came through because just before we closed our first deal Steve had approached me and said that he didn’t feel Greg should get 25% of a $20M contract so he was going to say he had executed his conversion clause before I had forced its removal and take control of the company as soon as we closed the deal. This caused me to believe that once he had control of the operating capital he would have unlimited resources with which to fight any legal attacks – so despite the fact that he would have been laughed out of court the chances of such litigation ever seeing the light of a courtroom was slim to none. I felt I needed to make a preemptive strike to keep him from doing this, so I met with Greg and told him I wanted to file a Motion for Declaratory Judgment from a local court to get them to say that Steve could not do what he was threatening to do. We met with Greg’s lawyer who told us it was not possible to ask a court to declare something illegal that hadn’t happened yet. So I asked if we could simply emulate the situation then and ask the court to declare what we had just done illegal and effectively also declaring that Steve could not do what he had been threatening to do.
So we did just that. We gave each other promissory notes with conversion clauses and converted them to stock, moved all of the assets to a temporary holding company, and filed a Motion for Declaratory Judgment asking the court to tell us we could not do this. Only this is where everything fell apart. Steve filed a countersuit (obviously he had no idea what we were really doing – he assumed we were trying to steal the company just as the multimillion dollar deal came through and beat him to the punch). We were told that we had to disclose the pending litigation to any company we were entering into agreements with which caused all of the pending deals to be put on hold. Then my homes went into foreclosure and we didn’t have the money to continue with the litigation I had started. In the end Steve got a default judgment against me, and my entire financial world fell to ruins.
So when the feds came knocking on my door and indicted me in July of 2011 I didn’t have the money to hire an attorney. Now I go to trial in a month in a fight for my life, and my public defender (not out of the FPD’s office but he is a CJA panel attorney) hasn’t even looked at my case yet as he has been involved in several murder trials in the year he has represented me. I found out through discovery that Steve had precipitated the criminal investigation by writing a 40-page diatribe to the FBI full of lies. I have a fairly strong case, but I am fearful that I will not be adequately represented at trial and that I may spend decades in a federal penitentiary.
Either way I am planning to write a book about this bizarre case and the entire story of my life.

