Earlier this week, a previous post introduced the story of one defendant who found himself caught up in a massive government investigation after an IRS agent saw him in a TV interview. Based on nothing other than curiosity about how the man could afford to train for a race while still earning a living, the agent started a determined investigation.
Over the course of 700 hours, the agent exhausted all available information in the man's tax filings and bank records. He set a surveillance team on the man and even ransacked his garbage looking for more evidence. Despite all of time, money, and government resources expended thus far, the agent had not found evidence of financial crimes or tax fraud.
Determined to find something, the IRS dispatched an undercover agent to continue the investigation. The agent, an attractive woman who claimed to be a runner, knocked on the man's door and invited him to lunch. In hindsight, the man realized that all of her questions were part of the investigation.
The undercover agent asked a lot about the man's finances. Finally, he made one small statement that made a big impact at the trial: he admitted that his mortgages were "liar loans." "Liar loan" refers to a type of mortgage that was extremely common before the housing bust - lenders simply accepted that the borrower had the income that he or she "stated" on the application. They did not independently verify it.
The man received mortgages based on exaggerated income - but he did not prepare the applications or fill in fraudulent information. Instead, he merely signed off on the closing documents that his broker had already prepared. A jury found that this was enough to send him to prison for mortgage fraud.
This case provides a relatively rare inside look at government investigations. Federal authorities have the resources to turn over every stone in an attempt to dig up evidence of criminal activity. Given this aggressive model of investigation, it is important to talk to a skilled and experience criminal defense attorney at the first indication that the government suspects something.
Source: NBC News, "Borrower targeted for mortgage fraud, while bankers got bailouts," Sopan Deb, Nov. 14, 2012