By Ken Alltucker
The Cincinnati Enquirer

Four Cincinnati-area real estate investors face federal charges in connection with a buy-low, sell-high mortgage operation.

SPECIAL REPORT

• Home schemes, broken dreams

In plea deals filed Thursday in U.S. District Court in Cincinnati, investors Roberto Ramirez, Richard Reynolds and Rodger Randall admitted their part in an illegal property flipping operation using phony down payments. Horace Roberson, a fourth investor who didn't sign a plea deal, faces charges of bank, wire and mail fraud and filing a false loan application.

The four investors are accused of participating in a complicated scam that involved buying single-family houses on the cheap and quickly reselling or "flipping" the properties at inflated prices using false loan documents. Investors involved in flipping often work closely with friendly title agents or property appraisers, who agree to inflate real estate values to pocket mortgage dollars.

The four criminal cases filed Thursday stem from an investigation launched more than a year ago by the FBI and Internal Revenue Service. Federal investigators suspect hundreds of illegal flips in many Cincinnati neighborhoods, potentially costing lenders millions of dollars in bad loans. Three title agents already have been charged and have agreed to cooperate.

"The word is out in the investment community that the U.S. attorney is prosecuting this type of activity," Ohio Rep. Steve Driehaus, D-Cincinnati, said. "I suspect we will see indictments that continue to roll out."

Ramirez, Reynolds and Randall agreed to waive a federal grand jury indictment and to cooperate with federal investigators. The three face up to 30 years in prison and a $1 million fine, but federal prosecutors have the option of recommending a lighter sentence as part of the plea deals.

No maximum sentence or fine is outlined in Roberson's "information" filed by Assistant U.S. Attorney Amul Thapar.

The court documents indicate that Roberson bought a Madisonville home in November 2001 for $40,000 and sold the property nine days later to another investor for $83,000. Loan documents suggested that the investor furnished a down payment of $9,031, but in reality, no money changed hands at the closing.

Roberson signed the loan application knowing there was no real down payment, federal prosecutors contend.

The lender, ABN Amro, initiated foreclosure of the house and resold the home in December for $42,000 - or about half the sales price Roberson netted in the flip, court papers say.

The charges against Ramirez, Reynolds and Randall describe similar transactions. All three have agreed to cooperate with federal investigators, and federal prosecutors have the option of recommending a lighter sentence.

The court papers state that Reynolds used a phony down-payment method to buy a West Price Hill home in October 2001 for $84,000 from investor David Lockwood.

Lockwood bought the home for $28,000 just three months earlier. Reynolds also is accused of signing a loan application that falsely stated he worked for First Financial and earned $72,000 a year.

Illegal property flipping is one of a handful of housing practices targeted by neighborhood leaders seeking to end predatory housing practices.

A multineighborhood task force involving representatives from Northside, Westwood, East Price Hill, West Price Hill, South Fairmount and other neighborhoods also has asked Cincinnati to crack down on investors who offer rent-to-own homes.

Many investors promote the rent-to-own contracts as a legitimate way for people with poor credit to buy a home.

But Driehaus, who is from West Price Hill, and other neighborhood leaders contend that the contracts often take on a predatory edge by requiring buyers to make hefty down payments and make costly repairs to dilapidated homes.

Driehaus and Vice Mayor Alicia Reece have scheduled a hearing June 8 to discuss possible legislation to regulate lease-option deals.

E-mail kalltucker@enquirer.com