United States Attorney Laura E. Duffy has announced that Rollo Richard “Rick” Norton II was sentenced in federal court in San Diego by United States District Judge Marilyn L. Huff to serve 24 months in prison plus three years of supervised release in connection with a felony charge of mail fraud arising from his participation in a scheme to draw equity out of a San Diego condominium complex through a series of sham purchase transactions and refinances. Norton also faces an order of restitution from the Court. The amount of the restitution—which depends, in part, on payments made to Norton’s former clients through certain recent third-party civil settlements—remains to be determined by the Court.
According to court papers, Norton was an investment advisor in Ramona, Calif. In or about 1999, an entity controlled by Norton purchased an apartment complex located on Crown Point Drive in San Diego, Calif., with the intention of completing the conversion of the apartments to condominiums for sale. Norton initially financed the acquisition and conversion of the Crown Point condominiums by taking the project subject to existing loans and by raising funds from investors. However, because of unfavorable loan terms, Norton’s mismanagement of the project, insufficient rental income, and other problems, Norton and his entities soon lacked sufficient funds to service the debt on the condominium project, to make promised payments to investors, and to complete the condominium conversion process.
As part of his guilty plea, Norton admitted that, to raise additional funds, he and others devised a fraudulent scheme to obtain loan proceeds from numerous financial institutions. The scheme ran from late 2001 to late 2005. As part of the scheme, Norton induced straw purchasers to let him use their names and credit histories to obtain new mortgage loans on individual condominium units with the understanding that Norton (and not the straw purchasers) would take care of the mortgage and tax payments. Norton then obtained mortgage loans in the straw purchasers’ names without disclosing to the financial institutions the side agreements between Norton and the straw purchasers.
Norton also admitted that he and others intentionally transferred ownership of condominium units into the names of some individuals without even telling them. Norton then used the names and credit histories of these unwitting “purchasers” to take out new loans on the condominiums. To facilitate this scheme, Norton admitted that he signed the names of other persons on grant deeds and other escrow closing documents and then had the signatures notarized by someone in his office or elsewhere. To prevent detection, Norton had the escrow documents, mortgage bills, real estate tax bills and delinquency notices sent to Norton’s office, rather than to the persons to whom he had transferred ownership of the condominium.
“The first half of this decade unfortunately created far too many opportunities for mortgage and real estate fraud," said United States Attorney Duffy. "The investigation and vigorous pursuit of this matter triggered a series of events that ultimately led to the defendant’s accepting responsibility and to the recovery of a significant portion of lost investor funds through private, third-party civil settlements. Today’s events reflect this office’s unwavering commitment to pursue aggressively all types of financial fraud.”
Two other individuals who have entered guilty pleas associated with this case—Scott Greer and Todd Johnson—are awaiting sentencing by U.S. District Judge Huff.
For more information, visit http://sandiego.fbi.gov.