Earl Gross, the former president and CEO of U.S. Mortgage, a loan servicing company in Nevada, pled guilty for his role in a scheme to defraud Wells Fargo Bank of more than $8 million. Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and U.S. Attorney Daniel G. Bogden of the District of Nevada made the announcement after the plea was accepted by U.S. District Judge Andrew P. Gordon.
Earl Gross of Las Vegas, pleaded guilty to one count of bank fraud. Gross faces a maximum penalty of 30 years in prison when he is sentenced on September 19, 2013. Gross has agreed to forfeit $8,440,439 pursuant to his plea agreement.
According to plea documents, Wells Fargo Bank contracted with U.S. Mortgage to service pools of residential mortgage loans held by investors in mortgage-backed securities. Under the agreement, Gross and U.S. Mortgage were obligated to collect from the borrowers the monthly payments that the borrowers made toward their mortgage obligations and forward these proceeds to Wells Fargo Bank. In the event that a borrower paid off the loan—usually by selling the mortgaged property—U.S. Mortgage was obligated to remit to Wells Fargo Bank the full payoff amount. U.S. Mortgage agreed to provide Wells Fargo Bank with monthly reports, which described the status of the loans, such as the balance, principal, and interest, and payment status and received servicing fees for each loan it serviced.
According to the indictment, from 2004 to 2009, Gross and U.S. Mortgage withheld more than $8 million in loan payoffs that were due Wells Fargo Bank by submitting to the bank reports stating that numerous borrowers were continuing to make monthly payments when, in fact, they had paid off the loans in full. Rather than remit to Wells Fargo Bank the full payoff amount, Gross and U.S. Mortgage forwarded only what the borrowers’ monthly payment would have been and retained the difference in U.S. Mortgage’s bank account. To deceive Wells Fargo Bank about the status of paid off loans, Gross and U.S. Mortgage created fake amortization schedules indicating that borrowers who had sold and paid off homes were continuing to make monthly payments. In addition to withholding loan payoff amounts to which he was not entitled, Gross charged Wells Fargo Bank fees to service mortgage loans that had been paid off.