Earl Gross of Las Vegas, the former president and CEO of U.S. Mortgage, a loan servicing company, was sentenced to serve 18 months in prison for his role in an $8 million scheme to defraud Wells Fargo Bank. Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Daniel G. Bogden of the District of Nevada and Special Agent in Charge Laura A. Bucheit of the FBI’s Las Vegas Field Office made the announcement after the sentence was imposed by U.S. District Court Judge Andrew P. Gordon of the District of Nevada.
On June 11, 2013, Gross pleaded guilty to one count of bank fraud. In addition to his prison term, Gross was ordered to forfeit $8,440,439 in fraudulent proceeds.
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 that described the status of the loans, and it received servicing fees for each loan it serviced.
According to the indictment, from 2004 to 2009, Gross and U.S. Mortgage withheld over $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 the full payoff amount to Wells Fargo Bank, Gross and U.S. Mortgage forwarded only what the borrowers’ monthly payments 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.