Courthouse notebook | Thompson wants judge to exclude evidence in mortgage fraud case

Gaither B. Thompson II – accused of taking part in a multi-million-dollar mortgage fraud scheme – has asked a judge to exclude statements he made to federal investigators in 2009, when the fraud probe was in its early stages, from any court hearings.

Thompson is one of three people named in an Oct. 25 indictment and other court papers who purchased condominiums at the Pineapple Bay project in Myrtle Beach as part of an alleged mortgage fraud scheme involving developer Ford Shelley, who is Thompson’s brother-in-law.

The indictment charges that Thompson, Linda Audino and Anthony Audino filed mortgage loan applications containing false information in order to purchase the condos in exchange for kickbacks from the developer.

Prosecutors say Thompson falsely claimed on loan documents to have income of $45,000 per month and a bank account containing more than $200,000. Prosecutors also say Thompson received kickbacks totaling $161,247.74 from the condo developer.

Thompson and the Audinos were arraigned in November and are free on bond while awaiting trial. They face one felony charge apiece of conspiracy to commit wire fraud, which carries a maximum 20-year prison sentence and a $250,000 fine.

Thompson is fighting his charge in federal court, saying prosecutors should not be allowed to use statements he made during an interview with FBI investigators on Dec. 17, 2009.

Thompson had signed an agreement with the FBI two days earlier that said “no statements made or other information provided by [Thompson] will be used against [Thompson] in any civil or criminal case,” unless the statements prove to be false or Thompson fails to cooperate with investigators.

Thompson also has asked a judge to quash – or reject – the indictment against him because he believes prosecutors used his 2009 statements in grand jury proceedings. Reynolds Williams, a Florence lawyer representing Thompson, has requested copies of the minutes and transcript of the grand jury hearing that resulted in Thompson’s indictment.

John Potterfield, the assistant U.S. attorney who will prosecute the case, said he intends to respond to Thompson’s motion. Potterfield did not give details about that response.

Shelley, who is being tried separately, pleaded guilty in November to one felony charge of mail fraud related to the Pineapple Bay project.

Shelley told The Sun News that he agreed to the guilty plea even though he is an innocent victim of a mortgage broker who misled him about the legality of loan programs used to sell the condos.

No sentencing date has been scheduled for Shelley. Judge Bryan Harwell recused himself from Shelley’s case during a status conference with lawyers earlier this month. Harwell said he has a possible conflict of interest in the case, but court documents do not specify the nature of that conflict. A new judge has not yet been assigned to the case.

Shelley, in court documents, admitted that he agreed to pay the buyers at Pineapple Bay “large sums of money” after the sales were completed. Those payments were not disclosed on loan documents as required by law. Prosecutors say Shelley also delivered loan packages to banks that contained false, misleading and fraudulent information, according to court documents.

Most of the buyers at Pineapple Bay included Shelley’s family – including Shelley’s wife, Gina, and Thompson – and friends or business associates. All but one of the condo loans wound up in foreclosure and most of the buyers never made a payment on the mortgages, real estate and court documents show.

Although Shelley admitted to one felony charge, real estate and court documents show similarities between most of the initial mortgages made between 2006 and 2008 on the 12-unit Pineapple Bay project at 7001 Porcher Drive.

The sale price for each of the 2,250-square-foot condos ranged from $625,000 to $700,000, according to county property records.

Gene Connell, a Surfside Beach lawyer representing Shelley, said that the buyers had hoped to flip the condos for a profit.

“This was a period of time when people were selling condos at enormous prices,” Connell said. “Everybody was looking to flip them.”

When the real estate crash hit, however, the buyers were stuck with the condos and mortgages for more than their property was worth.

Court documents show Shelley, his family members and others defaulted on mortgages totaling nearly $5.8 million.

Pineapple Bay condos now are selling for a fraction of their original prices. For example, property records show one unit sold for $155,000 in May and another sold for $135,000 in April.