Developer to begin prison sentence in Myrtle Beach area mortgage fraud case

Kenneth Paul Holmes, a Columbia area real estate developer who once boasted on his web site about his ability to flip homes for a profit, will begin serving a five-month federal prison sentence next week for his part in a Grand Strand mortgage fraud scheme.

Judge Terry Wooten sentenced Holmes last month and delayed his report to prison until after the holidays. Holmes also will spend five months on home confinement after his release, followed by 4 ½ years of probation. He has been ordered to pay nearly $2.5 million in restitution – at the rate of $1,000 per month – to banks that lost money on a series of real estate transactions involving homes he built in Garden City Beach and Surfside Beach.

Holmes, who had faced a maximum of 30 years in prison, was given a lighter sentence because his cooperation with federal investigators has led to six guilty pleas by others involved in the scheme.

At least four more people have been named in criminal cases as unindicted co-conspirators in the fraud, which used straw buyers nationwide to purchase the area homes at inflated prices. The straw buyers obtained loans from banks, which were never repaid. The buyers then received kickbacks from the loan proceeds, as did mortgage brokers, bankers and others who helped arranged the loans.

Among the unindicted co-conspirators is Jeremy Eason, a former employee at Dunes Mortgage in Myrtle Beach. Documents from a related civil lawsuit allege that Eason formed a shell corporation called JJE Enterprises, which received at least $427,000 from the home sales during real estate closings and then re-distributed some of that money to other co-conspirators.

Malia McCaffrey, the owner of Prodigy Consulting mortgage brokerage in Myrtle Beach, also is named as an unindicted co-conspirator. Prodigy Consulting received at least $165,000 in kickbacks from the Holmes real estate deals, according to the related civil lawsuit filed by RBC Bank.

The bank claims that the Holmes deals were just a small part of a wide-ranging fraud scheme involving Eason and McCaffrey, stating in court documents that the two laundered millions of dollars in kickbacks during the real estate boom.

Other unindicted co-conspirators include Mike Wimberly, a California resident who court documents say arranged a home sale and received a $90,000 kickback through a shell corporation he formed, and Guisell Fuentes, a Florida resident who court documents say arranged a home sale and received a $90,000 kickback through a shell corporation she formed.

Holmes, in an affidavit filed last month, said he is frustrated that prosecutors have not yet charged any of the unindicted co-conspirators.

“I had certainly thought that they would have been indicted at least by now,” Holmes said, adding that he “gave a lot of evidence against these people, including quotes of things they said, copies of canceled checks and incriminating e-mails.

“They are the ones who actually received the money lost by the victim lenders in these crimes,” he said.

Federal investigators refuse to discuss specifics of cases that are not yet resolved, but have said further indictments of Grand Strand mortgage fraud participants are imminent.

In addition to its civil lawsuit against Holmes and others, RBC Bank has filed lawsuits against 13 appraisers and two lawyers that the bank says played a role in this area’s fraudulent real estate transactions. None of the appraisers or lawyers have been charged with any crime.

Holmes had asked for a sentence without any confinement, claiming he was lured to this area by the housing boom and didn’t realize he was participating in a fraud scheme until it was too late to back out of the home sales. Holmes also said in the affidavit that he was threatened by others involved in the scheme if he didn’t go along with the sales.

Holmes, who once had a web site in which he discussed what he said was a successful home-flipping business during the real estate boom, said in his affidavit that he still teaches real estate investment classes and warns students of the consequences they might face if they participate in mortgage fraud.

“I am making sure that my students understand what can happen if they bend to the will of others and do something outside of the rules,” he said. “It is truly amazing how many times agents, mortgage brokers and others ask you to do something that is against the law. I have brought this up often in the past year, hoping that they will learn from what happened to me.”