Myrtle Beach developer appeals prison sentence in mortgage fraud case

dwren@thesunnews.comOctober 29, 2012 

— Condominium developer Ford Shelley is appealing his prison sentence in a mortgage fraud case involving the Pineapple Bay project here, claiming the bank that loaned money on the project committed more fraud than he did yet isn’t being held accountable for its actions.

Shelley pleaded guilty to one felony charge of mail fraud and was sentenced earlier this month to 20 months in prison. Judge Terry Wooten ruled that Shelley does not have to report to prison until an unspecified date early next year. Shelley, who could have faced a maximum of 20 years in prison for the charge, had asked for either probation or home confinement.

Shelley filed an appeal of his sentence last week, claiming he was duped by a GMAC Mortgage officer who assured Shelley that an illegal plan to sell the townhomes was, in fact, legal. Shelley said in his appeal that GMAC approved loans for Pineapple Bay purchases even though it knew the mortgage applications contained false information.

“The fraud of GMAC greatly exceeds any wrongdoing of Shelley,” the appeal states, adding that GMAC should not be allowed to claim a purported $873,536 loss on Pineapple Bay mortgages that went into default. Shelley’s prison sentence was based, in part, on the amount of the bank’s loss.

Shelley also stated in his appeal that GMAC packaged the Pineapple Bay loans into mortgage-backed securities and sold them on the secondary market, thus fully recouping its money.

A spokeswoman for Residential Capital LLC, which owns GMAC Mortgage, did not respond Monday to a request for comments.

John Potterfield, the assistant U.S. attorney who prosecuted Shelley’s case, said he cannot comment because of the pending appeal.

Shelley filed his notice of appeal despite signing a waiver of his right to appeal about a week earlier.

Shelley, in court documents, admitted that he agreed to pay 10 percent of the purchase price to each Pineapple Bay buyer to help them qualify for their mortgages. Those payments were not disclosed on loan documents as required by law. The applications for those mortgages also contained falsified financial information, according to prosecutors.

Shelley stated in his appeal that he was approached by a GMAC loan officer who told him the bank had a program in which the 10 percent payments were legal.

“Shelley was under the impression that this was a common practice, and due to his limited knowledge of the law and inexperience as a developer, he did not know this practice was illegal,” the appeal states.

The loans initially were rejected by GMAC’s underwriting department, but the loan officer – who has not been charged with a crime – was able to push them through and get the mortgages funded, according to the appeal. GMAC fired the loan officer when it learned of the scheme but proceeded to close the loans.

“GMAC now comes to court claiming a lost of $873,536 and such a claim seems unfair in view of its own misconduct,” Shelley said in his appeal.

Four Pineapple Bay buyers previously pleaded guilty to mortgage fraud charges and each were sentenced to between three years and five years of probation plus restitution.

Most of the buyers at the 12-unit Pineapple Bay project included Shelley’s family – including Shelley’s wife, Gina, and his brother-in-law and sister-in-law – and friends or business associates. The original sale price for each of the 2,250-square-foot condos ranged from $625,000 to $700,000, according to county property records.

Contact DAVID WREN at 626-0281.

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