Leader of Myrtle Beach-area real estate fraud scheme pleads guilty

dwren@thesunnews.comJuly 17, 2013 

— Mark Dain – one of the key figures in a multi-state real estate scam that cost banks millions of dollars at failed projects such as Craven’s Grant in Georgetown and Legacy Estates at Barefoot Resort in North Myrtle Beach – has pleaded guilty to bank fraud in federal court, and his agreement with prosecutors could lead to further arrests.

Dain, one of the co-owners of Woodbridge, Va.-based Total Realty Management Inc., admitted his company falsified loan applications sent to various banks to help buyers qualify for mortgages on home sites in Virginia and the Carolinas. TRM promised buyers that they could flip the home sites for a profit, but most buyers wound up with worthless properties that quickly fell into foreclosure. Little or no development has taken place at the projects that TRM marketed.

Dain, 33, was scheduled to turn himself in to the U.S. Marshals Service on Wednesday, and he will be incarcerated while he awaits sentencing. Prosecutors have agreed to recommend a prison sentence of no more than 6 1/2 years in exchange for Dain’s cooperation in investigating other participants in the alleged fraud. A sentencing date has been scheduled for Oct. 4 in Alexandria, Va.

Meanwhile, a lawyer representing the trustee in the Legacy Estates bankruptcy case has obtained a court order to question Myrtle Beach lawyer Robert “Shep” Guyton about his involvement in that project and the diversion of funds from Legacy closings to a third party company controlled by Dain and his TRM partner, Mark Jalajel.

Guyton was the closing attorney and settlement agent for a number of Legacy Estates sales, according to court documents. In addition, Guyton received fees in connection with each of the real estate closings for the preparation of documents, including those in which he was not the settlement agent. Legacy Development SC Group LLC, the project’s developer, was forced into bankruptcy last year by its creditors.

“Because of his role in the real estate closings, Guyton has knowledge of some of the issues the trustee is investigating,” Columbia lawyer Barbara Barton, who represents trustee Michelle Vieira, said in court documents. Barton said Vieira “has obtained email correspondence which indicates that Guyton may have knowledge” about the money transfers to the third-party company, called Carolina Waters.

“The trustee has attempted to obtain this information without the need for a formal [deposition], but has been unsuccessful in doing so,” Barton said in court documents. A bankruptcy judge has ordered Guyton to answer the trustee’s questions no later than Aug. 9. Guyton could not be reached for comment Wednesday.

TRM’s largest project in this area was Craven’s Grant, a 140-acre site along Winyah Bay that was supposed to have 292 homes. Roads and a clubhouse were constructed, but no homes were built and most of the lots went into foreclosure. Home sites that TRM sold for up to $400,000 apiece now sell for as little as $2,000, according to county property records.

Court documents in Dain’s criminal case show TRM falsified loan applications at Craven’s Grant and other subdivisions by inflating buyers’ wages, misrepresenting their job duties and submitting false tax forms and pay stubs. The company also deposited money into buyers’ bank accounts to make it appear as if they had assets that did not really exist. The buyers returned the money after the loans were approved.

“Employees of mine, during 2006 to 2008, submitted loan applications and HUD-1 statements to banks that contained information that was inaccurate . . . in order for purchasers to qualify who would not have otherwise qualified,” Dain said during his guilty plea hearing, according to an account of the hearing by The Washington Post reporter Tom Jackman.

Court documents show TRM’s scheme cost four banks more than $7.1 million, although the amount of loss has been estimated in the tens of millions in related bankruptcy cases and civil court filings. Several of TRM’s loan officers have received prison sentences for their roles in the scheme, but Dain is the highest-profile participant to plead guilty.

Dain’s link to the Legacy Estates subdivision involves payments funneled to him following that project’s land sales through a North Myrtle Beach company called Gabriel Financial Real Estate Services Inc. Some of the HUD-1 closing statements for Legacy Estates show six-figure commissions being paid to Gabriel Financial, which then wired the money to a company called Carolina Waters, which was owned by Dain and Jalajel.

Legacy Estates was marketed by Ron LeGrand, a partner in Legacy Development and a self-proclaimed real estate guru known for his get-rich-quick seminars. Court documents show LeGrand had borrowed money from Dain and Jalajel to start a W.Va.-based company called Mountain Country Partners. Court documents show the money funneled through Gabriel Financial was for repayment of that loan, not for sales commissions as reflected on the HUD-1 statements.

Gabriel Financial owner Timothy Gabriel told The Sun News that Carolina Waters hired his company to be the referral agent for Legacy Estates. Gabriel said he was not aware of any allegations of mortgage fraud against Dain, Jalajel or others at the time and neither Gabriel nor his company have been named named as a defendant in any legal action related to the transactions. Gabriel said his company received a flat fee of $1,000 per transaction while at least $5.6 million was wired to Carolina Waters.

In addition to the false commission payments shown on HUD-1 statements, a pending civil lawsuit claims falsified down payments were shown on the closing documents to help borrowers qualify for mortgages. Flagstar Bank also is suing LeGrand and others over alleged fraud at Legacy Estates, claiming loan applications sent to the bank included falsified information about buyers’ incomes and misrepresentations about the condition of the properties being sold.

Mountain Country Partners, founded by LeGrand in 2006, invested in a bankrupt oil and gas company. LeGrand and a business partner raised more than $9.5 million by selling limited partnership interests to 54 investors, who wound up losing their money. The U.S. Securities and Exchange Commission levied a civil penalty of $150,000 against LeGrand, who paid the fine but did not admit to any wrongdoing.

The other failed developments that TRM marketed were Cannonsgate in Carteret County, N.C. and Summerhouse in Onslow County, N.C.

Contact DAVID WREN at 626-0281.

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