A Gilbert man who spearheaded an investment fraud scheme involving distressed homeowner loans, is facing up to 20 years in federal prison for the crimes.
Gerald Lee Kelly, 47, entered into a plea agreement in U.S. District Court in Phoenix on Monday, pleading guilty to one count each of wire fraud, transactional money laundering, and structuring financial transactions through a domestic financial institution. He also was ordered to pay $855,000 in restitution, the amount of money he defrauded “investors” out of and could be fined $250,000, according to the plea agreement.
In January, Kelly had been indicted by a federal grand jury on 25 fraud-related counts, alleging that he ran a scam promising “investors” 18 to 25 percent returns on their investment from his short term, high interest loan program that he said would help distressed homeowners, according to the U.S. Attorney’s Office.
From 2006 to 2007, Kelly operated a business called Cornerstone Financial Holdings, LLC (“Cornerstone”) and through that entity defrauded investors out of about $855,000 by promising them the high returns, according to the indictment.
Kelly had told victims that their investments would fund short-term, high interest loans to distressed homeowners and that they would be secured by promissory notes, second deeds of trust, home equity lines of credit, contracts or some other form of documentation which purportedly conveyed an interest in the homeowners’ properties.
In an office-issued statement at the time of Kelly’s indictment, acting U.S. Attorney Ann Birmingham Schell said, “The defendant took advantage of the victims at their most vulnerable time, fearing the loss of their homes. This office, along with its investigating partners, is committed to investigating and prosecuting those that take advantage of distressed homeowners.”
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