U.S. District Judge Timothy Batten sentenced Walter Hermann on May 4 to serve almost three years in federal prison. Hermann, a 41-year-old Dunwoody real estate appraiser, was found guilty of involvement in a regional real estate scheme that included Dunwoody and Lithonia.
Batten also sentenced the ringleader, Edward Farley, to serve 25 years in federal prison on charges that include bank fraud and conspiracy involving mortgage fraud, a real estate investment “Ponzi” scheme with more than 100 victims, a check-kiting scheme and bankruptcy fraud.
“Not only did these different mortgage fraud schemes cause the lenders to suffer cash losses of $23 million, they contributed to the losses that many homeowners and communities have experienced because of the blight of empty houses,” said U.S. Attorney Sally Yates.
Yates said Farley, a former mortgage broker, operated through four real estate companies he owned located in Dunwoody and Norcross. He defrauded mortgage lenders through same-day flips of properties in Lithonia and other metro area cities, authorities said.
Farley paid Hermann to inflate the value of each property by $50,000 to $100,000, and found inexperienced investors to purchase the properties from one of his companies. Farley often aided unqualified investors by using false financial documents, such as bank statements and W2s, as well as inflating investors’ income.
According to authorities, Farley did not purchase the properties he was selling to investors until after the fraudulently obtained loan proceeds on the second purchase had been disbursed.
In a separate real estate Ponzi scheme, he lured more than 100 investors with promises of interest payments ranging from 14 percent to 60 percent for the renovation of old houses that would be resold at a profit. He made payments to early victims to generate new investors who ultimately lost more than $20 million.
Hermann pleaded guilty in December to the charges against him. For his role, Hermann must pay more than $2 million in restitution. And Batten prohibited him from requesting reinstatement of his appraiser’s license during his prison sentence and five years of supervised release.
In March, Batten sentenced Trent Wright to one year and nine months in prison. Farley used Wright, a real estate closing attorney, to issue title policies without paying off prior security holders. Wright, who pleaded guilty in December to mail fraud, must also pay $2.4 million in restitution and serve three years of supervised release.