Judge sentences developer for $8M fraud
A man responsible for an $8-million title insurance fraud scheme has been handed his sentence.
U.S. Attorney Patrick A. Miles, Jr. announced yesterday that Charles Gahan, currently a resident of New Smyrna Beach, Fla., and formerly of Grand Rapids, was sentenced yesterday in U.S. District Court to 70 months imprisonment for his role in a conspiracy to commit wire fraud affecting financial institutions.
Gahan was also ordered to pay restitution of $8,205,405.71.
Title insurance fraud
From 2002 to 2006, Gahan operated as a real estate developer under the name GBW Development. Gahan conspired with Scott Hoeft, then the owner of Prime Title Services, to divert real estate closing proceeds to his own pocket.
The essence of the fraud was that Hoeft assisted Gahan in obtaining construction loan financing, by agreeing to provide the prospective lenders with fraudulent title commitments that purposefully failed to disclose the existence of prior liens against the properties where new homes would be constructed.
After a home was constructed and sold, Hoeft would fail to disclose these prior liens to the buyer’s lender or, if he did disclose the liens, he did not pay off the liens with the loan proceeds deposited to his escrow account. Instead, those funds were transferred to Gahan, who used them to support his lifestyle or to build the next home in his development.
Hoeft was previously sentenced to 63 months imprisonment for his role in the scheme, which was reduced to 45 months imprisonment for his cooperation in the prosecution of Gahan.
The two title insurance companies Hoeft used to issue the title insurance policies suffered more than $8 million in losses to provide clear titles to the homeowners.
The fraud scheme also impacted numerous homeowners in the region.
“Innocent homeowners arrived home to find foreclosure notices on their doors, from banks they had never heard of, solely because Gahan fraudulently diverted closing funds from those banks to his own pocket,” Miles said.
Miles called the long-running fraud scheme “very sophisticated,” and said the sentence “reflects the seriousness of this financial crime.”