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Dream dims for investors hoping to recoup money lost in Dream Homes mortgage fraud Date published: 5/14/2009
BY CATHY JETT Investors who lost millions in an alleged mortgage fraud scheme that operated in Spotsylvania County and elsewhere may never get much money back. While funds poured in to Metropolitan Dream Homes' offices in Washington and eight states for its purported mortgage payment program, it poured out just as quickly, said Raymond J. Peroutka, who is heading the court-ordered investigation into its finances. "We have not identified pots of cash out there that are subject to recovery," he said. Most of the funds apparently were used to pay off the mortgages of people who got involved early, and on such lavish expenditures as a fleet of chauffeured luxury cars. Both moves appear to have been calculated to convince later investors that the scheme was profitable. "That's the nature of a Ponzi scheme," said Peroutka, who is managing director of Invotex, a Baltimore firm specializing in financial analysis. Last month a federal grand jury in Maryland indicted Isaac Jerome Smith, 46, formerly of Spotsylvania, and three others for their roles in the scheme, which involved about 1,000 investors and $70 million. Using such names as Metropolitan Grapevine LLC, Metro Dream Homes and POS Dream Homes (known collectively as MDH), they are accused of tricking homeowners into investing a minimum of $50,000 per home in their other business ventures with the promise that revenues would be used to pay off the mortgages within five to seven years. After that, the home buyer and MDH would own equal interests in the home. According to a Justice Department summary of the indictments, the other businesses never generated meaningful income, and funds from later investors allegedly were used to pay the mortgages of earlier investors, as well as to provide perks for employees. Smith was president of POS Dream Homes, which had an office that has since closed near Chancellor Center on State Route 3 in the county. He later sold his nearly $1 million home in Spotsylvania and moved to Conyers, Ga. The other officers who were indicted are Andrew Hamilton Williams Jr., of Hollywood, Fla., founder and owner of MDH; Michael Anthony Hickson, 46, of Commack, N.Y., chief financial officer; and Alvita Karen Gunn, 31, of Hanover, Md., vice president of operations.
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