Construction company owner pleads guilty to mortgage fraud scheme


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Submitted: Wed, 12/07/2011 - 10:14pm
Updated: Wed, 12/07/2011 - 10:17pm By:

RALEIGH, NC (NEWS RELEASE) – United States Attorney Thomas G. Walker announced
that in federal court today DANIEL P. OSTBY, 41, pled guilty
before United State District Judge Terrence W. Boyle to wire fraud,
in violation of Title 18, United States Code, Section 1343, and
money laundering, in violation of Title 18, United States Code,
Section 1956(a)(1)((A)(i).

According to the Criminal Information filed on October 28,
2011, OSTBY and his co-defendant, Curt Vanderzee, formed DC
Development of North Carolina, LLC, which held itself out as
providing construction services. OSTBY and Vanderzee developed a
scheme to “flip” houses, in which they would buy real property,
improve the property by building on it, and then quickly sell the
property for a profit. OSTBY also solicited friends and
acquaintances to go into business with him by telling them they
could “flip” houses and make $20,000.00 to $40,000.00 per property.
Over 17 business-LLC’s were formed with family members and
acquaintances.

The investigation revealed that once the businesses were
established, OSTBY took the business partners to an individual who
“specialized” in obtaining credit for start up businesses. Once
the business credit cards were obtained, cash advances were taken
and used to open a business LLC bank account. OSTBY told the
business partners that they could draw a monthly salary, and pay
personal expenses with the account to help build up their credit.
The money used to pay for those items were either credit card
withrawals or lines of credit obtained at various banks since the
businesses had no source of income.

From 2007 to January, 2009, OSTBY and Vanderzee charged over
$1,025,000.00 on the business credit cards, which were all linked
to various businesses either owned by OSTBY and/or Vanderzee or
linked to other businesses to which they had some financial
interest. Once the money was received, they would funnel the money
back to the businesses bank accounts and then use the money to pay
their monthly salaries, personal expenses, the minimum monthly
credit card payments, and in many instances fund the down payments
of lots and properties being purchased. Additionally, OSTBY and
Vanderzee submitted mortgage applications to purchase real estate,
which had misrepresentations of their employment, monthly income,
and assets. The financial institutions, relying on the information
submitted, approved the applications, and either mailed or wired
the funds to the closing real estate attorney’s bank account. It
is estimated that OSTBY and Vanderzee committed over $3.7 million
in mail and wire fraud.

Acting Special Agent in Charge Kay B. Jernigan stated, “IRSCriminal
Investigation will continue to use the full resources of
our agency to expose the perpetrators and vindicate the victims of
complex financial frauds.”

The maximum penalty for wire fraud is up to 30 years’
imprisonment. The maximum penalty for money laundering is up to 20
years’ imprisonment.

Vanderzee was charged in a Criminal Information on August 30,
2011. He pled guilty on September 29, 2011. Sentencing is
currently set for January 3, 2012.

Investigation of this case was conducted by the Internal
Revenue Service and the United States Secret Service. Assistant
United States Attorney Felice McConnell Corpening is serving as
prosecutor for the government.

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