13 charged in $19M Central Oregon bank fraud

AP News
Posted: Nov 20, 2009 8:59 PM

The collapse of a Bend real estate development company has resulted in charges against 13 people in what prosecutors say is the largest Oregon fraud case to emerge from the national real estate boom and bust.

A federal grand jury in Eugene returned five separate indictments on Thursday that charged the principals in Desert Sun Development and others with mortgage and loan fraud that cost financial institutions more than $19 million in losses.

Developer Tyler Fitzsimons, several employees, two bankers and two mortgage brokers were among those indicted.

Arthur Balizan, FBI special agent in charge for Oregon, said the fraud took a heavy economic toll in Bend and Central Oregon, where the real estate market soared with one of the highest growth rates in the nation before the recession hit.

"When a development company collapses under the pressure of fraud, as is alleged in this case, we are left with millions of dollars in losses, empty lots and abandoned buildings," Balizan said. "Everyone loses."

The grand jury charged Fitzsimons, 31, of Prineville, with multiple counts of bank fraud, conspiracy to commit bank fraud, money laundering and making false statements to banks.

Also charged in the indictment naming Fitzsimons were two former employees of the company, Jeremy Kendall and Shannon Egeland, and Bend businessman John Partin.

No defense attorneys were listed among the court documents filed with the indictments. Efforts to contact the various defendants were not immediately successful, except for Partin.

He said he did not learn about being named in an indictment until a friend called.

"I thought he was just being funny," Partin said. "I'm dumbfounded. I've got nothing to hide. All I did was sell a guy some steel."

Partin claims that Fitzsimons skipped out of a job on him and still owes him money. But he said gave all his records to federal agents who requested them and has cooperated fully with the investigation.

According to the indictments, various financial institutions loaned in excess of $25 million to Desert Sun for its commercial construction projects.

Acting U.S. Attorney Kent Robinson said the charges are "typical of what has caused so much havoc in the mortgage and financial sectors."

Five commercial buildings in Bend and Redmond were never built but defendants made representations that construction was under way, prosecutors said.

Partin, 65, the owner of Advance Steel in Bend, is alleged to have issued false invoices for steel building kits for the nonexistent buildings.

Partin denied the allegations and said he believes his records will show the charges against him should be dismissed.

In a separate indictment, Robert Brink, a construction loan officer at Umpqua Bank, was charged with making false statements to the bank.

Prosecutors allege Brink, 58, of Junction City, filed inspection reports with Umpqua Bank certifying that construction was under way on Desert Sun projects when it was not.

A third indictment charges conspiracy, bank fraud, and false statements to banks for Desert Sun's residential real estate investment program.

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Fitzsimons is listed in that indictment, along with Egeland, 35, of La Grande; Kendall, 33, of Redmond; another Desert Sun employee, Garret Towne, 29, of Culver; two mortgage brokers, Shaun Little, 41, of Bend; and Del Barber Jr., 44, of Bend; a bank loan officer, Jeffrey Sprague, 46, of Bend, a loan processor, Barbara Hotchkiss, 40, of Redmond, and a building materials supplier, Kevin Palotay, 46, of Bend.

The indictment alleges they schemed to provide false statements to financial institutions to finance the purchase or construction of residential properties.

The charges include allegations that defendants inflated applicant income and temporarily parked Desert Sun funds in applicant accounts to obtain false proof the prospective borrowers had independent funds available to them.

In a separate indictment, Teresa Ausbrooks, 47, of Bend, is charged with bank fraud for allegedly making false statements about her income and debts in an application to finance Desert Sun's construction of a house for her.

In the final indictment, Michael Wilson, 58, of Murrells Inlet, S.C., is charged with bank fraud. He is alleged to have been Desert Sun's residential construction superintendent.

The indictment also seeks forfeiture of a Ferrari, two Viper automobiles, and other assets related to the fraud and money laundering allegations.

All 13 defendants were scheduled for arraignment Dec. 16 in U.S. District Court in Eugene.