Defendant. ) 1. Defendant R. ALLEN SINCLAIR (*SINCLAIR') was the owner and operator of

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1 Title 18, United States Code, R. ALLEN SINCLAIR, ) Section 1344(2) ) Defendant. ) The Grand Jury charges: GENERAL ALLEGATIONS At all times relevant to this Indictment or other times specified: 1. Defendant R. ALLEN SINCLAIR (*SINCLAIR') was the owner and operator of Newport Investments, LLC C'NI) and Newport Development, Inc. ("ND") located at 1 1 Overhill Road, Youngstown, Ohio. 2. SINCLAIR advertised NI as a real estate investment company primarily in the business of buying, renovating. and selling residential real estate properties. He maintained web sites with the addresses: and 3. SINCLAIR was a licensed attorney in the State of Ohio, with a private sole practitioner law office also located at I I Overhill Road, Youngstown, Ohio.

2 4. First Place Bank, Huntington National Bank, Wachovia Bank, Wells Fargo Bank, lst County Bank, Ohio Savings Bank, MidFirst Bank, JP Morgan Chase, Citi Mortgage, Sun Trust Bank, and Bank of America, were financial institutions as defined in l8 U.S.C. $ 20, in that their deposits were insured by the Federal Deposit Insurance Corporation C'FDIC). 5. Five ofthe mortgage loans involved in the scheme set forth below were insured by the Federal Housing Administration C'FHA), which was an agency within the United States Department of Housing and Urban Development ("HUD). FHA loan insurance protected lenders by guaranteeing that ifthe borrower defaulted on a loan, the lender could foreclose on the mortgage, sell the properfy and seek reimbursement from the FHA for any losses resulting from the default. 6. One ofthe mortgage loans involved in the scheme set forth below was insured by the Veterans Affairs ("VA"), which was an agency within the United States Department ol Veterans Affairs. VA loan insurance protected lenders by guaranteeing that ifthe borrower defaulted on a loan, the lender could foreclose on the mortgage, sell the property and seek reimbursement from the VA for any losses resulting from the default. 7. D.K., an individual known to the Crand Jury but not charged herein, was the managing partner at Commonwealth Land Title Agency ("CLTA," a,/va Commonwealth Suburban), located in Youngstown, Ohio. In the scheme set forth below, D.K. served as the primary title agent for real estate transfers that SINCLAIR referred to CLTA. 8. S.B.. an individual known to the Crand Jury but not charged herein, was the administrative assistant to SINCLAIR, and also the treasurer for NI. S.B. handled all of the paperwork for NI and ND, served as the notary public on deed transfers, and communicated directly with sellers regarding payments to various lenders.

3 9. SINCLAIR, by and through NI and ND, solicited money from multiple investors within the Northem District of Ohio. Eastem Division. SINCLAIR enticed investors by off'ering an opportunity to eam interest rates in excess of 107o, when as SINCLAIR, NI and ND then well knew, they would not be able to pay the promised retums. 10. SINCLAIR told investors their investments would be used for the acquisition and renovation of multiple residential real estate properties in and around Youngstown, Ohio, when as SINCLAIR then well knew, many of the acquired properties needed little or no renovation. I l. SINCLAIR converted a significant portion of the solicited investor funds lbr his own personal benefit, and those ofnd. 12. D.K., at the direction of SINCLAIR, prepared multiple HUD- I 's which reflected a "cash" lender was involved in the transactions described in paragraphs l5 through 28 below. The amount of the "cash" loans listed on the HUD-l's was the amount invested by each respective investor and was listed as the "[p]rincipal amount of new loan(s)" on the HUD-l's. SINCLAIR failed to disclose to the financial institutions that additional mortgages were incurred for each property. 13. As a result of SINCLAIR's false and fraudulent pretenses, representations and promises, approximately five investors invested a total of approximately $147,000 in the aggregate. Statutory Violations 14. From on or about December 12,2005, through on or about March 16, 2007, SINCLAIR bought houses from individual sellers through land trusts he created for each specific transaclion. SINCLAIR lraudulently misled the sellers to believe that the land trusts had assumed their mortgage loans, but, in fact, SINCLAIR never informed the lenders or sought the

4 lenders' agreement to the supposed loan assumptions. After making minimal monthly payments, SINCLAIR stopped paying the mortgages without notifuing the sellers, who were unaware that they were still obligated on the loans. As a result, the mortgage loans went into default, which caused substantial losses to many of the lenders and federal agencies that insured the loans. 15. SINCLAIR generally offered as his purchase price. the balance ofthe existing balance on the mortgage loan or loans on the house. In most cases, the seller agreed to transfer title to lhe subjecl house to the respective land trusts based on SINCLAIR's false and misleading assurances that the existing mortgage was assumed by the land trust, thereby discharging the seller ofany further legal responsibility for the mortgage payments. 16. SINCLAIR solicited potential sellers ofhouses subject to existing mortgage loans through various means, including materials on the NI website, brochures distributed or mailed to houses, media advertising, and contacts with Realtors. He liequently targeted persons who were likely to seek quick sales oftheir house for various reasons, including but not limited to: A. the seller's house was listed for sale, but had not sold; B. the seller had a change in employment. such asjob loss, transfer, or retirement; or C. the seller had a recent, pending, or impending separation or divorce. 17. SINCLAIR crealed a separate land trust for each property that he acquired. By the closing of the sale transaction, the property was deeded to the land trust with ND as the grantor and beneficiary and NI as the trustee. 18. For each transaction, SINCLAIR drafted and signed a trust agreement, which listed SINCLAIR as the grantor and trustee for NI and ND. respeclively. I 9. SINCLAIR and each seller executed multiple agreements created by SINCLAIR including a limited power of attomey; authorization to release information tiom existing lender;

5 declaralion of trust; assignment ofbeneficial interesu appointment of trustee; and, assignment of escrow. The agreements stated the amount and means by which the purchase price was payable, which included a line beginning "'Subject to' the existing loan balance," followed by the lender name, loan number, interest rate, other terms ol the mortgage loan, and the loan balance. A similar line provided the same inlormation for a second mortgage when applicable. 20. SINCLAIR generally told the sellers he would either renovate and sell the property, or find tenants on a rent-to-own program until the tenants could qualifu for a mortgage. 21. Many sellers believed they were discharged oftheir mortgage loan obligations. and made commitments to other housing costs and financial obligations, often including new mortgage loans on new homes. 22. Instead of NI or the land trusts assuming the loans, SINCLAIR structured the transactions to transfer the title ofthe houses to the land trusts, with the sellers still liable for the mortgage balances. SINCLAIR did not notify, or cause anyone to notify, the lenders of the purported loan assumptions because the lenders would have called the loans upon sale or transfer. He also made sure that anyone who handled the title work or closing documents did not notify the lenders. 23. In all but one case, the title work and closings for SINCLAIR were handled by D.K. at CLTA. In the other case, SINCLAIR ananged for a lawyer acquaintance to handle the title work. At each closing. the seller executed a warranty deed that transferred the subject houses to a land trust. CLTA (or the attomey) provided to the seller a U.S. Department of Housing & Urban Development Settlement Statement C'HUD-l') that purported to disclose all olthe seller's and buyer's costs in the transaction, including the cost ofthe property. All but one of the HUD-I's falsely stated that the seller's mortgage was "assumed."

6 24. SINCLAIR executed a HUD-I on behalf of NI for each prope(y, leading the sellers to believe that they sold their prope(ies to SINCLAIR's land trust. The HUD-l's listed each land trust as the borrower, and the sales price was listed as approximately the amount ofthe seller's assumed mortgage. 25. After acquiring the properties as described above, SINCLAIR and S.B. tlpically conveyed the properties to others through land contracts. After some period of time, typically between two and six months, SINCLAIR continued to collect payments on the land contracts but stopped making mortgage payments on the properties. 26. After SINCLAIR stopped paying the mortgages, the sellers found themselves in the position of continuing to owe the mortgage loan balances to the lenders without title to the property. Lenders often contacted the sellers to obtain payment of the delinquent amounts. The sellers then attempted to contact SINCLAIR to complain and seek redress. In a number of circumstances, SINCLAIR and/or S.B. told the sellers that the lender had made a mistake and that NI would resolve the problem, then knowing the representation to be false. As the lenders' demands for payment continued, sellers often found themselves unable to reach anyone at NL SINCLAIR and S.B. did not answer the phone and failed to retum most phone messages. 27. From in or around December 2005, through in or around March 2007, SINCLAIR acquired approximately I 2 properties through the NI and ND land trusts.

7 The Grand Jury further charges: Counts l-12 (Financial Institution Fraud) 28. The allegations in paragraphs I through 27 of this Indictment are re-alleged and incorporated by reference herein. 29. From in or around December 2005, through in or around March 2007, and on or about each of the dates set forth below, in the Northem District olohio, Eastem Division, and elsewhere, SINCLAIR, aided and abetted by S.B. and D.K.. knowingly executed and attempted to execute the scheme to obtain any of the moneys, funds, credits, assets, securities and other property owned by and under the custody and control ofthe financial institutions listed below by means offalse and fraudulent pretenses, representations, and promises, with each real estate transfer constituting a separate substantive count. ProDertr Date of Address Transfer Loss Amount Wells Fargo Bank 4523 Alderwood Chase Ilome Finance Drive Wells Fargo Bank Youngstown, Wells Fargo Bank Huntington National Stillson Place Struthers, Citi Mortgage 4866 Darbyshire Austintown, Court Wachovia Bank 64 Walnut Street Slruthers, Wells Fargo Bank Youngstown, Ohio Savings & Loan

8 4564 Woodridge Drive 119 S. Main Street Austintown, Austintown, Bank of America $55, Sun Trust Mortgage $ All in violation oltitle 18, United States Code, Section 1344(2). Original document - Signatures on file with the Clerk of Courts, pursuant to the E-Govemment Act of2002.

9 United States v. R. Allen Sinclair Ann C. Rowland Deputy Criminal Chief