Swindler who did his time is back in jail


How could Michael Clott afford a $650,000 house in a Washington suburb when, as he told his probation officer, he was working for a tire company and making only $300 a week?

Efforts to answer that riddle landed Clott in jail yesterday. Again.

A former Baltimore banker, Clott served seven years in federal prison on three different convictions stemming from a scheme to sell fraudulent mortgages in the 1980s. But, shortly after his release in May 1994, federal prosecutors say he began offering unsuspecting borrowers the opportunity to refinance second mortgages through a New Jersey bank. The bank, authorities say, knew nothing about the deals.

All the while, he told his probation officer that he was living in a modest Rockville apartment and selling tires. He even offered forged documents from the Advance Tire Company as evidence of his employment there, according to court records.

But in January of this year, using funds that prosecutors believe belonged to the borrowers, Clott bought the spacious home in the 8800 block of Watts Mine Terrace in Potomac.

After receiving complaints from several borrowers, state and federal officials began an investigation earlier this month. Clott was arrested in the Washington area last week.

Over the past year, authorities say, Clott bilked at least 50 borrowers out of some $2 million.

"It seems that Mr. Clott is incapable of being forthright and honest with anyone," said Jane Barrett, the assistant U.S. attorney who has handled federal cases against Clott going back nine years. "There are no conditions [of probation] that the court could come up with that would stop Mr. Clott from perpetrating this sort of fraud."

During a hearing in Baltimore yesterday before U.S. Magistrate Daniel Klein Jr., Ms. Barrett portrayed Clott as an unusually dangerous and habitual offender. After the hearing, prosecutors and Clott's lawyer agreed that the Montgomery County man be jailed, pending resolution of the alleged parole violations.

As yet, no charges have been filed in the current refinancing case.

"This repeat behavior is not as frequent with white-collar defendants," Ms. Barrett said. "This is more in line with what you see in more common crimes."

Neither Clott nor two affiliated companies, Phoenix Financial Services and Capital Financial Group, were authorized to refinance the second mortgages in the name of the bank, City National of New Jersey.

Clott and his attorney, Christopher B. Mead, refused to comment yesterday.

Clott was the 32-year-old chairman of First American Mortgage Co. (FAMCO) in 1985 when a multimillion dollar lawsuit against him by E.F. Hutton attracted the attention of state regulators.

FAMCO collapsed later that year, and Clott's life slowly unravelled.

In 1987, he was convicted on charges of racketeering, mail fraud and interstate transportation of stolen securities. A judge also permanently barred him from selling or brokering any type of securities in Maryland.

Two years later, he was found guilty of an additional charge of bank fraud for kiting $280,000 in bad checks. He received three sentences, serving seven years in jail.

In all, Clott swindled nearly 300 investors out of $15.7 million -- money used to finance art, jewelry and expensive homes in Owings Mills and Boca Raton, Fla. According to prosecutors, Clott took the money by selling the same mortgages to multiple investors.

Court documents indicate that Clott's most recent scheme involved at least five other people, all employees and officers of various companies. Clott's supporters maintain that he served only as a consultant on the mortgage sales. Some borrowers, however, have told the FBI that Clott handled their loans personally.

Wearing a dark pin-striped suit, Clott looked on anxiously as his attorney asked that he be allowed to live with his ex-wife, Alissa, and their two children. "His story is more pathetic and sad than anything else," Mr. Mead said, adding that his client was not a risk to flee.

Ms. Barrett countered that Clott's history of repeat offenses warranted his imprisonment.

"He didn't care enough about those kids, about being a role model for those kids, to clean up his act," she said.

Before Judge Klein could rule, Ms. Barrett and a visibly frustrated Mr. Mead, who is based in Washington, reached agreement on an order that would assign Clott to a state prison in Talbot County while allowing him limited contact with some family members. Prosecutors, who have been as yet unable to trace all of Clott's money, expressed concern that relatives might be able to make transactions on his behalf.

But Clott's jailing did little to soothe the handful of jilted borrowers who showed up in court yesterday.

Joseph and Louise Taylor, a Hyattsville couple, lost $28,000 in the scheme. Mr. Taylor, an exterminator citing a bad credit history, said he had sought a refinancing to free up money for his children's college tuitions.

Mr. Taylor, 51, said he was told he was eligible for the special 7.5 percent rate because he is black.

"These dogs really hurt me," he said. "I sometimes feel like doing something violent, but I know better."

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