A federal indictment charging four individuals in a Baltimore property "flipping" scheme that allegedly bilked lenders and buyers out of more than $2 million was unsealed yesterday.
The 21-count indictment -- the second of its kind in Baltimore in two months -- comes after a two-year investigation of an operation that bought and quickly resold at much higher prices 500 to 1,000 city houses, mainly in East Baltimore and Westport, prosecutors said.
The indictment, handed down by a federal grand jury Wednesday, was unsealed after one of the defendants, Carl E. Schulz of Baltimore, was arrested by the FBI early yesterday at his Calvert Street office.
Schulz, 51, was released on his own recognizance after an appearance yesterday afternoon in U.S. District Court in Baltimore.
Charged with Schulz were Marcia Kirven McNeil, 45, of Severna Park, who worked for one of Schulz's companies and operated a title company; and two property appraisers, Guy Shaneybrook, 51, of Middle River; and Narade Pramuan, 34, of Baltimore. They were not arrested.
Shaneybrook, the only defendant to comment, said the indictment surprised him because he has cooperated with authorities. "I'll stand by the appraisals," he said.
The indictment alleges violations of the mail and wire fraud statutes. Schulz was charged in 19 counts while McNeil was charged in eight, Shaneybrook in four, and Pramuan in seven.
The indictment represents the second major flipping case brought by federal prosecutors in two months. Robert L. Beeman, of Wilmington, Del., who bought and quickly resold more than 100 Baltimore houses, was indicted last month along with an appraiser, a lawyer and two mortgage brokers.
"Other similar types of investigations with other targets are ongoing," Stephen M. Schenning, first assistant U.S. attorney, said yesterday.
The investigations follow a wave of property flipping that, state officials say, has seen more than 2,000 Baltimore houses quickly resold in the last four years for price increases of at least 100 percent. While flipping itself is legal, it becomes illegal if appraisals inflate the property values and documents are falsified to make buyers appear more credit-worthy than they are.
Some close observers of flipping believe many more than 2,000 houses were involved -- and the prosecutors' estimate that Schulz's alleged scheme involved up to 1,000 properties lends credence to that belief.
Schulz would not comment after his court appearance. Pramuan referred questions to his attorney, who did not return a call. McNeil could not be reached.
The indictment, which said that more than three dozen lenders were victimized, said the "scheme and artifice to defraud" began in 1996 and continued until Wednesday.
The indictment said Schulz and McNeil, operating through a series of corporations, bought cheap city houses "for the purpose of fraudulently reselling them, sometimes after making cosmetic improvements." They recruited investors to buy packages of houses at much higher prices, promising to sell the properties for little or no down payment and also paying the buyers' settlement expenses.
In some cases, it said, Schulz and McNeil were the ultimate buyers and obtained mortgages.
Schulz and McNeil "induced the mortgage lenders to provide large mortgage amounts by supplying false information and fraudulent documents to make the borrowers appear more financially secure than they actually were and to make the properties appear to be better investments than they actually were," said a statement from U.S. Attorney Lynne A. Battaglia.
They also obtained "appraisals of the subject properties for figures much higher than the prices" they paid, the statement said.