Ponzi and Check Kiting Schemes by Georgia Mortgage Broker Cost Victims $23 Million

According to a press release by the U.S. Attorney's Office for the Northern District of Georgia, Edward William Farley, of Hoschton, Georgia, was sentenced to 25 years imprisonment today in the U.S. District Court for the Northern District of Georgia for causing more than $23 million in losses to mortgage lenders in a real estate investment Ponzi scheme. Walter Julius Herman, of Dunwoody Georgia, was sentenced to over 2 years imprisonment. Farley was also ordered to pay restitution of $24,131,857. He had pled guilty to the charges last November.

Farley, a mortgage broker, operated through the entities Creative Home Search, Southern Land Partners, Georgia Land Group, and Global Mortgage. Farley engaged in same-day flips of properties in Buford, College Park, Conyers, Cumming, Dacula, Grayson, Lawrenceville, Lithonia, Norcross, Marietta, Roswell, Snellville and Suwanee. He paid Hermann, an appraiser, to fraudulently inflate the value of each property by $50,000 to $100,000. He also recruited purchasers to purchase the properties from one of his entities. In the process of flipping the properties, Farley would submit loan applications with false statements.

Farley was also charged with operating a real estate investment/Ponzi scheme through an entity called Alliance Resource Management. Farley falsely represented to investors that Alliance Resource Management was in the business of purchasing residential properties, renovating the properties and selling them at a profit, when in truth Alliance Resource Management had insufficient equity or income to purchase or renovate property. Farley also falsely promised investors that their investments were guaranteed by a first security position in property, a personal guarantee or title insurance, and provided investors with false promissory notes promising interest rates between 14 and 60 percent. In typical Ponzi scheme fashion, Farley paid early investors with investment proceeds from later investors.

Finally, Farley was charged with fraudulently obtaining $1.2 million from Washington Mutual Bank
in a check kiting scheme by transferring funds he did not have among several Alliance Resource Management bank accounts, and withdrawing scheme proceeds before the “insufficient funds” checks were returned.