Broken Arrow man sentenced in mortgage fraud scheme

Journal Record, The (Oklahoma City),  Sep 30, 2008  by Marie Price

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A Broken Arrow man has been sentenced to 13 years in prison for a mortgage fraud scheme that lured homeowners with "cash-back rebate coupons."

Terry Hugh Mahon, 69, was found guilty of conspiracy, mail fraud and money laundering in March. Co-defendant Grover Harold Phillips, 70, pleaded guilty and awaits sentencing.

"These defendants, aided by others, concocted a scheme whereby they falsely promised buyers and homeowners that if they took out a new mortgage or refinanced their existing mortgage, they could pay it off in just five years, with one catch: they had to buy a bogus 'cashback rebate coupon,'" said U.S. Attorney John C. Richter. "This coupon promised financial freedom, but delivered financial misery."

In addition to the prison sentence, Mahon was also ordered to pay more than $3 million in restitution to victims, and is subject to a forfeiture order amounting to more than $1 million.

Mahon and Phillips were indicted last November for falsely representing that people could pay off their mortgages by purchasing coupons for about 17 percent of their face value, redeeming them at full value after five years.

Beginning in 2000, Mahon started operating Rebates International Inc. in Hollister, Mo. Prosecutors said that Phillips worked in tandem with Mahon through Amsterdam Fidelity Business Trust, which Phillips operated out of his Stillwater home.

The government's evidence showed that from 2000 to 2003, the two worked with others to sell the sham rebate coupons to homebuyers.

Victims paid 17 percent of the value of their homes to Mahan and Phillips, receiving in return coupons that they were told were worth the entire value of their homes.

The funds were supposedly invested in high-yield trading programs, which the conspirators claimed could generate about 60 percent annually.

At trial, prosecutors presented evidence showing that the only investment in anything resembling a high-yield program was a $50,000 payment in April 2002 to OsGold, a Ponzi scheme that folded after a federal investigation.

Mahon and others siphoned off hundreds of thousands of dollars that victims were told would be invested, other evidence indicated.

In March, prosecutors said that payments for market analyses were sent to intermediary corporations under control of Mahon and Phillips, but most were later deposited into bank accounts in the name of Amsterdam, with about a third transferred to an account in the name of Rebates International.

Federal attorneys said that many victims refinanced their homes to generate the 17 percent required to participate in the program.

Another conspirator, Emzie Huletty, Oklahoma City, pleaded guilty to mortgage fraud in March 2006 and was sentenced to two years in prison.

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