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Federal judge to hear plea agreement in Cape fraud case

By Staff | Mar 13, 2010

Plea hearings have been set for two men, one the Cape Coral police chief’s son, who are accused in a $4.2 million mortgage fraud conspiracy.
Stephen Petrovich, the son of Police Chief Rob Petrovich and a former detective for the Cape Coral Police Department, is scheduled to go before U.S. District Judge Sheri Polster Chappell at 11 a.m. Tuesday in courtroom D at the U.S. Courthouse, located at 2110 First St. in Fort Myers.
His co-defendant, Steven Reese, has a plea hearing set at 10 a.m.
Petrovich, 35, and Reese, 32, both of Cape Coral, entered into plea deals March 3 with federal prosecutors, along with Cape residents Tyler Forrey, 28, and Ryan O’Brien, 34, and Troy Bossert, 32, of San Antonio, Texas. No plea hearings had been set for Forrey, O’Brien or Bossert as of Friday.
“I don’t know why the other hearings have not been set,” Steve Cole, spokesman for the U.S. Attorney’s Office Middle District of Florida, said. “They will be on separate days … but that is not unusual.”
The men have each pleaded guilty to one count of conspiracy to commit bank fraud and wire fraud and one count of money laundering. All five each face up to 20 years in federal prison, fines up to $500,000, a term of supervised release and up to $200 in special assessments.
According to a prepared statement from the U.S. Attorney’s Office Middle District of Florida, the men operated a “cash-out” mortgage fraud scheme in the Cape from 2007 to 2008. They reported “inflated sales prices to lenders and falsified applications for loans based on the higher prices, then pocketed the excess loan proceeds at closing. Eight Cape properties were involved.
Taking advantage of the housing market downturn, the men “targeted ‘for sale by owner’ homes and offered to pay the sellers their asking price,” the statement reported. The sellers were often told that the paperwork “would show a higher amount so that the buyers could use the excess cash to fund ‘future improvements.'”
The men used “third-party buyers to obtain loans based on inflated sales prices, falsifying loan qualification information and creating fictitious cashier’s checks, bank statements, W-2s, and other documents to support the loan applications,” according to the statement. They obtained loans from several lenders for amounts “far exceeding the sales prices of homes.”
During the closings, the men “caused the excess loan monies — typically more than $100,000 — to be wired to entities under their control, showing the funds as payoffs for ‘existing liabilities’ on the HUD statements.” At one point, they “simply began creating two HUD statements,” one for the closing with the home’s real price and one for the lender that had the false price.
“The buyers made approximately three payments on the mortgages and walked away, leaving the home to foreclosure,” according to the statement. No “improvements” were ever made to the homes using the excess money.
The Internal Revenue Service, U.S. Secret Service and Federal Bureau of Investigation initiated the investigation in 2008. The homes were located at 4923 S.W. Eighth Court, 5609 Del Rio Court, 5223 Stratford Court, 130 S.W. 49th St., 5341 Cobalt Court, 2649 S.W. 29th Ave., 4311 Pelican Blvd. and 1414 N.E. 14th Ave.
Stephen Petrovich resigned from the CCPD in November after being placed on administrative duty pending the outcome of the federal investigation. He had been with the agency for 11 years. He was assigned to the Property and Financial Crimes section and his salary was $64,084 when he resigned.
CCPD Sgt. James O’Brien was also placed on administrative duty pending the outcome of the investigation. O’Brien has worked for the department for 10 years. He became a sergeant with the Special Operations Unit in 2006 and his annual salary is $68,244.
O’Brien remained on administrative duty Thursday, according to Cape police spokeswoman Connie Barron.
Cole confirmed that the federal investigation is still an open investigation.