White-Collar Crime

Criminal Defense Lawyer Gets 6 Years, Real Estate Attorney Gets 9 in Federal Mortgage Fraud Case

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Updated: On Tuesday, longtime criminal defense attorney Charles Murphy gave up his Illinois law license.

Before the end of the week he was sitting stone-faced in a federal courtroom in Chicago full of his supporters, awaiting sentence in a $9.2 million mortgage-fraud case.

U.S. District Judge Ronald Guzman gave the 65-year-old ex-attorney six years. Prosecutors had sought more than double that amount, contending that Murphy was a key figure in a flipping scheme. It involved the sale of 40 homes in low-income South Side neighborhoods at inflated prices between 2002 and 2006, often to so-called straw buyers who weren’t qualified or willing to actually make the loan payments, according to the Chicago Tribune.

Another attorney who is a co-defendant in the case, 50-year-old John Farano, was sentenced to nine years on Wednesday, the Southtown Star reports.

An earlier Chicago Tribune article published when Murphy and Farano were convicted by a federal jury in December of five counts of mail and wire fraud explains the claimed scheme.

Prosecutors said co-defendants worked together to sell homes purchased by Murphy and Farano to unqualified buyers. Lenders were then persuaded to grant mortgages based on loan paperwork that contained false information, such as inflated down payment amounts. The homes often needed work, and buyers were promised renovations that didn’t occur, according to court documents. Farano served as a closing attorney on some of the fraudulent deals.

Meanwhile, buyers were persuaded to sign on in order to get no-money-down or cash-back-at-closing deals, explains a press release (PDF) from the U.S. Attorney for the Northern District of Illinois. It notes that Farano was found guilty of four counts of mail and wire fraud and five counts of theft of government funds, but acquitted on three mail and wire fraud counts.

The Illinois Attorney Registration and Disciplinary Commission website shows that Farano’s law license was suspended on an interim basis pending further proceedings, on June 26.

Updated at 3:57 p.m .to include information from Southtown Star.

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