Feds accuse Delco man of $13M fraud scheme

A Newtown Square man is accused of defrauding banks out of nearly $13 million so he could finance a lavish lifestyle that included yacht captains and luxury beach homes, a federal indictment said.

The indictment, unsealed on Friday, July 15, charges George Barnard, 45, with 24 counts of wire fraud, four counts of bank fraud, and three counts of filing a false tax return, U.S. Attorney Zane David Memeger said in a press release.

The indictment alleges that Barnard, who from 2005 to March 2013 was one of the two owners of Capital Financial Mortgage Corporation (CFMC), based in Delaware County, and also was the owner of several title companies. Instead of using the money he received from banks to fund mortgage loans for borrowers and pay off the borrowers’ existing mortgages, he used the money to purchase items such as yachts, luxury cars and multi-million dollar beach homes in Avalon and Florida.

The indictment further alleges that in order to continue to have access to a large pool of money to fund his extravagant lifestyle, Barnard orchestrated a massive fraud scheme, which included selling other banks the mortgages that CFMC had written and representing to the lenders who purchased those mortgages that they were first mortgages, rather than worthless second mortgages.

While the tax returns Barnard filed with the IRS showed hundreds of thousands of dollars in losses, the indictment said, in reality Barnard had more than $2.3 million in unreported income. To convince other banks to issue mortgage loans to him so he could purchase his yachts and multi-million dollar beach homes, Barnard gave false tax returns to the banks with inflated income figures, the indictment said. On at least one occasion, he told the bank that he was buying the beach home for more than $3 million when the sales price was $2 million, the indictment said, adding that Barnard was able to conceal this deception by using his own title company to handle the closing of that loan.

The indictment said that as a result of Barnard’s actions, lenders suffered losses of more than $12.7 million, and more than 25 borrowers who obtained refinanced loans from CFMC were stuck with two mortgages on their homes after Barnard’s companies failed to pay off the borrowers’ existing first mortgages.

Barnard faces a maximum sentence of 669 years’ imprisonment, a five-year period of supervised release, a $12,300,000 fine, a $3,300 special assessment, and a likely advisory sentencing guideline range of 135 to 168 months’ imprisonment, the release said.

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