November 19, 2009
Former Nixa business accused of more than $2.6 million in fraud.
Tara Muck
Owners of a now-defunct Christian County title company have been indicted on federal charges of bank fraud, wire fraud and money laundering conspiracies, according to a news release by U.S. Attorney Matt J. Whitworth.
The 19-count federal indictment handed down Tuesday accuses former Nixa-based Guaranty Title Co. owners Richard G. “Rick” Burton, 59, of Nixa, and Kathy Cyrena Allen, also known as Kathy Stanton, 66, of Sarcoxie, of conspiring to defraud financial institutions of more than $2.6 million through a series of illegal financial transfers related to stolen escrow payments.
The owners first came under scrutiny in June 2007 after Springfield-based Great Southern Bank, where the title company held 15 escrow accounts, froze the bank accounts because of insufficient funds. On that same day, Guaranty notified its underwriter, Commonwealth Land Title Insurance — now LandAmerica Financial Group — that there was a shortage in its escrow accounts.
The next day, the company abruptly shut down.
A week later, Commonwealth filed a lawsuit in Christian County Circuit Court seeking injunctions against Guaranty and its officers.
Guaranty Title was an agency that issued title insurance polices on behalf of Commonwealth and provided escrow services in real estate transactions. The title company under indictment is not connected to Guaranty Bank, which has nine locations in Springfield, Nixa and Ozark.
In the court affidavit filed with the suit, Kevin Hickey, senior auditor for LandAmerica, said Guaranty was short $4.5 million on its books.
He also wrote that co-owner Stanton “admitted in front of me and other witnesses, a scheme of inappropriately commingling and transferring funds between and among different banks and multiple accounts to replenish shortages and to also mask shortages.”
The case continues in Christian County Circuit Court. Messages left Wednesday at LandAmerica for comment were not returned.
In December 2007, the Missouri Department of Insurance, Financial Institutions and Professional Registration filed a complaint before the Administrative Hearing Commission alleging that Guaranty and its owners violated state laws.
Don Ledford, spokesman for the U.S. Attorney’s office, said Wednesday the department of insurance contributed to the investigation but he couldn’t provide specifics of the investigation beyond the federal indictment.
According to that indictment, Burton and Stanton are each charged with one count of conspiracy to commit wire fraud, conspiracy to commit bank fraud and conspiracy to commit money laundering.
They’re also charged with six counts of wire fraud related to wire transfers of escrow funds from financial institutions into Guaranty’s main escrow bank account.
The two are alleged to have committed wire fraud from May 12, 2005, to June 18, 2007, by defrauding “mortgage companies and individual customers of escrow money which had been wired to Guaranty to pay real estate closing costs.”
In May 2005, Burton and Stanton allegedly began taking a portion of the escrow money that had been transferred to escrow accounts — causing $2.04 million of stolen escrow funds to be deposited into the firm’s business operations account and used the money for day-to-day business operations, the indictment said.
The two then allegedly instructed Guaranty’s in-house bookkeeper to record deposits of stolen escrow money into Guaranty’s business operations account as loans from Stanton or from a fictitious company called “K & S Investments.”
Burton and Stanton are also charged with five counts of bank fraud relating to financial transactions that occurred as part of a check-kiting scheme.
According to the indictment, the two allegedly committed bank fraud from April 1, 2007, to June 18, 2007.
Burton and Stanton are thought to have concealed shortages in Guaranty’s main escrow account by writing and depositing checks between various accounts held by Guaranty at Great Southern Bank and Ozark Mountain Bank that did not contain sufficient funds to cover the checks.
The scheme caused Ozark Mountain Bank to lose $682,954.
The two are also charged with five counts of money laundering related to financial transactions of wire fraud proceeds.
The indictment alleges Burton and Stanton conspired to commit money laundering from May 12, 2005, to June 18, 2007, by conducting “financial transactions that involved proceeds of the wire fraud and bank fraud conspiracies, in order to promote that criminal activity and to conceal the source of the proceeds of the unlawful activity.”
Ledford said this type of fraud wasn’t unusual.
“We have had some significant mortgage fraud cases that involved title companies and employees that worked with title companies and were involved with mortgage fraud schemes,” Ledford said, adding that many of those cases are in the Kansas City area.
Matt Morrow, executive director of the Home Builders Association of Springfield, said he hasn’t been aware of this type of a scheme happening in the area during his nine-year stint with the Springfield HBA.
“Thankfully there aren’t that many other incidents like that (in the Springfield area),” Morrow said. “But once is too many.”
Ledford said, to his knowledge, Burton and Stanton have not been arrested or appeared in court as of Wednesday.