Toms River Attorney Admits Role in $30M Mortgage Fraud Scheme

An attorney from Toms River was in court Monday to admit his role in a mortgage fraud scheme that bilked financial institutions out of $30 million, officials said.

Michael Rumore, 55, was joined in federal court in Newark by a tax preparer, Kenneth Jones, 64, of Elizabeth, who also admitted his part in the fraud.

Both pleaded guilty before U.S. District Judge Esther Salas to informations charging them with conspiracy to commit bank fraud, said U.S. Attorney Paul Fishman. Jones also pleaded guilty to aiding and abetting the filing of false and fraudulent tax returns.

According to could documents and statements made in court, from 2006 to 2010, Rumore, Jones and numerous others engaged in two related mortgage fraud conspiracies through a company called Premier Mortgage Services (PMS).

The conspirators targeted properties in low-income areas of New Jersey, and after recruiting so-called "straw buyers," they used a variety of fraudulent documents, some of them created by Jones, to make it appear as though the straw buyers possessed far more assets and earned far more income than they actually did.

The conspirators, Fishman said, then submitted the fraudulent documents as part of mortgage loan applications to financial institutions. Relying on these fraudulent documents, financial institutions provided mortgage loans for the properties in question. The conspirators then split the proceeds from the mortgages among themselves at closing time, including at closings presided over by Rumore.

The closings, the government charged, went forward through the use of fraudulent settlement statements known as HUD-1s, which hid the true sources and destinations of the mortgage funds provided by financial institutions.

The straw buyers had no means of paying the mortgages, and many of the properties entered into foreclosure proceedings. The conspirators defrauded financial institutions out of more than $30 million.

Rumore, the Toms River man, used his status as an attorney to further the fraudulent scheme, including by convening closings, receiving funds from lenders, and preparing HUD-1s that purported to reflect the sources and destinations of funds for mortgages on subject properties when in fact, the HUD-1s were neither true nor accurate, Fishman said.

Rumore also disbursed mortgage loan proceeds directly to PMS and other conspirators, including amounts not reflected on the HUD- 1s. He received a fee for each fraudulent loan in which he participated. 

The bank fraud conspiracy count to which Rumore and Jones pleaded guilty is punishable by a maximum 30 year term in prison and a fine of $1 million, Fishman said.

The aiding and abetting false tax returns to which Jones pleaded guilty is punishable by a maximum potential penalty of three years in prison and a $250,000 fine.

The government was represented by Assistant U.S. Attorneys Rahul Agarwal of the U.S. Attorney’s Office Special Prosecutions Division and Zach Intrater of the Criminal Division.

Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Aaron T. Ford, and special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge Shantelle P. Kitchen, for the investigation leading to Monday’s guilty plea.

Sentencing is scheduled for March 31, 2014