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February 2, 10

NEWS / Annapolis Mortgage Broker Charged in Fraud Scheme


Allegedly Stole Millions of Dollars to Day Trade and Pay Personal and Business Expenses; SEC Files Civil Action to Enjoin Against Future Securities Violations

BALTIMORE, MD—A criminal information was filed today charging mortgage broker David Wehrs, Sr., age 54, of Annapolis, Maryland, with wire fraud in connection with a scheme to defraud investors and financial institutions of approximately $2.3 million.

The charge was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation.

According to the information and court documents, Wehrs owned Maryland Title and Escrow Company, Inc., located in Annapolis, and operated a small home remodeling company called Show-Me. From 2007 to October 2009, Wehrs allegedly induced individuals to invest money through Maryland Title into a purported FDIC-insured money market fund that Wehrs “guaranteed” would pay monthly interest payments of 10.85 percent. Instead of depositing the money into an “American Funds Fixed Rate Money Market” as promised, Wehrs allegedly deposited investor funds into one of two bank accounts he controlled in the name of his title company. Wehrs then wire transferred a large portion of these investor funds to a brokerage account in the name of his title company at Terra Nova Financial LLC located in Chicago, Illinois.

The information alleges that Wehrs then used the money he obtained to “day trade.” Day trading is the rapid buying and selling of securities throughout the day in the hope that the stocks will continue climbing or falling in value for the seconds to minutes that they are owned, allowing a person to lock in quick profits. During the scheme, Wehrs is alleged to have conducted millions of dollars of stock trades per month.

In addition to day trading, Wehrs allegedly used some of the investor funds to: pay “monthly interest” and “redemptions” to other investors; pay expenses of his other businesses, including Show-Me; make escrow payments for his title company; buy real estate and personal property; and pay other personal expenses.

The information further alleges that when Wehrs had no money left in his personal bank accounts or day trading accounts to pay interest due to investors, he used $630,611 earmarked to pay lending institutions for mortgage payoffs from his escrow account at Maryland Title to pay investors, causing a loss of such amount to a title insurance company. He also allegedly used $100,000 from the Maryland Title escrow account that was earmarked as earnest money for the purchase of an individual’s home to pay interest to investors, causing a loss of $100,000 to the home buyer.

As a result of the scheme, Wehrs is alleged to have caused a total loss of $2,371,06 to investors and the title insurance company.

Wehrs faces a maximum sentence of 20 years in prison. No court appearance has been scheduled.

An information is not a finding of guilt. An individual charged by information is presumed innocent unless and until proven guilty at some later criminal proceedings.

Simultaneous with the filing of the information, the Securities and Exchange Commission filed a parallel civil action and a proposed settlement today in U.S. District Court for the District of Maryland against Wehrs and Maryland Title, arising out of the same scheme to persuade investors to participate in the purported FDIC-insured fund. The SEC complaint seeks a permanent injunction of future violations of the Securities Act, the Exchange Act, and the Advisers Act; disgorgement of fraudulent gains; prejudgment interest and money penalties. A proposed settlement was also submitted to the court in which Wehrs, without admitting or denying the allegations in the SEC complaint, consents to the entry of the permanent injunction and to entry of an administrative order that will permanently bar him from association with any investment adviser.

Mr. Rosenstein and Mr. McFeely gave special thanks to the Securities and Exchange Commission and the Maryland Insurance Administration for their work in the investigation and prosecution of this case.

United States Attorney Rod J. Rosenstein commended Assistant United States Attorney Tonya Kelly Kowitz, who is prosecuting the case.

http://baltimore.fbi.gov/dojpressrel/pressrel10/ba020110.htm

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