JACKSON — As his wife softly choked back tears three rows of seats behind him, Todd Phillips apologized for his role in a mortgage fraud scheme that operated from March 2003 through January 2006.
The apology came shortly before U.S. District Court Senior Judge Tom S. Lee sentenced Phillips to 51 months in federal prison on Friday. At the end of the sentence, Phillips will enter a three-year supervised release and will not be allowed to incur new credit until full restitution has been paid.
Phillips, 38, of McComb, and his former attorney, Dwayne Deer, were indicted on charges of conspiracy to commit bank fraud in 2008.
Deer, who now lives in Biloxi, was sentenced to 37 months with the same terms following release, plus random alcohol testing and entrance into a drug and alcohol rehabilitation program.
Phillips’ business manager, Dawn Stinson, was charged with misprision of a felony, or failing to report a felony to authorities and was sentenced to two year’s probation.
All had pleaded guilty.
Phillips owned and operated Statewide Realty Holdings LLC and Todd Phillips Investments Inc.
The government said Deer and Stinson helped Phillips pledge financed properties as collateral for new loans and hid information from banks and title insurers.
The trio also prepared and forged cancellations of deeds of trust that were given to the banks and filed at county courthouses as evidence that previous loans had been paid and the collateral had been released.
Stinson notarized the documents at Phillips’ request.
The scheme unraveled when Phillips failed to repay the loans and filed for bankruptcy as the banks attempted to foreclose on the properties, prosecutors said.
“The only thing I can truly offer at this point is an apology for anyone that any of my actions may have harmed,” Phillips said with a voice that was shaky at first but soon gained strength. “I take full responsibility for my actions and will pay back every cent to the best of my ability.”
Phillips also thanked his family and friends for standing by him, as well as his church and Parklane Academy. He said at this point, he believes he is a better person than he was at the time of his transgressions.
“No matter the sentence, I give God the honor and glory for the sentence,” Phillips added. “God knocked me to my knees when I needed. I probably wouldn’t have made it to today with that lifestyle.”
He closed by requesting his sentence allow him to be productive and continue to pay off his debt.
Judge Lee acknowledged Phillips’ remorse and said it appears he has “lived an exemplary life the last few years.”
However, that was not enough to severely reduce the length of the sentence.
“The criminal conduct you admitted was serial,” Lee said. “The result was many lenders left with defaulted loans and no collateral. The court can’t lose sight of the egregiousness of it.”
Phillips thanked Lee for the sentence after it was handed down.
Deer’s and Stinson’s sentences were preceded by character witnesses.
Jackson attorneys Joel Gatlin and and Rebecca Reynolds — both former colleagues of Deer’s — said there were shocked when they heard of Deer’s involvement.
“I believe that. … These crimes are so out of character,” Reynolds said. “He’s not a scheming attorney.”
Gatlin, who attended law school with Deer, added, “He’s got a huge heart. He doesn’t have the same self-preservation characteristics other lawyers have. I don’t think money itself means a lot to him.”
Deer was disbarred for his involvement, and both Reynolds and Gatlin said the loss of his practice was a severe punishment. Deer expressed remorse for his actions and said he hopes someday to become a productive member of society.
Lee expressed sympathy for Deer’s situation, but as with Phillips, said he could not overlook the offenses .
“I’m sorry. This is a very sad situation,” Lee lamented. “I can’t get away from what a serious crime this is. The amount of money is catastrophic.”
Like the other two, Stinson expressed her remorse, breaking down when her time to speak came.
“I am truly sorry for my stupidity in this case,” she said. “I hope I am given the opportunity for a second chance.”
McComb attorney Norman Gillis Jr., whom Stinson worked under for several years as a secretary, said he could not believe she was involved, and said he believed she didn’t fully understand the nature of Phillips’ and Deer’s actions.
Jackson attorney Mike Malouf, who represented Stinson, argued she did not profit from the fraud.
“Maybe she turned a blind eye to some things she shouldn’t have done,” Malouf said. “But, at what point does someone with a high school diploma question an attorney? Her greatest crime is being a loyal, dedicated employee.”
Lee said the report was that Stinson merely did what she was told, and he saw validity in the argument that if Stinson came forward, no one would have believed her over a lawyer.
Per their request, Lee said he would recommend Phillips and Deer serve their sentences in Federal Prison Camp at Pensacola, Fla., a minimum security facility. Both are to report on April 5.
Both will also be required to pay full restitution for the funds they illegally acquired.
The government claims a loss of $5.4 million, but Phillips’ attorney, Michael Fawer of Covington, La., said a separate analysis concluded the real loss to be $1.8 million.
His first point of contention was the inclusion of three insurance companies — Fidelity National Property & Casualty Insurance Group, First American Title & Insurance and Zurich Insurance — that did not file claims.
The government’s figures indicated $178,000 was owed to Fidelity, $782,000 to First American and $500,000 to Zurich, which Fawer said should be reduced to $250,000.
“(The list includes) duplications of claims made by other lenders,” Fawer said. “They’re double-dipping.”
Fawer also argued that restitution has been made to People’s Bank of Franklin County, which was listed at $363,000, and Fawer said should have been listed at $200,000 — at best. The $387,000 listed for State Bank, Fawer said, had been resolved.
Fawer also argued that Parish National Bank, which was listed at $297,000, was related to a separate, irrelevant issue. He also said the $1 million the government claims is owed to Your Bank should be reduced to $500,000, and $500,000 claimed by Central Progressive should be reduced to $250,000.
He said a debt owed to Wachovia was paid in full.
“How can there be a loss if it’s paid in full?” Fawer asked.
He did agree with claims of $800,000 and $485,000 by Natchez-based Concordia Bank & Trust and Hattiesburg-based The First, respectively.
U.S. Attorney Carla Clark disputed Fawer’s claims, saying loans from companies that did not file claims do not lose victim status, and it was clear to Phillips, Deer and Stinson that they would need insurance to get the loans. She also said restitution does not offer absolution.
“Restitution may have been made, but underlying fraud remains,” she said.
The amount Phillips and Deer will be required to pay in restitution was not determined Friday, and an exact figure will be set at a later date.
