A federal judge on Tuesday sentenced a leader of a sprawling mortgage and investment fraud conspiracy to 30 years in prison, as an eight-year investigation that led to charges for 91 individuals nears an end.
During a daylong hearing Tuesday, Assistant U.S. Attorney Maria Vento told Senior U.S. District Judge Graham Mullen that James Tyson Jr., 34, was the “leader of the leaders” in the case and deserved the longest sentence.
“This defendant is the most culpable … by a landslide,” Vento said.
The hearing marked one of the final chapters in a federal investigation called Operation Wax House that led to charges against builders, mortgage brokers, attorneys, homebuyers, bank insiders, a former pro football player and others for activities running from 2005 to 2012, mostly in Charlotte and neighboring Waxhaw.
Mullen on Thursday also doled out punishments to two other convicted leaders of the enterprise: Tyson’s mother, Carrie Tyson, 61, who received 18 years in prison, and Victoria Hunt, who received eight years. Hunt, 36, cooperated extensively with the government, including testifying at four trials.
Vonetta Tyson Barnes – the sister of James Tyson Jr. and the daughter of Carrie Tyson – received the lightest sentence given out in the case so far – 30 days in prison – after she tearfully asked the judge for a lenient prison term because of her two children. Barnes, 41, said she was divorced and still making arrangements to care for them while in prison.
Mullen said she may have been too trusting of her family. The family’s patriarch, James Tyson Sr., was previously sentenced to about three years in prison.
In a new wrinkle disclosed Tuesday, Vento said James Tyson Jr. once flew boxer Floyd Mayweather Jr. to Charlotte in a private jet to give him an investment pitch, but the boxer instead put his money into an unrelated entity run by someone else, resulting in a $7.5 million loss for the fighter.
Mullen ordered Tyson to pay about $11.3 million in restitution to his victims, a figure that excluded the $7.5 million for Mayweather. Although Tyson may have intended to take the money from Mayweather, he never received the investment, Mullen noted. The judge also called the amount a “rounding error” for the fighter who reportedly made as much as $200 million for his recent fight against Manny Pacquiao.
Either way, the judge acknowledged it will be “problematic” for Tyson – who was arrested in 2012 at Dulles International Airport near Washington, D.C., after a trip originating in Dakar, Senegal – to make restitution while in prison.
In the hearing, a defense attorney also disclosed the names of two professional football players who were victims of the investment portion of the scheme – Baltimore Ravens and former Charlotte Latin star Chris Canty and Sinorice Moss, who played for the New York Giants.
Wax House is one of the biggest U.S. mortgage fraud investigations in terms of losses and people involved and a rare instance of racketeering charges being applied to a white-collar crime case, prosecutors have said. Of the 91 individuals charged, 89 have either pleaded guilty or been convicted after a trial.
Two individuals remain fugitives. After Tuesday’s hearing, only five more defendants await sentencing.
The victims in the case included duped investors who lost money, individuals who had their identities stolen for the purpose of buying houses, banks that lost money on soured loans, and neighborhoods that suffered when homes went into foreclosure or went unoccupied.
Some vacant homes purchased in the scheme became sites for pornography shoots, wild parties and squatters, Vento said in court.
“The prosecution of 91 defendants in Operation Wax House underscores the breadth and magnitude of this massive mortgage and investment fraud,” acting U.S. Attorney Jill Westmoreland Rose said in a statement. “The long-term financial loss and psychological impact on the victims of the scheme has been devastating.”
The Wax House investigation, spearheaded by FBI and IRS Criminal Investigation agents, began in 2007 with a focus on mortgage fraud in Mecklenburg and Union counties. The first defendant pleaded guilty in January 2009.
But over time, the investigation expanded, resulting in a racketeering indictment against 17 individuals unsealed in October 2012 and a superseding indictment against nine more defendants unsealed in April 2013.
The racketeering indictments accuse James Tyson Jr., Carrie Tyson, Victoria Hunt and a fourth leader, Ramin Amini, of running a criminal enterprise that engaged in investment fraud, mortgage fraud, money laundering and the distribution of illegal drugs. The operation stole more than $75 million from investors and mortgage lenders, according to the indictment.
Amini remains a fugitive with his last known address in Tehran, Iran.
In the investment fraud portion of the case, the co-conspirators are accused of targeting professional athletes and doctors for investments in sham corporations. The defendants stole more than $27 million from more than 50 investor victims, including some who even took out loans to make investments. Instead of investing the money, members of the enterprise used the money to buy luxury cars, take lavish vacations, organize extravagant parties and invest in other sham businesses, according to the indictment.
The mortgage fraud portion of the case involved buying luxury homes in upscale neighborhoods such as Providence Downs South, Woodhall, Chatelaine, Firethorne, Piper Glen, and Stratford on Providence.
According to the indictment, here’s how the mortgage fraud worked:
A member of the enterprise would agree with a builder on the “true price” for a home. This promoter would then arrange for a buyer to purchase the property at an inflated price. Typically, the buyers would agree to buy the properties in their own name in return for a kickback. After the lender agreed to make a loan based on the inflated price, the difference between that price and the true price would be extracted by the enterprise at the closing.
In one example in the indictment, the enterprise purchased 1040 Spyglass Lane in Marvin in the name of a straw buyer for an inflated price of $1.6 million and obtained a loan for $1.5 million. Members of the enterprise made fraudulent representations that the buyer would live in the home and had a job, when she was actually unemployed.
Instead, James Tyson Jr., Carrie Tyson, James Tyson Sr. and Barnes moved in after closing, according to the indictment. The home later fell into foreclosure and sold for $1.1 million – more than $500,000 less than the inflated price.
On Tuesday, the four defendants sat together briefly during arguments over one motion but were then sentenced one by one.
A mostly stoic James Tyson Jr., of Charlotte, apologized to the victims and said he still believed in the companies he set up. A sobbing Carrie Tyson, of Winterville in Eastern North Carolina, said she was only responsible for $1.3 million lost by the professional football players but was not a leader of the scheme. Both Hunt, of Rockville, Md., and Barnes, of Mililani, Hawaii, apologized for their actions.
During the hearing, more than a half dozen victims recounted via video and in person the damage the defendants wreaked on their finances, their marriages and their health.
A single mother who knew James Tyson Jr. at East Carolina University said she took out $65,000 in loans in order to make an investment. A Charlotte doctor who was a sorority sister with Vonetta Tyson Barnes at N.C. State said she is now working two jobs to avoid filing for bankruptcy. And a Charlotte minister who lost money through James Tyson Jr. said he is now only able to afford a substandard long-term care facility for his 86-year-old mother, who has Alzheimer’s disease.
“I have to wear that for the rest of my life: I failed my mother,” said the Rev. James Covington.
What is Operation Wax House?
The long-running federal investigation is one of the biggest U.S. mortgage fraud investigations in terms of losses and people involved, prosecutors have said. Of the 91 individuals charged, 89 have either pleaded guilty or been convicted after a trial. Two remain fugitives.
The probe covered activities running from 2005 to 2012, mostly in Charlotte and neighboring Waxhaw. Racketeering indictments in the case accuse James Tyson Jr., Carrie Tyson, Victoria Hunt and a fourth leader, Ramin Amini, of running a criminal enterprise that engaged in investment fraud, mortgage fraud, money laundering and the distribution of illegal drugs. The operation stole more than $75 million from investors and mortgage lenders, according to the indictment.
James Tyson Jr., Carrie Tyson and Hunt were sentenced Tuesday. Amini remains a fugitive with his last known address in Tehran, Iran. The other fugitive is Nazeere Saddig, formerly of Charlotte.
Among the more high-profile defendants in the case was former Carolina Panthers player Jimmy Hitchcock, who was sentenced to 46 months in prison last year after pleading guilty to mortgage fraud conspiracy, bank bribery conspiracy and money laundering conspiracy charges. Rick Rothacker