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Appraiser pleads guilty to 'flipping' scheme in Decatur and Springfield Businessman Gary Knox, the 60-year-old mastermind of a scheme to sell rundown rental houses in Springfield and Decatur at inflated prices, pleaded guilty Wednesday to federal fraud charges. Knox, of Decatur, admitted guilt to 11 counts of bank, mail and wire fraud and conspiracy to commit money laundering. Another defendant in the case, a former real estate appraiser, Dennis Wiese Jr., 38, of Washington County, accepted a plea agreement in which he admitted guilt on four counts of bank, mail and wire fraud. Prosecutors dismissed other charges in exchange for his cooperation. Knox and Wiese appeared in separate hearings in U.S. District Court. A third man, Frank Kelly Ciota of Riverton, entered a guilty plea Monday for his part in the so-called flipping scheme. Assistant U.S. attorney Timothy Bass estimated Knox would receive a prison sentence in the range of 15 to 20 years, and that Wiese's would be 41 to 51 months. Knox has a federal prison record, while this is Wiese's first felony conviction. Knox is being held in the DeWitt County Jail and wore an orange jumpsuit to court. Wiese, who is free on bond, wore a suit and tie. The final decision on a sentence will be made by U.S. District Judge Michael McCuskey at hearings set for Aug. 29 and 30. Both men also face the possibility of fines of up to $1 million and restitution. Knox, Ciota and Wiese - who were the subjects of a State Journal-Register investigation in 2004 - ran a scheme to defraud real estate lenders, buyers and sellers. Knox's Central Illinois Management and Development Co. bought cheap rental houses in Decatur and Springfield. He and his associates would then find buyers interested in investing in rental property. Wiese produced appraisals that falsely inflated the property values, and the appraisals were used to obtain mortgage loans worth far more than the properties. Knox and Ciota took away hundreds of thousands of dollars in proceeds from the loans, federal authorities said. The unwitting buyers were left responsible for the loans that went into foreclosure. The scheme involved more than 150 properties that totaled more than $8 million and generated $3 million in profits, authorities said. But in court Wednesday, Knox's public defender, Robert Alvarado, disputed the scope of the scheme. He stipulated that Knox was pleading guilty only to the transactions specified in the indictment used to charge him. The indictment lists examples of at least 25 real-estate transactions. McCuskey said he would hear evidence on the scope of the scheme at this summer's sentencing hearings. One of the transactions discussed Wednesday was the sale of a Decatur couple's house without the owners' knowledge. "How did you do that?" the incredulous-sounding McCuskey asked Knox. "Well, at first I did not believe that I did," Knox replied, though he did not explain to the judge how the sale happened. The sale is the subject of a civil lawsuit filed by the owners of the house, Don and Edith Schwalbe. The Schwalbes never lived in the house themselves. Their lawsuit says they were selling the house contract-for-deed to Jeremiah Young of Decatur for $13,445. Knox bought the house from Young, but the house wasn't Young's to sell - the Schwalbes still possessed the deed. The house was resold to Ciota's relatives for $43,000. The Schwalbes accused Knox of filing false documents with the county recorder to verify the sale. The Schwalbes said they learned their house had been sold out from under them when they read about it in a newspaper. Knox and Ciota collected $25,000 from the fraudulent sale, the federal indictment says. Knox said Wednesday that he and Ciota were "kind of like partners" and that Ciota would bring buyers to him. According to the indictment, Ciota sold 12 properties to his own relatives, a married couple in Springfield, without their permission. Wiese told the judge that he was paid his regular appraisal fee for each transaction, and that he earned a total of about $30,000 from the scheme. He appeared Wednesday with attorney Jeffrey Steinback. The bank fraud charge relates to the scheme to defraud lenders, including Central Illinois Bank of Champaign. The wire fraud charge resulted from the wire transfer of loan proceeds, and the mail fraud charges stem from the use of mail carriers to send fraudulent documents. The charge of conspiracy to commit money laundering against Knox and Ciota resulted from their use of proceeds from illegal activities to promote the scheme. By LISA KERNEK STAFF WRITER Published Thursday, April 20, 2006 |
