Owner of Prophet Development Pleads Guilty to Fraud Charges

St. Louis, MO: Joseph A. Baumeister pled guilty to bank fraud charges in a mortgage fraud scheme involving 16 area properties, United States Attorney Catherine L. Hanaway announced today.

According to court documents, between January 2007 and October 2008, Baumeister operated a scheme to defraud several mortgage lenders through his company, Prophet Development, located at 50 Crestwood Executive Center, St. Louis, MO. Baumeister used straw purchasers to buy 16 residential properties based on misrepresentations to lenders. He then took money from the closings of the properties by artificially inflating the sales price or by falsely claiming that various home improvements had been made.

After the closings on these properties, Baumeister found tenants for the properties, collected rent, and made mortgage payments on occasion. Eventually, mortgage payments fell behind or were not made, and the majority of these properties went into foreclosure.

The funds Baumeister extracted from the closings on these 16 properties, totaling $364,523, were used in large part to pay for a wide range of personal expenses.

Baumeister, 56, St. Louis, 63126, pled guilty to one felony count of bank fraud. He appeared before United States District Judge Donald J. Stohr.

Baumeister now faces a maximum penalty of 30 years in prison and/or fines up to $1,000,000, when he is sentenced on May 1, 2009.

Last November, U.S. Attorney Hanaway convened the first meeting of the U.S. Attorney’s Mortgage Fraud Task Force. The task force consists of over 70 residents of the Eastern District of Missouri involved in banking, mortgage brokerage, real estate sales, title insurance, real estate appraising as well as federal, state, and local law enforcement, regulatory officials and non-government organizations. Anyone wishing to report suspected mortgage fraud or participate in the work of the task force is encouraged to call the Mortgage Fraud hotline at 1-866-587-9571.

Hanaway commended the work on the case by the Federal Bureau of Investigation, the Postal Inspection Service, Department of Housing and Urban Development Office of Inspector General, and Assistant United States Attorney Jeffrey Jensen, who is handling the case for the U.S. Attorney’s Office.

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