Appeals court upholds mortgage fraud conviction in Las Vegas case

A federal appeals court this week rejected a former loan officer’s efforts to blame his multimillion-dollar mortgage fraud scheme on negligent lenders.

In affirming Nicholas Lindsey’s 2013 fraud conviction, the 9th U.S. Circuit Court of Appeals weighed in on an issue of accountability that locked national attention in the aftermath of the Great Recession’s housing crash.

“We understand the desire to see lenders shoulder responsibility for their role in the mortgage crisis of the last decade,” Judge Ronald Gould wrote. But, he wrote, “a victim’s negligence is not a defense to wire fraud.”

Lax lending practices that plunged the Las Vegas area into a foreclosure crisis around 2007-2009 also enabled Lindsey to profit millions in commissions, rent payments and diverted escrow funds on properties he helped straw buyers purchase.

In one case, he secured a mortgage on a $720,000 property for a woman who had less than $50 to her name by misrepresenting her income and assets on the loan application. He then used her personal information to purchase another property without her knowledge.

Lindsey was convicted of nine counts of wire fraud and one count of aggravated identity theft. He appealed his conviction, arguing that he was not granted a fair trial because the judge did not allow him to present as evidence specific examples of irresponsible lenders.

“Two wrongs do not make a right, and lenders’ negligence, or even intentional disregard, cannot excuse another’s criminal fraud,” Gould wrote.

Lindsey was allowed to introduce at trial broader evidence about the shady, unchecked nature of the mortgage industry at the time. He argued that the “Wild West” era of “no document” and “stated income” loans facilitated the fraud scheme, through which he used five straw buyers for nine home loans and eight properties. In total, he secured $3 million in mortgages.

Evidence at trial showed that Lindsey would live in or rent out the properties in the borrowers’ names. Once he turned a profit, he would stop making the mortgage payments. When the borrowers defaulted on their loans as a result, both they and the lenders suffered, the appeals court ruled.

The foreclosure crisis pummeled Las Vegas harder than almost anywhere else in the country. The 9th Circuit acknowledged that fact in its ruling, citing statistics that the city has the second-highest foreclosure rate in the nation.

Lindsey, who worked for Clear Mortgage Inc. from 2006 to 2007, is serving an 11-year prison sentence. He also was ordered to pay $2.2 million in restitution.

Contact Jenny Wilson at jenwilson@reviewjournal.com or 702-384-8710. Follow @jennydwilson on Twitter.