Guaranty Title Owners Indicted

November 19, 2009

Springfield News-Leader: Guaranty Title owners indicted

Former Nixa business accused of more than $2.6 million in fraud.

Tara Muck

News-Leader

Owners of a now-defunct Christian County title company have been indicted on federal charges of bank fraud, wire fraud and money laundering conspiracies, according to a news release by U.S. Attorney Matt J. Whitworth.

The 19-count federal indictment handed down Tuesday accuses former Nixa-based Guaranty Title Co. owners Richard G. "Rick" Burton, 59, of Nixa, and Kathy Cyrena Allen, also known as Kathy Stanton, 66, of Sarcoxie, of conspiring to defraud financial institutions of more than $2.6 million through a series of illegal financial transfers related to stolen escrow payments.

The owners first came under scrutiny in June 2007 after Springfield-based Great Southern Bank, where the title company held 15 escrow accounts, froze the bank accounts because of insufficient funds. On that same day, Guaranty notified its underwriter, Commonwealth Land Title Insurance -- now LandAmerica Financial Group -- that there was a shortage in its escrow accounts.

The next day, the company abruptly shut down.

A week later, Commonwealth filed a lawsuit in Christian County Circuit Court seeking injunctions against Guaranty and its officers.

Guaranty Title was an agency that issued title insurance polices on behalf of Commonwealth and provided escrow services in real estate transactions. The title company under indictment is not connected to Guaranty Bank, which has nine locations in Springfield, Nixa and Ozark.

In the court affidavit filed with the suit, Kevin Hickey, senior auditor for LandAmerica, said Guaranty was short $4.5 million on its books.

He also wrote that co-owner Stanton "admitted in front of me and other witnesses, a scheme of inappropriately commingling and transferring funds between and among different banks and multiple accounts to replenish shortages and to also mask shortages."

The case continues in Christian County Circuit Court. Messages left Wednesday at LandAmerica for comment were not returned.

In December 2007, the Missouri Department of Insurance, Financial Institutions and Professional Registration filed a complaint before the Administrative Hearing Commission alleging that Guaranty and its owners violated state laws.

Don Ledford, spokesman for the U.S. Attorney's office, said Wednesday the department of insurance contributed to the investigation but he couldn't provide specifics of the investigation beyond the federal indictment.

According to that indictment, Burton and Stanton are each charged with one count of conspiracy to commit wire fraud, conspiracy to commit bank fraud and conspiracy to commit money laundering.

They're also charged with six counts of wire fraud related to wire transfers of escrow funds from financial institutions into Guaranty's main escrow bank account.

The two are alleged to have committed wire fraud from May 12, 2005, to June 18, 2007, by defrauding "mortgage companies and individual customers of escrow money which had been wired to Guaranty to pay real estate closing costs."

In May 2005, Burton and Stanton allegedly began taking a portion of the escrow money that had been transferred to escrow accounts -- causing $2.04 million of stolen escrow funds to be deposited into the firm's business operations account and used the money for day-to-day business operations, the indictment said.

The two then allegedly instructed Guaranty's in-house bookkeeper to record deposits of stolen escrow money into Guaranty's business operations account as loans from Stanton or from a fictitious company called "K & S Investments."

Burton and Stanton are also charged with five counts of bank fraud relating to financial transactions that occurred as part of a check-kiting scheme.

According to the indictment, the two allegedly committed bank fraud from April 1, 2007, to June 18, 2007.

Burton and Stanton are thought to have concealed shortages in Guaranty's main escrow account by writing and depositing checks between various accounts held by Guaranty at Great Southern Bank and Ozark Mountain Bank that did not contain sufficient funds to cover the checks.

The scheme caused Ozark Mountain Bank to lose $682,954.

The two are also charged with five counts of money laundering related to financial transactions of wire fraud proceeds.

The indictment alleges Burton and Stanton conspired to commit money laundering from May 12, 2005, to June 18, 2007, by conducting "financial transactions that involved proceeds of the wire fraud and bank fraud conspiracies, in order to promote that criminal activity and to conceal the source of the proceeds of the unlawful activity."

Ledford said this type of fraud wasn't unusual.

"We have had some significant mortgage fraud cases that involved title companies and employees that worked with title companies and were involved with mortgage fraud schemes," Ledford said, adding that many of those cases are in the Kansas City area.

Matt Morrow, executive director of the Home Builders Association of Springfield, said he hasn't been aware of this type of a scheme happening in the area during his nine-year stint with the Springfield HBA.

"Thankfully there aren't that many other incidents like that (in the Springfield area)," Morrow said. "But once is too many."

Ledford said, to his knowledge, Burton and Stanton have not been arrested or appeared in court as of Wednesday.

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News-Leader: 'Increase in spending on home building spurs hopes'

On Tuesday, November 3, the Springfield News-Leader ran a front-page headline and story signalling the beginning signs of recovery in the home building industry. The 1A news article follows, or, to read the story directly from the News-Leader site, click here.

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November 3, 2009

Martin Crutsinger

News-Leader

Washington -- Construction spending in September posted a better-than-expected performance, powered by the largest jump in housing construction in more than six years.

The advance spurred hope that the battered housing sector is starting to turn around and will provide support for the overall economy as it struggles to emerge from the worst recession since the 1930s.

The Commerce Department said Monday that total construction spending was up 0.8 percent in September, much better than the 0.3 percent drop that analysts had forecast.

The August performance was revised down to show a 0.1 percent drop rather the 0.8 percent gain first reported.

The overall increase reflected a 3.9 percent rise in spending on residential construction, the biggest jump in housing activity since July 2003. Economists believe that this sector is starting to rebound and should help support an economic recovery.

Locally, builders say housing starts have picked up. But the bigger news is the shrinking inventory of new homes.

Matt Morrow, chief executive officer of the Home Builders Association of Greater Springfield, said there could be a shortage of new homes in the area by first quarter 2010, "and that means we'll have to be building some homes pretty quick."

Builder Rusty MacLachlan, president of the Springfield HBA, said the recovery has been slow, "but it is getting better."

MacLachlan said local builders "responded appropriately" to the housing downturn -- "they stopped building."

Combined with a below-normal but "good sales pace all things considered," the inventory of new homes in the area could reach a point soon where new inventory is needed.

MacLachlan, who sits on the board of directors for the national association of homebuilders, is optimistic the industry is on the mend. But there's still reason to be cautious. As construction fell off across the country, building material suppliers cut production, as well.

"If demand returns too quickly, then we're in a position of material shortages," which could drive up prices, he said. "It's a fine line we're walking on the recovery here. We want it to happen, but if it happens too quickly we'll hurt ourselves."

He also expects construction, when it picks back up, to be more conservative.

"I think people are getting a little more realistic about what they need in a house," MacLachlan said. "I think there was a trend for a little while where everybody wanted a little more."

Buyers still want nice amenities, but they're backing off of "too big," he said.

Green building, too, may be more common -- when it's affordable and cost-effective.

"If there's a payoff to going green, I think people want to do it," he said.

Another worry on the national front is that a big part of the activity in recent months may have reflected a rush by builders to start projects that could qualify for a tax credit of up to $8,000 offered by the government to first time home buyers.

That tax credit is due to expire on Nov. 30 although a group of senators last week agreed to extend the tax credit for potential buyers who have sales agreements signed by the end of April. Those buyers would have until the end of June to close on their new homes.

The housing industry has lobbied for the extension, arguing that without this support the tentative rebound that is now occurring in housing could be derailed.

MacLachlan said he thinks the extension, as well as another plan being considered that would offer somewhat smaller tax credits to existing homeowners looking for an upgrade, will help.

"I think that will push some people along to go ahead and buy that next house," he said.

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News-Leader Editorial: 'Home building news cause for joy'

Following Tuesday's page 1A news story on signs of life in the building industry, the Springfield News-Leader editorialized Wednesday on what great news that would be for the community and local economy. The editorial follows below, or can be read directly on the News-Leader site by clicking here.

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Our Voice

November 4, 2009

Experts say the growth rate can be foundation for future prosperity.

For now, it's just a ray of optimism for home builders.

But it's a bright ray.

Battered by sour economic news month after recent month, a headline Monday could be a harbinger of better days on the horizon.

"Increase in spending on home building spurs hope" were the words atop a 1A News-Leader story Tuesday.

It told how the U.S. Commerce Department is reporting that September showed the biggest increase in private residential building in six years.

Of course, no one's anywhere close to declaring an end to lean times. But the latest numbers have spurred a positive buzz that the housing market is rebounding.

It's sunny in the Ozarks this week, with temperatures approaching balminess. It's a good time for a reprieve from the bleak and the dire.

Take a minute or two to bask in these latest numbers and allow yourself a rosy glance forward.

Economic experts say a return to health for the housing industry will support economic recovery overall.

Cautions about overreacting abound, but one thing is clear: this growth -- a 3.9 percent rise in residential construction -- was not expected. Analysts had been predicting an overall decline in total construction spending, which includes public building projects.

Locally, experts say an upturn could soon create demand for more new homes, because the current inventory has shrunken. These might be smaller homes, perhaps built with evolving, green technology, but at least a demand is predicted.

Builders in Greene and four other nearby southwest Missouri counties also received other soothing news recently.

A market research company -- reporting an analysis of census information, building permits, lot supply vs. demand, the historical rate of demands for new homes and other data -- concluded the Southwest Missouri housing market "is moving in a healthy direction."

Among the key factors noted: a projected 7 percent population growth over the next five years; a "relatively healthy employment picture"; and an economic resilience not enjoyed in other parts of the nation.

Builders had essentially stopped constructing homes due to the downturn. Deciding which kind to build as the market surges back is undoubtedly the kind of problem they'd be glad to tackle.

Hopefully, September wasn't an anomaly.

There's nothing like the sounds of industry -- hammers, nail guns, concrete trucks -- to complement another beautiful, fall day in the Ozarks.

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This editorial is the view of the News-Leader Editorial Board.

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News-Leader: 'It's a good time to build'

On Monday, October 19, Springfield News-Leader reporter Cory de Vera had this report from the weekend HBA Home Remodeling Expo:

'It's a good time to build'

Remodeling expo attracts fewer,

but more serious patrons this year.

For Battlefield residents Judy and Jerry O'Dell, the Home Builders Association Home Remodeling Expo was the place to be over the weekend.

After living in their home 33 years, Judy O'Dell said she's ready for some upgrades.

"I'm looking at remodeling the bathroom, the kitchen, the living room," she said. "I'm wanting wood floors, granite tops. I'm wanting marble in my bathroom."

Matt Morrow, executive director of the HBA, estimated that this year's show at the Ozark Empire Fairgrounds drew about 4,500 people Friday through Sunday, fewer than the 5,000 to 7,000 that the show has drawn in years past.

But, vendors told him, those who did come seemed to have definite plans for projects. In other years, the show may attract higher numbers of people who come for entertainment.

"They did say the show helps create a few jobs that will help get them through to the next construction season," Morrow said.

If the Remodeling Market Index is an accurate measure, business has been picking up from when the index hit a low point in December 2008.

The RMI is an economic indicator created by the National Association of Home Builders based on a survey that goes out every quarter to 2,000 remodelers around the country. The survey asks questions about the current demand for remodeling for projects under $25,000 and for projects over $25,000.

A second portion of the survey calculates an index number quantifying future expectations of remodelers, based on responses to questions about topics like their calls for bids and their backlog of work.

In December 2008, the index number measuring future expectations hit a low of 18.6, but that climbed to 30 after the first quarter of 2009 and to 34.2 after the second quarter. The index numbers reflecting actual contracts showed the same trend.

Still, those numbers are a far cry from when the indexes were over 50 in 2003 and 2004.

Morrow said anecdotally, he has heard that business for remodelers had been picking up locally, but there isn't an easy way to get hard data for the area.

"A lot of municipalities and most counties in this part of the state don't issue permits (because) they don't have building codes," said Morrow. "So you can't just go down to the courthouse and say, 'How many remodels have we had?' You can for a particular permitting jurisdiction that they happen to track, but you can't do it for all of southwest Missouri."

One trend Morrow has seen is that as demand for new construction has decreased, builders have moved into major remodeling projects instead.

That was true for builder Sam Bradley.

"Almost all the calls that I get have been for remodeling this year, up until about three or four weeks ago," Bradley said.

"Then just this last month I've had five calls for new homes. That's why I think new construction is coming back."

Springfield residents Gary and Tish Orrick came to the show because they are planning to build a new home, starting in the next 30 days.

"It's a good time to build," Gary Orrick said. "With the economy being bad, all of the subs and all of the people who furnish materials for you have lowered their prices."

Judy O'Dell, who was planning major remodeling, said she was spotting good deals, too.

Remodeling appeals to her more than buying a new home because she likes where she lives, she said. In the long run, she believes remodeling will cost less.

"And when you remodel you can do it one room at a time," she said. "You can save your money, do one room, rather than dishing out all the money at once. ... Nowadays with the economy, you have to save for each project."

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