Government

Sinclair, Key Witness Against Traficant, Accused of Fraud

YOUNGSTOWN, Ohio – R. Allen Sinclair, once the administrative counsel to the late U.S. Rep. James A. Traficant Jr. and a key prosecution witness in his 2002 criminal trial, has been indicted by a federal grand jury alleging he defrauded investors of $147,000 and swindled property from sellers as part of an elaborate real estate scheme.

The indictment, filed Wednesday in the U.S. District Court for the Northern District of Ohio (READ DOCUMENT), says that Sinclair solicited money from multiple investors through two companies, Newport Development Inc. and Newport Investments LLC.

Sinclair, an attorney whose offices were at 11 Overhill Road in Youngstown, served as Traficant’s administrative counsel until early 2000. During Traficant’s racketeering trial in 2002, Sinclair testified that he had paid monthly kickbacks of $2,500 to Traficant., who was convicted and served seven years in federal prison.

The Ohio Supreme Court suspended Sinclair’s law license in 2004, but it was reinstated in 2008.

According to the indictment, Sinclair promised investors an opportunity to earn 10% “when as Sinclair, NI and ND then well knew, they would not be able to pay the promised returns.”

As a result of Sinclair’s “false and fraudulent pretenses,” approximately five parties invested a total of $147,000, the indictment says.

Sinclair allegedly told investors that their money would be used for the acquisition and renovations on the properties, when he knew that the properties required little or no renovation, the indictment says. Instead, Sinclair used the money for his own personal benefit, according to document.

The government alleges that between Dec. 12, 2005, and March 16, 2007, Sinclair purchased houses from individual sellers through specific land trusts he established for each transaction. The indictment says that Sinclair misled the sellers to believe that the land trusts had assumed their mortgages.

However, Sinclair never informed lenders about the supposed loan assumptions and structured it so the titles were transferred to the trusts, but the sellers were still liable for the mortgages, the government claims.

The indictment further states that once Sinclair acquired the properties, he and an associate – identified as “S.B.” — conveyed the properties to others through land contracts. After about two to six months, Sinclair continued to collect payments on the land contracts, but stopped paying mortgages on the properties.

Once Sinclair stopped paying the mortgages, the sellers found they were liable for the loan balances without title to the properties, the complaint says. As lenders demanded payment from the sellers, the sellers were unable to reach Sinclair or S.B.

According to the indictment, Sinclair targeted people who were looking to sell their houses quickly, such as those who had listed a house for sale that had not sold; those sellers who had a change in employment such as job loss, retirement, or transfer; and those who had a recent, pending, or impending separation or divorce.

After making minimal monthly payments, Sinclair stopped paying the mortgages without notifying the sellers, who were unaware they were still obligated to pay the loans, the indictment reads. The mortgages went into default, causing substantial losses to many of the lenders and federal agencies that insured the loans, the government says.

Among the private lenders assuming losses are Huntington National Bank, Wachovia Bank, Wells Fargo Bank, 1st County Bank, Ohio Savings Bank, MidFirst Bank, JP Morgan Chase, Citi Mortgage, Sun Trust Bank and Bank of America, court documents say. Together, these lenders claim losses of $882,084 on 12 properties identified in the indictment in Canfield, Youngstown, Struthers, and Austintown.

The Federal Housing Administration insured five of the mortgage loans through the U.S. Department of Housing and Urban Development, the U.S. Department of Veterans Affairs insured one of the loans, according to the charges.

A party who has not been charged — identified only as “D.K.” and a former managing partner at Commonwealth Land Title Agency, Youngstown — served as the primary title agent for the real estate transfers, the government alleges. According to court documents, D.K. provided to the seller a HUD statement that disclosed all the buyer’s costs and all but one of the statements falsely claimed that the seller’s mortgage was “assumed.”

In all but one case, D.K., handled the title work, while the one transaction was handled by a lawyer acquaintance, the indictment says.

“S.B.” was the administrative assistant to Sinclair and acted as treasurer for Newport Investments, and assisted in the scheme by handling all the paperwork, served as the notary public, and communicated directly with sellers regarding payments to various lenders, according to documents.

Published by The Business Journal, Youngstown, Ohio.