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Coast Exec: "I was greedy"

By Alan E. Tannenbaum

Published Bradenton Herald: Tuesday, December 8, 2009
By: Grace Gagliano - ggagliano@bradenton.com

TAMPA - Philip William Coon said Monday he was an "idiot" and "greedy" for committing wire fraud and money laundering by illegally pocketing $1.2 million.

The former Coast Bank executive testified during an evidentiary hearing in the case in federal criminal court. Coon is charged with co-conspiring with John Robert Miller, president of American Mortgage Link, to charge the mortgage company's client sellers an extra 1 percent fee. Coon took 75 percent of the extra point and the remainder went to Miller.

The hearing, which continues today, will determine whether Bradenton's Coast Bank borrowers are owed restitution as a result of the additional point.

"I was an idiot," Coon said when asked by his attorney James Felman why he participated in the loan skimming scheme with Miller. "I guess I was greedy," said Coon who admitted to coming up with the scheme.

"I believed he (Miller) was charging too small of an amount so I asked him to add another point," Coon said.

Despite his crime, Coon said he has no doubt the closing costs on the loans were paid by the builder, not the Coast Bank borrowers.

A majority of the evidentiary hearing focused on who paid the closing costs, which included the additional 1 percent. The court must decide whether the borrowers suffered financial harm and whether they are owed restitution before Coon can be sentenced Jan. 25-29. Coon faces up to five years in prison, followed by three years of supervised release, and a fine of $250,000 and forfeiture.

Assistant U.S. Attorney Rachelle Desvaux Bedke was aggressive in trying to show that builder Jesse Battle III with Construction Compliance Inc. paid closing costs. Desvaux Bedke pulled out several documents pertaining to the loans and the lot and home packages for Miller to review during his testimony.

To emphasize the government's argument that the builder agreed to pay closing costs, DesVaux Bedke had Miller read aloud all instances on the documents such as the good faith estimate where it stated the builder agrees to pay closing costs.

DesVaux Bedke then asked Miller why he advised Battle, president of Construction Compliance Inc., about the additional point charged to borrowers' loan origination fees.

"Jesse Battle was paying the closing costs so I had to consult him," Miller said.

During Battle's testimony, he admitted he was responsible for the closing fees.

"We bore that risk and we bore that cost," Battle said.

But Sarasota attorney Alan Tannenbaum, who is representing 152 Coast Bank borrowers, pointed out that those same documents stated the agreement wouldn't be fulfilled in most cases because a majority of homes were never constructed.

Tannenbaum said at closing the closing costs were paid by borrowers'loans. "The bargain between the builder and the purchaser is not fulfilled or completed until there was a completed house" Tannenbaum said. "I'll leave it at that."

To further illustrate Coast Bank borrowers suffered financial harm, Tannenbaum argued that the appraised values of the homes could have been skewed because appraisers knew Coast Bank was running a program in which it was selling the homes and lots at 90 percent of the appraised value.

While Coon was on the stand, Tannenbaum pointed out to the defendant in appraisal documents that the appraiser at work seemed to know there was a "target sales price" that Coast Bank and American Mortgage Link wanted to hit, thus not giving borrowers a faithful 10 percent discount as the program entailed.

"It is looking like to me the appraiser already knew American Mortgage Link wanted to have this property sold at $228,6000," Tannenbaum said. "So it is pretty convenient then he appraised it at $254,000."

Coon denied appraisers were given a target contract sales price prior to their assessments.

"That's seems like a lot of assuming to me," Coon said.

The evidentiary hearing resumes today with the continuation of Battle's testimony.

Full post as published by Florida Community Association Construction Law Blog on December 11, 2009 (boomark / email).