June 16, 2007 in Business

Fraud suspect in court after 15 years

By The Spokesman-Review
 

After hiding out in Mexico for 15 years, a man accused of defrauding homeowners out of a quarter-million dollars in 1992 was brought before a federal judge in Spokane on Friday to face three counts of bank fraud.

Citizens National Mortgage Corp., the Spokane company that Steven W. Francis allegedly used to defraud people, was set up with investment funds from a known organized crime figure, authorities say.

Francis is accused of obtaining refinancing for three homeowners, but not paying off their first mortgages before disappearing with the new loan funds in the summer of 1992, said First Assistant U.S. Attorney Tom Rice.

When out-of-state lending institutions forwarded refinancing payments, the indictment alleges Francis took that money and did not pay off the first, underlying mortgages, Rice said.

“That left various insurance companies and mortgage companies and individuals responsible for this debt,” the chief federal prosecutor said.

The fraud investigation was opened in 1992 by the FBI after more than a dozen homeowners complained they had been defrauded when they went to Citizens National Mortgage Corp., which had its office at 315 W. Ninth.

Three charges, which don’t identify the victims, were contained in a grand jury indictment returned against Francis in Spokane in July 1998.

Shortly after he vanished, FBI agents and deputy U.S. marshals had reason to believe Francis may have gone to Mexico, Rice said.

Federal investigators are pursuing leads suggesting Francis may have continued selling mortgage refinancing in the Midwest, perhaps using the Internet, while living in Mexicali, Mexico, just across the U.S. border, under the name “Gary Stevens,” authorities said.

With information provided by the FBI and the U.S. Marshals Service, Mexican authorities recently determined “Stevens’ ” identity and learned he was a U.S. fugitive illegally living in Mexico.

“The defendant was, for lack of a better term, kicked across the border,” and taken into custody on May 15 by U.S. authorities in El Centro, Calif., Rice told U.S. Magistrate Judge Cynthia Imbrogno.

Rice asked the court to hold the 50-year-old suspect without bond as a flight risk until a bail hearing Tuesday. He also is wanted on a warrant in Idaho, so it’s unlikely he will be released.

Before moving to Spokane, Francis worked at a bank in Boise, the court was told.

In 1989, he was convicted of theft by a bank employee and sentenced to 18 months in a federal prison in Oregon, according to court records.

Francis was a principal in Citizens National Mortgage Corp., which incorporated May 22, 1991, according to the Washington secretary of state’s office.

One nvestor in the mortgage company was James F. McQuade, a longtime associate of the Colacurcio organized crime family based in Seattle, authorities said.

The only officer listed in the company’s incorporation papers was Terrence J. Dunn, a former Spokane accountant who now works as a business consultant, specializing in start-up businesses, mergers and acquisitions.

Dunn and McQuade are not charged with criminal wrongdoing in the Citizens Mortgage case, Rice said.

Contacted Friday, Dunn said he and McQuade both invested in Citizens National Mortgage and were defrauded by Francis. McQuade, who lives in Spokane, recently was hospitalized and couldn’t be reached for comment.

Dunn said he didn’t know his former business partner had been indicted and he was surprised to learn Francis had been located and returned to the United States.

“I invested, oh, about $30,000 in the company for office equipment, stuff like that,” Dunn said, “and I’ve got a personal note for another $32,000 I loaned him (Francis).”

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