Scammer hired to sell loans to seniors
A convicted swindler who is a key player in a $50 million nationwide investment scam has been selling “reverse mortgages” to senior citizens in the Spokane area while he awaits a date to report to prison.
Michael Duane Smith has worked as a “reverse mortgage planner” for Golf Savings, a subsidiary of Spokane-based Sterling Savings, according to a brochure touting the loans, which are geared toward older homeowners. “He no longer works here,” Sterling spokeswoman Jennifer Lutz said Tuesday. She and other senior officials with Sterling and Golf declined to answer other questions, including why a felon would be working for a lending institution.
Federal prosecutors in Denver said Tuesday they knew Smith was working in the mortgage business in Spokane; they’ve made three failed attempts to get him banned from such activity since 2004.
A federal judge in Denver determined Smith, who’s likely looking at 15 years in prison, doesn’t pose “a danger to the community” by continuing to work in the mortgage industry.
“We made the argument that he does pose an economic danger to the community, but the court didn’t agree with those arguments,” a senior Justice Department official said.
Besides his employment with Golf Savings, Smith has worked out of a rented duplex in north Spokane, selling mortgages for American Freedom Mortgage.
Smith applied to the state of Washington for a “loan originator license,” but his application was denied Dec. 17 because of his felony conviction and “character and fitness,” said Deb Bortner, of the state’s Department of Financial Institutions, in Olympia.
“If he’s working for a bank, he doesn’t need a license,” she said, “but he does need one if he is working for a mortgage company.”
Bortner said bank employees and representatives aren’t licensed by the state because of their own self-imposed restrictions and background checks.
“They’re not going to have a guy working where all the money is at if he’s a convicted felon,” she said. “I can’t remember a time in all the time I’ve been a regulator when a bank actually hired a felon.”
Smith was indicted in Colorado in 2004 and convicted last year by a federal jury in Denver of securities fraud. He was one of seven defendants in a high-yield investment scheme that pulled in $50 million from 1,000 investors, who lost nearly everything.
The money was used for the purchase of eight NASCAR racing cars, a $6.5 million castle and foreign currency. A story about the case published in Sunday editions of The Spokesman-Review was read by a 66-year-old north Spokane man who said he nearly spit out his morning coffee when he and his wife saw the accompanying picture of Smith and read details of his involvement in the investment fraud scheme.
“It was a real shocker,” the man said, asking that his name not be used. “We’ve been talking with him about a reverse mortgage. He’s been here in our home. We signed the papers to get this going, but I don’t think we’re going to go through with it now.”
He expressed outrage that he shared personal financial information with a man, representing a lending institution, “who turns out to be this crook. I just can’t believe it.”
A similar story came from a 70-year-old widow who lives near Wandermere. She said Smith was involved in helping her buy a house late last year, signing papers as the “regional manager” for American Freedom Mortgage.
“I had no idea about this man’s past until I saw the newspaper on Sunday,” she said.
She could have paid cash for the $320,000 home, the woman said, but she decided to put two-thirds down and invest the remainder.
While the transaction was pending, Smith and one of his associates tried to interest her in a reverse mortgage or other investments after learning about her strong financial portfolio.
“I don’t need any of this, but they’ve been after me, trying to get my money,” the widow said.
Reverse mortgages are for homeowners 62 and older who are looking for ways to supplement their incomes. A lender pays a monthly or lump-sum amount to the homeowner, and then the loan is paid off when the homeowner sells the home or dies. But fees for reverse mortgages are higher than those for other mortgages and can be as much as 12 percent of the amount borrowed.
A reverse mortgage appealed to a 69-year-old Cheney woman who said she recently responded to a television advertisement for “Senior Lending Network,” featuring actor Robert Wagner. He was pitching the advantages of reverse mortgages to seniors whose homes are paid off.
After responding to the TV ad, the woman said Smith called her and set up a visit in late January at her home. She also contacted the newspaper after reading Sunday’s story and asked that her name not be used.
During his visit to her home, she said, Smith brought a small portable copy machine with him and copied several of her personal financial documents. He also gave her Golf Savings literature, showing his picture, a Golf Savings e-mail address and phone number. She provided copies to The Spokesman-Review.
“Golf’s reverse mortgage specialists make you feel right at home,” said the promotional material bearing Smith’s photo.
The Cheney woman, a retired government employee, said she was sickened and outraged after learning the details of Smith’s past, including his ties to a mid-1990s scheme to bilk 1,100 terminally ill people out of $100 million for discounted purchases of their life insurance policies.
She called Golf Savings and was told that bank officials “had picked up Mr. Smith’s laptop and his keys” Sunday.
“Then they told me I could come on in and sign for the loan,” she said. “Well, I never signed for a loan. I never signed anything. All I told them was I wanted nothing to do with none of this and that they had a crook working for them.”
Lutz, the Sterling spokeswoman, refused to say if the bank knew about Smith’s criminal past before hiring him. She also refused to say when or why Smith was terminated by Golf.
Troy Sims, the supervisor at Golf Savings office at 111 W. North River Drive, also refused to answer questions.
“Under the circumstances, for obvious reasons, we’re not really in a position to say much,” he said. “Please understand that because of human resources laws and rules, I’m not really in a position where I’m allowed to say much as this point.”
He referred questions to Monte Kennaston, at Golf’s headquarters in Seattle. He declined to answer any questions.