FRESNO — Former real estate mogul David Crisp and his wife, Jennifer, admitted in federal court Monday to taking part in a massive mortgage fraud scheme that shocked Bakersfield, forced foreclosures throughout the city and cost banks millions of dollars.
Dressed in a white business shirt and black slacks but no suit or tie, a clean-cut Crisp, 34, told a U.S. District Court judge in Fresno he was guilty of conspiracy to commit bank, mail and wire fraud.
The former chief executive of Crisp, Cole & Associates faces up to 30 years in prison and a $1 million fine at his sentencing, set for March 3.
His answers to Judge Lawrence O’Neill’s questions were brief, and he and his attorney declined to speak to a reporter outside of court.
Jennifer Crisp, 31, who arrived at the courthouse with her husband holding hands just before 1:30 p.m., pleaded guilty to one count each of mail and wire fraud.
She also will be sentenced March 3 and faces up to 20 years in prison and a $250,000 fine.
“The defendants falsely inflated real estate prices knowing that the foreclosures that followed would do harm to local builders, consumers and lenders,” said U.S. Attorney Benjamin B. Wagner. “The conduct of Crisp, Cole & Associates was emblematic of the recklessness and lawlessness in the mortgage industry in the mid-2000s that caused the financial crisis.”
Also Monday, the attorney for the case’s sole defendant without a plea deal, Julie Dianne Farmer, said his client does not deny participating in the scheme but that she did not know at the time that her actions violated the law.
Her Fresno attorney, Tony Capozzi, said he intends to call a psychiatrist as an expert witness to testify about Farmer’s mental state at the time of her alleged crimes. She was charged with eight counts of mail fraud, four counts of wire fraud, one count of conspiracy to commit mail, wire and bank fraud, one count of conspiracy to launder money and one count of bank fraud.
Farmer’s trial is scheduled to begin Feb. 4. It is expected to finish before the Crisps are sentenced March 3.
Speaking to reporters outside of court, Capozzi said Farmer, 45, the former operations manager of Crisp & Cole, was not involved in falsifying loan documents, only making sure bills were paid on time.
“Julie’s only job was to do what she was told to do,” he said.
Capozzi added that going to trial instead of seeking a plea deal represented a “very big risk” for Farmer. But he said anything short of a not guility plea would be wrong, because she is not guilty of the charges.
Carl Cole, former business partner of David Crisp, was present Monday at the courthouse.
Speaking to reporters outside the courthouse, he reiterated claims that he was too distracted with other projects at the firm to keep track of day-to-day operations.
The lead prosecutor in the case, Assistant U.S. Attorney Kirk E. Sherriff, said Monday’s pleas represent the office’s “desired outcome.”
“I think the case is moving toward...what we believe would be a just resolution,” he said.
Crisp and Cole each had been charged with 56 felony counts.
Asked why prosecutors settled for a single plea in Crisp’s — and Cole’s — case, Sherriff said, “The conspiracy count captures all of that.”
Cole pleaded guilty in November and faces a maximum sentence of 30 years in prison and a $1 million fine when he is sentenced Feb. 18.
Cole said he hasn’t spoken with Crisp for two to three years.
It was a far cry from the high living those two and their business enjoyed following Crisp & Cole’s meteoric rise through Bakersfield real estate circles in 2006.
The company and its principals were the picture of real estate excesss, with employees and agents required to drive high-end cars and David Crisp renting a private Gulf Stream jet and using bodyguards.
At the peak of the company’s power, Cole famously boasted, “We’re trying to change the face of Bakersfield.”
Part of that change was the real estate firm’s $470-million proposal for two 31-story towers joined at the top by a "Sky Club" entertainment and events pavilion, parking facilities, an emergency management education center and a 9,000-square-foot child care area at Cal State Bakersfield.
But by 2007 the state Department of Real Estate began investigating the company.
Prosecutors have accused Crisp, Cole and their business associates and family members of using straw buyers and others to buy and sell various properties multiple times. Each time they skimmed equity that had been built up using artificially inflated home valuations.
As the housing bubble burst, Crisp & Cole’s projects fell through, home defaults mounted and lawsuits were filed. By September 2007 the IRS had slapped David and Jennifer Crisp with a $111,170 lien in back taxes and the FBI began investigating.
Within days, more than 75 federal agents swarmed over 13 properties related to the former Crisp & Cole company.
In his plea agreement, David Crisp admitted that he and his co-conspirators caused losses of at least $29.8 million to defrauded lenders.
The Crisps pleading guilty raised to 14 the number of defendants having pleaded guilty in the case. One has been released from custody; the rest are expected to be sentenced by Judge O’Neill by June 9, 2014.
“The guilty pleas submitted...offer little solace to victims who suffered devastating losses and the community that continues to suffer the repercussions of the articially inflated home prices generated by this large scale conspiracy,” said Special Agent in Charge Monica M. Miller, of the FBI’s Sacramento field office.