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Felix Adamo/ The Californian

Julie Farmer is the only person charged in the Crisp

FRESNO — A former loan officer at Tower Lending — the mortgage brokerage of disgraced Crisp & Cole Real Estate — detailed in federal court Thursday how he believes defendant Julie Farmer deceitfully used money and straw buyers to secure home loans.

Christopher Lance Stovall was testifying during the third day of Farmer’s trial in U.S. District Court in Fresno, where she faces multiple fraud charges related to a huge Bakersfield mortgage fraud scheme led by David Crisp and Carl Cole.

Stovall testified for more than two hours Thursday morning about two transactions in which he said money had to be deposited into borrowers’ checking accounts to convince lenders the applicants had adequate assets to buy homes. He said Farmer was the one who made sure the money was deposited.

Farmer has maintained her innocence, saying she neither participated in nor was aware of any fraudulent activity. Her attorney has bristled at any suggestion Farmer was part of any Crisp & Cole “scheme” as prosecutors allege.

Farmer was the No. 3 person at now-defunct Crisp & Cole and is the only one of 15 15  defendants in the case to go to trial.

She faces charges of conspiracy to commit mail, wire and bank fraud, six counts of mail fraud, four counts of wire fraud and one count of conspiracy to commit money laundering.

Stovall pleaded guilty in July 2010 to four counts of mail fraud, and aiding and abetting. He is scheduled to be sentenced June 2.

At one point, Stovall referred in court to a loan application by Leslie Sluga — mother-in-law of Crisp and one of the defendants who accepted a plea deal. She pleaded guilty to two counts of wire fraud in January 2010 and is scheduled to be sentenced May 27. jan 2010, may 27

The application was a 100 percent-financed loan for a property with a first mortgage of $1.275 million and a second of $200,085. numbers per john

Sluga did not have enough money in her account to qualify, Stovall said.

“I told Julie that I needed the money in the account,” Stovall testified. Soon, he continued, “Julie called and told me...that the money was in the account.”

The next day, he said, the money disappeared.

“I said, ‘Where’s the money?’” Stovall testified. He said Farmer told him that Crisp needed the money back. When the lender raised a question about the funds, Stovall said, someone put them back into the account.

Stovall said he later expressed to Farmer that the Sluga loan application bothered him and he was “getting fed up with all the fraud needed to close these loans.”

Farmer’s reaction?

“She empathized but said, ‘Talk to David about this,’” Stovall testified.

During cross examination, Farmer’s attorney, Tony Capozzi, tried to undermine the idea that Farmer had much authority over these kinds of transactions.

Capozzi asked Stovall whether Farmer was truly a manager or an employee doing what her boss said.

Stovall said Farmer could have fired him.

What would Stovall have done at that point? Capozzi asked.

“I’m sure I’d talk to David,” Stovall said.

Stovall conceded he didn’t know if Farmer hired people, gave raises or had authority.

He characterized Farmer’s role as checking the status of projects rather than directing.

“The way I define directing is what David Crisp did,” Stovall said.

Later Thursday, an underwriter testified that her bank would not have funded a loan to Farmer had the submitted loan application been complete and truthful.

Susan Carter, an underwriter with SunTrust Banks Inc., said the bank was not aware that the application from Farmer, her husband and David Crisp was for a $1 million investment property at Shaver Lake, something that would have affected loan interest rates.

Additionally, Carter said the Farmers were simultaneously buying a second property for $400,000. Either factor would have been a “red flag,” likely disqualifying them from receiving a loan, Carter said.

“Basically, everything on this application would be questioned by the lender at this point,” said Carter, who had no personal involvement with any loans SunTrust made to Farmer.

Under cross-examination by Bakersfield attorney Scott Howry, Carter said loan programs at SunTrust and other banks during the mid-2000s were more aggressive and more risky like the particular loan in question — a no-ratio loan where income was not verified.

Testimony was also provided Thursday by Janie Stockton, a former marketing employee at Crisp & Cole. She said she received payments of between $2,000 and $5,000 for allowing the company to use her name and credit to purchase a total of four homes between 2005 and 2007.

As part of these arrangements, she testified, Farmer took down Stockton’s Social Security number and birth date. Later on, Stockton signed loan applications she knew contained false information such as statements that she planned to live in the properties, she said.

Stockton said she did not know who filled out the falsified mortgage applications. But she said Farmer signed checks given to Stockton — one for $22,000 — for deposit into her personal checking account as evidence that she had enough money to qualify for the home loans. Stockton said she returned the money to the company after escrow closed.

Stockton, who was never charged in the fraud case, said she became aware at one point that payments were not being made on the properties purchased under her name. She asked Farmer what to do about it.

“She (Farmer) said not to worry about it, that David (Crisp) will take care of it,” Stockton said.

Under cross-examination by Capozzi, Stockton said she could not recall whether it was Farmer or Crisp who had suggested the idea of letting the company buy homes under her name. Stockton also said she did not think the arrangement was illegal, and that she was never asked to hide the fact that she received payments for her role.

As she understood it, “I just did David a favor,” Stockton said.

Near the end of her testimony, Stockton said that after the real estate company closed, she recommended Farmer for a job with a local oil field company Stockton was working for “because she worked hard” and was an honest person.

After court adjourned, Farmer walked out and silently gave Stockton a tearful hug.

Prosecutors have accused Crisp & Cole defendants of differing roles in a conspiracy to defraud lenders by using straw buyers to buy properties at inflated prices, often with 100 percent financing, using falsified loan applications.

The defendants, not the straw buyers, generally assumed control of the properties, the U.S. Attorney’s Office has alleged.

They’ve said the straw buyers typically received up to $20,000 or more for each property purchase while Crisp, Cole and other defendants received the profits from the sales.

Several homes went into foreclosure, something prosecutors say cost mortgage banks about $30 million in losses.

Crisp and Cole were recently sentenced to 17 1⁄2 years in federal prison after pleading guilty to conspiracy to commit mail, wire and bank fraud.