Opinion ID: 4024287
Heading Depth: 3
Heading Rank: 1

Heading: hfgi

Text: In 2006, Bill formed HFGI as a mortgage company to process investor loans. When that business failed to prosper, he transferred its assets to another company in 2007 and announced a new strategy. HFGI would target individuals, land developers, and construction companies in need of capital for redevelopment projects in the Gulf‐Opportunity Zone, which covered the region devastated by Hurricane Katrina, including Alabama, Louisiana, and Mississippi. Bill created a Board of Directors for HFGI, composed of himself, Stacey Lange (his wife), Russell, and Joseph Pascua, his long‐time business partner. In February 2008, HFGI began offering financing to investors. It issued letters of intent (ʺLOIsʺ) representing that it had secured lender approval and commitments to fund projects within thirty days. These representations were false: HFGI had neither lender approval nor lender commitments to fund projects and was not capable of providing meaningful funding. From February 2008 through early 2009, HFGI made loan commitments, requiring borrowers to pay a ten‐percent deposit. The deposits were supposed to be held in escrow, to be refunded if the loan was not issued. Instead, HFGI diverted the deposits for other purposes: investing in leveraged ‐5‐ funds, paying salaries, and covering personal expenses. Over the course of the scheme, HFGI financed only one house to completion, and it failed to provide funding for hundreds of projects it had committed to finance. In total, HFGI diverted over $9 million from its clientsʹ escrow accounts before shutting down and changing its phone number.
In 2006, Kristofor began working as an administrative assistant for his father at HFGI.2 Kristofor was not centrally involved in the HFGI scheme, but did attend a number of staff meetings where the lack of funding and messaging to clients was discussed. Kristofor testified in the grand jury that he knew HFGI ʺwasnʹt workingʺ and that as a result ʺwe closed it down . . . and started another company.ʺ Govʹt App. at 71. His grand jury testimony was admitted into evidence at trial.
Russell joined HFGI in 2006, working primarily as a loan processor. As a member of the Board, Russell attended a number of Board meetings and 2 Kristofor was not charged in Count One for his participation in the HFGI scheme, but his involvement serves as background for his knowledge and participation in the BSMI scheme. ‐6‐ general staff meetings where HFGIʹs strategy to secure funding for Gulf‐ Opportunity Zone development projects was discussed. As a loan processor, Russell was responsible for preparing and keeping custody of the loan documents for HFGIʹs clients. In this role, he was copied on emails with attachments from HFGIʹs escrow attorney reflecting the transfer of escrow funds to HFGI. Two land developers, whose clients were defrauded in the HFGI scheme, testified to Russellʹs participation in the scheme. One testified that when she met with the Board to discuss potential loans, Russell was present and spoke about the logistics of processing loans. She testified further that Russell was her primary contact, sending her accountings of her clientsʹ escrow deposits, wiring instructions, and LOIs promising financing. Another testified to similar communications with and receipt of loan documents from Russell. Both testified that they repeatedly asked Russell about the delays in funding, and that he responded by claiming ignorance and directing them to Bill. Russell never told them that HFGI did not have the funds or a lender to finance projects, and did not reveal that their clientsʹ deposits had been withdrawn from escrow. By late 2009, when HFGI could no longer maintain the ‐7‐ scheme and was over $9 million in debt, Russell, at Billʹs direction, changed the office phone number.