For the businesses and individuals who lost a sum of $4.1 million when Nixa-based Guaranty Title Co. abruptly closed its doors in June 2007, the Nov. 30 sentencing of its former owners on fraud charges did little to bring closure.
“Short of a miracle, we are still going to be in the backwash of this whole thing by the time they get out,” said Murney Associates real estate agent Kim Bateman, who with her husband lost nearly $70,000 that was held in one of Guaranty’s 1031 tax shelter accounts after they closed on the sale of nine properties in 2007.
Richard Burton, 60, of Nixa, will serve six years and six months without parole, and Kathy Allen, 53, of Sarcoxie, was sentenced to three years and three months without parole in federal prison, according to Randy Eggert, assistant U.S. district attorney for the Western District of Missouri.
Eggert said the sentences were correct under the law, but may not be satisfying to the victims who lost money.
“They’re not going to get that back anytime soon,” Eggert said. “It’s going to be hard for (Burton and Allen) to pay back what they owe.”
In separate hearings, Burton and Allen pleaded guilty to their roles in $4.1 million in wire fraud, bank fraud and money laundering conspiracies.
The federal court ordered the former owners of Guaranty Title Company of Southwest Missouri, Guaranty Title Co. dba Guaranty Title and Closing Co., and Guaranty Properties Inc., collectively referred to as Guaranty, to pay restitution of nearly $4.2 million, including fines.
Judy Shaw, a Cabool property owner and retired bank teller who lost more than $73,000 to Guaranty Title, said she thought her money was guaranteed by the Federal Deposit Insurance Corp. or she never would have put her money into a 1031 exchange.
“I felt violated. I was in a daze for weeks,” Shaw said, adding that the daze turned to devastation when she learned that Guaranty Title’s insurance company, Commonwealth Land Title Trust Insurance, was not obligated to cover the losses.
Carl Davis, owner of Advanced Lawn Care in Springfield, lost more than $81,000 held in a Guaranty Title escrow after he sold 120 acres of land to a Florida couple in 2007.
“I guess (the sentences) were fair under the laws and regulations, but I don’t think it’s enough for what they did and all the people they hurt,” Davis said.
As part of the plea agreements, Burton and Allen each admitted that between May 12, 2005, and June 18, 2007, they defrauded mortgage companies and individual customers of escrow money that had been wired to Guaranty Title to pay real estate closings.
They diverted more than $3.5 million of stolen escrow funds into the firm’s business operations account. The transfers were marked as loans to mask the transactions, including loans from a fictitious company called K&S Investments.
According to the plea agreements, Allen and Burton concealed shortages in Guaranty’s escrow accounts by authorizing checks to be written and deposited into various accounts held at Great Southern Bank and Ozark Mountain Bank that did not contain sufficient funds to cover the checks. The actions are known as a check-kiting scheme. As a result of the scheme, Branson-based Ozark Mountain Bank lost more than $680,000.
Calls to bank President Craig Richards were not returned by press time. Great Southern Bank spokeswoman Kelly Polonus said the company declined to comment.
Burton and Allen also admitted in court documents they participated in a conspiracy to commit money laundering as a result of conducting financial transactions that involved the proceeds of the wire fraud and bank fraud schemes.
At its peak, Guaranty Title operated 10 branch offices located in Aurora, Branson, Mount Vernon, Ozark, Springfield and Republic.
Eggert said that while most of the more than 50 people who lost money to Guaranty were insured against losses, the three people who testified against Burton and Allen that had money in 1031 accounts were apparently unprotected.
“We’re just in this loophole of loss,” Bateman said.
According to the Internal Revenue Service, if a person exchanges business or investment property solely for business or investment property of a like-kind, no gain or loss is recognized under section code 1031. All three victims said they had plans to reinvest the money.
Bateman and her husband, Ken, who together own Bateman Construction, had planned to use the money at Guaranty Title to secure a loan to build 18 duplexes in Ozark.
They moved forward on three duplexes, but missed a federal deadline to reinvest the 1031 account funds.
Now, she said they are working with the IRS to resolve the nearly $38,000 capital gains tax bill they’re facing. “This has had a ripple effect on us,” she said.
FBI special agent Mitch King said Allen received a reduced sentence under federal guidelines because she cooperated with the FBI early in its investigation.
He said Burton eventually cooperated with federal authorities, and his sentence was in accordance with those predetermined guidelines.
According to Case.net, Missouri’s online court record system, Guaranty has been named as a defendant in 58 civil court cases since 2007.
According to a spokesman for the U.S. Western District of Missouri, Burton and Allen will be remanded into custody on Dec. 14. Attempts to contact both of them for comment were unsuccessful.[[In-content Ad]]
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