Two St. Louis-area businessmen accused of operating mortgage fraud scheme centered in Sikeston, Mo.

Two St. Louis-based businessmen who operated a mortgage brokerage in Southeast Missouri were charged with 34 federal felonies in connection with a mortgage fraud scheme centered in Sikeston, Mo.

In the 73-page indictment handed down in April but unsealed Monday, Russell T. McBride, listed as living in Creve Coeur, Mo., and Robert P. Wrolstad, listed as living in O'Fallon, Mo., are charged with looting mortgage lenders by vastly inflating the prices of mortgaged properties.

Between July 2005 and November 2006, when mortgage companies nationally were lending with low standards, federal prosecutors allege that McBride and Wrolstad, acting through a company called Century Mortgage and Finance Inc., used knowledge of the loose lending practices to enrich themselves. Century Mortgage operated offices in Cape Girardeau, Sikeston and St. Louis.

While they allegedly inflated the values of the Sikeston homes by as much as 733 percent, the actual amounts borrowed were modest by standards of metropolitan areas.

"They were looking for properties where they could get a lot of gain out of it but still fly below the radar," federal prosecutor Catherine Hanaway said at a news conference at the U.S. Courthouse in Cape Girardeau.

By falsifying appraisals, giving mortgage clients the money to cover closing costs and down payments, and other means, prosecutors say McBride and Wrolstad caused mortgage lenders to write almost $500,000 in loans on 12 properties that were acquired for about $185,000.

The 34-count indictment includes one count for each man of conspiracy to commit wire and mail fraud, 12 counts of wire fraud and 12 counts of mail fraud. In addition, McBride is charged with six counts of money laundering and Wrolstad is charged with three counts of money laundering.

McBride faces a maximum sentence of 545 years in federal prison; Wrolstad's maximum term would be 515 years. In addition, they face fines of up to $250,000 on each count and, if convicted, must pay restitution to their victims.

Federal sentencing guidelines will determine the actual sentences imposed in case of a conviction, but Hanaway said she will seek the maximum penalty. "We want to get every day possible on the sentences," she said.

They will appear Thursday in federal court for an initial appearance, Hanaway said.

Flanked by investigators from the U.S. Postal Service, the FBI and an assistant federal prosecutor, Hanaway said the two men would make a deal for a property -- typically paying less than $20,000 -- and set up an investor with a mortgage based on a price of two to nine times the actual purchase price. They would have the mortgage company -- often a subsidiary of the failed Seattle thrift bank Washington Mutual -- write a loan based on the inflated amount.

Through back-door channels, McBride and Wrolstad would provide the money for closing costs and a 10 percent down payment. When the loan check arrived, McBride and Wrolstad would split the extra funds, the indictment charges.

The indictment said McBride told investors the properties were good investments, that rents would pay the mortgages and, in some cases, that property could be sold again in about a year for a profit. Most of the mortgages resulted in foreclosures.

The two targeted areas of Sikeston where property values were depressed, Hanaway said.

While the indictment only covers 12 properties, there were dozens, and potentially hundreds more involved. Hanaway said the indictment focuses on properties where prosecutors have the best chance of obtaining criminal convictions.

The investigation is continuing, Hanaway said. And other inquiries into mortgage fraud are underway.

"We have a lot of files open right now," she said.

rkeller@semissourian.com

388-3642

Sikeston, Mo., homes listed in the federal indictment of mortgage brokers Russell T. McBride and Robert P. Wrolstad:

811 Agnes St.

actual price: $15,000

stated price: $54,000

mortgage: $48,600

309 Prosperity St.

actual price: $7,500

stated price: $66,000

mortgage: $57,259

127 N. Handy St.

actual price: $15,000

stated price: $62,000

mortgage: $55,000

221 N. Handy St.

actual price: $10,500

stated price: $52,000

mortgage: $46,800

203 Adams St.

actual price: $13,500

stated price: $57,000

mortgage: $48,600

209 Adams St.

actual price: $17,000

stated price: $56,000

mortgage: $50,400

801 Delmar St.

actual price: $20,000

stated price: $62,000

mortgage: $55,800

834 William St.

actual price: $12,000

stated price: $59,000

mortgage: $48,000

617 Dorothy St.

actual price: $12,000

stated price: $59,000

mortgage: $50,150

416 Clayton St.

actual price: $30,000

stated price: $66,000

mortgage: $53,460

318 Daniel St.

actual price: $9,900

stated price: $53,000

mortgage: $47,700

405 Branum St.

actual price: $20,000

stated price: $60,000

mortgage: $54,000