Couple Guilty in $16-Million Fraud Case

An Orange County couple that helped borrowers fraudulently obtain about $16 million worth of real estate loans pleaded guilty Wednesday to federal mail fraud charges.

Daniel N. Bailey, 34, and Sandra M. Bailey, 33, of Orange operated several real estate investment and escrow companies in Tustin and Texas. The companies found and made offers on residential properties in Dallas and Fort Worth.

The Baileys then solicited investors from California to apply for loans to buy the properties, according to documents filed in federal court. In all, the Baileys completed 200 to 300 loan applications averaging $80,000, according to federal prosecutors.

To get the loans, the Baileys falsely represented to several banks and two federal home loan mortgage corporations that the borrowers were putting a 20% down payment on the properties. In fact, most of the borrowers put no money down, according to court records.

“If the banks had known this, they would not have made the loans,” Asst. U.S. Atty. Terree Bowers said.

The Baileys are accused of using only some of the money to buy the properties and keeping a portion for themselves.

Bowers said it was unclear how much money the banks and government mortgage corporations lost because many of the loans “are in various stages of default.”

Daniel Bailey pleaded guilty to four counts of mail fraud, which carry a total maximum penalty of 20 years in prison and $1 million in fines. Nancy Bailey, who worked as the office manager for several of her husband’s companies, pleaded guilty to one count of mail fraud. She faces a maximum prison sentence of five years and a $250,000 fine.

However, federal prosecutors said they would recommend a probationary sentence in exchange for her cooperation in helping the banks sort out the problems the Baileys created.

In a brief interview after entering his plea, Daniel Bailey blamed a downturn in the Texas real estate market for the loan problems. He said that many of the borrowers are still making payments on the loans and that he and his wife are trying to “work through the problems.”

U.S. District Judge J. Spencer Letts scheduled a Jan. 29 sentencing hearing.