The Bonnie and Clyde of mortgage fraud
A master con artist and his partner went on a six-state crime spree, ripping off homeowners, stealing identities and defrauding lenders.
(Fortune Magazine) -- In December 2004, Dr. Bruce Brown and his wife, Bridget, got a call around seven in the evening from a man who had seen the sales listing for their Columbia, S.C., house. He asked if he could come over right away. The Browns agreed.
They desperately wanted to sell the property, which had been on the market for six months. Dr. Brown was starting a new job in Augusta, Ga., in weeks. Just days before, they had amended their listing to offer $201,000 in owner financing, "hoping to broaden the pool of candidates," says Bridget. They did.
Within an hour, a man showed up in a fancy sports car and introduced himself as Gary Sullivan. With him was a petite blond woman he said was his realtor. Sullivan told the Browns he owned a temp staffing agency called Labor on Demand but had run up too much credit card debt and needed owner financing to buy a home. The two cased the traditional two-story house quickly and left. Within days, the Browns had a deal.
At the closing Sullivan was charming and self-effacing, recalls Bridget. He chatted about how great it would feel to own his own home and rebuild his equity, how he traveled quite a bit in his job and wanted to slow down, how he hoped to get married and have a family.
"He said he'd just gotten invisible braces on his teeth. He said, 'When you're as short as I am, you don't have much to work with!' I actually felt a little sorry for him."
Then it came time for them all to show identification, a common practice at real estate closings. As Bridget took out her driver's license, she casually mentioned she'd once been an identity-theft victim. Sullivan "suddenly looked at me, very startled. His eyes actually bored into mine. It was jarring," she recalls. Before she could react, one of the lawyers present shouted, "Sold!"
Four months later the Browns returned from a trip to Disney World to find a chilling message on the answering machine in their new home in Augusta. It was from a U.S. Secret Service agent named Andrea Peacock. Peacock informed the Browns that their old house had been bought by a con man - an exceptionally sinister one who had committed dozens, possibly hundreds, of mortgage frauds and identity thefts, netting millions of dollars.
The man who had seemed a bit of an earnest loser at the closing was in fact on the Secret Service's Most Wanted list. His real name was Matthew Bevan Cox, he was 34, and he used more than ten aliases. Peacock ended the voicemail with an unsettling directive: By no means should they approach Cox, since he was considered "armed and dangerous."
Bruce Brown fumed for five days, and then, on a Saturday, he hustled the family into the car and drove the 78 miles to Columbia. As soon as they arrived at the house's driveway, Bridget became terrified. "I told Bruce, 'You shouldn't go in,'" says Bridget. "I thought, he could be a murderer!"
Dr. Brown, a career military doctor who has "seen it all," according to his wife, got out of the car, told his wife to lock it, and carefully approached the front door. Surprisingly, his old key worked.
Brown stepped inside and flipped on the lights. Cox wasn't there. But there were moving boxes, a new couch and coffee table in the living room, and a huge carton that seemed to contain a large-screen plasma TV. The place certainly looked as though someone were moving in - and that was part of the con.
The boxes were stuffed with trash, even the gigantic TV box. Everything had been staged to throw off inquisitive neighbors. "It was like something out of the back lot at MGM Studios," says Bridget. In the kitchen they found a fax machine with dozens of pages spilling out. The faxes would turn out to be evidence: falsified mortgage documents to and from dozens of lenders, title agencies, and appraisers addressed to various Matthew Cox aliases.
Mortgage fraud frenzy
The real estate market has never offered such opportunity for graft. Since the housing market started to soar in 2001, mortgage fraud has become the fastest-growing white-collar crime, according to the FBI. Last year crooks skimmed at least $1 billion from the $3 trillion U.S. mortgage market.
Now that the market is slowing, fraud is only rising. As business dries up, there's increasing pressure on lenders, brokers, title companies and appraisers to be profitable. That means loan and title documents aren't scrutinized as carefully as they might be, and courts - many of them so low-tech they resemble Mayberry - can't keep up with the volume of paper.
Then there's the mad rush to sell, particularly by people who paid high prices for homes and suddenly can't afford the mortgages.
It's like a tasting menu for con artists and grifters, so tempting that in some cities drug dealers have turned to mortgage fraud, plaguing lower-income neighborhoods with crooked mortgages rather than crystal meth.
"It's an easier, more surreptitious crime," says Gale McKenzie, a U.S. attorney in Atlanta (and chief prosecutor on the Cox case).
And with a con man like Matthew Cox still at large, any homeowner in the land is vulnerable. "Master con men like Cox are charming, manipulative, cunning. They have an amiable facade, which makes them very adept at getting others to like them," says Louis B. Schlesinger, a professor of forensic psychology at John Jay College of Criminal Justice in New York.
For the better part of the past decade Cox has stalked his prey through MLS (multiple listing service) real estate ads. He has studied county courts, looking for ones he could easily dupe with falsified documents.
Schooled as an artist, he is an expert at forging signatures. He knows how to obtain corporate seals of actual banks. He launders money in complex webs of cashier's checks made out to counterfeit names. Authorities suspect he has stolen at least $15 million through fraudulent mortgages, although the figure could be much higher.
Cox's victims have been forced to pay tens of thousands of dollars to lawyers to save their property from foreclosure on unpaid fraudulent loans. They have had to clean up ruined credit. "It's been so stressful, both financially and psychologically," says Bridget Brown.
Schlesinger says classic con men, besides being psychopathic and greedy, are driven by a need to show the world how clever they are. "Their thinking is, 'Look at all these schmucks who actually go to work and earn so much less than I do. I get up at 11, work four hours a day, and make millions.' "
Their crimes are meticulously planned, and not just to elude law enforcement. "They have an overwhelming need to let others know how smart they are," says Schlesinger. "That's why they often leave notes and various clues behind."
Like, for instance, a 317-page hard-boiled crime novel about a serial con artist who becomes a mortgage fraud ace. Federal authorities believe an unpublished book by Cox, called "The Associates," is a blueprint for his crimes.
They say he started writing it while running a mortgage company in Tampa. To research it, he interviewed top real estate lawyers, mortgage brokers, title agency owners and others - telling them he was working on a novel and quizzing them about the ins and outs of real estate cons.
The main character in the book, Christian Locke, is a hard-working Tampa mortgage broker who ends up running his own company. He gets more crooked as the pages turn.
Locke is constantly pursued by beautiful women; his advice is sought by real estate pros and con artists. Naturally he gets involved with old-style mobsters when the company he owns helps them obtain fraudulent loans.
The gangsters knock off his partner for cooperating with the feds in an eerily detailed staged suicide involving a Taser stun gun and a Mercedes sports coupe. From then on, Locke is on the run from the Mob, as well as the FBI, the IRS, and the Secret Service, which are trying to pin fraud charges on him. The story Cox spins is chock-full of how-tos:
Christian studied the Florida identification card very carefully for several minutes and realized the name and address portions of the Florida ID and driver's license could be easily sanded off with 220-grade sandpaper. He could then print the new borrower's name and address on the computer in the identical Florida ID fonts, go to Kinko's, make a transparency of the new name and address and paste it over the altered ID. The result was a virtually perfect ID.
Bonnie v. Clyde
Like all great con men, Cox recognized early on he needed a moll, a charming frontperson who exudes innocence and engenders trust. Rebecca Marie Hauck, a perky, petite blond in her mid-30s, fit the bill perfectly.
Cox and Hauck, starting in December 2003, embarked on a crime spree crisscrossing six states, engaging in identity theft, money laundering and bank fraud, according to an indictment filed in U.S. District Court in Atlanta.
While on the run with Cox, Hauck assumed at least five identities and forged numerous documents, obtained fake driver's licenses, leased mail drops, rented apartments and opened bank accounts.
The details of their life on the run are the stuff of tabloid fodder: the sinister parting gifts Cox left behind for his victims after vacating a property he'd stolen; the flashy sports cars they fraudulently purchased, then abandoned in parking lots; the way he posed as a Red Cross worker to steal identities of homeless people ("The homeless just aren't utilized enough," he often quipped); the twisted use of aliases like "David Freeman" when Cox first went on the lam, and "C. Montgomery Burns," the aging moneybags on "The Simpsons" television cartoon.
The papers in Florida like to call Hauck and Cox the Bonnie and Clyde of mortgage fraud. Captured in March, Hauck has pleaded guilty to mortgage fraud conspiracy and bank fraud charges that together carry maximum penalties of 35 years in jail plus restitution of $1.25 million. Now Bonnie has turned on Clyde, trying to get her sentence reduced.
At the Atlanta Correction and Detention Center, off a gritty section of Peachtree Street, surrounded by get-out-of-jail outfits with catchy names like Free at Last Bail Bonds, Hauck, 35, sits in an arraignment room. With its wooden pews, it resembles a chapel. It's chilly in jail, about 60 degrees, she says, so under her standard-issue bright-orange jumpsuit she's wearing white long underwear.
She recently cropped her strawberry blond hair with a men's electric razor she was allowed to use. She says she's popular in prison because she cuts her fellow inmates' hair and doles out beauty tips.
When her attorney, Paula Hutchinson, arrives, Hauck is thrilled that she's brought makeup for a Fortune photo session. Hauck, who is called "Becky" by almost everyone, has no more than a high school education, yet she's quite articulate. She says, "People naturally like me 'cause they say I have the gift of gab. I can talk to anyone about anything."
She breathlessly tells everything she knows about Matthew Cox - things she thinks might lead to his capture: He takes Paxil and Xanax. She believes he still has the Shar-Pei dog, Pinky, they adopted together. His two front teeth are capped. He wears shoe lifts. He constantly Googles himself. She says he carries a gun.
Hauck says Cox has talents that handily accompany his chosen profession, like the ability to dramatically alter his appearance and demeanor. He can play the unassuming guy in jeans and a T-shirt, sometimes with blond, spiked or curled (with a curling iron) hair, and just as easily, the straitlaced banker. Hauck says he frequents tanning salons and has had numerous cosmetic surgeries, including male breast reduction, chin liposuction and a nose job.
Cox, she says, grew up in a strict middle-class Catholic family in Tampa. He was diagnosed with dyslexia and attention deficit disorder as a child, and got an art degree from the University of South Florida. Hauck says his insecurity may account for his need to bloodlessly manipulate people.
"Matthew had a way of controlling me that it's hard for me to explain or even understand myself," she says. One way was buying her stuff: a $3,000 Rolex, thousands of dollars' worth of clothes - and three years ago, a diamond engagement ring. "I loved him, but I can see now how dysfunctional it was. He told me I was ugly, that I wasn't really his type. All that stuff just made me want to please him more."
Hauck says Cox also tried to convince her that theirs were victimless crimes -that no one really ever got hurt, and everyone was in on the con.
Hell, one of the owners of a bank was in my office the other day, and he told me that as long as the borrower makes his first mortgage payment and the bank sells the loan to his secondary investors before the loan goes into foreclosure, he really doesn't give a crap whether the loans contain fraudulent documents or not.
'The answer to my prayers'
Hauck met Cox on Match.com, the Internet dating service, in September 2003. Both were living in Tampa; she was new in town. Cox had described himself in his ad as a wealthy real estate pro. Plus, "he had posted images of some of his paintings on his Match.com page. I was blown away by his art," Hauck says. "I thought, here's a guy who's both sensitive and successful."
Married and divorced twice by the time she was 30, Hauck had had a bit of a scattered life. She was raised in Chicago and Florida and graduated from high school in Arizona in 1989. She worked various jobs in Salt Lake City, Fresno and Las Vegas - Kmart clerk, actuarial assistant order taker for an adult publisher selling sex toys and magazines.
She had a son, Bryce. In Vegas she got hooked on video poker and eventually racked up $7,500 in gambling debts. She forged checks in her boss's name to pay them off. He found out and axed her. She filed for personal bankruptcy. Her next move with young Bryce was to Tampa, where she got a secretarial job at the greyhound racing track in St. Petersburg.
"Matt Cox seemed the answer to my prayers," she says. On their first date, he took her to his company, Urban Equity Inc. "There were about 20 people working for him, calling him 'Mr. Cox.' He was really running the show. His employees adored him," she says.
Then he took her to a fancy sushi restaurant in Ybor City. There was more to the attraction. "He drove this great Audi TT. He had a fabulous Mediterranean-style triplex apartment." His walls were covered by his Dali-esque murals: One depicted nuns smoking, another in the bathroom showed a priest oddly peering over a shower curtain. "I would say, 'Why don't you make a living selling your art? You could do it!'"
He had other valuable art. One evening as the couple was headed out to dinner, Cox took one of his paintings off the wall and pulled a stack of bills out of the back. He told Hauck he always kept $35,000 in cash there: "He said it was his emergency money." She didn't ask any questions.
Cox was obsessed, naturally, with crime movies. One night they saw the edgy film "Matchstick Men," in which Nicolas Cage plays an ace con who ends up victimized himself by the mother of all cons. It provided a conversation starter.
Cox confessed to Hauck he was on state and federal probation for mortgage fraud. Hauck says he somewhat proudly showed her an article about his company that had recently appeared in the St. Petersburg Times.
"I thought, 'Oh, we all make mistakes. I want to give him a chance,'" says Hauck. It was all too alluring, if dangerous, for the lonely single mom working at the dog track who seemed to crave living on the edge a little too much herself.
[Christian Locke confesses to his girlfriend:] "I got a little to [sic] creative with some of my own personal loan applications. And well, the FBI has subpoenaed the lender files, title company files, bank accounts and God only knows what else. That's several million in fraudulent mortgage loans."
"Could you go to jail?"
Christian began to laugh and said, "Yeah, I can go to jail."
Life on the lam
Cox's probation grew out of a 2002 guilty plea for bank fraud and grand theft. He had started out after college as an insurance agent, but soon noticed that friends in the mortgage business were driving fancy cars and living in posh apartments. He jumped into real estate just as the market started to take off.
At first Cox studied the business, learning the ropes legitimately (and working on his novel), but soon he was lured to the seedy side, shrewdly doing small-time mortgage frauds - typically targeting low-end properties, taking out loans around $100,000. That kept him under the radar.
But after Cox inadvertently sent a forged appraisal to the very appraiser whose name he had forged - a man who happened to be a former deputy sheriff - he was arrested and convicted in 2002.
After his sentencing, Cox's criminal activities only increased. He joined Urban Equity as a partner and allegedly masterminded a scheme to buy 21 run-down Tampa properties and inflate their value using corrupt appraisers and title companies.
One way Cox got the deals done, authorities say, was to hire so-called straw men - people willing to pose or act as buyers. The straw man would tell the homeowner, "I want to buy your house - I'll pay you the full price you're asking. But I need a loan for triple the purchase price to make improvements. Would you agree to up the price just for the paperwork?"
The unsophisticated sellers agreed. Why not? They were getting their price, and heck, the house needed repairs anyway. After the price was artificially inflated, the straw man would take out a loan, pay the homeowner the full price, pocket some cash, and give the biggest cut by far - around 90 percent - to Cox. Cox and his associates netted $2.7 million in fraudulent loans, authorities say.
That alleged scam was big enough to draw the interest of the FBI, which started investigating Cox, and also of a determined reporter, Jeff Testerman of the St. Petersburg Times, who wrote a series of stories about the straw-men deals.
Cox discovered that the newspaper was planning to print a major article on him and Urban Equity on Dec. 14, 2003. "The shit was going to hit the fan," says Hauck. Cox knew he'd be nabbed if he stuck around Tampa.
So just days before the piece ran - it was called "Dubious Deals" - the two took off up the highway in another Audi, a new, $80,000 S6 coupe Cox bought using an alias. Hauck's son was in Vegas with his grandparents for Christmas. Cox left his 5-year-old son, Casio, behind with his ex-wife.
At first the couple had no idea where to go. "Matt had hardly been outside of Tampa his whole life," she says. They drove north to the Atlanta area, barely stopping.
On the road Cox came up with a scheme: If they lived in one state and committed frauds in another, it would be harder for authorities to track them. So they moved into a residence hotel in Atlanta and within a few weeks developed a plan to defraud a homeowner in Tallahassee, a wheelchair-bound former office manager named Theresa A. Knight.
That's when Hauck committed her first crime with Cox: She leased a mail drop at a UPS store outside Atlanta, presenting a fake Florida driver's license in Theresa Knight's name, according to court documents.
That same day, Cox drove from Atlanta to Tallahassee, where he made a visit to the local county clerk. There, he filed a fraudulent satisfaction-of-mortgage form, forging the signatures of Knight and two purported bank officers, showing that Knight's mortgage had been paid off.
Copies of the court-approved mortgage satisfaction were sent to the mail drop Hauck had opened. Now that the property was "free and clear," in real estate parlance, the couple could apply for new mortgages on it. Hauck, still posing as Knight, and Cox received $53,000 at a closing weeks later in Tallahassee. "That's when Matt said to me, 'There's no going back now. You're in just as deep as I am,'" says Hauck.
Swindlers by day, couch potatoes in the evening, Cox and Hauck became hooked on the HBO series Oz, a hard-core account of prison life complete with gang rapes and murders. Cox, says Hauck, warned her that's what jail was like. "He was always trying to scare me so I wouldn't turn us in," she says, adding, "Matt was terrified of going to jail - he was scared of getting raped by another guy."
"I'm not going to prison, Amy. Look at me. A cute little morsel like me in prison? Hell, no."
Back in Atlanta they zeroed in on their next victim. Michael A. Shanahan was a newly engaged finance manager who had spent his nest egg to buy a house, a rental investment property, in Alpharetta, Ga., a suburb north of Atlanta.
Hauck, this time posing as Grace Hudson ("a totally made-up name," she says), showed up on Shanahan's doorstep in January 2004 pretending to be new to the area and an employee of Lloyd's & Associates ("a totally made-up company. Matt said to tell people it was a Lloyd's of London subsidiary").
When she explained that she lacked a credit history - she said she was just divorced and nothing had been in her name - he told her not to worry. "You seem trustworthy," he said.
The couple then pulled the same scam they'd done in Tallahassee. But this time they upped the ante, netting $329,000 on Shanahan's home from three different lenders. With the ill-gotten gains, Hauck visited Alpharetta's Swan Center for Plastic Surgery in March and spent almost $12,000 on liposuction, a tummy tuck, and breast implants. Cox bought a brand-new silver Honda Element.
It wasn't until June that Shanahan discovered that his identity and property had been stolen and that fraudulent loans had been taken out on his home. "Grace Hudson" had been sending him monthly rent checks, so his suspicions weren't aroused. But when he went to check on the house, he found a stack of mail addressed to different aliases. He also found a particularly disturbing piece of art created by Cox: a bizarre papier-mach‚ statue of a man kneeling on the floor. The statue's face resembled Edvard Munch's masterpiece, "The Scream."
"It was like Cox was saying, 'You sucker.' It wasn't enough for him to practically ruin someone's life," says Paula Hutchinson, Hauck's defense lawyer. By then, Cox and Hauck had vanished again. But this time the Secret Service was on their tail, searching for the couple they knew only as "John and Jane Doe."
Cox and Hauck moved to Charlotte, N.C. Cox commuted to Columbia, S.C., an hour and a half away, to commit more scams.
The Secret Service put together a "Wanted" poster for the couple, using images obtained from fake IDs the pair had used at a bank closing, and the Charlotte television news aired a piece about them. A Florida FBI agent had identified them, and their real names were now being publicized. Cox and Hauck knew they had to escape again.
Late one night, "I told Matt, 'I can't go on anymore, this is it for me!'" says Hauck. He lost his temper, threw her on the floor, and started choking her. She screamed, and a neighbor knocked on the door. He shushed her: "Shut up, bitch, or you'll get us caught!" She says, "I realized then he could kill me. No one knew who I really was, and my family thought I was dead. He'd get away with it."
Soon after, she says, she headed off to Houston in a sparkling new Infiniti FX 35 SUV - a vehicle she'd fraudulently bought. The plan was that Cox would follow after wrapping up some business.
One day in February 2005, Mary Nell Degenhart, a Columbia, S.C., real estate lawyer, met a man known as Gary Sullivan at a loan closing. "He talked a great game. He made you feel like you were dealing with a pro. He had all the right documentation, all in perfect order. Though in retrospect, all fake," she says.
"You could tell he wanted things to go as smoothly as possible so he could just get out of there quickly." At the same time, an abstractor researching records for Degenhart in the local courthouse noticed Sullivan had obtained six loans totaling nearly $1 million on two separate properties within a four-day period. "It was outright illegal," she says.
She arranged for a fraud alert to be sent to Columbia banks, and a few days later, when Cox was walking out of a Wachovia Bank in Columbia, cops nabbed him. They allowed him to drive his own car to the police station. On the way he called Hauck in Houston on his cell phone and said, "You might be on your own from here!"
She says they were both freaking out. At the station he played it cool, showing police another fake ID. When one cop noted that Cox seemed shorter than the 5 feet 9 inches listed on it, Cox joked, "Hey, fellas, you do what you gotta do to impress the ladies!"
Astoundingly, he convinced them he wasn't Sullivan. The police let him go. Degenhart, who mutters something in her Southern drawl about the Keystone Kops, says, "It was unbelievable. Cox had the police laughing at his jokes. He charmed them!"
That night Christian had nightmares of John Walsh profiling him on "America's Most Wanted".... Christian tossed and turned while the "America's Most Wanted" phones lit up and calls poured in from around the world.
There was a follow-up nightmare where Christian was shown handcuffed, wearing an orange prison uniform and trying to hide his face from the camera. Walsh said, "Thanks to your tips, we caught this sleazy bastard and tonight, he's behind bars where he belongs."
Cox then motored down to Houston in a new Infiniti sedan. When he got there, Hauck says, he told her he wanted his own apartment, he wanted to break up. They argued, yelling and throwing things. The next morning, when Hauck got out of the shower, Cox had vanished.
Hauck says she took it stoically. She took a new name, Rebecca Hickey, and though still in hiding, she says she went straight. She cocktail-waitressed at night and attended beauty school by day. She got back in touch with her family, letting them know she was okay.
One day in March she was styling a mannequin's hair in beauty school when five federal agents burst through the door. "My classmates were terrified. But I stayed pretty calm," she says. "It was like I was just waiting for this to happen."
Hauck, who will be sentenced on Nov. 15, remains at the Atlanta correction facility (locally referred to as the "ACDC"). Her attorney argues that she was manipulated by Cox. "Becky was totally controlled by Matt, there's no question," says Hutchinson.
Turns out Hauck wasn't the only one. In a Tampa jail sits Alison Arnold, 32, finishing a two-year sentence. Also a single mom and a petite blond, Arnold became Matt Cox's accomplice in Tampa in 2003, right before Hauck, pulling off similar schemes until she was charged with fraud.
Hutchinson believes Cox has worked with yet another small-framed blond since Hauck, possibly in South Carolina. She contends the woman Cox introduced to the Browns as his realtor wasn't Hauck. In fact, Hauck says she caught Cox going on Match.com one day in Charlotte. "Matt told me he always needs a woman like me to help him - that people trust women more than men," says Hauck, who adds that he said people's basic nature was to trust, "and because of that, you could easily take advantage of them."
Homeowners scammed by Cox say they'll never be the same. Says Bridget Brown: "We kind of liked the guy. My husband even went out of his way to have termites exterminated before he moved in." Cox forged the Browns' signatures on a false satisfaction-of-mortgage form and got new mortgages. In February 2005, Cox scored as many as five loans on the Browns' house, totaling around $800,000.
Michael Shanahan, who declined to be interviewed, was crushed by the entire ordeal, according to law enforcement officials. When he first approached the police, he had to convince them he wasn't part of the property scam. One problem is that Cox had also stolen Shanahan's identity, using it to obtain credit cards and financing, and open bank accounts.
Meanwhile, Cox, who faces a 42-count indictment carrying a 400-year jail sentence, could be anywhere. Some believe he may have made his way to Cuba - Hauck says he was strangely obsessed with the country. Others think he's still in the U.S., working his frauds as usual.
As Gerald Scott Cugno, a former business partner, told the local paper: "It's a game. He wants to see if he can pull it off." Cugno, who had his identity stolen by Cox, believes he's influenced by Frank Abagnale Jr., the con man played by Leonardo DiCaprio in the movie "Catch Me If You Can." In the 1960s, Abagnale impersonated a professor, doctor, lawyer and airline pilot while passing $2.5 million in bad checks until the FBI nailed him.
After Cox left Hauck in Houston, he vanished. In "The Associates," after a wild chase during which he manages to somewhat heroically lose the feds and mobsters on his tail, he also abandons a silver Audi TT in Tampa airport's long-term parking, boards a cruise ship, and makes his way to the Cayman Islands, where he plans to stash his millions and live the good life. As he writes:
He was free and about to start a new adventure, a new life in a new country.... [He] stared out at the glittering lights and the fading shore line.
But that's just fiction.
Mortgage fraud hot spots Reports of mortgage fraud Reported mortgage fraud losses
Reporter Associate Doris Burke contributed to this article.