RALEIGH – The United States Attorney’s Office announced that today in federal court, JOSEPH HAL KINLAW, JR., 63, of Bald Head Island, North Carolina, pled guilty to Bank Fraud.
Based upon the Criminal Information and evidence offered at the time of KINLAW’s guilty plea, KINLAW was a licensed North Carolina attorney who operated various alleged real estate investment and development entities on behalf of investors. KINLAW used the entities to obtain real estate development loans from Branch Banking and Trust (BB&T), and First Citizens Bank. BB&T and First Citizens Bank extended loans to these entities under the auspices that the entities would be engaged in the development of residential real estate in various subdivisions in the area of Camp Lejeune in Onslow County.
Between January of 2011 and April of 2013, KINLAW used the real estate development entities to defraud BB&T and First Citizens Bank by falsifying the legal descriptions of the loan collateral, and by falsifying releases of the collateral. Bydrafting a false legal description of the property, KINLAW was able to use the collateral for other real estate investment activities and loans. By fraudulently releasing the banks’ collateral before the banks’ loans had been satisfied, KINLAW was able, in several instances, to convey the collateral to third parties for value and continue the scheme.
To perpetuate the scheme and prevent its discovery,KINLAWalso used outside funds, that is, funds unrelated to the real estate development activity that was the subject of each loan, to make ongoing loan interest payments to BB&T and First Citizens Bank. In some instances,KINLAW used loan proceeds on one transaction to make loan interest payments on another transaction. In other instances,KINLAW fraudulently extracted funds from other investors and their business interests to make payments on the loans.
Ultimately, banks stopped loaning money toKINLAW and his related companies and investors. As a result, the existing loans went into default. BecauseKINLAW had substituted false legal descriptions of bank collateral, and fraudulently conveyed bank collateral, BB&T and First Citizens Bank were unable to capture their loan losses in foreclosure. Various title insurance companies and investors also lost substantial funds due to the scheme. While the exact amount of the loss remains the subject of investigation, losses are presently anticipated to exceed $18 Million.
At sentencing,KINLAW faces up to 30 years in prison and 5 years of supervise release. The defendant also faces a fine of up to $1 Million, and an order of restitution to victims.
The investigation of this case was conducted by the Federal Bureau of Investigation, with assistance of the United States Postal Inspection Service. Assistant United States Attorney William M. Gilmore of the Economic Crimes Section represents the United States.