Davis man sentenced to 56 months in mortgage fraud scheme

SALT LAKE CITY — A Davis County man involved in a multimillion dollar mortgage fraud scheme was sentenced to less than five years Wednesday — a reduced sentence he was granted for working with the government.

Lyle Clay Smith, 44, was sentenced to 56 months in federal prison, five years of supervised release and ordered to pay almost $2.5 million in restitution by U.S. District Judge Dee Benson.

Smith, who was indicted alongside Ronald William Haycock Sr. and Jamis Melwood Johnson in March 2009 on charges ranging from mail fraud to conspiracy, pleaded guilty to one count of conspiracy in October.

According to the indictment, the men recruited straw buyers with good credit scores to allow them to use their names to purchase homes in Highland, Draper, Salt Lake City, Sandy, Pleasant Grove, Provo, Alpine and Farmington, then falsified loan applications and inflated not only the appraisal values but also the straw buyers' incomes.

It is believed the men had 11 victims. Straw buyers were told they would have no financial risk and would not have to make payments or even occupy the home, but were left with mortgages that they could not repay and mortgage lenders who were left with outstanding loan balances far greater than the properties were worth, the indictment states.

Prosecutor Scott Thorley said the government was recommending a reduced sentence for Smith because he accepted responsibility for his actions, had turned himself in and was "candid" when it came to the scheme.

But he told the judge the sentence needed to send a message to others contemplating similar conduct.

"This type of conduct, repeated over and over again, is exactly the type of conduct that has shaken our economy," Thorley said.

While there was some debate in court about whether Smith knew that what he was doing was illegal, as he said he initially believed it wasn't, Smith apologized in court for the "stress and anxiety" his actions caused the straw buyers and his family.

Haycock and Johnson are currently scheduled to stand trial in August and Smith is expected to testify. If convicted, those men will also have to pay part of the $2,384,974 restitution as well.

e-mail: emorgan@desnews.com