VETTING

[flemsnopes]

Ed Johnson and Gwendolyn Carol Johnson of Heritage Capitol Credit Corporation

From Delaware Online

Couple accused of making fraudulent loans

Pair charged with bilking customers out of fees

By SEAN O'SULLIVAN
The News Journal

A Wilmington couple have been indicted by a federal grand jury for allegedly operating a fraudulent commercial loan business that bilked customers out of hundreds of thousands in loan and application fees without ever delivering the promised cash.

Ed Johnson, 59, and Gwendolyn Carol Johnson, 65, who operated Heritage Capital Credit Corporation, have each been charged with conspiracy, engaging in an illegal monetary transaction and multiple counts of mail fraud and wire fraud.

If convicted, each faces up to 20 years in prison, up to $250,000 in fines for each count and restitution to victims.

Calls to the company, whose Web site still was operating Monday afternoon, were not returned.

A message sent to the company's "contact us" e-mail address was returned by an automated program stating that the company did not respond to individual e-mails.

According to federal prosecutors, the fraud took place from February 2003 to March 2007 and also involved a company the Johnsons operated called MERL Financial Group and a Heritage subsidiary called Independent Capital Credit Corp., which lists the same 200 W. Ninth St. address in Wilmington and phone number as Heritage.

Callers to that joint phone number are greeted with an automated system that thanks you for calling "the corporate offices" without ever identifying the company.

Ed Johnson is barred by a court order from serving as an officer or director of Heritage or any publicly traded company, yet he was involved in the day-to-day operations of Heritage "and held himself out as a figure of authority within the company," according to the indictment.

In 2004, Ed Johnson was held liable in federal court and barred from participating in a public company following a conviction in a civil suit brought by the Securities and Exchange Commission for accounting fraud and insider trading related to MERL Holdings Inc.

Federal prosecutors charge in the criminal case that the Johnsons, through their companies, routinely promised customers loans knowing they didn't have the ability to fund them. Heritage would demand fees for loan-related services that either were never performed or never paid for and then would claim problems were slowing the deal, according to court papers.

One Florida customer, identified as R.B., applied for a $67 million loan through Heritage in 2004 to purchase a retirement community. R.B. paid $83,000 in fees but never received any loan money, the court papers said.

Another customer, representing a business that operated in Massachusetts and the United Kingdom identified as D.G.E., sought a $29 million loan in 2005 and paid more than $200,000 in fees, with Heritage claiming in 2006 it owed $400,000 more. The business never received any money, according to the indictment.

At the same time, according to federal prosecutors, the couple allegedly used the fees for their personal benefit, including vacations, living expenses and the purchase of unnamed "luxury items."

U.S. Attorney Colm F. Connolly said the indictment "reflects this office's commitment to hold accountable those who use Delaware as a the launching pad for their fraudulent schemes."