Thirteen Defendants Charged in $19 Million Bank Fraud
Cases Relate to the Collapse of Desert Sun Development in Bend, Oregon
EUGENE, OR—A federal grand jury sitting in Eugene, Oregon, yesterday returned
indictments against thirteen individuals on a variety of mortgage and loan fraud charges arising
out of the collapse of Desert Sun Development (DSD), a company previously headquartered in
Bend, Oregon. From 2004 through 2008, DSD built commercial buildings and residential
housing throughout Central Oregon. According to the indictments, DSD principals and other
defendants caused financial institutions to lose more than $19 million. In total, five separate
indictments were returned. Arraignments of all defendants are scheduled for December 16,
2009, before the Honorable Magistrate Judge Thomas Coffin in Eugene.
“These indictments represent a significant step in the government’s efforts to detect and
prosecute mortgage fraud,” said Acting U.S. Attorney Kent S. Robinson. “The conduct alleged
in these indictments is typical of what has caused so much havoc in the mortgage and financial
sectors. We will continue to seek charges whenever developers, businessmen, bankers, or loan
officers are alleged to have made false statements to financial institutions.” Robinson thanked
the Federal Bureau of Investigation, the Internal Revenue Service, and the State of Oregon,
Division of Finance and Corporate Securities, for their combined investigative efforts.
The first indictment charges three DSD principals (Tyler Fitzsimons, 31, of Prineville;
Shannon Egeland, 35, of La Grande; and Jeremy Kendall, 33, of Redmond); and a Bend
businessman (John Partin, 65) with conspiracy, bank fraud, making false loan applications to
banks, and money laundering, focusing on commercial construction projects. In total, it is
alleged that various lending institutions loaned in excess of $25 million to DSD for its
commercial construction projects, and suffered a loss of more than $9 million. The indictment
alleges that the defendants sought construction financing for five commercial buildings in Bend
and Redmond, Oregon which were never built. As part of the scheme, the defendants are alleged
to have made representations that construction was underway, when it was not. John Partin,
owner of Advance Steel in Bend, is alleged to have issued false invoices for steel building kits
for the non-existent buildings. The indictment also seeks forfeiture of a Ferrari, two Viper
automobiles, and other assets related to the fraud and money laundering allegations.
In a separate indictment, Robert Brink, 58 of Junction City, is charged with making false
statements to Umpqua Bank regarding DSD’s construction loans. Brink was a construction loan
officer at Umpqua Bank. The indictment alleges that on five separate occasions he filed inspection reports with Umpqua Bank certifying that construction was underway on DSD
projects, when in fact it was not.
A third indictment charges conspiracy, bank fraud, and false statements to banks in
connection with DSD’s residential real estate investment program. The defendants in that
indictment include Fitzsimons, Egeland, Kendall, a fourth DSD employee (Garret Towne, 29, of
Culver, Oregon), as well as two mortgage brokers (Shaun Little, 41, of Bend; and Del Barber,
Jr., 44, of Bend), a bank loan officer (Jeffrey Sprague, 46, of Bend), a loan processor (Barbara
Hotchkiss, 40, of Redmond), and a building materials supplier (Kevin Palotay, 46, of Bend).
The indictment alleges that defendants schemed to provide false statements to financial
institutions to finance the purchase or construction of residential properties. The allegations
include that defendants inflated applicant’s income and temporarily parked DSD funds in the
applicant’s accounts to obtain false proof that the borrowers had independent funds available to
them. The two mortgage brokers, loan officer and loan processor are alleged to have assisted in
preparing and approving false loan applications, causing them to be sent to financial institutions.
Finally, Palotay is alleged to have provided a false invoice to create the false appearance that
DSD had purchased construction materials.
In a separate indictment, Teresa Ausbrooks, 47, of Bend, is charged with bank fraud. She
is alleged to have made false statements relating to her income and debts in an application to
finance DSD’s construction of a house for her.
In the final indictment, Michael Wilson, 58, of Murrells Inlet, South Carolina, is charged
with bank fraud. Wilson is alleged to have been DSD’s residential construction superintendent.
The indictment alleges that DSD president Tyler Fitzsimons agreed to sell Wilson a $500,000
home built by DSD. The indictment alleges that, to qualify for the loan to purchase this
property, Wilson made false statements about his income and assets.
“The economic hit that a community like Bend takes in a case like this one is very real,"
said Arthur Balizan, Special Agent in Charge of the FBI in Oregon. "When a development
company collapses under the pressure of fraud - as is alleged in this case - we are left with
millions of dollars in losses, empty lots and abandoned buildings. Everyone loses.”
"The impact from the types of crimes alleged in these indictments cannot be overstated,”
said Kenneth J. Hines, the IRS Special Agent in Charge of the Pacific Northwest. "Similar
conduct surely played a role in shaking the confidence in our financial system last
year. Identifying and exposing those who enrich themselves through criminal means is a duty
we wholeheartedly accept as federal law enforcement officers. "
An indictment is only an allegation of a crime, and all defendants should be presumed
innocent until proven guilty.
This case is being prosecuted by Assistant U.S. Attorney Scott Bradford.
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