Posted by & filed under Accounting Principles, Advanced Accounting, All Articles, Auditing, Cost Accounting, Financial Accounting, Financial Reporting and Analysis, Financial Statement Analysis, Fraud Accounting, IFRS, Intermediate Accounting, International Accounting, Managerial Accounting, Uncategorized.

As a way of tracking the housing crisis, an NPR investigative team bought a toxic asset.  While it was filled with home loans from people across the country who borrowed more than they could afford, it also contained at least one mortgage that was a part of a $200 million mortgage fraud scheme. The house had six owners over four years and went from a sale price of $600,000 to $2,000,000 in the Florida market. Essentially, Craig Adams, a real-estate agent known in Sarasota as a guy who could make deals happen, had a group of friends and associates.  One would buy the house. Then he’d sell it to another, for a higher price. Then it would get sold again, at a price that was still higher. The sales often wouldn’t get listed publicly and Adams would set the price. Adams always represented the buyer and the seller. With each sale, someone would take out a loan that was more than big enough pay off the previous loan. The players would split the remaining cash. The last $2 million was the default point.  The banks kept handing out the loans because they were caught up in the bubble. Now the FBI is looking into more than 3,000 cases of mortgage fraud.  In Sarasota, they’re doing it with help of Craig Adams, who has gone from real estate genius to FBI informant.


1. In general terms, how would you classify this fraud scheme?

2. Could this scheme happen in today’s recessionary market?  Why or why not?

3. Research which states have the highest incidence of mortgage fraud.  What characteristics make this possible?  What are some red flags of this type of fraud?


Joffe-Walt, Chana. (2011). Inside our Toxic Asset (Continued): A $200 Million Mortgage Scheme,, March 21 (Retrievable online at