Running in Place - Page 4
Engle hugs Brett just before his January 10, 2011, sentencing, with Kevin and Engle's wife , Pam Engle, in the background. Photo by Tamara Lackey.
A KNOCK ON THE DOOR
Engle’s troubles began in April 2009 with a knock on his door, or rather a ring of the security buzzer at the apartment complex in which he lived. The person calling was a stocky man named Robert W. Nordlander, who produced a badge identifying himself as an IRS Criminal Investigator. Nordlander informed Engle that he was under investigation for tax evasion.
According to Nordlander’s trial testimony, he had been following Engle’s career in local newspapers, and began to wonder how Engle financed running all over the world, and what Nordlander called a “lavish lifestyle.” Nordlander takes his job seriously—before the grand jury, say Richard Engle and others who attended the trial, Nordlander testified that if he sees someone driving a Ferrari who doesn’t look like he should be, he will “run” his license plate and pull his tax return.
After over 600 hours of investigation, which included examining Engle’s trash for discarded mail and other documents, recording a conversation between Engle and an undercover agent and impounding his mail (compliments of the Patriot Act), Nordlander evidently had no case for tax-code violations or failure to report income. He turned to investigating loans obtained by Engle on two properties he owned in Cape Charles, Virginia, using information obtained from the tax-evasion investigation.
“This whole sordid affair started as a tax-evasion investigation by Robert Nordlander, whom we consider to be a rogue IRS agent, but the United States government was not able to find any tax-code violations,” says a livid Richard Engle in an open letter (in which he accuses Nordlander of lying under oath) to friends, the Department of Justice and others. “They used what they called a ‘confession’ by Charlie [to the undercover agent] to start an investigation into bank fraud. The ‘confession’ was not a confession. It was a statement regarding two stated-income loans which Charlie obtained. Charlie was never advised by any lender that he was getting a stated-income loan.”
The loan trail is complex. The first property, a condo, involved a $200,000 loan against a purchase price of $250,000, on which Engle made a down payment of $50,000. Then on a refinance/cash-out transaction of $300,000 against an appraisal of $400,000, Engle netted $80,000 in equity. That property subsequently sold at foreclosure for $312,000, with no loss to the lender/investor.
The other property, a house, involved an initial loan of $444,000 and a second mortgage of $111,000. Both were “purchase money,” meaning the funds were used for the purchase of the subject real estate. The purchase was made possible by proceeds coming out of another property, which Engle had owned for seven years, known as a 1031 exchange, and in which he netted equity of $66,000. After Engle eventually defaulted on that loan, the property sold in foreclosure for $292,000, generating a “loss” to the lender (Countrywide Mortgage) of approximately $262,000. So, in total, Engle netted about $146,000 in equity on his investments.
Nordlander and the Department of Justice claim that Engle had created a scheme to defraud the banks, and had overstated his income on the loan applications. Richard Engle, however, says Charlie was never asked to provide income information and readily complied with lenders’ requests to provide employer information, i.e. IRS Form 4506, which gave them permission to access his tax returns.
Jack Fierstadt, the ultrarunner who met Engle in the Gobi Desert, is a senior partner at a firm that deals in real estate and business litigation. Over the last several years, Fierstadt has represented numerous clients who were subject to predatory practices by some of the biggest lenders in the country. Many of the firm’s cases involve wrongful foreclosure issues related to fraudulent lending.
“The loans on the two properties were clearly of a predatory nature and were known as SIVA—stated-income/verified-assets—loans,” says Fierstadt, who says they are also called “liar’s loans.”
“Following the collapse of the real-estate market these loans were literally outlawed,” he says. When Engle’s interest rates climbed to over nine or 10 percent, he could no longer make the payments.
Fierstadt comments: “I have never heard of anyone being prosecuted by the federal government because they had no other choice but to let their property go into foreclosure. I know lenders, mortgage brokers, appraisers and other real-estate professionals who have been charged with crimes arising out of their practices but never a borrower.”
Richard Engle and Fierstadt also say the banks that foreclosed on Engle’s properties never complained to anyone about these properties being lost to foreclosure, because they made thousands of dollars in junk fees and high interest rates. In addition, following the foreclosure the lenders repossessed the properties. Engle’s loan broker, John Hellman, who was very active in the area at the time, has since pled guilty to various felonies related to his loan practices.
The most contentious part of the case boils down to what Engle was actually convicted of—not tax evasion, not the acts of defaulting on the two loans, but rather the alleged information he originally provided to lenders to acquire the loans, as relayed via fax and mail. (The lenders were: for the condo, Shore Bank, underwriter Decision One, a subsidiary of HSBC; for the house refinance, Priority Financial, underwriter Impac Funding, a division of Countrywide Mortgage.) Did Engle falsify his income on the loan apps?
Engle’s legal team contends that he did not. In fact, they say, the government’s own handwriting expert testified that initials on the applications “were probably made by someone other than Engle,” and that the loan signature might or might not have been Engle’s.
Asked whether he is guilty of the charges for which he was convicted, Engle says, “I absolutely did not falsify income information or any other information on these two loan applications. I did default on the properties, when the real-estate market tanked in late 2006, just as a few million other people have done. And it is estimated that more than half of the 13 million people with stated-income loans have incorrect income figures on their loan apps, either written by them or by the mortgage brokers or the mortgage banker.” He says he followed the instructions of the two mortgage brokers and “signed where they told me to sign.”
Continues Engle, “To my knowledge, I am still the only borrower in the United States who has been charged as a ‘sole conspirator’ in a mortgage fraud. ... In fact, I was found not guilty of falsifying information yet still found guilty of bank fraud. The prosecution convinced the jury that I was guilty of something but they weren’t sure what.”
Chris Justice, 40, of Greensboro, another running friend of Engle’s, who has acted as his attorney in the past (not in the case at hand) and who spoke as a character witness at Engle’s sentencing, says, “It is shocking that this case was prosecuted to begin with. There is so much blame to spread around. So many people who did the exact same thing and facilitated the same acts for others won’t ever see the inside of a jail cell.”
In the end, the case presented by United States Attorney/Prosecutor Joe Kosky and the Department of Justice convinced a jury to convict Engle of the 12 fraud counts, with sentencing scheduled for January 10, 2011.
THE MAIN EVENT
The night before the “Main Event”—Engle’s sentencing in federal court—the atmosphere at his residence is that of almost any cozy potluck. Daniels has brought chili, and eight or so other friends and family members sit on the living-room couches, while the Packers-Eagles NFL playoff game provides background noise. Engle sits in the middle, computer on his lap, allegedly writing his sentencing statement amid the banter, with his arm around his son Kevin. Behind him sits Pam Engle, stroking Kevin’s shaggy hair.
Pace and Engle trade pre-sobriety stories, still powerful motivators all these years later. Pace tells one about passing out in his car in front of a Denny’s restaurant with his headlights shining directly into the windows. The blinded patrons happened to be cops, who knew Pace well from numerous previous encounters and gave him a ride home.
“That’s a good one,” says Engle. “I’ve never heard that one.” Engle counters with another of his own, about another stint in Denver, getting busted for driving 110 miles per hour and DUI.
“You’re lucky to be alive,” says Daniels.
“Destiny,” says Pam Engle.
After a big play in the game, Daniels comments that the Eagles quarterback Michael Vick, convicted of animal-cruelty charges related to dog fighting, has really turned his life around.
“He’s doggedly pursuing a title,” Engles chimes in immediately, to groans.
“Hey, he’s had it ‘ruff,’” is Engle’s retort.
“That’s Charlie,” says Daniels, rolling her eyes.
“OK, I’ll ‘paws.’”
The next afternoon, the atmosphere in the United States District Court, Eastern District of Virginia, in Norfolk, however, is somber, with low murmurs and tense faces as about 50 of Engle’s friends and family, including Kevin and Brett, enter the courtroom, filling its long benches. I have seen many of the faces at the 10-miler yesterday.
All rise as Federal Judge Jerome B. Friedman enters the room. “In most cases, I’ll receive two or three letters in support of the defendant,” says Friedman. “In this case I received 120.”
The three-hour proceedings are like a mini-trial, with several witnesses taking the stand, as does Nordlander, and each side giving closing statements.
Claiming a loss to banks of $404,000, Prosecutor Kosksy pushes for a sentence of between four and five years in prison. He maintains that Engle chose the path of being an ultramarathoner and because he was not able to support himself, left the “banks holding the bag,” calling the alleged crimes a “significant offense, a serious offense.”
Engle’s were “not the actions of an honest and forthright person,” says Kosky, “but rather the actions of a fraudster. … The defendant lies when it suits him to get what he wants out of life.”
Paul Sun, Engle’s attorney, pleads with the judge to consider the conviction “an aberration to what Engle really is,” and seeking an “active probation” in which Engle would conduct work for charitable causes.
Engle himself is then called to the podium to read his statement, in which he pleads similarly for leniency. “I have a reputation for turning negatives into positives,” he says. “I have absolutely no doubt I will make the best of this.”
While the judge praises Engle’s eloquence, he says, “Mr. Engle has to be punished for what he did. I believe he knew what he was doing was wrong.”
Citing several mitigating circumstances, though, including Engle’s positive role modeling for substance abusers, work for H20 Africa and other charitable causes and how his absence could negatively affect his sons, Judge Friedman strays from the sentencing guidelines—a very rare occurrence, as Justice later says—which Friedman lowers from Kosky’s recommendation to 37 to 46 months based upon Friedman’s final assessment of the loss to lenders. The sentence: serve 21 months in federal prison, pay restitution to Bank of America of $262,500 and complete 100 hours of community service.
As friends gather outside on the courthouse stairs (after being kicked out of the lobby for being too noisy), discussing the verdict, out pops Engle, dapper in his navy-blue suit and a tie, beaming his white smile. He cracks, “I’ll bet you’re all wondering why I’m here.”
Charlie Engle’s blog is at www.charlieengle.com; it containswritings about his life and, now, his prison experiences.
You can read Richard Engle’s assessment of the case on Norma Bastidas’ blog
Visit www.runningthesahara.com for more about the Sahara expedition and H20 Africa.
Michael Benge is the Editor of Trail Runner.
POSTSCRIPT: On February 14, 2011, Charlie Engle began serving his 21-month sentence at the medium-security Beckley Federal Correctional Institution in Beaver, West Virginia. Contacted in the facility, Engle comments that Beckley is “an awful place, but I’m making friends, adjusting.” Posted by friends to his Facebook page, he relays:
> “Day 15—Beckley Prison—5 times per day I must stand next to my bed to be counted. No excuses. Miss the count, go to the hole.”
> “Good news, I am
flossing every day.”
> “Working out every day. No real weights here, so we lift anything not bolted down. Bleachers, rocks, lockers, pingpong table, logs. Necessity = Invention.”
> Another post: “I did heavy curls today using a mesh laundry bag and a giant bag of water and a broomstick stuck thru the mesh. Also walked 10 miles in steel-toed boots. Excellent workout!”
> “Day 15—Beckley Prison—I am in prison, completely deprived of free will physically but I will remain free mentally. Some people think I should be miserable but that is up to me. I choose to be positive.”