An Atlanta business owner was sentenced to three years in prisonlast week for running a home equity loan fraud scheme that led tolosses of nearly $3 million for the $82 billion Navy Federal Credit Union.

U. S. District Judge Claude M. Hilton also ordered Thomas ScottBrown, 47, to pay $2.7 million in restitution and to serve fiveyears of supervised released following his prison term. He pleadedguilty in May to one felony count of bank fraud and one felonycount to making a false statement to a financial institution.

Federal prosecutors said Brown ran an investment propertiescompany in Macon, Ga.

Starting in June 2006 Brown purchased properties for buyers withhis own money, used a law firm that specialized in real estatetransactions to transfer ownership to the buyers and claimed theypaid him in full for the properties. However, the properties,some of them foreclosed, were still owned by Brown, prosecutorssaid in court documents.

He then directed buyers to apply for home equity loans with theVienna,Va.-based Navy Federal Credit Union. In some instances,these individuals were not members. To consistently abuse thecredit union's loan process, Brown instructed buyers to falsifyinformation to become members. He also told buyers to fraudulentlymisrepresent to NFCU that they purchased and owned the properties free of anyliens.

The credit union approved these loans, based on therepresentations of the buyers and the false statements contained inthe paperwork, which Brown and the buyers signed.

Brown then directed buyers to use money from the approved homeequity loans to repay him. He exercised more control over thescheme by telling buyers what specific amounts to give him, as wellas when these payments should be made, according toprosecutors.

Brown used this process on more than 50 properties and pocketedprofits of $1.4 million generated from the difference he paid forthe properties and what he charged the buyers from their homeequity loan disbursements.

NFCU, however, did not receive repayments on these home equityloans. Instead, after the loans were distributed to the fakebuyers, fifty-one properties fell into foreclosure, causing thecredit union more than $2.7 million in losses.