BILOXI — A Coast attorney has pleaded guilty covering up evidence connected to a scheme to defraud two banks and the U.S. Bankruptcy Court.
The government says in a news release that it is seeking restitution on behalf of the victims in the amount of $7.7 million.
Stephen Richard Colson entered the plea in U.S. District Court in Gulfport. His sentencing is pending.
Federal prosecutors say Colson was a settlement agent and closing attorney. He also owned Prestige Title Inc. and Advanced Title and Escrow, both headquartered in Biloxi, with 18 office locations in Mississippi, Alabama, Florida, Georgia, Louisiana and Texas.
These companies handled loan closings for new mortgages and the refinancing of existing mortgages.
In addition, Colson served as escrow agent for several condominium developments on the Mississippi Gulf Coast. As settlement agent on loan closings, Colson was required to establish trust accounts from which to disburse funds exclusively for activities related to each individual loan. These trust funds were not to be commingled with other personal or business accounts.
An indictment alleged Colson diverted funds from trust accounts for his own personal use and concealed shortfalls in those accounts by co-mingling funds from other accounts when making payments to financial institutions.
Federal prosecutors said the count to which Colson pleaded guilty was part of a larger scheme wherein Colson, through his title businesses, used funds generated in new real estate closings to pay off earlier closings. The larger scheme was discovered following the acquisition of a title insurance company for which Colson served as agent, by a successor company.
In 2009, the successor title insurance company initiated an audit of Colson’s business records on and discovered that Colson’s title companies had a shortage in funds for settlement of real estate closings.
The successor title insurance company was forced to pay 54 claims from lenders, borrowers, and sellers and later won a $4.9 million judgment against Colson.
In a separate proceeding, the Bankruptcy Court denied Colson’s attempt to discharge a private investor’s $2 million claim.