Joseph Hal Kinlaw, Jr, 64, of Bald Head Island, North Carolina, was sentenced to 17 years in prison for Bank Fraud. Kinlaw was also ordered to serve 3 years of supervised release following imprisonment, and to pay $23,796,372 in restitution to the victims of his offense.
Based upon the Criminal Information and evidence available at the time of Kinlaw’s sentencing, Kinlaw was a licensed North Carolina attorney who operated various alleged real estate investment and development entities on behalf of investors in the Hubert area of Onslow County. Kinlaw used the entities to obtain real estate development loans from Branch Banking and Trust (BB&T), and First Citizens Bank. BB&T and First Citizen Bank extended loans to these entities under the auspices that the entities would be engaged in the development of residential real estate in various subdivisions in the area of Camp Lejeune in Onslow County.
Between 2004 and April of 2003, Kinlaw used the real estate development entities to defraud BB&T and First Citizens Bank by falsifying legal descriptions of the loan collateral, and by falsifying release of the collateral for other real estate investment activities and loans. By fraudulently releasing the banks’ collateral before the banks’ loans had been satisfied, Kinlaw was able, in several instances, to convey the collateral to third parties for value and continue the scheme.
The perpetuate the scheme and prevent its discovery, Kinlaw also used outside funds, that is, funds unrelated to the real estate development activity that was subject of each loan, to make ongoing loan interest payments to BB&T and First Citizens Bank. In some cases, Kinlaw used loan proceeds on one transaction to make loan interest payments on another transaction. In other instances, Kinlaw fraudulently extracted funds from other investors and their business interests to make payments on the loans. Numerous victims spoke at the sentencing concerning how Kinlaw had harmed them.
Ultimately, banks stopped loaning money to Kinlaw and his related companies and investors. As a result, the existing loans went into default. Because Kinlaw had substituted false legal descriptions of bank collateral, and fraudulently conveyed bank collateral, BB&T and First Citizens Bank were unable to capture their loan losses in foreclosure. Various title insurance companies and investors also lost substantial funds due to the scheme. While the exact amount of the loss remains the subject of investigation, losses are presently anticipated to exceed $18 Million.