MISSOULA – Two former western Montana men have been sentenced to federal prison and ordered to pay more than $1 million for operating a loan brokering firm that prosecutors said turned into a Ponzi scheme when the real estate market collapsed.
Former Polson resident Keith Kovick, 61, was sentenced Thursday to 2 ½ years in prison during a hearing before U.S. District Judge Donald Molloy. Robert Congdon, also 61 and a former Polson resident, was sentenced to two years. Both were held responsible for nearly $1.2 million in restitution.
Prosecutors have said Kovick and Congdon illegally arranged loans, as they were not properly registered with the state. Both men pleaded guilty this year to mail fraud, wire fraud and money laundering.
Prosecutors said they incorporated their business, Cornerstone Financial Inc., in May 2000 and began brokering loans for borrowers who wanted to purchase investment property but could not obtain standard bank loans.
Cornerstone received a 10 percent commission for placing borrowers with investors, prosecutors said.
Congdon told the Missoulian in 2009 that borrowers and lenders were happy with the work up through 2006 and even into 2007.
Cornerstone also was to hold the first year’s interest payments in escrow, but prosecutors said they used the funds to operate Cornerstone, repay earlier investors’ interest payments and for personal expenses.
The company collapsed in 2008. Prosecutors said Kovick and Congdon began to pledge their assets and Cornerstone assets to secure investor money and misrepresented the available equity in the property used to secure the loans.
By November 2008, they were no longer able to make interest payments.