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Defendants sentenced in mortgage fraud scheme

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Posted: Wednesday, January 7, 2015 3:15 pm

While three people were sentenced Wednesday to federal prison for their role in a major mortgage fraud scheme in the Permian Basin, the fourth — a realtor and wife of a long-time Odessa lawyer — was given probation.

Cynthia Gayle Hirsch, an Odessa realtor, could have faced up to 24 years in federal prison before defense attorney David Zavoda argued to have the guidelines lowered by a “minimal participant” designation.

Hirsch was sentenced to five years probation, with one year to be spent on house arrest, and was ordered to pay $25,000 in damages and serve 300 hours of community service.

Stephen Mark Hilliard and Michael Duraine Cowan II were sentenced to three years in federal prison with four years of supervised release upon the completion of their prison terms. They were also both ordered to pay $1 million in damages, which Cowan paid as of Wednesday with a check.

Hilliard also was forced to forfeit several vehicles and two small water crafts.

Berta Laura McFaddin agreed in her plea deal to a sentence of one year and one day in federal prison and was ordered to pay $100,000 in damages.

McFaddin , Cowan and Hilliard were ordered to turn themselves in no later than noon on March 11 to begin their sentences.

Hirsch, McFaddin, a Midland title company officer, and Michael Duraine Cowan II and Stephen Hilliard, owners of real estate companies in Midland, were indicted in federal court in January 2014 on one count each of conspiracy to commit bank fraud and conspiracy to commit money laundering.

Cowan and Hilliard were accused of buying properties from March 2003 through August 2011 in a “same-day property flip” scheme, and then submitting to the bank false purchase documents between each others’ companies for an increased value for a loan to cover the full cost of the legitimate purchase.

McFaddin was accused in the scheme of helping create the fraudulent sale and Hirsch was accused of creating a “broker’s price opinion” to substantiate the higher price.

The scheme involved about 800 properties and $45 million in loans.

During the Wednesday proceedings, attorneys for each of the four defendants argued for Judge Robert Junell to sentence them at the lower end of federal sentencing guidelines.

Junell said he received more than 100 letters from people around the community providing character references for the four defendants.

Hirsch was the last of the four to plead guilty in the proceedings, but her attorney argued she played less of a role because she didn’t have direct contact with bankers and didn’t profit as much.

Assistant U.S. Attorney Austin Berry, who was the prosecutor in the case, argued that of the more than 24 people the government considered charging, Hirsch was considered one of the top four in the scheme.

“She did hundreds of these (broker’s price opinions) and she was a central, critical figure in this scheme,” Berry said.

Junell disagreed, however, and granted the motion to lessen the guidelines for sentencing. Junell also ordered to keep language in the sentencing report stating she took advantage of special skills to perpetuate the crime.

Though initially facing a maximum of two years in prison, by the time Junell sentenced Hirsch she was facing a maximum of one year in prison.

Hirsch, as did the rest of the defendants, spoke for the first time about the case during open court. She apologized to the court, her family and the Odessa Board or Realtors but said if she went to prison she wouldn’t be able to care for her husband.

Hirsch said her husband has almost died three times due to poor health and would most likely have to go to a nursing home or assisted living facility if she couldn’t care for him.

Zavoda also noted that her husband, Tom Hirsch, has been an established attorney in the area who has appeared in federal court as an attorney in the past.

Berry painted a different picture, however, noting that each defendant has their own personal problems that could be used as excuses to not go to prison.

However, Berry said, Cynthia Hirsch was the last of the group to plead and also has two prior theft convictions when she was 39-years-old, both of which happened within a year of each other.

Hilliard said during the proceedings that he accepts full responsibility for the crime but assured Junell that no banks lost money — and in fact, they profited by millions of dollars — through the scheme.

In pleading with the judge for leniency, Hilliard also said he’s “already been punished,” and apologized for the embarrassment to his family.

Hilliard requested to serve his time at the Big Spring federal corrections institution.

Cowan said he is sorry for his actions and wants to begin making amends, pausing during his remarks to sob briefly while thanking those who sent letters for him.

Cowan requested to be sent to the Bastrop federal corrections institution.

During her remarks, McFaddin also apologized to the court and her family.

“I hope that some day my friends and family will forgive me for the embarrassment and pain I have caused,” McFaddin said.

McFaddin requested to be sent to the Carswell medical/corrections facility.

Berry said he is satisfied with the outcome of the cases because it’s within the range the government agreed to in the plea deals.

“We wanted the sentence of imprisonment for the court to be able to send a message through a prison sentence,” Berry said. “It doesn’t matter what area of town you’re from or what your background is, if you commit a crime, you’re going to be held accountable.”

Berry also said he commends the work of the FBI agents who worked the case and the forensic accountants who helped to go through thousands of documents for the eight-year scheme.

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