Background on the Alvin Clay story can be found here.
Alvin Clay just dropped me off at my motel room. He’s feeling strong and his spirits are high. “I’m not going to quit, even if they convict me,” he said as I shook his hand in farewell. “They’ve taken five years of my life and they need to pay for that.””I’ll be fighting with you,” I assured him.
Today was document day at the federal courthouse in Little Rock. Six well-groomed white women in business suits and high heels took the stand; they were all associated with firms from California, Kansas City, Missouri, and Little Rock that lent money to Ray Nealy’s clients.
“What would you do if you knew that an applicant was giving you fraudulent information?” the government repeatedly asked.
“We wouldn’t make the loan,” the bean-counters replied.
The prosecution was trying to show that Ray Nealy and Donny McCuien had faxed in fraudulent loan applications. That doesn’t take much effort; the fraud is obvious and blatant.
Just one problem: when all the puzzle pieces are painstakingly assembled they don’t look like Alvin Clay; they look like Ray Nealy.
“Did Alvin Clay send you any documents?” defense attorneys asked the well-groomed white women in high heels.
“No, sir, he didn’t” came the inevitable reply.
“And these were as-is loans, weren’t they?” defense counsel would ask.
“So, your approval of the applications was not tied to Alvin Clay’s rehab work in any way?”
“No, sir,” the women replied dutifully, “that had absolutely no bearing on our decision to release funds.”
This was bad news for the government. Clay is charged with faxing fraudulent loan applications to lenders. But Clay didn’t meet the buyers or the sellers, and he played no role in arranging financing or filling out the applications.
The jury didn’t learn much about Clay, but, as the testimony unfolded, document by dreary document, they witnessed a workshop on America’s mortgage mess.
The loans offered to Ray Nealy’s clients were “stated income” mortgages. In theory, these loans are for folks who want to maintain their privacy or for affluent folks who have trouble documenting income. In reality, these financial instruments were aggressively marketed to people with shaky credit, low incomes and no collateral. It was time for the lending industry to boldly go where no lender had gone before.
“Was there an assumption by these companies that this was an invitation to fraud?” attorney George Hairston asked one well-groomed white woman.
She shook her head vigorously. “The assumption was that people were going to be honest with one another,” she said. “We certainly didn’t want people to commit fraud with us.”
That is true. Lenders simply discounted their shaky stated income loans and passed them on to the highest bidder. With interest rates two or three points above market norms, lenders could afford to take a small loss.
It was also disclosed that Ray Nealy was tying his customers to variable rate mortgages that start at 8.5% and balloon to a much higher rate after two years.
All of this explains why seventeen of the nation’s largest lenders are currently being investigated for fraud. These companies didn’t just beg clients to defraud them; most of the hanky-panky was internal.
“This is a case in which everybody is scamming everybody else,” Hairston told me in his Morgan Freeman baritone. “Ironically, the only innocent dupe happens to be my client.”
Before the parade of well-groomed white women began, the government spent a couple of hours painting Alvin Clay as a liar and a cheat. In 2001, Clay and a friend named Pat Joyner started a non-profit 501 (c) 3 organization dedicated to making decrepit homes habitable for low-income renters. Clay lined up a couple of handy men to work with him, but first he needed a Contractor’s License.
Although he scored 94% on the written test, Alvin had no actual experience. He was informed that, if he applied as a corporation, he could enter the experience of employees on his application as his own.
But Alvin’s company didn’t have any employees-not yet. So he decided to use the experience of two men whom he planned to hire. This was stretching the rules to the breaking point, but the regulations were so elastic that it is hard to say if he stepped over the line. His questionable tactic left him legally vulnerable when he and Joyner had a falling out and he was unable to follow through with his plan to hire workers for Clay Construction.
In 2007, FBI agent Rodney Hayes told a grand jury that Clay had forged the signatures of three people on his contractor’s application. Was he lying, telling the truth, or is Hayes living in a magic kingdom where terms like “true” and “false” don’t apply?
Asked if she had signed her name as a reference on Clay’s contractor’s license, Joyner looked like a deer caught in the headlights. She said that a friend named Earl Jones did the work ascribed to Clay Construction on Alvin’s application.
Asked if she had attributed the work to Clay construction, Joyner hesitated before answering. “I don’t remember doing that?” she said.
“Is this your signature?” the government asked.
“No, it’s not,” she said.
The witness was passed to Ron Davis, one of Clay’s attorneys.
“This is your signature, isn’t it?” Davis asked.
Joyner paused. “Yes,” she said at last.
“And didn’t we have a conversation just yesterday in the hall outside this courtroom in which you told me that when agent Hayes interviewed you, you told him you signed Alvin’s application?”
“Yes,” she said, a look of silent terror spreading across her face.
Slowly, the story about the non-profit organization came out. An architect had even been hired. Alvin Clay fully intended to work as a contractor.
“Unified CDC [the name of the company] was intended to do legitimate real estate transactions, was it not?” Davis asked.
Joyner admitted it was so.
Next it was time for Earl Jones, a retired AT&T shipping clerk who did handy man work on the side, to testify. Questioned by the government, he insisted that he had never signed Clay’s application.
Seconds later, Ron Davis had Jones admitting that he had agreed to serve as a reference for Clay and that a signature on his application was a necessary part of that process. “You had no problem having Clay use your name on the document,” Davis said.
“No,” Jones admitted.
Then Allan Nelson was on the stand. “You said your son could use your name as a reference,” Davis told Nelson.
Nelson acknowledged that it was true. After a good deal of back-and-forth, it became clear that Allan Nelson had allowed his son Kristian to sign his name. There is nothing illegal about that, Davis pointed out. It’s isn’t forgery unless your name is signed without your knowledge or consent.
Absolute power doesn’t buy you the truth; it buys you what you want to hear. Water-boarding victims don’t tell dark secrets; they say whatever will make the torture stop.
Joyner, Jones and Nelson are no different.
Like the fearsome eagle on the Great Seal; federal officials come with one hand bristling with arrows and the other hand extending an olive branch. “Which will it be?” they ask, “the arrows or the olive branch?”
Joyner, Jones and Nelson didn’t want to go to prison over a simple signature; so they told agent Hayes what he wanted to hear. FBI agents, CIA operatives and federal prosecutors are very good at getting people to say the right words; they aren’t much good at getting the truth.
One of the well-groomed white women in high heels said she became unemployed when her subprime mortgage firm declared bankruptcy. The day came when no one would buy their worthless loans at any price.
The implied message had been simple: “Tell us what we want to hear. Please! Say you’re drowning in cash; that you’re hauling down 100K a year; that your credit’s rock solid, and we’ll give you all the money you want.”
Agents of the federal government have worked the same scam on the weak, fearful people associated with the Clay case.
If you really want to see the arrows and the olive branch in action, stay tuned for the testimony of Donny McCuien, that man Alvin Clay paid $80,000 to rehab Ray Nealy’s houses.