Missouri Mortgage Broker Found Guilty of Social Security Disability Fraud

KANSAS CITY, Mo. – Tammy Dickinson, United States Attorney for the Western District of Missouri, announced that an Independence, Mo., man was convicted in federal court today of a scheme to receive Social Security disability payments while running a mortgage brokerage firm that he founded in Blue Springs, Mo.

Charles Daniel Koss, 63, of Independence, was found guilty of two counts of theft of government money, one count of Social Security disability fraud, one count of mail fraud and one count of transmitting a false negotiable instrument with the intent to defraud the government.

Evidence introduced during the trial indicated that Koss fraudulently received a total of $212,768 in Social Security disability insurance payments between September 1994 and January 2010. He also fraudulently received a $250 American Recovery and Reinvestment Act payment. During that time, Koss owned and operated Embassy Mortgage in Blue Springs, a company he founded in 1994. Several witnesses during the trial confirmed that Koss worked full-time as a loan officer and ran the business; his wife did paperwork, such as paying bills and processing documents. Embassy Mortgage was involved in approximately 550 closings, nearly all of which were conducted with Koss present.

Koss, who began receiving disability payments in 1987, failed to report any change in his health condition or any income from Embassy Mortgage to the Social Security Administration. In order to qualify for and to keep receiving Social Security disability insurance benefits, a person must be so disabled that they are unable to perform substantial work. Individuals are required to report all work activity to the Social Security Administration. Koss led an active lifestyle that included bowling, golfing, horseshoes, boating, activities at his lake house and frequent visits to Ameristar Casino, where he gambled a total of $260,000 during this time.

On April 15, 2010, Koss received a billing statement from the Social Security Administration requesting repayment of the $212,768 he was overpaid as a result of his unreported work activity.  About a month later, he mailed to the Social Security Administration a document entitled “Registered Private Money Order,” a false negotiable instrument purporting to draw on a trust account purportedly held at the United States Treasury. In actuality, the account did not exist and the document was fraudulent.

Koss told federal agents in interviews during the investigation that he has studied redemption theory. Redemption theory involves bogus claims that when the United States government abandoned the gold standard in 1933, it pledged its citizens as collateral so it could borrow money. The movement also asserts that common citizens can gain access to funds in secret accounts using obscure procedures and regulations. According to the theory, the government created a fictitious person (or “straw man”) corresponding to each newborn citizen and each citizen has an alleged secret trust account with the United States Treasury. The theory also claims that through obscure procedures under the Uniform Commercial Code, a citizen can “reclaim” the “straw man” and write negotiable instruments against its accounts. Its adherents sometimes call themselves “sovereign citizens.” The “sovereign citizen” movement is a loosely organized collection of groups and individuals who have adopted anarchist ideology. Its adherents believe that virtually all existing government in the United States is illegitimate and they seek to “restore” an idealized, minimalist government that never actually existed.

Redemption theory and sovereign citizen beliefs are totally without merit and they have no basis in law or fact. Individuals often use these ideas to further various fraudulent schemes.

Following the presentation of evidence, the jury in the U.S. District Court in Kansas City, Mo., deliberated for about three and a half hours before returning the guilty verdicts to U.S. District Judge Brian C. Wimes, ending a three-day trial that began Tuesday, Feb. 19, 2013.

Under federal statutes, Koss is subject to a sentence of up to 61 years in federal prison without parole, plus a fine up to $1.1 million and an order of restitution. A sentencing hearing will be scheduled after the completion of a presentence investigation by the United States Probation Office.

This case is being prosecuted by Special Assistant U.S. Attorney Trey Alford, Assistant U.S. Attorney Daniel M. Nelson and Special Assistant U.S. Attorney Kate Hoey. It was investigated by the Social Security Administration – Office of Inspector General, the Department of the Treasury – Inspector General for Tax Administration and the U.S. Postal Inspection Service.