United States Federal Courthouse Los Angeles. Photo by John Schreiber.
United States Federal Courthouse Los Angeles. Photo by John Schreiber.

A federal judge on Thursday acquitted three brothers — all Los Angeles County sheriff’s deputies — charged with mortgage fraud after ruling that the government had not proven its case.

Billy, Benny and Johnny Khounthavong were charged with conspiracy to make false statements to two banks in connection with an alleged “buy-and- bail” mortgage fraud scheme, and had faced the possibility of multi-year federal prison terms if found guilty.

Immediately after the government concluded its case Wednesday, defense attorneys moved for acquittal, arguing that prosecutors had not proven that a crime had been committed.

U.S. District Judge Manuel Real today granted the motion, ending the trial.

“We are enormously grateful,” defense attorney Adam Braun told City News Service. “The judge found no evidence of criminal intent, and that the banks had not been harmed in any way.”

Federal prosecutors — who announced the Khounthavong indictment in December 2013 as part of a widespread investigation of the Sheriff’s Department that resulted in the arrests of 18 deputies on corruption charges — were blindsided by Real’s ruling.

“We disagree with today’s ruling that ended this case, but we respectfully accept the court’s decision,” said Thom Mrozek, spokesman for the U.S. Attorney’s Office in Los Angeles.

The 10-count indictment alleged that the Khounthavong brothers lied to Flagstar Bank in order to purchase a 3,900-square-foot home in Corona.

Prosecutors also argued that the Khounthavongs made false statements to Bank of America regarding another large house they owned in Chino. The deputies walked away from — or “bailed” on — the second home, in which they were “under water,” meaning they owed substantially more than the house was worth, according to the indictment.

As a result of the alleged scheme, the brothers dodged more than $340,000 of unpaid mortgage debt, the prosecution argued.

The Khounthavong brothers — two of whom were assigned to LASD jail facilities — were placed on leave from the department last year.

“This is a wonderful result — the brothers didn’t defraud anyone,” defense attorney Dominic Cantalupo told CNS. “Judge Real stood up to the government. He saw through their case and we are all very pleased.”

On the first day of trial last week, a Flagstar underwriter testified that in loan applications to purchase the Corona home, the brothers withheld information that they were a party to a lawsuit over the Chino house.

Seven ex-deputies were convicted of corruption charges last year and sentenced to federal prison terms ranging from 1 1/2 years to almost 3 1/2 years.

City News Service

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