U.S. District Judge Thomas E. Johnston sentenced Michael Hurd, 37, of Salt Lake City, to 27 months in prison on charges of conspiracy to commit wire fraud and bank fraud for acting as a middleman in a "flipping" scheme involving several homes in the Stonegate subdivision of Hurricane.

"Moving forward, I understand the price that my family's been through," Hurd said during Friday's hearing, at times pausing to wipe tears from his eyes. "The cost has been high to us, but it's nothing compared to the remorse I feel."

Hurd originally faced up to 60 years in prison for his involvement in the Stonegate scheme, along with a similar scheme in Modesto, Calif., which sapped about $5.5 million from lenders there.

Johnston, however, noting representations from prosecutors that they would have been unable to pursue the case against several of his co-conspirators had Hurd refused to cooperate, agreed to the vast reduction in the sentence.

"It's this sort of criminal activity that contributed to the financial collapse from which our country still suffers," Johnston said, later noting that, although Hurd helped investigators a great deal, he still intended to give him prison time to deter other potential fraudsters. "I don't think that [cooperation] changes the fact and scope of the criminal activity you were involved in."

In the mid-2000s, Hurd, attempting to cash in on the burgeoning real estate market, invented a "mousetrap" to circumvent lending rules and restrictions. His objective was to purchase a property and immediately resell it at a higher price for a quick profit without risking his own money, U.S. Attorney Thomas C. Ryan said in a sentencing memorandum filed in Hurd's case.

Hurd created a program called the Gift Program, which he marketed as a "seller-funded down payment assistance program," and used as a conduit to mislead banks into believing that his buyers were funding their own down payments on their loans, according to the memorandum.

"In reality, the lenders were not only funding their own down payment, but were providing the buyers the initial cash to make mortgage payments," Ryan said. "Michael Hurd thought he had the perfect mousetrap."

In 2006, Hurd, with the help of Putnam County real estate developers Todd and Deborah Joyce and Raymond P. Morris, the reported ringleader of the operation, flipped several properties using the Gift Program.

Deborah Joyce would approach a homeowner and offer to sell their home at or above the fair market price without having to list the home on the market. Once the seller agreed, Joyce would then secure a falsely inflated appraisal for the home, which Morris would then float to members of his real estate investor group in Utah, promising that the home would resell for an even higher price.

Morris would negotiate a price for the home with one of his unwitting investors, but would conceal the initial sale. The buyer then would quickly default on the mortgage, ultimately leaving the bank that funded the loans with the loss, according to the memorandum.

Last year, after federal agents confronted Hurd, he hired a lawyer and immediately decided to help the government build a case against Morris, according to the memorandum.

Without Hurd's testimony, prosecutors most likely would have been without direct evidence to link Morris to the conspiracy to shield the role of the Gift Program from the lenders, Ryan said in the memorandum.

Hurd's cooperation also helped investigators implicate Morris in the separate scheme in Modesto, which the two carried out in a similar manner. Morris has since pleaded guilty to his role in both schemes.

"Not only did Hurd's guilty plea avoid the cost of trials in two separate jurisdictions for his own conduct, but also saved the government the cost of two lengthy trials to prosecute Morris for the role in the cross-continental fraud scheme," Ryan said.

Finally, Hurd also volunteered information in a "cash-leasing" Ponzi scheme Morris operated in Utah that bilked $60 million from investors who bought unregistered promissory notes from Morris on the promise that their investments would yield towering interest rates.

Hurd identified key witnesses and documents in the case and saved agents the effort of sifting through thousands of pages of documents, essentially facilitating Morris' guilty plea on money-laundering charges connected to the Ponzi operation.

"His quick decision to cooperate brought successful resolution to three complex white-collar criminal investigations that had, to the point of his cooperation, taken years to develop," Ryan said.

Hurd will serve an additional five years of parole when he is released from federal prison. He will be required to pay back nearly $4 million in restitution at minimum payments of $400 a month.

Morris faces up to 30 years in prison when he is sentenced on Oct. 29.

Reach Zac Taylor at zachary.tay...@wvgazette.com or 304-348-5189.