The former mistress of a convicted commercial loan officer from Cumberland is fighting to keep federal authorities from seizing the house in Windham they say the married man bought her with a portion of more than $14 million he stole through bank fraud.
Cherish Burgess filed a written claim Thursday in U.S. District Court in Portland, saying that she paid back Walter Scott Fox III for the house he bought for her at 17 Critter Lane in Windham, that she paid the bills and that she has made improvements to the property.
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Burgess says in the claim that she is either the “bona fide purchaser” or has a “superior” right, title or interest in the property over Fox.
“Ms. Burgess had no inkling whatsoever of Mr. Fox’s professed criminal activity until the charges under which he pleaded guilty came to light in the fall of 2013,” wrote Burgess’ attorney, Stacey Neumann, in the five-page claim.
Fox, 56, who worked at KeyBank’s state headquarters in Portland, pleaded guilty on Feb. 4 to federal bank fraud and tax evasion. His plea surprised many who knew him.
Although his attorney, Thomas Hallett, had approached the U.S. Attorney’s Office in September of 2012 to discuss Fox’s years of theft from KeyBank, prosecutors did not charge Fox until he appeared in court to waive a grand jury proceeding and entered his guilty plea, according to court records.
When Fox reached a plea agreement with the U.S. Attorney’s Office in February, Judge D. Brock Hornby signed a forfeiture order for the house in Windham that would take effect as part of Fox’s sentence.
The judge allowed Fox to remain free on an unsecured bond of $5,000. Fox has sold his house in Cumberland and now lives in Canton, Ga., with his wife. He is scheduled to return to Maine for sentencing on June 26.
Burgess, who has been convicted on misdemeanor charges in the past, was not charged by federal authorities in Fox’s case. Her past convictions are for charges such as drunken driving in Windham in 2012 and obstructing police at the scene of a drug raid in Brewer in 2009, according to a state database and state court records.
Burgess, 26, first met Fox in December 2008. They began dating in January 2011 and broke off their affair in July 2012, Neumann wrote in Thursday’s court filing.
Fox paid about $179,900 in cash for the house, which he and Burgess found together, with the intent that she would live there with her then-only child, according to court documents.
Burgess paid Fox $5,000 as a down payment for the house and then paid him $550 per month as part of a mortgage contract. Fox discharged the mortgage in March 2012 and signed the house over to Burgess in exchange for money she had paid him to that point, Neumann wrote.
“Ms. Burgess has lived in the property for three years. She currently lives in her home with her three small children, the eldest of whom has already begun kindergarten in the town school system,” Neumann wrote. “Ms. Burgess also lives with her fiance and his terminally-ill father. Ms. Burgess serves as the caretaker not only of her small children, but also her soon-to-be father-in-law.”
Attempts to reach Neumann for further comment were unsuccessful. Burgess did not respond to a phone message.
The U.S. Attorney’s Office filed a response to Burgess’ claim late Friday afternoon, saying that even if she paid the $5,000 down payment and eight $550 mortgage payments, that’s not enough.
“(Burgess) is not a bona fide purchaser … because a mistress who pays $9,400 to acquire real property worth $179,900 in transactions that are not at arm’s length is not a bona fide purchaser for value, particularly where a victim has been defrauded of $14,000,000 and $179,900 worth of those funds were used to acquire the residence,” wrote Assistant U.S. Attorney Donald Clark.
Fox’s attorney, Hallett, said he had received Burgess’ claim but he does not intend to file a response on Fox’s behalf. “We’re not specifically taking a position one way or another,” he said.
Burgess is entitled to a hearing within 30 days.
Fox faces as much as 30 years in prison for bank fraud and as much as five years for tax evasion, as well as fines totaling as much as $19.1 million.
From 1995 until 2012, Fox originated KeyBank loans and credit lines using the identities of four people without their knowledge. One of the people named on loan papers died in 2007, and Fox wrote a memo saying the person’s son had taken over the loan, court records say.
Of the $14 million in loans and credit that Fox received, he used $5.8 million to keep the scheme going and spent the other $8.2 million on his family, his mistress and his boating business, The Boathouse.
Because Fox didn’t report that income to the Internal Revenue Service, he was charged with evading $1.3 million in taxes. That’s the amount he would have owed on the money he obtained fraudulently from 2006 to 2011, years that are not beyond the statute of limitations for tax offenses, prosecutors have said.
Fox’s scheme fell apart in 2012, when KeyBank denied an increase in one of his lines of credit – money he was counting on to keep the complex scheme going, according to the U.S. Attorney’s Office.
By that August, he was delinquent on all of the fraudulent loans, sparking the concern of a supervisor who started asking questions about his loan portfolio. Fox resigned from KeyBank the next month.
The Boathouse, on Foreside Road in Falmouth, closed last spring.
Scott Dolan can be contacted at 791-6304 or at:
Twitter: @scottddolan
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