Sale of the Century

MATTHEW COX WAS THE WORLD S GREATEST BEAL ESTATE FRAUDSTER—UNTIL THE

BUBBLE BUBST. WITH THE LAW ON HIS TAIL, NO MATTEB HOW MUCH PLASTIC SUBGEBY

HE HAB TO HIBE HIS IBENTITY, HE COULON'T ESCAPE HIS OWN FACE IN THE MIBBOB

Matthew Cox always wanted to make his father proud, but he didn't think it would land him on the top of the Secret Service's most wanted list. His scam was real estate fraud, and he was the best.

For five years during the peak of the housing boom, he crisscrossed

the southern United States, hustling home owners and banks for as much as $26 million—with the help of a revolv­ing cast of female accomplices.

Weaned on heist films, he went to cinematic lengths to succeed, becoming

a master forger, assuming dozens of identities and spending tens of thou­sands of dollars on plastic surgery to alter his appearance. It's one of the cra­ziest crime sprees in recent memory. It

also offers new insight into the mortgage cri­sis from which we're

still reeling. Cox surfed the tidal wave of greed in the housing industry right up until it crashed, helping lead America into one of its worst recessions ever. He epitomized just how reckless lending practices were (continued on page 124)

SALE OF THE CENTURY

(continued from page 74) over the past decade. For everything we hear about the bad loans that Wall Street-ers peddled, this one horny young con artist in Florida had them beat. "I'm going on 20 years as a federal public defender," said his attorney Mildred Dunn, "and I don't know that I've ever seen anyone quite as imagi­native as him."

Despite Cox's ingenuity, this globe­trotting fugitive failed to take one thing into account: that he would end up in prison. That's where I found him one sweltering afternoon last summer, sitting in a bare con­crete courtyard at the federal correctional institution in Coleman, Florida. A short, clean-cut 43-year-old with spiky brown hair, green eyes and a graying soul patch, Cox stood out from the tattooed prisoners mill­ing nearby. "It's depressing," he told me as he glanced furtively around. "This is not a good environment."

For the next 21 years, however, it's his, and I had come to get the first full account of his inside story. How did a dyslexic kid from Florida become one of the greatest swindlers of our time?

If you ask Cox, he'll give you two answers. Told by his father that he'd never amount to anything, he had an insatiable need to prove himself. And as he discovered, he had just the power he needed to do so: an ability to look at a system and artfully exploit its flaws. As he told me, "I see something, and I just see the holes in it."

Cox first saw holes every time he picked up a book. Dyslexic, he hated the fact that he couldn't read like other kids. To make matters worse, he was put in a special pro­gram where some of his classmates had Down syndrome, which compounded his insecurities. A teacher told him he'd never graduate from high school. "That almost made him more determined," recalled his mother, Margaret.

Ashamed of his condition, Cox became an expert actor. To avoid the embarrassment of not being able to read a menu quickly, he realized he could just order chicken all the time and go unnoticed. It was a key insight for the future con artist. "You come up with ways around things," he recalled. "It's diversion." Cox's dad, an insurance agency manager and alcoholic, was less than sympathetic. "You grow up being called a loser and 'you stupid nothing,'" Cox told me with a grimace. "The only way to fix all your problems is with money."

Despite his troubles, Cox grew to be charming and ambitious, a people pleaser with a taste for fast cars, sexy women and fine art. To compensate for his diminutive frame, he began obsessively working out. He also taught himself to paint. Although he graduated summa cum laude from the fine arts program at the University of South Flor­ida, his dad told him the best he'd do was to become a caricaturist at Disney World.

Determined to prove his father wrong, Cox set out to look for a future. His girl­friend, who worked in the mortgage

industry, suggested he take a job as a broker. Despite the recent dot-com crash on Wall Street, a housing bubble was beginning to grow—particularly in Florida, where aging boomers were eager to retire. Cox saw an opportunity to join the 28,000 other people in the state with mortgage-broker licenses. He got a job and a cubicle in a mortgage-brokerage office.

Though a natural salesman, he couldn't earn enough to maintain his increasingly expensive lifestyle. With credit card bills going unpaid, he fell into debt, warding off repo men and foreclosure—and facing the crushing reality that he'd have to move in with his parents.

Then his fortune changed. Cox had a sizable deal that wasn't closing. His client had been late on her rent. Now she wanted to buy a place, but banks were wary. His boss offered a solution: Take a bottle of Wite-Out and doctor the application so it looked as though the rent payments had been made on time. Cox had never done anything criminal before, but he felt desper­ate enough to dab Wite-Out on the page. "That decision changed the course of my entire life," he later recalled.

When the tweaked application closed without a problem, Cox became a con artist—in the truest sense of the word. With his steady hand and eagle eye, he discovered his fine-art training made him an expert forger. He began to meticulously craft bogus documents he needed to close a loan: W-2 statements, pay stubs and canceled checks. He even figured out how to make his own notary stamp.

Before long Cox left his job and opened his own company to cash in on his skills. He had reason to be inspired. By 2002 America's real estate market was, as The Washington Post put it, "roaring." To beef up the economy, mortgage rates dropped to their lowest in 30 years, fueling a wave of home purchases and refinancing. Although some had concerns about an overextended bubble, Federal Reserve chairman Alan Greenspan told Congress not to worry, attributing the boom to the "demand of low mortgage rates, immigration and shortages of buildable land."

But the boom, as Cox knew, was also sparked by scams like his own. Remark­ably, Cox later recalled, his forgeries were "caught all the time" by various underwrit­ers and banks. But, he said, despite people making vague threats to report him to the FBI, no one ever did. Everyone was making money, so why fuss?

Cox soon realized there was a way to make even more cash. Instead of doctoring appli­cations of real people to get them loans, why not make up fake identities and use them to take out loans for himself—loans he would never pay back?

Using his access to home loan applications, Cox stole Social Security numbers—even from toddlers—and then created false identities to go along with them. He got so brazen that he named some of his ficti­tious people after colors, inspired by one of his favorite crime movies, Reservoir Dogs.

"I thought I was being clever, but it was obnoxious," he recalled. He was also pen­ning his own loosely autobiographical novel, The Associates, about a mortgage-fraud con.

But Cox couldn't outrun his scams for­ever. Eventually one of his counterfeit canceled checks caught up with him, and he pleaded guilty in 2002 to one count of conspiracy to commit wire fraud. The plea only emboldened him. The sentence, he marveled, was remarkably light: a $1,000 fine, 42 months of probation and the loss of his mortgage license (which he had never needed to pull off his dirty work anyway).

His crimes continued unabated as he picked up new counterfeiting tricks, such as using sandpaper and an X-Acto knife to create fake driver's licenses. Soon Cox devised an even bigger plan: inflating the value of homes he bought in bad areas so he could refinance them and pull out heaps of cash. With the help of allies in the industry, Cox refined a system. He'd buy a crappy house and have his accomplices create inflated warranty deeds. Then other aides would refinance the homes so Cox could make a fortune.

Housing prices in Florida were heading for an astonishing 56 percent increase com­pared with five years prior. The Department of Commerce soon reported that new-home construction had hit its highest point since the mid-1980s. With money flowing in, Cox became a party-hopping playboy known around town for rolling up in his silver Audi 11 Quattro and charming women and wan­nabe brokers alike. Kevin Stuteville, one of his early employees, found him to be "a very personable smooth talker. He makes an impression quickly."

Business continued to grow, and Cox maintained laser-sharp focus to stay on top of all his scams. Still, he needed help staying organized and found just the right office assistant in a pretty blonde named Alison Arnold. A young mom with a New Age streak, Arnold had her work cut out for her. "Nothing was organized," she recalled. Cox sensed something in Arnold that was "sweet and innocent," he told me, liken­ing her to "a babe in the woods." To keep her onboard, Cox paid for her apartment and showered her with compliments. "No one ever believed in you like I believe in you," he'd say.

He took Arnold to his stylishly furnished apartment, which seemed to her more like an elaborate lair out of a crime movie. "He always had a dark side," she recalled. "He's like Batman." There was a back exit in case he had to flee and a picture frame on a wall that gave way to a secret room. "This is where I'm going to hide," he told her. Her suspicions were confirmed when he con­fessed that the "investors" in his properties were a ploy to acquire more properties. "My investors are me," he said. "They're ficti­tious, aliases, characters."

He was still ripping off identities from real people too. Cox had stolen the iden­tity of a woman, Rosita Perez, and wanted Arnold to start withdrawing funds from bank accounts he'd opened in Perez's name. Arnold claimed she wanted to back out, but Cox leveraged her apartment to make her

comply. "You owe me," he told her. Ner­vous but with a son to support and hungry for money, Arnold dyed her hair brown, donned glasses and a baseball cap and tried to pass herself off as Latina. As she walked into the bank, she recalled, "I felt like my life was a movie."

But the movie was quickly turning dark. When the bank clerk told Arnold she'd have to wait a few days to withdraw her funds, she panicked and quit working with Cox. It was good timing. A task force out of Tampa was on his trail, sending hundreds of subpoenas around town and estimating that he had inflated the value of more than 100 properties, equaling millions of dollars in fraud. It was, as one investigator put it, "one of the largest, most flagrant displays of public-records and banking manipulation we've ever seen."

When Cox got word that the local paper was preparing an expose on him, he felt his throat constrict. Rather than face going to what he called "the federal rape factory," he devised another plan: assume a new identity for real—and run.

"Free home loan applications, 100 percent financing available, good credit/bad credit, no problem." This ad in a Tampa Bay flyer seemed too good to be true, but so did the real estate market. By 2004 housing prices in nearly half of America's major metropoli­tan areas were showing double-digit annual increases, a record achievement. And six of the 10 areas posting the biggest gains— increases of more than 25 percent—were in Florida.

Eager home buyers who answered the flyer ad, however, weren't being patched through to a legitimate broker. They were talking with a fugitive. With $83,000 in cash in his pocket, Cox had fled Florida for Atlanta, on a mission not just to evade the law but to find a permanent identity he could hide behind. Using his ad as a front, he was conning callers into turning over all their personal information.

Meanwhile, lying in bed beside him was a new sidekick, a sexy and rambunctious blonde named Rebecca Hauck. Cox had met Hauck, a single mother who had recently relocated from Las Vegas, on a dating site, and the affair was passionate and intense. Cox told her of his crimes and his need to escape Tampa, but she didn't care. She sent her young boy to live with relatives so she could be the Bonnie to Cox's Clyde.

They were soon traversing the South, stealing identities, opening fake accounts and scamming hundreds of thousands of dollars from mortgage lenders and credit card companies. They blew the cash on designer bags, laptops, Rolexes and plas­tic surgery for Hauck. There was so much cash around they had to hide it in air-conditioning vents and in their freezer. But the feds had recently raided his office in Tampa, and Cox was buckling under the stress of life on the run. He was numbing himself with Xanax, trying to dull the pain of disappearing from his family without a trace.

Jacked on sex, money and drugs, Cox was on the prowl for a lucrative pool of victims:

the homeless. Stealing an identity always involved the risk that the real person would track him down, but, Cox realized, peo­ple on the streets rarely had the means. Pretending to be a survey taker for the Sal­vation Army, Cox would pay a homeless person $20 to answer a series of questions: where he was from, his mother's maiden name, his Social Security number and so on—the details Cox needed to take out credit cards and loans.

On a trip to Vegas, he pried the details from a male prostitute, Gary Sullivan. Cox drove off with a new identity and a grin on his face. "You know," he told Hauck, "the homeless are widely underutilized."

One day Cox took a long look in the mirror. He barely recognized himself. His nose was thinner, his hair thicker, his teeth whiter. Even his man-boobs—"bitch tits," he called them—were gone. That's what $27,000 in cosmetic surgery, hair grafts and dental work had gotten him. The physical changes weren't just for his ego. They were for his survival. By now Cox was at the top of the Secret Service list, and wanted posters of him and Hauck hung in more than a thou­sand banks and real estate companies in several states.

With a new face and a new identity, complete with forged documents for Gary Sullivan—his birth certificate, state ID, even a new Social Security card—Cox was eager to fatten his wallet. He opened up several bank accounts, enough that he could easily fill with a couple of million in home-equity loans. He gobbled up homes at full price using owner financing (a system by which the buyer finances the home through the seller rather than a bank, taking possession of the property while paying the seller off in monthly installments). Then he could take out mortgages against the homes. For just a $12,500 down payment he could

borrow more than $500,000 against a home.

His victims never knew what hit them, especially not Dr. Bruce Brown, an ophthal­mologist who was on active duty in the Army, and his wife, Bridget. The couple badly needed to sell their house in Columbia, South Carolina. Their baby boy was born with a birth defect that had required 50 sur­geries so far. To make matters worse, they were eager to move to Georgia for a new job and were unable to find a buyer for their home. Their real estate agent suggested they consider owner financing—and there was Gary Sullivan, ready to do the deal.

At the closing Sullivan seemed nice enough, though, as Brown later put it, "a little cheesy." He also seemed to have "a little inferiority complex," Brown recalled. "He said he had to be good in one area to make up for being short." But Sullivan's $20,000 deposit went through without a hitch, and he gave the Browns a year's worth of payments in the form of postdated checks. Using Sullivan's identity, Cox took possession of the home and immediately refinanced, pulling out cash. Brown came back from a trip to Disney World and found a message from a Secret Service agent on his answering machine. "I thought it was some­one at work playing a prank," he recalled. It wasn't, and as the Browns painfully learned, they'd fallen victim to Cox's ruse.

In a daze, the Browns went to the house they'd sold Cox, and what they found was chilling. It looked like a model home that had been staged, since of course Cox didn't actually live there as he'd claimed. There was some spare furniture. Upstairs, they found a bed made with a comforter and pil­lows, but when they pulled back the blanket there were no sheets underneath. The bath­room contained clothes and toiletries, as if a woman lived there, but the Browns noticed the clothes still had price tags on them.

By early 2005 Cox's relationship with Hauck had become volatile, and one

morning after an argument he walked out for good—just as she was threatening to call the cops on him. The investigators were already close on Cox's trail, however. To help legitimize his fake identities, he also created fake voice-mail systems for his fake employers—just in case anyone checked his references. But now when he dialed the voice mail, Cox heard a message from the Secret Service looking for one of his fake identities.

Soon after, in Charlotte, North Caro­lina, Cox was buying coffee at a Starbucks when he noticed two employees of the nearby apartment complex where he lived. They were eying him so intently that Cox assumed he owed them rent. He was wrong. One began shouting, "Right here! Right here!" Cox turned to see two men in suits running toward him. He had always loved crime films, and now he was living the part for real, hopping in his car and flooring the gas pedal.

He escaped this close call, but he wasn't in the clear. He was addicted to the scams, the adventures, the sprees—and the women. He soon fell for a new single mom he'd found online, Amanda Gardner, a pretty blonde who'd recently left the Army and had a young son. This time Cox refused to reveal his real name and instead passed himself off as the latest homeless person whose identity he'd stolen, Joseph Carter.

Gardner didn't know Cox's real name or that he was a wanted criminal, but he was falling hard for her. Using the fake passport he'd created for himself, the two traveled to Italy and Greece, buying Cart-ier jewelry and Dolce & Gabbana clothing. Dreaming of a life with Gardner, Cox hatched a plan: As soon as he got $2.5 mil­lion in cash, they'd run off together. "I thought I'd get a chunk of money and leave the United States," he told me. "I was in love."

He and Gardner found a new home in Nashville, and they met a sexy and fun-loving blonde computer saleswoman. Cox had had his share of sexual adventures, but he was soon living his biggest dream yet: a three-way relationship with two women. He began to suspect the blonde was falling harder for Gardner than for him, but he put it out of his mind—until one afternoon when he got an urgent call from Gardner.

Gardner had just gotten off the phone

with their friend, who was "acting really strange," she said. "She started telling me about how much I mean to her. I think she might have done something."

On November 16, 2006 Cox felt as if he were in a movie again, but this time it was the inevitable ending. He heard squealing tires. Saw a black car pulling up. Another car blocking his way. The agents with their guns trained on him. The firm hands on his shoulder. His face slamming the pavement. But it was a face that, after all the plastic surgery, even the feds couldn't be sure they recognized.

"You think it's him?" he heard one Secret Service agent ask another.

"It's him," the agent replied. "Look at his eyes. It's him."

Cox wasn't the only one crashing hard by 2007. So was the overheated housing market he personified. After years of easy credit, the American economy finally buckled under the weight of all the bad and unpaid loans. The worst economic downturn since the Great Depression was soon upon us.

Fannie Mae and Freddie Mac—which owned almost half the country's $12 trillion mortgage market—were collapsing. Nearly 10 percent of mortgages were said to be either in default or in foreclosure by late 2008. As the ripple effect took down Wall Street stalwarts such as Lehman Brothers, the so-called global financial crisis became a reality, and the party, for Cox and everyone else who had lived high during the bubble, was over.

When asked later about his capture, Cox said, "I was relieved briefly. I didn't realize how much stress I was under." He remained convinced that the blonde turned him in out of jealousy over Gard­ner. All his plans and ploys couldn't overcome something truly uncontrollable: a threesome gone bad.

Facing 42 counts of fraud and more than 400 years in prison, Cox copped a plea that got him a 26-year sentence and an order to pay almost $6 million in restitution. Authori­ties estimate he stole as much as $26 million. He wasn't the only one who went down. Both Hauck and Arnold have served time, and the two have since met and traded sto­ries about Cox. "He always had a fantasy of being wanted," Arnold told me. "He found

it more exciting than living this boring life."

Cox has dealt with the boredom of prison by writing a memoir and teaching a real estate class to the prisoners in his plentiful spare time. He has been in demand outside the walls too. Denis Kelly, a former bank partner and the founder of ID Cuffs, an identity-theft protection service, has con­sulted with Cox to improve his product. "It's surprising that we're working together at all," Kelly told me. "Here's the guy who was our nemesis for so long."

The Florida Mortgage Broker School, which administers required exams and education for industry hopefuls, has also worked with Cox to improve student train­ing. According to Jim Montrym, head of the school, Cox's insights were essential and the moral of his story remained clear: "That you can go to jail for 26 years when you pull this bullshit."

But the "bullshit" is still being pulled by others, experts say. "As far as the scams I was running," Cox told me, "nothing has changed that could have stopped anything I did."

Before I left the prison, I broached the touchiest subject for Cox: his dad, who was suffering from Alzheimer's and couldn't tell his side of the story. Cox glazed over as he recalled the day his father had come to visit him in prison. The two sat across from each other, awkwardly trying to con­nect over the din of vending machines and shuffling guards.

Since his childhood, Cox had desperately craved love and respect from a man who never seemed able or inclined to give either. The son's memories of his father were of drunken nights and insults. But on this day, his father had surprised him. "The things you know how to do are incredible," his dad had told him. "You lived an incredible life. I'm proud of you."

As Cox recalled this story, his eyes welled up and his shoulders slackened. These were the words from his father that he'd been waiting for his whole life. He just never expected it would take going to prison to hear them.

"So how did you feel when he said this to you?" I asked.

"Horrible," he said.