RIVERSIDE - The former head of a now-defunct Inland Empire-based mortgage company was sentenced today to 13 years in prison for defrauding the federal government and private lenders in a multimillion-dollar scheme that involved filing false documents to obtain loans for unqualified borrowers.

John Richard Varner, 56, was one of 15 people convicted of ripping off the U.S. Department of Housing and Urban Development and banks over a five-year span that began in 1997.

Varner's four-week trial ended in April, when a Riverside jury found him guilty of conspiracy to defraud a government agency, bank fraud and two counts of subscribing false income tax returns.

Varner was the president of Mortgage One Corp. in Hesperia, which has since closed. According to federal prosecutors, the firm, together with Riverside-based M-1 Capital Corp., packaged, financed and sold home loans, obtaining mortgage insurance from the Federal Housing Administration, an agency of HUD.

The companies received "Direct Endorsement Lender'' status, which often exempted them from federal scrutiny, according to the U.S. Attorney's Office.

Prosecutors said the defendants submitted false documents, including bogus audit reports, to keep the preferred status and mislead federal officials.

According to the U.S. Attorney's Office, Advertisement

Jim Holbrook - Exit Realty Select loan documents filed by Mortgage One and M-1 were regularly falsified to mask the fact that many borrowers didn't meet federal requirements to obtain a loan, or were in some cases "straw buyers,'' having no stake whatever in a home purchase.

A number of loans were sold to banks, including Firstar Bank, N.A. -- which has since been absorbed by U.S. Bank -- and Chase Manhattan Mortgage Corp., according to prosecutors.

More than 900 of the 3,813 federally insured loans approved by Mortgage One and M-1 ended up in default, resulting in nearly $30 million in taxpayer loses, according to the U.S. Attorney's Office. The losses incurred by lenders were not immediately known.

Varner was convicted of intentionally omitting a number of assets from his 1999 and 2000 income tax returns, including a Corvette, a recreational vehicle and jewelry.

In sentencing papers, Assistant U.S. Attorney Sheri Pym said Varner's testimony "consisted of a series of breathtaking lies that appeared designed to shift responsibility for the defendant's crimes to others.''

U.S. District Judge Virginia Phillips agreed, noting during his sentencing hearing that the defendant's testimony was "knowingly untruthful on a number of points.''