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Charles and William King made money by cheating the federal government.

Monday, a federal judge responded by sentencing the two brothers to six months' home confinement, plus three years' probation, and ordering them to pay $273,717 in restitution to the government.

The Kings got caught operating a housing scam in Buffalo called "flipping," the practice of buying depressed houses and fraudulently selling them at much higher prices.

"They have obviously paid a very big price," U.S. District Judge Richard Arcara said of the personal and professional problems resulting from the brothers' illegal real estate practices.

Arcara, who just a few days ago said he was prepared to give the Kings jail time, stopped short of that, suggesting the two men have shown remorse. In addressing the court, William King broke down into tears, pausing several times to compose his words.

"We were real stupid," he told the judge. "I love this country. I'm ashamed that you have to be here to represent the U.S. government against me."

Housing activists say flipping, the subject of congressional hearings and an investigation by the General Accounting Office, is a growing problem across the country, especially in poor, inner-city neighborhoods.

The practice is not illegal unless the seller or buyer engages in fraud. In many cases, the fraud is a false down payment or inflated appraisal.

In the Kings' case, fraudulent down payments led to their guilty plea in April 2000.

The Kings, as part of their plea agreement, admitted giving five Buffalo home buyers the down payments they needed to qualify for federally insured mortgages. They then directed the buyers to sign federal documents indicating the money came not from the Kings, but from "gift donors."

In the end, all five buyers were approved for mortgages insured by the Federal Housing Administration. The insurance means the government ultimately foots the bill if owners lose their home to foreclosure.

Assistant U.S. Attorney Paul Campana said each of the five houses sold by the Kings is in arrears and headed to foreclosure.

He also noted that the Kings have cooperated in the prosecution of a third individual but declined to name him.

As part of the sentence, the Kings will be required to pay back money the federal government stands to lose -- $273,717. The judge ordered them to sell several inner-city houses they own to help make restitution.


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