PHOENIX -- A Phoenix mortgage broker is sentenced to 3 1/2 years in prison for defrauding four Valley seniors of more than $400,000, the county attorney general's office said.

Rick McCullough, 36, was also ordered to serve seven years probation and pay $343,811 in restitution after he pleaded guilty to one count of securities fraud and one count of fraudulent schemes and artifices on Friday.

McCullough, who was the president of licensed mortgage broker CactusCash, Inc. in 2005 and 2006, used his position to persuade four seniors, two single women and one couple, to refinance their homes through him for amounts far greater than the balance of their existing mortgages, court documents said.

McCullough also convinced all four victims to invest their net refinancing proceeds with him, effectively obtaining for himself much of the equity that these elderly clients had in their homes, documents stated. McCullough claimed that he would invest the victims' funds in real estate and personally guaranteed the loans, documents said.

According to the terms of their "investments," McCullough agreed to make monthly payments between $650 and $3,150 to the victims, documents said.

McCullough used the money to make personal purchases, including a $42,000 ring for his wife, documents said.

McCullough lacked the assets to guarantee any of the loans. His primary method of obtaining funds to make payments to victims was fraudulently obtaining more funds from investors, documents said. As a result, McCullough failed to make payments to three of the victims after several months and, in one case, failed to make any payments at all.

"Because of this vicious scheme, an elderly woman may lose her home of 45 years and a 65-year-old victim must choose between a needed surgery and making the new mortgage payment," said Arizona Attorney General Terry Goddard.

In April 2008, the Arizona Department of Financial Institutions filed a complaint with the Office of Administrative Hearings to remove McCullough from the financial services industry. DFI also alleged that McCullough violated mortgage broker statutes.

After an administrative hearing, Superintendent Felecia Rotellini issued a final order barring McCullough from employment with any financial institutions and companies regulated by DFI.

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