Attorney Sentenced in $2.5M Mortgage Fraud Scam

admin —  December 3, 2009 — Leave a comment

Pasquale Scavitti, III, 46, Cranston, Rhode Island, a former attorney, has been sentenced to 42 months in prison and ordered to pay a total of $2,496,812 in restitution to various individuals and financial institutions for diverting more than $2.5 million in mortgage funds from his firm’s client account for personal use.

As previously reported on Mortgage Fraud Blog, in June, Scavitti pleaded guilty to wire fraud. At the plea hearing, Assistant U.S. Attorney Andrew J. Reich said the government could prove that Scavitti maintained a law practice in Cranston and shared his office space with other attorneys. As part of his practice, he maintained a client escrow bank account.

Mortgage Guarantee and Title Company, a real estate title and closing company, utilized the services of Scavitti’s law office to facilitate mortgage lending. As part of those services, mortgage and refinancing proceeds were wired into the client escrow account at Scavitti’s firm. The firm’s obligations were to pay off existing liabilities from those loan proceeds.

Between 2003 and August 2008, Scavitti directed that client escrow account funds not be used to pay off the corresponding existing mortgages but rather to pay for various personal and business expenses. Escrow funds were also used to pay off previously negotiated mortgages that were already delinquent, since they had not been paid off in a timely fashion.

Some of the proceeds that Scavitti caused to be diverted were used to pay off personal mortgage expenses. Other diverted funds were used to pay gambling expenses. In a four-day period in 2004, Scavitti bought $23,000 worth of casino chips at Foxwoods Casino.

In September 2007, Mortgage Guarantee terminated the authority of Scavitti’s law office and its attorneys from acting as approved attorneys for Mortgage Guarantee. However, for subsequent mortgages, Scavitti contacted other attorneys to act as title attorneys on real estate transactions and closings. For these transactions, Scavitti falsified letters purporting to authorize his firm to act as the approved attorney for Mortgage Guarantee. As before, loan proceeds were deposited into the escrow account at Scavitti’s firm, and Scavitti directed that they not be used to pay off the corresponding existing mortgages but instead be used for various personal and office expenses.

As a result of Scavitti’s fraudulent scheme, he failed to pay off 13 mortgage loans and refinancing transactions, resulting in total losses of approximately $2.5 million to borrowers and financial institutions.

The Federal Bureau of Investigation conducted the investigation.

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