Archives For Straw Buyer

Okechukwu Josiah Odunna, 60, Abuja, Nigeria made his initial appearance in a federal court in Miami, where he is accused of playing a key role in a fraud scheme in which he fraudulently obtained loans in connection with the fraudulent purchases of approximately 20 residential properties in Florida. This plot resulted in the loss of about $8 million to U.S. financial institutions, the Justice Department announced today.

According to the indictment, between December 2005 to approximately May 2008, Odunna and his co-conspirators devised a scheme to defraud and to obtain money by making false representations and material omissions to U.S. banking institutions. As part of the scheme, Odunna and his co-conspirators would, among other things: submit false and fraudulent loan applications and documents to financial institutions relating to purchases of residential properties, resulting in lenders loaning out more money than they otherwise would. These false statements to the lenders included false names of the persons who would be borrowing the money to purchase the properties, falsely inflated sale prices that were much higher than the true prices and false details regarding the receipt and disbursement of funds in connection with the purchases of the properties.

Odunna, who was a licensed attorney at the time, was also one of the directors of Direct Title and Escrow Services, Inc. (DTES). Odunna was the settlement agent in approximately 20 fraudulent closings of property purchases. To disguise the fraud, Odunna and his co-conspirators provided sellers and lenders with two different settlement statements, which included false information and omitted information regarding the sale price, the identity of the purchaser, and the receipt and the disbursement of funds.

Odunna faces charges of wire fraud and conspiracy to commit wire fraud affecting a financial institution. Odunna was arrested on September 24, 2024, by Nigerian authorities pursuant to a U.S. extradition request. Nigerian authorities extradited Odunna to the Southern District of Florida on March 6, after he waived extradition. He has remained incarcerated since his arrest. Odunna is scheduled to appear at his pretrial detention and arraignment hearings on March 11 before U.S. Magistrate Judge Jonathan Goodman.

Odunna’s co-conspirators, charged in the same indictment, included Karl Oreste, Marie Lucie Tondreau and Kelly Augustin. Oreste pleaded guilty and was sentenced to 100 months in prison. Tondreau, who was the former Mayor of North Miami, was convicted at trial. She was sentenced to 65 months in prison. Augustin remains a fugitive.

If convicted, Odunna faces up to 30 years in prison on the conspiracy to commit wire fraud affecting a financial institution charge and up to 30 years in prison on the wire fraud affecting a financial institution charge. Each count also carries the possibility of a fine and supervised release upon completion of any prison sentence. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

U.S. Attorney Hayden P. O’Byrne for the Southern District of Florida, Acting Special Agent in Charge Brett Skiles of the FBI Miami Field Office, and Commissioner Russell C. Weigel, III, of the Florida Office of Financial Regulation (OFR), made the announcement.

The FBI Miami and OFR are investigating the case. The Justice Department’s Office of International Affairs provided significant assistance in securing the arrest and extradition of Odunna. The United States also thanks the FBI International Operations Division, Africa Unit Legal Attaché Office, Abuja, Nigeria, Ministry of Justice, Central Authority Unit, Nigeria, and Economic and Financial Crimes Commission, Nigeria for their valuable assistance.

Assistant U.S. Attorney Ana Maria Martinez is prosecuting the case. Assistant U.S. Attorney Daren Grove is handling asset forfeiture.

An indictment is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Related court documents and information may be found on the website of the District Court for the Southern District of Florida at www.flsd.uscourts.gov or at http://pacer.flsd.uscourts.gov, under case number 14-cr-20349.

Lee Holliday, 66, of Schererville, Indiana, has been sentenced to more than three years in federal prison for orchestrating a mortgage fraud scheme in Chicago that bilked multiple financial institutions out of more than $1.5 million.

Holliday admitted in a plea agreement that he engaged in mortgage fraud in 2011 and 2012 in connection with the purchase of multiple properties on the West and South Sides of Chicago, Illinois. Holliday recruited buyers and provided them with funds for the down payments, which were only 3.5% of the purchase price since the loans were insured by the Federal Housing Authority. Holliday worked with the buyers to purchase homes at inflated prices and then split the proceeds with both the buyers and sellers.  Although Holliday promised the buyers that the properties would provide rental income, the promises proved to be false and most buyers eventually fell behind on their mortgage payments.  Seven properties went into foreclosure proceedings. In all, Holliday caused the lenders to lose a total of approximately $1.53 million through the submission of false and fraudulent loan applications.

In addition to the mortgage fraud scheme, Holliday also admitted in his plea agreement that he engaged in Covid-relief fraud in 2020 and 2021, fraudulently obtaining $391,869 in Paycheck Protection Program funds to which he was not entitled.

Holliday pleaded guilty last year to a federal bank fraud charge.  U.S. District Judge Sara L. Ellis on Friday sentenced Holliday to three years and three months in federal prison.

The sentence was announced by Morris Pasqual, Acting United States Attorney for the Northern District of Illinois, and Machelle L. Jindra, Special Agent-in-Charge of the U.S. Department of Housing and Urban Development’s Office of Inspector General in Chicago. Valuable assistance was provided by the FBI Chicago Field Office.  The government was represented by Assistant U.S. Attorney Stephanie C. Stern and former Assistant U.S. Attorney Charles W. Mulaney.

FHA loans are intended to help people who could not otherwise afford a home,” said Acting U.S. Attorney Pasqual.  “In this case, the money that was supposed to help those people and improve their neighborhoods instead went into the defendant’s pockets.

Lee Holliday repeatedly engaged in an egregious mortgage fraud scheme causing borrowers to falsely represent critical income and asset information to qualify them for loans they would not have otherwise qualified for,” said HUD-OIG SAC Jindra.  “When people take advantage of HUD-insured mortgage programs, it limits opportunities for hard-working individuals trying to achieve the American dream of homeownership.  HUD-OIG will continue to work with the U.S. Attorney’s Office and our law enforcement partners to investigate individuals who jeopardize the integrity of FHA mortgage programs.

 

Christopher J. Gallo, 44, Old Tappan, New Jersey, and Mehmet Ali Elmas, 32, a U.S. citizen who resided in Turkey until the time of his arrest, were indicted by a federal grand jury on Oct. 24, 2024, on charges related to their roles in a large-scale mortgage fraud scheme.

According to documents filed in this case and statements made in court:

Gallo and Elmas were previously employed by a New Jersey-based, privately owned licensed residential mortgage lending business. Gallo was a senior loan officer and Elmas was a mortgage loan officer and Gallo’s assistant. From 2018 through October 2023, Gallo and Elmas used their positions to conspire and engage in a fraudulent scheme to falsify loan origination documents sent to mortgage lenders in New Jersey and elsewhere, including their former employer, to fraudulently obtain mortgage loans. Gallo and Elmas routinely mislead mortgage lenders about the intended use of properties to fraudulently secure lower mortgage interest rates.  Gallo and Elmas often submitted loan applications falsely stating that the listed borrowers were the primary residents of certain proprieties when, in fact, those properties were intended to be used as rental or investment properties. By fraudulently misleading lenders about the true intended use of the properties, Gallo and Elmas secured and profited from mortgage loans that were approved at lower interest rates.

The conspiracy also included falsifying property records, including building safety and financial information of prospective borrowers to facilitate mortgage loan approval. Between 2018 through October 2023, Gallo originated more than approximately $3 billion in loans.

They appeared today before U.S. District Judge Brian R. Martinotti in Newark federal court and each pleaded not guilty to on one count of conspiracy to commit bank fraud, eight counts of bank fraud, eight counts of false statements to a financial institution; and one count of aggravated identity theft.

 The charges of conspiracy to commit bank fraud, bank fraud, and false statements to a financial institution each carry a maximum potential penalty of 30 years in prison and a $1 million fine, or twice the gross gain or loss from the offense, whichever is greatest. The aggravated identity theft charge carries an additional consecutive mandatory minimum term of two years in prison and a maximum fine of up to $250,000, or twice the gross gain or loss from the offense, whichever is greatest.

U.S. Attorney Philip R. Sellinger made the announcement today.

U.S. Attorney Sellinger credited special agents of the FBI, under the direction of Acting Special Agent in Charge Nelson I. Delgado, and special agents of the Federal Housing Finance Agency, Office of Inspector General, under the direction of Special Agent in Charge Robert Manchak, with the investigation leading to the indictment.

The government is represented by Assistant U.S. Attorney Shontae D. Gray of the Economic Crimes Unit in Newark.

The charges and allegations contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

galloelmas.indictment.pdf

 

Nicholas Espinosa, 38, Randolph, Massachusetts, pleaded guilty today to two counts of wire fraud conspiracy; one count of conspiracy to make false statements to a mortgage lending business (mortgage fraud conspiracy); 16 counts of wire fraud; six counts of unlawful monetary transactions (money laundering); and one count of making false statements to a mortgage lending business.

Espinosa was arrested and charged in March 2023 along with alleged co-conspirator Daniel Cleggett.

According to the charging documents, Cleggett was the founder of the sober home business, A Vision From God LLC (AVFG), with locations in in Boston, Wakefield, Quincy and Weymouth under trade names including Brady’s Place, Lakeshore Retreat and Lambert House. Espinosa managed the day-to-day affairs of Cleggett’s business.

Espinosa, and allegedly Cleggett, along with a sober home client entered into a conspiracy to defraud a New York-based family trust that was paying for the client’s room and board at Brady’s Place in Quincy. Specifically, Espinosa, and allegedly Cleggett, overcharged the family trust for room and board by up to $12,500 per month by submitting false and fraudulent invoices to the family trust. Espinosa, and allegedly Cleggett, would then issue “refund” checks to the client in furtherance of the fraud scheme.

According to the charging documents, from approximately October 2019 to December 2021, Cleggett personally, and through straw purchasers including Espinosa, purchased the three residential properties in Weymouth and Boston to use as sober homes. Espinosa falsely represented that one of these properties was intended to be purchased as a primary residence for himself when, in reality, it was intended to be a sober home.

In addition to the sober home business, Cleggett operated numerous insulation contracting companies that participated in the Mass Save Program: Green Save Energy Corporation; Environmental Construction Objective Inc. (ECO); Green Giants, LLC; and Insulation Situation, LLC. Mass Save is a Massachusetts public/private partnership sponsored by gas and electric utility companies that funds energy conservation projects and improvements via energy efficiency funds charged to Massachusetts residents’ utility bills.

Specifically, Green Save and ECO received millions of dollars for residential insulation work from a lead vendor company under the Mass Save program. It is alleged that, from 2018 through mid-2021, Green Save and ECO fraudulently billed the vendor company for required permits that were not actually obtained. Green Save and ECO were ultimately terminated from participating in the company’s program in June 2021, and Cleggett was banned from participating in the Mass Save program. In response to this, Espinosa, and allegedly Cleggett and others, formed Green Giants as a new lead vendor with the same company under a straw owner. As a result, Espinosa, and allegedly Cleggett, obtained a total of $509,326 in payments from the company to Green Giants, despite a ban from participating in the Mass Save program.

The charges of wire fraud and wire fraud conspiracy provide for a sentence of up to 20 years in prison, three years of supervised release and a fine of up to $250,000. The charge of making false statements to a mortgage lending business provides for a sentence of up to 30 years in prison, five years of supervised release and a fine of up to $1 million. The charge of unlawful monetary transactions provides for a sentence of up to 10 years in prison, three years of supervised release and a fine of up to $250,000. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and statutes which govern the determination of a sentence in a criminal case.

U.S. Senior District Court Judge William G. Young scheduled sentencing for March 11, 2025. Espinosa was arrested and charged in March 2023 along with alleged co-conspirator Daniel Cleggett

Acting United States Attorney Joshua S. Levy; Jodi Cohen, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division; and Harry Chavis, Jr., Special Agent in Charge of Internal Revenue Service’s Criminal Investigations in Boston made the announcement today. Valuable assistance was provided by the Kingston, Randolph and Quincy Police Departments. Assistant U.S. Attorneys John T. Mulcahy and Dustin Chao of the Public Corruption & Special Prosecutions Unit are prosecuting the case.

The details contained in the charging documents are allegations. The remaining defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

 

Kevin Smith, 52, of Melrose Park, Illinois, a loan originator was found guilty on September. 6, 2024, of orchestrating a mortgage fraud scheme that bilked multiple financial institutions out of $2.6 million.

Smith was a loan originator for mortgage lending businesses that originated and processed loans for real estate purchases in the Chicago area.  Evidence at the two-week trial revealed that Smith engaged in a scheme to fraudulently obtain approximately $2.6 million in federally guaranteed mortgage loans in connection with the purchase of 14 properties in Chicago.  Smith recruited buyers at real estate investment seminars held in Chicago-area churches and hotels and caused them to make false representations to lenders about, among other things, the source of their down payments and their intention to occupy the properties as their primary residences.  Smith provided or caused others to provide funds to the buyers for use as down payments, knowing that the lenders would be falsely led to believe that the money belonged to the buyers.  After a closing and the issuance of the government-insured mortgage loans, Smith made payments to the buyers – describing them as “grants” – and then pocketed payments from the sellers without notifying the lenders.

Each count is punishable by up to 30 years in federal prison.  U.S. District Judge John F. Kness set sentencing for Dec. 17, 2024.

The conviction was announced by Morris Pasqual, Acting United States Attorney for the Northern District of Illinois, Machelle L. Jindra, Special Agent-in-Charge of the U.S. Department of Housing and Urban Development’s Office of Inspector General in Chicago, and Gregory Billingsley, Special Agent-in-Charge of the Department of Veterans Affairs, Office of Inspector General, Central Field Office.  The government is represented by Assistant U.S. Attorneys Rick D. Young and Misty N. Wright.

Loan originators and other mortgage professionals are entrusted with protecting the integrity of the government-backed mortgage program,” said Acting U.S. Attorney Pasqual. “Our office will continue to hold accountable any individual who violates that trust to line their own pockets.”

Smith abused his position of trust as a gatekeeper of FHA-insured mortgage loans and used his real estate knowledge to circumvent the rules to secure his own self-interest,” said HUD-OIG SAC Jindra.  “HUD-OIG will continue to work with its prosecutorial and law enforcement partners to aggressively pursue and bring to justice those who seek to profit by abusing HUD’s mortgage insurance and housing programs.”

This guilty verdict demonstrates the VA Office of Inspector General’s commitment to protecting vulnerable veterans from fraudulent lending practices,” said VA-OIG SAC Billingsley.  “The VA-OIG thanks the U.S. Attorney’s Office and our law enforcement partners for their efforts in this investigation.

Christopher J. Gallo, 44, Old Tappan, New Jersey, and Mehmet A. Elmas, 32, a U.S. citizen who resides in Turkey, are charged by complaint with one count of conspiracy to commit bank fraud, in connection with their roles in a large-scale mortgage fraud scheme.

According to documents filed in this case and statements made in court:

Gallo and Elmas were previously employed by a New Jersey-based, privately owned licensed residential mortgage lending business. Gallo was employed as a senior loan officer and Elmas was a mortgage loan officer and Gallo’s assistant. From 2018 through October 2023, Gallo and Elmas used their positions to conspire and engage in a fraudulent scheme to falsify loan origination documents sent to mortgage lenders in New Jersey and elsewhere, including their former employer, to fraudulently obtain mortgage loans. Gallo and Elmas routinely mislead mortgage lenders about the intended use of properties to fraudulently secure lower mortgage interest rates. Gallo and Elmas often submitted loan applications falsely stating that the listed borrowers were the primary residents of certain proprieties when, in fact, those properties were intended to be used as rental or investment properties.

By fraudulently misleading lenders about the true intended use of the properties, Gallo and Elmas secured and profited from mortgage loans that were approved at lower interest rates.  The conspiracy also included falsifying property records, including building safety and financial information of prospective borrowers to facilitate mortgage loan approval. Between 2018 through October 2023, Gallo originated more than $1.4 billion in loans.

They appeared today before U.S. Magistrate Judge André M. Espinosa in Newark federal court and were each released $200,000 unsecured bond.

U.S. Attorney Philip R. Sellinger made the announcement.

The conspiracy to commit bank fraud charge carries a maximum potential penalty of 30 years in prison and a $1 million fine, or twice the gross gain or loss from the offense, whichever is greatest.

U.S. Attorney Sellinger credited special agents of the FBI, under the direction of Special Agent in Charge James E. Dennehy in Newark, and special agents of the Federal Housing Finance Agency, Office of Inspector General, under the direction of Special Agent in Charge Robert Manchak, with the investigation leading to today’s arrests.

The government is represented by Assistant U.S. Attorney Shontae D. Gray of the Economic Crimes Unit in Newark.

The charges and allegations contained in the complaint are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

 

Maria Esperansa Salgado, 64, Ft. Washington, Maryland, pleaded guilty today to bank fraud.

According to court documents, from at least August of 2012 through April 2019, Salgado devised a scheme to defraud a mortgage lender into agreeing to a short sale, or pre-foreclosure sale, of a residential property in Alexandria, Virginia that was pending foreclosure for non-payment of the mortgage. The defendant and her brother had purchased and lived in the property for about ten years.

After filing a Chapter 7 petition for bankruptcy to discharge her debts in 2013, Salgado used the identity of an unsuspecting victim to obtain a home mortgage from a lender. Salgado then entered into fraudulent sales contracts with straw purchasers and the victim to make it appear as if she was selling the property to third parties as part of an arms-length transaction. A straw purchaser is someone who buys a property on behalf of another person when the real buyer cannot complete the transaction. The fraudulent sales contracts made it appear as if the straw purchasers and the victim were buying the house on behalf of themselves. In truth, Salgado’s intention was to retain ownership of the property and the proceeds from the fraudulent short sale.

In 2015, Salgado executed a fraudulent refinance of the property using the name of straw purchasers and kept the proceeds. The victim was unaware of the re-finance.  In 2019, Salgado used a nominee owner to sell the property to a third-party buyer. Salgado and the nominee owner received the proceeds of the fraudulent sale and paid off the remaining loan balance and used a portion to purchase a new property in Ft. Washington, Maryland.

To date, the victim has been unable to qualify for a loan to purchase her own home because of the fraudulent mortgage taken out in her name. The scheme also resulted in $146,188 of loss to the mortgage lender. As part of her plea agreement, Salgado agreed to pay restitution to the victim and to forfeit the proceeds of the bank fraud.

Salgado is scheduled to be sentenced on February 21, 2024. She faces a maximum penalty of 30 years in prison. Actual sentences for federal crimes are typically less than the maximum penalties. A federal district court judge will determine any sentence after taking into account the U.S. Sentencing Guidelines and other statutory factors.

Jessica D. Aber, U.S. Attorney for the Eastern District of Virginia, and Javan Wilson, Special Agent in Charge of the U.S. Department of Treasury, Office of Inspector General, made the announcement after U.S. District Judge Rossie D. Alston, Jr. accepted the plea.

The Fairfax County Police Department, the Arlington County Police Department, the Prince William County Police Department, the City of Hyattsville (MD) Police Department – Criminal Investigations Section, and the U.S. Department of Homeland Security, Homeland Security Investigations also provided significant assistance in this investigation.

Assistant U.S. Attorney Kimberly Riley Pedersen is prosecuting the case. Former Assistant U.S. Attorney Carina Cuellar provided significant assistance to the investigation and prosecution of this case.

A copy of this press release is located on the website of the U.S. Attorney’s Office for the Eastern District of Virginia. Related court documents and information are located on the website of the District Court for the Eastern District of Virginia or on PACER by searching for Case No. 1:23-cr-154.

 

 

David Plunkett, 57, Lynn, Massachusetts, was sentenced today in federal court in Boston for creating fraudulent tax returns and submitting fraudulent letters to lenders in a multi-year mortgage fraud scheme.

Plunkett was charged in September 2018 along with co-defendants Joseph Bates III and George Kritopoulos.  From 2006 through 2015, Bates, Kritopoulos and Plunkett engaged in a scheme to defraud banks and other financial institutions by causing false information to be submitted to those institutions on behalf of borrowers – people recruited to purchase properties – located primarily in Salem, Massachusetts. The properties were usually multi-family buildings with two-to-four units, which Kritopoulos and Bates then converted into condominiums. Kritopoulos recruited new borrowers to purchase the individual condominium units. Kritopoulos also recruited Plunkett to prepare false tax returns in the names of the buyers to support the fraud scheme. Together, Kritopoulos and Bates created other false documents and provided them to lenders to obtain fraudulent mortgages for financing the purchases.

The false information submitted to lenders included, among other things, representations concerning the borrowers’ employment, income, assets and intent to occupy the property. Specifically, the false employment information included representations that borrowers were employed by entities that were, in fact, shell companies “owned” by Kritopoulos and were used to advance the fraudulent scheme. The employment information also included false representations about the income that the borrowers received from the entities, when the borrowers actually received little or no income from them. Furthermore, the income asserted on the borrowers’ loan applications substantially overstated their true income. The false information also included representations that the recruited borrowers intended to live in the properties that they were purchasing, when they did not intend to do so.

Plunkett assisted the scheme by preparing tax returns for some of the borrowers that contained false and inflated income. Some of those tax returns were submitted to lenders in support of the fraudulent loan applications. Plunkett also signed letters falsely representing that his CPA firm had prepared corporate tax returns for one of the shell entities, when in fact no such returns had ever been prepared or filed.

The borrowers did not have the financial ability to repay the loans, therefore in all but two instances among 21 properties, they defaulted on their loan payments, resulting in foreclosures and losses to the lenders.

Plunkett was sentenced by U.S. District Court Judge Richard G. Stearns to time served (approximately one day in prison) and three years of supervised release. Plunkett was also ordered to pay $147,500 in restitution to victims and $64,284 in restitution to the Internal Revenue Service. In February 2019, Plunkett pleaded guilty to one count of bank fraud and one count of aiding in the submission of false tax returns.

In October 2022, Kritopoulos was sentenced to four years in prison and two years of supervised release after being convicted by a federal jury of one count of conspiracy, two counts of wire fraud, six counts of bank fraud, one count of aiding the preparation of a false income tax return and one count of obstruction of justice. Kritopoulos was also ordered to pay restitution to lender victims in the amount of $2,238,354 and forfeiture of $700,000. On Jan. 25, 2023, Bates was sentenced to 18 months in prison and three years of supervised release after previously pleading guilty to one count of conspiracy, three counts of wire fraud affecting a financial institution and two counts of bank fraud. Bates was also ordered to pay restitution in the amount of $2,238,354 and forfeiture of $700,000.

United States Attorney Rachael S. Rollins; Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division; Christina Scaringi, Special Agent in Charge of the U.S. Department of Housing and Urban Development, Office of Inspector General, Northeastern Regional Office; and Joleen D. Simpson, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston made the announcement today. Assistant U.S. Attorneys Victor A. Wild, of Rollins’ Securities, Financial & Cyber Fraud Unit and Brian M. LaMacchia, of Rollins’ Affirmative Civil Enforcement Unit prosecuted the case.

 

Joseph Bates III, 42, Wakefield, Massachusetts, was sentenced today in federal court in Boston for a mortgage fraud scheme involving at least two dozen fraudulent loan transactions and $4.3 million in losses to lenders.

Bates was originally charged in September 2018 along with co-defendants George Kritopoulos and David Plunkett.  From 2006 through 2015, Bates, Kritopoulos and others engaged in a scheme to defraud banks and other financial institutions by causing false information to be submitted to those institutions on behalf of borrowers – people recruited to purchase properties – located primarily in Salem, Mass. The properties were usually multi-family buildings with two-to-four units, which the co-conspirators then converted into condominiums. Kritopoulos recruited new borrowers to purchase the individual condominium units. Together, Kritopoulos and Bates created and provided false documents to defraud lenders for financing the purchases. Kritopoulos also recruited Plunkett to prepare false tax returns in support of the fraud scheme.

The false information submitted to lenders included, among other things, representations concerning the borrowers’ employment, income, assets and intent to occupy the property. Specifically, the false employment information included representations that borrowers were employed by entities that were, in fact, shell companies “owned” by Kritopoulos and were used to advance the fraudulent scheme. The employment information also included false representations about the income that the borrowers received from the entities, when the borrowers actually received little or no income from them. Furthermore, the income asserted on the borrowers’ loan applications substantially overstated their true income. The false information also included representations that the recruited borrowers intended to live in the properties that they were purchasing, when they did not intend to do so. Plunkett assisted the scheme by preparing tax returns for some of the borrowers that contained false and inflated income. Some of those tax returns were submitted to lenders in support of the fraudulent loan applications.

Because the borrowers did not have the financial ability to repay the loans, in all but two instances among 21 properties, they defaulted on their loan payments, resulting in foreclosures and losses to the lenders.

Bates was sentenced by U.S. Senior District Court Judge Douglas P. Woodlock to 18 months in prison and three years of supervised release. In October 2018, Bates pleaded guilty to one count of conspiracy, three counts of wire fraud affecting a financial institution, and two counts of bank fraud. Bates was also ordered to pay restitution in the amount of $2,238,354 and forfeiture of $700,000.

In October 2022, Kritopoulos was sentenced to four years in prison and two years of supervised release after being convicted by a federal jury of one count of conspiracy, two counts of wire fraud, six counts of bank fraud, one count of aiding the preparation of a false income tax return and one count of obstruction of justice. In February 2019, Plunkett pleaded guilty to one count of bank fraud and one count of aiding in the submission of false tax returns and is scheduled to be sentenced on Feb. 9, 2023.

United States Attorney Rachael S. Rollins; Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division; Joleen D. Simpson, Special Agent in Charge of the Internal Revenue Service – Criminal Investigation Division, Boston Office; and Christina Scaringi, Special Agent in Charge of the U.S. Department of Housing and Urban Development, Office of Inspector General, Northeastern Regional Office made the announcement today. Valuable assistance was provided by the Salem Police Department. Assistant U.S. Attorneys Victor A. Wild, of Rollins’ Securities, Financial & Cyber Fraud Unit, and Brian M. LaMacchia, of Rollins’ Affirmative Civil Enforcement Unit prosecuted the case. Assistant U.S. Attorney Carol Head, Chief of Rollins’ Asset Recovery Unit, is handling the forfeiture and restitution aspects of the case.

Victor Santos, aka Vitor Santos, 63, Watchung, New Jersey, and Fausto Simoes, 69, Millington, New Jersey, a New Jersey real estate developer and attorney each admitted today to conspiring to orchestrate a mortgage fraud scheme that led to over $3.5 million in losses.

According to documents filed in this case and statements made in court:

From September 2007 through November 2008, Santos, a real estate developer, and Simoes, an attorney, conspired with each other and others to fraudulently obtain mortgage loans with a total value of more than $4 million. Santos orchestrated the scheme to recruit fake, or “straw” buyers to purchase 12 properties in Newark. Using the identity and credit of these straw buyers allowed Santos, Simoes, and their conspirators to conceal their identities from the lender as the actual purchasers of the properties. Santos and others induced people to be straw buyers by agreeing to pay each straw buyer at least $5,000, secure tenants to lease the purchased properties, and cover costs associated with the property, including fees associated with the real estate purchases and the mortgage payments on each of the fraudulently obtained mortgages. Santos, Simoes, and others also caused the submission of fraudulent and false loan applications and documents to the mortgage lender.

Simoes conducted the closings of 10 of the fraudulent transactions and helped perpetuate the fraud by falsely reporting that the straw buyers were providing the cash required at closing when, in fact, Simoes received those funds from a shell company controlled by Santos and another conspirator. For several transactions, Simoes also failed to disclose to the lender that the shell company controlled by Santos and another conspirator would receive a substantial payout from the loan proceeds.

Shortly after the properties were acquired, Santos and his conspirators broke their promises to pay the mortgages. The straw buyers, in whose names the mortgages were obtained and thus were responsible for the payments, did not have enough money to pay the fraudulently obtained mortgages and defaulted, which caused the lender, Fannie Mae, and insurers to lose more than $3.5 million.

Conspiracy to commit bank fraud carries a maximum potential penalty of 30 years in prison, a fine of $1 million or twice the gross gain to the defendants or twice the gross loss to others whichever is greatest. Sentencing for Santos is scheduled for April 12, 2023, and for Simoes, April 13, 2023.

Two other conspirators previously pleaded guilty and are awaiting sentencing.

U.S. Attorney Philip R. Sellinger made the announcement.

U.S. Attorney Sellinger credited special agents of the Federal Housing Finance Agency, Office of Inspector General, under the direction of Special Agent in Charge Robert Manchak, and special agents of the FBI, under the direction of Special Agent in Charge James E. Dennehy in Newark, with the investigation leading to the guilty pleas.

The government is represented by Special Assistant U.S. Attorneys Charlie Divine and Kevin DiGregory of the Federal Housing Finance Agency, Office of Inspector General, assigned to U.S. Attorney’s Office’s Economic Crimes Unit in Newark.