George Kritopoulos, 46, Salem, Massachusetts, a real estate developer, Joseph Bates III, 38, Lynnfield, Massachusetts and David Plunkett, 52, Lynn, Massachusetts were charged today in connection with a 10-year mortgage fraud scheme involving at least two dozen fraudulent loan transactions and $4.3 million in losses to lenders.
According to the charging documents, from 2006 through 2015, Kritopoulos, Bates, 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, Massachusetts. The properties were usually multi-family buildings with two-to-four units, which the co-conspirators then converted into condominiums. The co-conspirators recruited other borrowers to purchase the individual condominium units, which were also financed by mortgage loans obtained by fraud.
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 used to advance the fraudulent scheme. The employment information included false representations about the income that the borrowers received from the entities, when, in fact, the borrowers 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 the borrowers, in fact, 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 many instances, they defaulted on their loan payments, resulting in foreclosures and losses to the financial institutions of more than $4.3 million.
In addition, Kritopoulos sought to obstruct the federal criminal investigation into the mortgage fraud scheme by encouraging others to make false statements and provide false documents. Kritopoulos also made false statements to federal investigators.
Kritopoulos was charged with 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. Bates was charged with one count of conspiracy, three counts of wire fraud, and two counts of bank fraud. Plunkett was also charged with one count of bank fraud and one count of aiding in the preparation of a false tax return.
The charges of bank fraud and wire fraud each provide for sentences of no greater than 30 years in prison and five years of supervised release. The charge of obstruction of justice provides for a sentence of no greater than 20 years in prison and five years of supervised release. The charge of conspiracy provides for a sentence of no greater than five years in prison and three years of supervised release. The charge of aiding the preparation of false tax returns provides for a sentence of no greater than three years in prison and one year of supervised release. Each charge also carries a fine of $250,000, or twice the gross gain or loss, whichever is greater. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.
United States Attorney Andrew E. Lelling; Harold H. Shaw, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; Christina Scaringi, Special Agent in Charge of the U.S. Department of Housing and Urban Development, Office of Inspector General, Northeast Regional Office; and Kristina O’Connell, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston, made the announcement today. Assistant U.S. Attorneys Mark J. Balthazard and Sara Miron Bloom of Lelling’s Economic Crimes Unit are prosecuting the case.
The details contained in the charging documents are allegations. The defendants are presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.