Ten people were arrested Thursday on federal charges in connection with a mortgage fraud land-flipping scheme that involved about 200 properties and $15 million in fraudulently obtained loan proceeds.
U.S. Attorney Michael J. Sullivan announced that a federal grand jury returned an indictment against the 10, charging them with 62 counts of wire fraud and one count of conspiracy to launder money. According to the indictment, several of the defendants allegedly purchased distressed properties within low-income neighborhoods and then resold them rapidly at artificially inflated values between 1998 and 2002.
Individuals known as “runners” allegedly were used to recruit prospective buyers and were paid finders’ fees for the successful sale of a property. The defendants allegedly told prospective buyers they would not have to make any down payments and also promised them they would receive money back at closing.
The prospective buyers were then referred to mortgage brokers who also were allegedly involved. Since many of the prospective buyers could not financially qualify for loans, the defendants allegedly generated and then processed fraudulent loan applications and other documentation to obtain loans for the buyers. The false documentation included bogus down-payment information, fraudulent income information and false documentation to show improvements to the properties that were never made.
The defendants also allegedly used appraisers to generate false appraisals for the artificially inflated property values. In exchange for participating, the mortgage brokers and appraisers apparently received incentive payments such as cash or hidden interest in real estate deals, as well as continued business.
Once the buyers were approved for the loans, they were referred to real estate attorneys who allegedly generated fraudulent closing documentation.
Charged in the fraud were: Albert Innarelli, Michael Bergdoll, Anthony Matos, Pasquale Romeo, Wilfred Changasie, Theodore Jarrett, Mark McCarthy, James Smith, Jonathan Frederick and Joseph Sullivan.
If convicted, the defendants each face a maximum prison term of 30 years and a fine of $1 million for each wire fraud charge, and a maximum prison term of 10 years and a fine of twice the amount of funds involved in the money laundering conspiracy.
The case is a result of a joint investigation by the Federal Bureau of Investigation, the Internal Revenue Service’s Criminal Investigation and the U.S. Department of Housing and Urban Development, and is being prosecuted from the U.S. Attorney’s office in Springfield, Mass.
The FBI recently made clear that it has ramped up its efforts to dismantle a variety of financial crimes, including mortgage and loan fraud. Since 2000, FBI financial fraud investigations overall have resulted in more than 11,466 indictments, 11,362 convictions and approximately $8.1 billion in restitution orders.
Mortgage fraud is a growing problem in the real estate industry, with more cases coming to the surface in recent years. Perpetrators often are real estate agents, mortgage brokers, title agents, appraisers and attorneys, and the complex crimes can cost financial companies millions of dollars in losses and litigation expenses.
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