| Three Massachusetts men were charged last week in federal court in Boston 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.
George Kritopoulos, 46, of Salem, a real estate developer, was arrested and 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.
Joseph Bates III, 38, of Lynnfield, was charged with one count of conspiracy, three counts of wire fraud, and two counts of bank fraud. David Plunkett, 52, of Lynn, was also charged with one count of bank fraud and one count of aiding in the preparation of a false tax return.
Kritopoulos, Bates and others allegedly 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, from 2006 through 2015.
The properties were usually multifamily 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. 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; the borrowers received little or no income from those companies. 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, which they did not intend to do. Plunkett allegedly 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.
