Mortgage Fraud- Arrest against Joseph Bates
Joseph Bates III, age 42, from Wakefield, Massachusetts, was sentenced today in federal court in Boston for his involvement in a mortgage fraud scheme that resulted in at least two dozen fraudulent loan transactions and $4.3 million in losses to lenders. Bates was found guilty of the scheme.
The initial charges against Bates and his co-defendants, George Kritopoulos and David Plunkett, were brought forward in September of 2018. From 2006 until 2015, Bates, Kritopoulos, and others participated in a scheme to defraud banks and other financial institutions by causing false information to be submitted to those institutions on behalf of borrowers, who were people recruited to purchase properties, primarily in Salem, Massachusetts.
The scheme was carried out by causing false information to be submitted to those institutions on behalf of borrowers located in Salem, Massachusetts. Typically, the properties were multi-family buildings with two to four units that the conspirators converted into condominiums after purchasing them.
In order to purchase the individual condominium units, Kritopoulos was successful in recruiting new borrowers. In order to defraud lenders into providing financing for the purchases, Kritopoulos and Bates worked together to create and provide false documents. In addition, Kritopoulos was responsible for recruiting Plunkett to assist in the preparation of fraudulent tax returns in support of the fraud scheme.
The lenders were given false information, which included representations concerning the borrowers’ employment, income, assets, and intention to occupy the property, among other things. Specifically, the fraudulent 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. These shell companies were used to further the scheme.
In addition, the employment information contained false representations about the amount of income that the borrowers received from the entities, when in reality, the borrowers received either a very small amount of income or none at all from them. In addition to this, the potential borrowers’ reported incomes on their loan applications were grossly inflated in comparison to their actual incomes.
Furthermore, the false information included representations that the recruited borrowers intended to live in the properties that they were purchasing, whereas in reality, the recruited borrowers did not intend to do so. Plunkett played a role in the scheme by assisting the borrowers by preparing their tax returns, which included fabricated and exaggerated income information. Lenders were provided with copies of some of those tax returns as supporting documentation for the fraudulent loan applications.
The borrowers were unable to repay the loans, so in all but two of the 21 properties, they defaulted on their loan payments, which led to foreclosures and losses for the lenders. The defaults occurred because the borrowers did not have the financial ability to repay the loans.
U.S. Senior District Court Judge Douglas P. Woodlock handed down the sentence that called for Bates to serve 18 months in prison followed by three years of supervised release. Bates entered a guilty plea for one count of conspiracy, three counts of wire fraud affecting a financial institution, and two counts of bank fraud in October of this year (2018). In addition, the court mandated that Bates pay restitution in the amount of $2,238,354 and forfeiture in the amount of $700,000.
After being found guilty by a federal jury on 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 sentenced to four years in prison and two years of supervised release in October 2022. He was also convicted of one count of obstructing justice.
Plunkett entered a guilty plea to one count of bank fraud and one count of assisting in the submission of false tax returns in February of 2019, and he is scheduled to be sentenced on February 9, 2023.
Today’s announcement was made by United States Attorney Rachael S. Rollins, as well as by Joseph R. Bonavolonta, the Special Agent in Charge of the Federal Bureau of Investigation’s Boston Division; Joleen D. Simpson, the Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation Division’s Boston Office; and Christina Scaringi, the Special Agent in Charge of the Office of Inspector General of the United States Department of Housing and Urban Development’s Northeastern Regi The Salem Police Department was able to offer helpful assistance in this situation.
The prosecution of the case was handled by Assistant United States Attorneys Victor A. Wild and Brian M. LaMacchia of Rollins’ Securities, Financial, and Cyber Fraud Unit and Rollins’ Affirmative Civil Enforcement Unit, respectively. The aspects of the case involving restitution and forfeiture are being handled by Assistant United States Attorney Carol Head, who is also the Chief of Rollins’ Asset Recovery Unit.