CPA Sentenced for Mortgage Fraud in Decade-Long Scheme

CPA Sentenced for Mortgage Fraud in Decade-Long Scheme
CPA Sentenced for Mortgage Fraud in Decade-Long Scheme

David Plunkett, 57, from Lynn, Massachusetts, was sentenced today in federal court in Boston for his participation in a mortgage fraud scheme that spanned multiple years and involved the creation of fraudulent tax returns and the submission of fraudulent letters to lenders.

The Mortgage Fraud Case

CPA arrested for long term mortgage fraud

In September 2018, charges were brought against Plunkett, Joseph Bates III, and George Kritopoulos, who were also co-defendants in the case. From 2006 until 2015, Bates, Kritopoulos, and Plunkett 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 the city of Salem, Massachusetts.

The scheme targeted banks and other financial institutions in the state of Massachusetts. The properties, which were typically multi-family buildings with two to four units, were then converted into condominiums by Kritopoulos and Bates. In order to purchase the individual condominium units, Kritopoulos was successful in recruiting new borrowers.

In addition, Kritopoulos was responsible for recruiting Plunkett to support the fraud scheme by preparing false tax returns in the names of the buyers. Together, Kritopoulos and Bates forged additional documents, which they then presented to lending institutions in order to obtain fraudulent mortgages for the purpose of financing the purchases.

The lenders were given false information, which included representations concerning the borrower’s 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. In addition, 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.

Plunkett also signed letters that contained false representations that his CPA firm had prepared corporate tax returns for one of the shell entities, when in reality, no such returns had ever been prepared or filed. These letters were sent despite the fact that Plunkett was aware that the representations were false.

Because the borrowers did not have the financial ability to repay the loans, they defaulted on their loan payments for all but two of the 21 properties, which led to foreclosures and losses for the lenders. Because the borrowers did not have the financial ability to repay the loans, the lenders suffered losses.

Plunkett was given a sentence of time served (the equivalent of approximately one day in prison) and three years of supervised release by Judge Richard G. Stearns of the United States District Court.

Plunkett was also ordered to pay restitution to the victims in the amount of $147,500, as well as restitution to the Internal Revenue Service in the amount of $64,284. Plunkett entered a guilty plea in February 2019, admitting to one count of bank fraud as well as one count of assisting in the submission of false tax returns.

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.

Furthermore, the court ordered Kritopoulos to pay $2,238,354 in restitution to the victims of the lending scam and to forfeit $700,000.After Bates had previously pleaded guilty to one count of conspiracy, three counts of wire fraud affecting a financial institution, and two counts of bank fraud, on January 25, 2023, he was sentenced to 18 months in prison and three years of supervised release.

Bates was also ordered to pay restitution to the victim of the fraud. In addition, the court mandated that Bates pay restitution in the amount of $2,238,354 and forfeiture in the amount of $700,000.

Today’s announcement was made by United States Attorney Rachael S. Rollins, Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation’s Boston Division, Christina Scaringi, Special Agent in Charge of the Office of Inspector General for the United States Department of Housing and Urban Development’s Northeastern Regional Office, and Joleen D. Simpson, Special Agent in Charge of the Internal Revenue Service’s Criminal Investigation in Boston.

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.

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