Another Mortgage Fraud
A federal jury in Boston found Salem, Massachusetts resident George Kritopoulos, 50, a former self-described real estate developer, guilty of a 10-year mortgage fraud scheme that involved at least 20 fraudulent loan transactions totaling $6.5 million and caused lenders to lose more than $3.8 million.
On May 27, 2022, a jury found Kritopoulos guilty of one conspiracy charge, two wire fraud charges, six bank fraud charges, one charge of aiding in the preparation of a false tax return, and one charge of obstructing the course of justice.
Judge Patti B. Saris of the U.S. District Court set the sentencing date as September 29, 2022. Co-defendants David Plunkett and Joseph Bates III were also charged with crimes alongside Kritopoulos in September 2018.
In a scheme to defraud banks and other financial institutions, Kritopoulos, Bates, and others operated from 2006 to 2015, primarily targeting Salem-based borrowers by causing false information to be submitted to those institutions on behalf of borrowers who had been recruited to buy properties.
The properties were typically two- to four-unit multifamily buildings that the co-conspirators later converted into condominiums. To finance the individual condominium units, which were also financed by fraudulently obtained mortgage loans, Kritopoulos recruited new borrowers.
Among other things, the borrowers’ employment, income, assets, and intent to occupy the property were among the false information provided to lenders. Particularly, the false employment information included claims that borrowers were employed by organisations when in fact they were shell companies that Kritopoulos “owned” and that were being used to further the fraudulent scheme.
False statements about the income that the borrowers received from the entities were also made in the employment information, despite the fact that this income was either negligible or nonexistent. As a result, Kritopoulos greatly overstated the borrowers’ true income on the loan applications he submitted to lenders. The false information also included claims that the borrowers who were recruited intended to live in the properties they were buying, when in reality they did not.
Plunkett prepared tax returns with false and inflated income after Kritopoulos brought newly recruited borrowers to him. In order to support the fraudulent loan applications, some of those tax returns were provided to lenders.
In all but two of the 21 properties, the borrowers missed loan payments because they lacked the resources to pay back the loans. This led to foreclosures and losses to the lenders of more than $3.8 million.
Additionally, Kritopoulos encouraged Bates and Plunkett to fabricate statements and documents in an effort to give the impression that the businesses were legitimate in order to thwart the federal criminal investigation into the mortgage fraud scheme.
Bates entered a guilty plea to one conspiracy count, three counts of wire fraud involving a financial institution, and two counts of bank fraud in October 2018. The Court has not yet set a hearing date for Bates’ sentencing. Plunkett will be sentenced on September 15, 2022, after entering a guilty plea to one count of bank fraud and one count of aiding in the filing of false tax returns in February 2019.
“Mr. Kritopoulos believed he was above the law and presented himself as a well-known real estate developer. He is not, and this guilty verdict proves it, said United States Attorney Rachael S. Rollins. “Mr. Kritopoulos and his accomplices believed they could enrich themselves by taking advantage of innocent lenders and borrowers.
When the plan started to fall apart, Mr. Kritopoulos tried to get his accomplices to make fictitious documents, but they refused. Mr. Kritopoulos misled investigators in an interview. We are dedicated to holding those responsible for their actions who exhibit this kind of behaviour.
“This verdict demonstrates that George Kritopoulos is a predator who repeatedly preyed on young, helpless victims, using them as a way to line his own pockets while further indulging them in debt. He attempted to obstruct our investigation while lying to the banks on behalf of those victims, according to Joseph R. Bonavolonta, special agent in charge of the Boston Division of the Federal Bureau of Investigation.
Cases of mortgage fraud like this one are crucial for both deterring potential fraudsters and ensuring that those who do commit fraud, like Kritopoulos, are brought to justice. After all, this kind of crime devalues homes and imperils the investments of legitimate buyers.
Joleen D. Simpson, Special Agent in Charge of the Internal Revenue Service – Criminal Investigation Division, Boston Office, stated that mortgage fraud, like many financial crimes, causes untold harm to people, communities, businesses, and the integrity of the financial system.
This guilty verdict demonstrates the IRS Criminal Investigation’s commitment to defending our communities’ financial stability when it is in danger.
The penalties for bank fraud and wire fraud are up to 30 years in prison and five years of supervised release, respectively. A sentence of up to 20 years in prison and five years of supervised release is possible for the crime of obstructing justice. Conspiracy charges carry a maximum five-year prison term and a three-year supervised release period.
A sentence of up to three years in prison and one year of supervised release is possible for the offence of aiding in the preparation of false tax returns. A $250,000 fine, or twice the gross gain or loss, whichever is greater, is also imposed for each offence. A federal district court judge will impose sentences in accordance with the laws and U.S. Sentencing Guidelines that control how sentences are determined in criminal cases.
The announcement was made today by U.S. Attorney Rollins, FBI Special Agent in Charge Bonavolonta, IRS Chief Investigator Special Agent Simpson, and Christina Scaringi, Special Agent in Charge of the U.S. Department of Housing and Urban Development, Office of Inspector General, Northeastern Regional Office. The Salem Police Department provided crucial support. The case is being prosecuted by Assistant U.S. Attorneys Brian M. LaMacchia of Rollins’ Affirmative Civil Enforcement Unit and Victor A. Wild of Rollins’ Securities, Financial & Cyber Fraud Unit.
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