Scam involved at least two dozen fraudulent loan transactions totaling $6.5M
A former self-proclaimed Salem real estate developer has been convicted by a federal jury in Boston in connection with a 10-year mortgage fraud scheme involving at least two dozen fraudulent loan transactions totaling $6.5 million and resulting in more than $3.8 million in losses to lenders, justice officials said.
George Kritopoulos, 50, of Salem, was convicted on May 27 of 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. US District Court Judge Patti B. Saris scheduled sentencing for September 29. Kritopoulos was charged in September 2018 along with co-defendants Joseph Bates III and David Plunkett.
“Mr. Kritopoulos held himself out to be a prominent real estate developer and believed he was above the law,” US Attorney Rachael S. Rollins said in a prepared statement. “This guilty verdict makes it clear that he is not. Mr. Kritopoulos and his co-conspirators thought they could line their pockets by victimizing innocent lenders and borrowers.
“When the scheme began unraveling, Mr. Kritopoulos attempted to have his co-conspirators create phony documents, but they refused. In an interview, Mr. Kritopoulos lied to investigators. We are committed to holding those who engage in this type of behavior accountable.”
Added Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division: “This verdict proves that George Kritopoulos is a predator who repeatedly targeted young, financially vulnerable victims and exploited them to pad his own pockets while driving them deeper into debt.
“He lied to the banks on behalf of those victims and tried to obstruct our investigation. Mortgage fraud cases like this one are important to deter would-be fraudsters from acting, and to ensure those who commit fraud, like Kritopoulos, face justice. After all, this type of crime artificially influences home values and threatens the investments of lawful buyers.”
Joleen D. Simpson explained these are not victimless crimes: “Mortgage fraud, like many financial crimes, creates untold harm to individuals, communities, businesses and the integrity of the financial system,” the Special Agent in Charge of the Internal Revenue Service – Criminal Investigation Division, Boston Office, said. “This guilty verdict is proof of IRS Criminal Investigation’s dedication to protecting the financial health of our communities when they are threatened.”
From 2006 through 2015, Kritopoulos, Bates and others 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.
The properties were usually multi-family buildings with two to four units, which the co-conspirators then converted into condominiums. Kritopoulos recruited new 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. Specifically, the false 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.
The employment information also included false representations about the income that the borrowers received from the entities, when, in fact, the borrowers received little or no income from them. As a result, the income asserted on the borrowers’ loan applications that Kritopoulos submitted to lenders grossly inflated their true income.
The false information also included representations that the recruited borrowers intended to live in the properties that they were purchasing, when the borrowers, in fact, did not intend to do so. Kritopoulos brought newly recruited borrowers to Plunkett, who then prepared tax returns 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 all but two instances among 21 properties, they defaulted on their loan payments, resulting in foreclosures and losses to the lenders of more than $3.8 million, according to justice officials.
In addition, justice officials detailed how Kritopoulos sought to obstruct the federal criminal investigation into the mortgage fraud scheme by encouraging Bates and Plunkett to make false statements and create false documents he hoped would make the companies appear to have been legitimate.
In October 2018, Bates pleaded guilty to one count of conspiracy, three counts of wire fraud affecting a financial institution, and two counts of bank fraud. A sentencing hearing for Bates has not yet been scheduled by the Court. In February 2019, Plunkett pleaded guilty to one count of bank fraud and one count of aiding in the submission of false tax returns and is scheduled to be sentenced on Sept. 15.
The charges of bank fraud and wire fraud each provide for sentences of up to 30 years in prison and five years of supervised release. The charge of obstruction of justice provides for a sentence of up to 20 years in prison and five years of supervised release. The charge of conspiracy provides for a sentence of up to five years in prison and three years of supervised release.
The charge of aiding the preparation of false tax returns provides for a sentence of up to three years in prison and one year of supervised release. Each charge also carries a fine of $250,000, or twice the gross gain or loss, whichever is greater. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and statutes which govern the determination of a sentence in a criminal case.