BOSTON — A former self-proclaimed real estate developer has been convicted by a federal jury in Boston in connection with a 10-year mortgage fraud scheme that involved at least two dozen fraudulent loan transactions totaling $6.5 million and losses of more than $3.8 million US dollars led lenders.
George Kritopoulos, 50, of Salem, was convicted on May 27, 2022 of one charge of conspiracy, two charges of wire fraud, six charges of bank fraud, one charge of aiding and abetting the preparation of a false income tax return and one charge of obstruction of justice. US District Court Judge Patti B. Saris scheduled the sentencing for September 29, 2022. Kritopoulos was indicted in September 2018 along with co-defendants Joseph Bates III and David Plunkett.
“Mr. Kritopoulos posed as a prominent real estate developer and believed he was above the law. This guilty verdict makes it clear that he is not,” said US Attorney Rachael S. Rollins. “Mr. Kritopoulos and his co-conspirators thought they could line their pockets by harassing innocent lenders and borrowers. As the plot began to unravel, Mr Kritopoulos tried to get his co-conspirators to create forged documents, but they refused. In an interview, Mr Kritopoulos lied to investigators. We are committed to holding accountable those who engage in this type of behavior.”
“This verdict proves that George Kritopoulos is a predator who has repeatedly targeted young, financially vulnerable victims and exploited them to line his own pockets while driving them even deeper into debt. He lied to the banks on behalf of these victims and attempted to obstruct our investigations,” said Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division. “Mortgage fraud cases like this are important to discourage would-be scammers from acting and to ensure those who commit fraud, like Kritopoulos, are brought to justice. After all, this type of crime artificially affects home values and threatens the investments of legitimate buyers.”
“Mortgage fraud, like many financial crimes, causes immeasurable damage to individuals, communities, businesses and the integrity of the financial system,” said Joleen D. Simpson, Special Agent in Charge of the Internal Revenue Service – Criminal Investigation Division, Boston Office. “This guilty verdict is testament to the IRS Criminal Investigation’s commitment to protecting the financial health of our communities when they are threatened.”
From 2006 to 2015, Kritopoulos, Bates, and others participated in a scheme to defraud banks and other financial institutions by submitting false information to those institutions on behalf of borrowers—people recruited to buy property located mainly in Salem. The properties were mostly apartment buildings with two to four residential units, which the co-conspirators then converted into condominiums. Kritopoulos recruited new borrowers to purchase the individual condominiums, also funded by fraudulent mortgage loans.
The false information provided to the lenders included, among other things, representations about the borrowers’ employment, income, assets and intention to occupy the property. In particular, the false employment information contained representations that borrowers were employed by companies that were in fact “owned” by Kritopoulos shell companies and were being used to further the fraudulent scheme. The employment information also contained misrepresentations about the income that the borrowers received from the companies, when in fact the borrowers received little or no income from them. As a result, the income claimed on the borrowers’ loan applications that Kritopoulos submitted to the lenders greatly inflated their true income. The misinformation also included representations that the solicited borrowers intended to reside in the properties they purchased, when in fact the borrowers did not intend to do so. Kritopoulos brought newly recruited borrowers to Plunkett, who responded by filing tax returns that included false and inflated income. Some of these tax returns were submitted to lenders in support of fraudulent loan applications.
Because borrowers were unable to repay the loans, they defaulted on their loan payments at all but two of 21 properties, resulting in foreclosures and losses to lenders of more than $3.8 million.
In addition, Kritopoulos attempted to obstruct the federal criminal investigation into the mortgage fraud program by encouraging Bates and Plunkett to provide false information and create false documents that he hoped would make the companies appear legitimate.
In October 2018, Bates pleaded guilty to one count of conspiracy, three counts of wire fraud involving 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 and abetting the filing of false tax returns and is scheduled to be sentenced on September 15, 2022.
The charges of bank fraud and wire fraud each carry prison terms of up to 30 years and five years of supervised imprisonment. The charge of obstruction of justice carries a prison sentence of up to 20 years and five years in prison under supervision. The charge of conspiracy carries a prison sentence of up to five years and three years in prison under supervision. The allegation of aiding and abetting the preparation of false tax returns carries a prison sentence of up to three years and one year in prison under supervision. Each charge also carries a fine of $250,000 or twice gross profit or loss, whichever is greater. Penalties are imposed by a federal district court judge based on the US Sentencing Guidelines and the statutes governing the determination of a sentence in a criminal proceeding.
The announcement was made by US Attorney Rollins, FBI SAC Bonavolonta, IRS CI SAC Simpson and Christina Scaringi, Special Agent in Charge of the US Department of Housing and Urban Development, Office of Inspector General, Northeastern Regional Office. The Salem police provided valuable assistance. Assistant U.S. Attorneys Victor A. Wild of Rollins’ Securities, Financial & Cyber Fraud Unit and Brian M. LaMacchia of Rollins’ Affirmative Civil Enforcement Unit are prosecuting the case.
