A former self-proclaimed Salem, Mass., 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.
George Kritopoulos, 50, was convicted on May 27, 2022, 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. U.S. District Court Judge Patti Saris scheduled sentencing for Sept. 29, 2022. Kritopoulos was charged in September 2018 along with co-defendants Joseph Bates III and David Plunkett.
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 the 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 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 the recruited borrowers intended to live in the properties 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.
In addition, 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. 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, 2022.
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.