BOSTON — A Lynn accountant has pleaded guilty to aiding a multi-year mortgage fraud scheme of defrauding banks by filing fraudulent tax returns and creating false information to be sent to those financial institutions on behalf of borrowers who were unable to repay the loans.
As borrowers did not have the financial ability to repay the loans, they often defaulted on their loan payments, resulting in foreclosures and millions of dollars of losses to financial institutions, according to the U.S. Attorney’s office.
David Plunkett, 53, of Lynn, pleaded guilty in U.S. District Court on Monday to bank fraud and aiding in the submission of false tax returns. Sentencing was scheduled for June 25.
George Kritopoulos, 46, of Salem, one of the alleged leaders of the mortgage fraud scheme, was indicted in September and has pleaded not guilty.
Co-conspirator, Joseph Bates III, 38, of Lynnfield, pleaded guilty in October to conspiracy, three counts of wire fraud affecting a financial institution and two counts of bank fraud, prosecutors said.
Plunkett’s role included preparing fraudulent tax returns for the borrowers, which included false or inflated income and were submitted to lenders in support of fraudulent loan applications. He also signed letters falsely representing that his CPA firm had prepared corporate tax returns for one of the shell employment entities, when none had been filed, prosecutors said.
Prosecutors said Bates and others engaged in a scheme to defraud banks and other financial institutions from 2006 to 2015 by causing false information to be submitted to those institutions on behalf of borrowers, who were people recruited to purchase properties.
The multi-family properties, primarily located in Salem, were converted by the co-conspirators into condominiums, who then recruited other borrowers to purchase the units, which were financed by fraudulent mortgage loans, prosecutors said.
False information submitted to lenders included representations concerning the borrowers’ employment, income, assets and intent to occupy the property, prosecutors said.
The scheme included co-conspirators submitting false employment information that showed borrowers were employed by entities that were actually shell companies used to advance the fraudulent scheme, prosecutors said.
Income information was distorted as borrowers received little to no income from the entities. Information also indicated borrowers intended to live in the properties they purchased which was not the case, prosecutors said.
Plunkett’s charges carry a sentence of up to 33 years in prison, six years of supervised release, and fines up to $1.25 million, or twice the gross gain or loss, whichever is greater.