Boston U.S. Attorney’s Office Files More Charges In Mortgage Fraud Case

Last January, the Boston Globe published a lengthy investigative piece on an apparent mortgage fraud scheme run by several individuals. The story alleged that the ring was led by one Michael David Scott, a Mansfield, Massachusetts real estate developer, who recruited several other co-conspirators to assist him in the bank fraud scheme. At the time of the Globe’s January 2010 story, no one had yet been arrested or charged.

That all changed last week when Scott was indicted by a federal grand jury on 62 counts of wire fraud, bank fraud, and money laundering in connection with this operation. Yesterday, things changed even more in this case, when the Boston U.S. Attorney’s Office charged (separately) a former Bank of America Corp. branch manager and a Virginia-based real estate recruiter with wire fraud in this unfolding federal case. The case alleges that Scott masterminded and led a long-running mortgage fraud scheme to convert at least 50 buildings (usually three-deckers) into about 170 condos in some of the city’s poorest neighborhoods. Some units sold at market prices, but almost none were made habitable. More than 100 of the properties eventually went into foreclosure. Aside from defrauding investors, almost all of those properties ended up being abandoned and blighted, resulting in even further deterioration of the communities they were located in. The case is being prosecuted in U.S. District Court in Boston (federal court,) and not Massachusetts state Superior court, due to the interstate nature of the alleged bank fraud involved. Scott is scheduled to appear before a federal judge Sept. 13, but federal court officials have not yet set an appearance date for Fowler or Samuels.

Arthur Samuels, a former manager at Bank of America’s Fields Corner branch in Dorchester, and Jerrold Fowler, of Norfolk, Virginia, were both charged yesterday in U.S. District Court in Boston with wire fraud (this charge applies because almost all of the electronic and physical transactions occurred over state lines.) Jerrold Fowler was charged for his alleged role as a recruiter for investors – many of them out of state – who participated in the alleged scheme to defraud lenders. Previously, in the indictment handed down last week against Michael David Scott, federal prosecutors said Scott worked with “associates,” but at the time the Grand Jury heard the evidence against him, those “associates” were not identified. It seems apparent now that these “associates” were, at the least, Arthur Samuels and Jerrold Fowler. Samuels’s role, inside Bank of America, allegedly involved manufacturing false documents to support the fraudulent loan applications involved. According to an FBI affidavit filed in the case, Scott, Fowler, Samuels, and others in the ring paid people to purchase condominiums, promised the buyers that they didn’t have to invest in the sale, represented that the mortgage payments would be paid for by tenants, and told buyers that they would share in the profits when the properties were eventually resold. The criminal complaint also alleged the group falsely inflated purchase prices, incorrectly said buyers would live in the homes, and falsely claimed inflated investors assets to qualify for the mortgages granted.

As a Boston white collar criminal defense lawyer, I can assure you that Samuel’s and Scott’s legal problems are not limited to the U.S. Attorney’s office only. Aside from these federal criminal charges against them, Samuels and Scott were also sued civilly in the last year by Bank of America in Suffolk Superior Court for their alleged roles in defrauding the lender of $1.5 million, as part of this “inside job.” That civil case is still pending, and Bank of America officials declined to comment on that case.