Articles Posted in Criminal Fraud/Embezzlement

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.

A long-suspected underboss of the reigning New England crime family has reached a criminal defense plea agreement with federal and state criminal law authorities, which will net him a 6-year federal prison sentence.

Federal and state law prosecutors and law enforcement officials announced yesterday that Carmen S. “Cheeseman” DiNunzio, 51, of Boston, has agreed to plead guilty to a variety of federal and state criminal charges, thus avoiding prolonged federal and state trials on those charges. If ending in guilty verdicts, those trials could have netted Dinunzio decades in federal and state prisons. Through this plea agreement, authorities secured the guilty findings they sought, secured prison time for DiNunzio, and sent a message to other crime family members that they too can be pursued.

With respect to the federal charges, DiNunzio pled guilty to charges of conspiring to bribe a state official in connection with a proposed sale of materials to a project related to the Massachusetts Central Artery Tunnel Project, otherwise known as the “Big Dig,” and for providing a $10,000 down payment on the illegal payoff. On the state charges, DiNunzio will also plead guilty in a separate hearing in Essex County Superior Court on July 8, 2009, to state charges of extortion, promoting an illegal gambling operation, and conspiring to violate state gaming laws in connection with his role in the ongoing mob-related extortion of local bookmakers. Authorities brought no charges involving violent crime, such as murder, assault and battery, or drug trafficking. These are common charges involving organized crime, along with extortion and money laundering.

Unfortunately, the alleged Ponzi scheme reportedly orchestrated by Bernard L. Madoff continues to cause ripple effects locally in Massachusetts. Aside from wealthy individual investors, many institutional clients have suffered as result of this scheme, including several charitable organizations. While some organizations have suffered substantial financial losses but appear able to absorb the damage without folding, some have suffered a fatal blow.

One such charitable organization is the Picower Foundation of Palm Beach, Florida, run by Jeffry and Barbara Picower, well-known philanthropists. This charitable foundation has been one of the largest philanthropic organizations in the United States, with assets at one point reaching a half a billion dollars. The foundation invested a great deal of its money with Bernard Maddoff, and suffered devastating losses as this scheme collapsed. Barbara Picower, the foundation’s president, announced earlier this week that the foundation has ceased all grant-making activity, and will close its doors. The effect in the Massachusetts medical community will be felt painfully: The Picower Foundation had donated heavily to the Massachusetts Institute of Technology, to fund brain research, and to Harvard Medical School, for diabetes research. Now, that funding, and the important medical results that flow from research in these areas, will cease.

Madoff was arrested by federal authorities earlier this month, on December 11, and charged with orchestrating and running a Ponzi scheme – which essentially pays one set of investors with money from another set. In addition to the Picower Foundation, the Boston family of Carl and Ruth Shapiro, which has funded tens of millions of dollars in medical research in Boston, reportedly lost over $145 million, and the Robert L. Lappin Charitable Foundation in Salem, Massachusetts, was also forced to cease operations last week.