Historic mortgage origination fraud scheme
In the longest prison sentence ever given to a Congressman, Former Representative Randy “Duke” Cunningham began his eight year and four month sentence in March 2006 for accepting bribes in the form of yachts, $2.4 million in homes, cash and other bribes, more bribery than any Congressman has ever been caught accepting. New York real estate developer Thomas Kontogiannis, 62, is already serving an eight year prison term for his role in laundering bribes for Rep. Cunningham. Kontogiannis (aka Konty) began his initial sentence in 2008.
Kontogiannis was sentenced today for his role in the $98 million mortgage fraud scheme for nine years, reduced from the initial sentence of 12 years 10 months, originally facing up to 30 years in prison for the charge. U.S. District Judge Kiyo Matsumoto calls this case “one of the largest mortgage origination frauds on record,” for which he has ordered Kontogiannis to serve concurrently for his eight year term for money laundering. “The offense is extremely serious, especially in light of the staggering losses,” Matsumoto said.
How the scheme worked
According to court documents, from 2003 to 2007, Kontogiannis sold mortgages he had obtained through repetitious straw buyers (friends, family and employees), to Washington Mutual and DLJ Mortgage Capital Inc (a Credit Suisse subsidiary). The scheme involved taking out multiple loans on the same properties, and falsification of applications on New York area properties.
Records show that the mortgages were financed by entities controlled by Kontogiannis and then packaged to be sold to secondary buyers at the banks with losses totalling $98 million.
In addition to concurrent prison terms, Judge Matsumoto ordered Kontogiannis to pay that sum back to the banks in full.
Veteran real estate and mortgage broker, Stan Brody weighed in, “In the scheme of things, when compared to the billion “earned” by the investment banks, “rating” agencies and AIG for their criminal CDO’s, $98 million in fraudulent loans is chicken feed, and further proof that the DOJ and FBI seeking a high “batting average” ALWAYS go after the easy to get, low hanging fruit. NOT ONE of those responsible for taking the world to its economic knees has been brought up on charges, let alone convicted of anything greater than a parking ticket. The only way that Bernie Madoff got caught was the tanking market… I guess not going after the real crooks is the DOJs’ way of rewarding Wall Street for taking him down.”
