Home Builder Jailed for Straw Buyer Fraud
After he has served his term, Giuseppe Cracchiolo, of Romeo, Mich., will also have three years of supervised release and an additional six months of home confinement, presumably at his home on Pinecone Boulevard in Shelby, which records show he purchased in 2004 for $76,333. In addition, he will have to pay restitution of $1,654,500 to numerous financial institutions, according to the district attorney's office.
"Those who line their pockets with profits from these schemes should know they will not go undetected and will be held accountable," said Erick Martinez, special agent in charge, IRS-criminal investigation.
Cracchiolo pleaded guilty to conspiracy to commit wire fraud in September 2010, but he was not alone in the scheme.
Although the scheme to defraud involved the sale of 15 high-end homes built by Cracchiolo, recruited and paid individuals to act as straw buyers in the fraudulent transactions, court records reveal.
The straw buyers generally had good credit ratings, but not enough income to qualify for the purchases. As a result, another conspirator, Ted Carter, 59, who in December was sentenced to one year and a day imprisonment, followed by two years' supervised release, created false documents, including fictitious W-2 forms and pay stubs to be used by the straw buyers to inflate their asset and income information submitted with their mortgage loan applications.
A straw buyer situation occurs when one person uses their information to state to the lender that they are buying and will occupy the home, but in reality another person will become the occupant. In some cases, no one occupies the purchased home and instead the loan proceeds are divided among the participants and the home is placed back on the market for sale at an inflated price or are just never sold nor occupied. At times, a buyer is not even aware that they are participating in a straw buy, they think they are just investing in a real estate deal.
In this case, after the loans were approved by the lending companies, Cracchiolo used MCI to receive and disburse the illegally gained proceeds. This scheme to defraud resulted in the approval and disbursement of over $4.1 million in fraudulent mortgage loans.
In his pleadings Cracchiolo said that during the conspiracy he arranged to have the illegally obtained loan proceeds transferred back to borrowers and others without the knowledge and approval of the lending companies. All of the properties involved in the fraud went into foreclosure resulting in approximately $2.5 million in losses to the lenders.
If you find yourself in a "too good to be true" real estate scheme, it probably is, says Stephen Moore, the public information officer for the Internal Revenue Service, Criminal Division, in Detroit who was assigned to Cracchiolo's case.
Moore tells AOL Real Estate there are several things potential buyers should be wary of:
• Be wary if sellers make outrageous promises of profit in a short span of time.
• Be cautious of strangers and unsolicited contacts.
• Look out for high-pressure salespeople. They are like con men, they will identify your weaknesses, and say things such as this deal "is not going to be offered anymore."
• Ignore what the seller says the home's value is. Instead do your own leg work. Go through the recent information for comparable sales or property tax information. If the property has been flipped multiple times or been sold in a short span of time and the value keeps going up, this should be a red flag. Essentially, know the history of the property before you sign anything.
• Make sure your know what you're signing. Don't just sign a sheet because they tell you to. You need to know what those documents are. Make sure the application matches your identification if someone else filled out or typed up the information you supposedly provided.
• Speak up when you see misinformation. You know your own income. False W-2s is a big red flag. Know and understand the terms of your mortgage.
Says Moore: "You have to stop and think, 'What am I getting involved in?'"
Sheree R. Curry, who has owned three homes but has never been a straw buyer, is a three-time award-winning journalist who has covered real estate for six years. During her 20-year career, her articles have appeared regularly in the Wall Street Journal, TV Week, and Fortune. She's been writing for AOL Real Estate since 2009 from a Minneapolis-area rental. She seeks a book publisher -- or at least a lender who'll give a reasonable mortgage rate to a self-employed mom.
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