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Tuesday, March 27, 2012

Former Nashua man indicted on money laundering and mail fraud charges as ringleader of mortgage scheme

CONCORD – A federal grand jury has indicted a former Nashua man whom investigators say was the ringleader of a mortgage scheme that duped financially strapped homeowners out of their properties, which were eventually lost to foreclosure.

Michael Prieto will make his first appearance in U.S. District Court in Concord on Tuesday afternoon to answer charges of mail fraud and money laundering, according to federal court documents.

The indictments allege Prieto coordinated the mortgage scheme from offices in Manchester, controlling a number of employees and agents involved in the scam, and that he identified struggling homeowners to target.

Prosecutors say dozens of New Hampshire homeowners, including at least one in Nashua, were targeted by the conspiracy.

The scheme was part of a long-running criminal conspiracy whose members defrauded lenders and homeowners across New Hampshire, Assistant U.S. Attorney Michael Gunnison told Judge Steven McAuliffe when another defendant, Richard Winefield, was sentenced.

Two other people – Walter Bressler and Sadie Stanhope Ng – have also pleaded guilty and are scheduled to be sentenced in April, according to court documents.

Prieto has said in previous interviews that there was no scheme, but rather a refinancing program intended to help struggling homeowners, which would have worked if they paid their agreed-upon rent.

“The agreement and the program … was not a scam,” Prieto previously told The Telegraph. “It was designed for its purpose, which was helping people pay off their debts, giving them breathing room, giving them an opportunity to stay in their homes for two years.”

Prieto said it was a genuine effort to help people with debts. He noted, as have prosecutors, that they also paid off other creditors.

Yet prosecutors claim that Prieto and others sought out homeowners who were having trouble making ends meet and offered to buy the property, take over the loan and rent the home back to homeowners. They also contracted to let the homeowner buy the home back later, at a higher price, although no homeowner was ever able to do so, Gunnison said.

Meanwhile, and without the homeowners knowing it, Gunnison said, the other conspirators were flipping the homes, selling them at inflated prices to bogus straw buyers who had taken out much larger loans. Those larger loans paid off the original mortgages and were then defaulted on while the difference, often tens of thousands of dollars, was pocketed, according to court documents.

The indictments accuse Prieto of overseeing the entire enterprise.

Prieto recruited straw buyers, used misleading newspaper ads to find buyers, and caused mortgage lenders to be defrauded because some of the applications included false information about income, assets and liabilities, employment and that the homes would be the applicant’s primary or secondary residences, according to court documents.

He typically paid the straw buyers $5,000 for each transaction, according to the indictments. The charges include a list of 10 payments of $5,000 to several alleged straw buyers from several different LLCs.

Prieto started and used several companies to run the scheme, according to court records, including Houston Finance and Leasing Inc., Hyannis Investments LLC, Houston Real Estate Management LLC, Rock Point Management LLC, 2Maisie5 Realty I LLC, and 5Summit5 Realty LLC.

He kept the proceeds from the scheme in a TD Bank account, paid himself large amounts of money from the account and also made payments using the account on restaurant meals and trips to Foxwoods Casino, according to the indictments.

Prieto stopped making mortgage payments in most cases by October 2007 and defaulted on more than $13 million in loans. Dozens of homes were foreclosed on, according to court documents.

He also didn’t tell the original homeowners that the homes had been sold to straw buyers, so several continued making rent payments to his LLCs even after the mortgages had been defaulted, including more than $26,000 in November 2007.

Joseph G. Cote can be reached at 594-6415 or jcote@nashuatelegraph.com. Also follow Cote on Twitter (@Telegraph_JoeC).