Real Estate Developer Gets Nine Years in Mortgage Fraud Scheme

A Long Island real estate developer previously jailed for laundering bribes to a California congressman has been sentenced to nine years in prison for a Queens and Brooklyn-based mortgage fraud conspiracy that resulted in more than $98 million in losses, the U.S. attorney for New York’s Eastern District said.

Thomas Kontogiannis, 62, was sentenced Wednesday in Brooklyn by U.S. District Judge Kiyo Matsumoto to 108 months of imprisonment for conspiracy to commit bank fraud, U.S. Attorney Loretta Lynch said.

The defendant and seven others pleaded guilty to the scheme in October 2010.

Kontogiannis defrauded Washington Mutual Bank and DLJ Mortgage Capital, Inc., which is a subsidiary of Credit Suisse, through the development of two tracts of land - College Point’s Edgewater Development and East New York’s Loring Estates –that he subdivided.

He then staged sales of the properties financed by mortgage loans to straw buyers and directed others to prepare false loan files to create the appearance that the buyers were creditworthy homeowners, Lynch said.

The mortgages were supported by fraudulent appraisals depicting completed homes, but the buildings had yet to be constructed or had fictional addresses.

The mortgage files contained fraudulent title abstract reports and other documents that were designed to indicate that the lender’s interest was protected by title insurance and that the seller, which was controlled by Kontogiannis, had clear title to convey, the U.S. attorney said.

The loans were financed by Interamerican Mortgage Corp., which was later known as CIP Mortgage Corp., and Coastal Capital Corp.

The lenders were all controlled by Kontogiannis, Lynch said.

After the loans were closed, the defendant ensured that the mortgages and deeds were not recorded, which allowed him to continuously sell the same properties. He then sold the loans to Washington Mutual Bank or DLJ Mortgage Capital, the U.S. attorney said.

Kontogiannis changed the addresses in East New York to addresses in Howard Beach to conceal the multiple sales of the same properties. He also directed others to make monthly payments on the mortgages to ensure that none of them became delinquent.

The payments ceased in 2007 with $98 million in principal outstanding on the mortgages, the U.S. attorney said.

The defendant will serve his sentence concurrently with the remainder of an eight-year sentence he received in 2008 for laundering money to former U.S. Rep. Randy “Duke” Cunningham, a California Republican.

Cunningham admitted to taking $2.4 million in bribes.