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Riverton Man Sentenced To 97 Months In Prison For Role In Real Estate “Flipping” Scheme

March 12, 2008

Urbana, Ill. - Another defendant has been sentenced to federal prison in a real estate “flipping” scheme that involved properties in Springfield and Decatur, Illinois. Frank Kelly Ciota, 47, of Riverton, Illinois, was sentenced today to a term of 97 months (eight years, one month) in prison, as announced by Rodger A. Heaton, U.S. Attorney for the Central District of Illinois. Chief U.S. District Judge Michael P. McCuskey, who presided at today’s hearing, ordered Ciota to report to the federal Bureau of Prisons on June 27, 2008, to begin serving his prison sentence. An additional hearing has been scheduled for May 15, 2008, to determine restitution to be paid to victims of the scheme.

Ciota was involved in the real estate scheme with co-defendant Gary Knox, 61, of Decatur, who was sentenced last week to 235 months (19 years and seven months) in prison. A third defendant, Dennis Wiese, Jr., 39, of Belleville, Illinois, who performed real estate appraisals, is scheduled for sentencing on May 2, 2008.

The three defendants each pled guilty to their respective roles in the scheme which involved more than 150 fraudulent real estate sales and financing transactions of more than $8 million from 1999 to 2005 in Springfield and Decatur, Illinois. Knox represented himself and his business, Central Illinois Management and Development Company, as being in the business of buying, selling and managing real estate; however, he was not a licensed real estate broker or salesperson. Knox and Ciota obtained more than $3 million for their personal use and to promote the ongoing scheme while Wiese received fees of $350 to $450 per appraisal.

The three men admitted engaging in a practice known as “flipping,” which involved making false representations, including fraudulently inflated real estate appraisals by Wiese which were used by Knox and Ciota to entice owners to sell, buyers to purchase, and lenders to finance rental properties that were sold at substantially higher prices than their reasonable value.

Ciota, who was not a licensed real estate broker or salesperson, admitted that relatives were among his victims whom he advised of investment opportunities in rental real estate. Ciota falsely represented to one couple that they qualified for financing to purchase 12 to 20 houses. As a result, the couple became unwitting buyers of 12 properties, including four in Springfield that were purchased within a three-day period in November 2002 for a total of $229,500. Three of the properties – 830 S. 12th Street; 1320 S. 13th Street, and 1305 South Grand Avenue East – were purchased by the couple, without their knowledge or approval, on November 5, 2002. The fourth property, at 821 S. 14th Street, was sold to the couple on November 8, 2002, also without their knowledge or approval.

The case was investigated by the Federal Deposit Insurance Corporation’s (FDIC) Office of Inspector General, Western Region; the U.S. Postal Inspection Service, Chicago Division; and the Federal Bureau of Investigation, Springfield Division. The Illinois Department of Financial and Professional Regulation, Division of Banks and Real Estate, also provided assistance in the investigation. Assistant U.S. Attorney Timothy A. Bass is prosecuting the case.

Ciota pled guilty to one count of bank fraud; one count of wire fraud; five counts of mail fraud; and one count of conspiracy to commit money laundering.

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