Four Arrested On Bank Fraud And Conspiracy
Defendants Allegedly Defraud Bank Of America Of More Than $500,000 By “Flipping” Property To Catholic All-Girls School For Nearly $1 Million
An indictment was unsealed earlier today charging individuals with bank fraud and conspiracy arising from a scheme to take advantage of plans by an all-girls high school in Hempstead, New York, to expand its campus and build an athletic field for students.
The defendants, two couples, including a real estate attorney and the officer of a real property corporation, were arrested earlier today by special agents of the Federal Bureau of Investigation and will be arraigned this afternoon before United States Magistrate Judge William D. Wall at the United States Courthouse in Central Islip, New York. If convicted, each defendant faces up to 30 years of imprisonment, fines, and the forfeiture of $539,000 in allegedly illegal profits arising from the scheme.1
The charges and arrests were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, and George Venizelos, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).
As set forth in the indictment, defendants Sofia Atias, Joseph Atias, and Nicholas Pellegrini conspired to defraud Bank of America of over half a million dollars by fraudulently avoiding foreclosure on a home through a fraudulent “short sale” of the property to a straw buyer -- defendant and co-conspirator Paula Berckhoff, also known as “Paula Pellegrini” -- and then profiting from the home’s re-sale or “flip” to Sacred Heart Academy, a Catholic all-girls high school that paid the conspirators almost $1 million for the property to accomplish long-sought plans to improve and expand its facilities.
Early in 2011, defendant Sophia Atias had defaulted on some $750,000 in a mortgage and home equity loan secured by a home she owned at 83 Cathedral Avenue, Hempstead, New York, which sat adjacent to the high school. As Bank of America began foreclosure proceedings, defendants Sophia Atias, Joseph Atias, and Nicholas Pellegrini, acting as the couple’s attorney, negotiated with representatives of Sacred Heart Academy and ultimately won a commitment from the school to buy the property for $925,000 -- an amount that would have been enough to repay the Atias’ debts to the bank.
Instead, the defendants allegedly conspired to induce Bank of America to agree to a short sale of the Cathedral Avenue property. Short sales are an alternative to lengthier and often costly foreclosure proceedings. In a short sale, a bank agrees to accept whatever price a defaulting borrower can get on the immediate or short sale of a property in foreclosure. As the bank did here, lenders may also release the borrower from any obligation to repay any remaining balances owed on the original mortgage or loans.
Knowing that Sacred Heart Academy had already agreed to buy the Cathedral Avenue home for $925,000, the defendants nonetheless induced Bank of America to agree to a short sale of the house for only $480,000 to Jefferson Real Property Corporation, whose secretary and treasurer was defendant Nicholas Pellegrini’ s wife. As part of their agreement with the bank, Mrs. Pellegrini, using the name Paula Berckhoff, and Mrs. Atias, both falsely represented that neither would receive any undisclosed proceeds from the transaction and further claimed that the short sale was not an attempt to “flip” or use “straw buying” to avoid repayment of Atias’ debt.
In fact, as charged in the indictment, several months after the fraudulent short sale, the Atiases and Pellegrinis did re-sell or “flip” the Cathedral Avenue home to Sacred Heart Academy for the previously agreed price of $925,000. Given the fraudulent inducement to accept the short sale, Bank of America was defrauded of almost $540,000.
“Through a web of lies and false documents, the defendants took advantage of a school’s desires to improve its students’ athletic facilities, lied to win concessions from a bank, and then lied again by ‘flipping’ the property and defrauding the bank of over half a million dollars. This is not a case about tough bargaining. This is fraud, pure and simple,” stated United States Attorney Lynch.
FBI Assistant Director-in-Charge Venizelos stated, “As alleged in the indictment, while the defendants did not brandish a weapon, they stole over half a million dollars from Bank of America based upon their false misrepresentations and filing of false documents with the victim-lender. Bank fraud burdens lenders with bad loans and weakens our financial markets. Individuals who engage in this criminal activity should be reminded that they will be vigorously investigated and held accountable.”
The government’s case is being prosecuted by Assistant United States Attorney Charles P. Kelly.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency task force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
Name: SOFIA ATIAS
Age: 44 years old
Residence: Great Neck, NY
Name: JOSEPH ATIAS
Age: 50 years old
Residence: Great Neck, NY
Name: NICHOLAS A. PELLEGRINI
Age: 51 years old
Residence: Garden City, NY
Name: PAULA BERCKHOFF
Age: 34 years old
Residence: Garden City, NY
1 The charges in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.