Federal authorities on Thursday arrested four people, three linked to real estate firms in the Wildwoods, as part of an alleged $15 million mortgage fraud scheme.
U.S. Attorney Paul J. Fishman announced the arrests of Fredric DiAntonio, 40, of Wildwood, and Louis V. Catarro, 60, of Runnemede, Camden County, who are co-owners of Blue Ocean Realty on New Jersey Avenue in Wildwood.
Fishman also announced the arrests of Kathryn W. Lockwood, 43, of Wildwood Crest, a co-owner of Hoffman Agency North in North Wildwood, and Thomas E. Morello, 55, of Mount Laurel, Burlington County. Morello formed Bay Breeze Development LLC to develop real estate in North Wildwood.
The U.S. Attorney’s Office alleges the four were part of a conspiracy from May 2006 to June 2008 to obtain fraudulent mortgages on properties in Wildwood and North Wildwood.
The indictment said the four defendants “did knowingly and intentionally” devise a scheme to “defraud, and to obtain money and property by means of materially false and fraudulent pretenses, representations and promises."
This is one of several mortgage fraud cases the U.S. Attorney’s Office in New Jersey is working on at the New Jersey shore. Federal authorities already made 11 arrests last year as part of a similar scheme in the Wildwoods that used fraudulent documents to scam money out of lending companies.
Other cases centered at the shore have involved the U.S. Attorney’s Office for the Eastern District of Pennsylvania because the defendants lived in that region.
All four were indicted by a federal grand jury on Wednesday and taken into custody Thursday.
The defendants appeared Thursday afternoon before U.S. Magistrate Judge Karen M. Williams in federal court in Camden, but they did not make pleas at their initial appearance, said Matthew Reilly, a spokesman for the U.S. Department of Justice.
Attempts to reach the defendants at their real estate offices were unsuccessful Thursday.
“You can’t talk to them today. They can’t come to the phone, but I’ll give them the message,” said a woman answering the phone at Blue Ocean Realty.
All four defendants were charged with conspiracy to commit wire fraud, which is punishable by a maximum prison term of 30 years and a $1 million fine. DiAntonio, Catarro and Lockwood were also charged with conspiracy to commit money laundering, which carries a maximum penalty of 10 years in prison and a $250,000 fine.
DiAntonio and Catarro were also charged with making false statements to representatives at HUD. This could bring two years in prison and a $250,000 fine.
The indictment alleged real estate agents DiAntonio, Catarro and Lockwood located properties in Wildwood and North Wildwood that real estate developer Morello was selling.
Unqualified purchasers, dubbed “straw buyers,” were set up to purchase the units and were given kickbacks ranging from $30,000 to $60,000 per sale.
Real estate contracts were drafted and the indictment alleged the agents fraudulently listed deposit fees the buyers were supposed to submit but were never collected.
Fraudulent documents were used at the real estate closings, including U.S. Department Housing and Urban Development settlement statements.
The scheme initially defrauded lending companies but ultimately U.S. taxpayers footed some of the bill because HUD’s Federal Housing Administration backs up bad loans when the borrower defaults.
“By these means, HUD shifted the financial risk of issuing its insured mortgages from the lender to the taxpayer,” stated the indictment. The indictment explained how the alleged scheme worked.
Lenders, the indictment noted, rely on information in loan applications on a purchaser’s assets, employment, income, credit rating, liabilities and other financial information. They also want to know the down payment they will make, and they rely on property appraisals.
Lenders typically want to know if the property will be a primary or secondary home, or simply an investment. After approval, the indictment stated, the lender usually wires the money to a settlement agent such as a title company or an attorney handling the closing. They are in charge of distributing the funds, with most going to the seller.
But at that time, the oceanfront condominium market on the island was saturated and developers were financially stressed.
John C. Lucidi Jr., a Pennsylvania mortgage broker indicted in a previous mortgage fraud case centered in North Wildwood, allegedly worked with DiAntonio, Caratto and Lockwood finding such properties.
Lucidi was named as a co-conspirator but not a defendant in the indictment.
Working together, the four allegedly created sales contracts at inflated prices, which the real estate agents got commissions on. They allegedly did not disclose that the buyer would receive a kickback and had not made a deposit.
The lenders wired money to Mutual Title Agency, Rhino Settlement Services, Shore Title Agency and Silk Abstract Co. for units at the Bay Breeze Development, Sun Ray Beach Development, the Thunderbird Development and other individual properties totaling $15 million in fraudulent loans.
It remains unclear how much of this became a liability to taxpayers. Once the funds for these mortgages were deposited into the title company’s escrow account, the indictment alleged the real estate agents extracted proceeds through checks payable to Blue Ocean Realty and Hoffman Agency North.
Fishman credited FBI agents, some working out of Atlantic City, along with agents at the IRS and HUD with help in the investigation. The case will be prosecuted by R. Stephen Stigall, attorney in charge of the U.S. Attorney’s Office Criminal Division in Camden.
Contact Richard Degener: 609-463-6711 RDegener@pressofac.com