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Ally Financial Scammer Sentenced to Four-Year Prison Term

MAY 28, 2014 5:32pm ET
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The head of a California mortgage lender who perpetrated a $5.3 million mortgage fraud scheme against Ally Financial will serve more than four years in prison.

Stephen Pitchersky, who pleaded guilty to wire fraud in September, was sentenced to 51 months in prison and ordered by U.S. District Court Judge John Padova to pay $3.2 million of restitution.

The scheme was uncovered by the Special Inspector General for the Troubled Asset Relief Program. SIGTARP had jurisdiction because Ally's predecessor, GMAC, was a Tarp recipient.

The fraud took place between August 2009 and January 2011. According to investigators, Pitchersky's origination company, Nationwide Mortgage Contracts, made misrepresentations to Ally to secure a $10 million warehouse line of credit. Specifically, he claimed to have had another $10 million warehouse line of credit with a company named MPL, which turned out to be business that Pitchersky ran.

To refinance the mortgages held by other banks for Nationwide customers, Ally required the lender to disburse funds through a title company. Pitchersky used a fictitious company called Hanover. Since Ally was unaware this company was not real, Pitchersky had complete control over money Nationwide Mortgage acquired from Ally's warehouse line.

Overall, Ally sent Nationwide approximately $5.3 million to pay off 23 first mortgages for Nationwide clients, but Pitchersky used this money to pay off mortgages for other customers, SIGTARP said.

Ally terminated its warehouse agreement with Pitchersky's firm in early 2011.

In total, $17.2 billion of taxpayer funds were invested in Ally Financial through Tarp. The Treasury Department still owns 17% of Ally.

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