Massachusetts accountant pleads guilty to bank fraud in mortgage scam

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David Plunkett, a 53-year-old accountant in Lynn, Mass., pleaded guilty to bank fraud this week for his part in a scheme to defraud mortgage lenders between 2006 and 2015.

Plunkett also pleaded guilty to one count of aiding in the submission of false tax returns in entering his plea in Boston federal court, according to the U.S. Attorney's Office in Massachusetts. Plunkett faces sentencing in June.

Plunkett allegedly participated in a scam with co-conspirators in which people were recruited to buy residential housing using false income, employment and occupancy information when they applied for loans. The properties primarily were two- to four-unit structures located in Salem, Mass.

After the properties were purchased, the co-conspirators would convert them into condominiums and recruit more borrowers to purchase individual units using fraudulent mortgages, according to charges filed in court. Many borrowers later defaulted on their loans, costing lenders millions of dollars in losses.

Plunkett pleaded guilty to assisting in the scheme by preparing tax returns with false and inflated income to help borrowers apply for loans, as well as letters that falsely represented his firm had prepared corporate tax returns for shell entities borrowers claimed were their employers.

Employer fraud has been a concern in other parts of the country as well. Last year, Fannie Mae issued multiple warnings that fake employers had been discovered on several loan applications submitted to finance properties in California.

Income falsification is the fastest-growing form of mortgage fraud, according to CoreLogic's latest annual fraud report. Income fraud was up 22.1% year-over-year in the second quarter of 2018, followed by occupancy fraud (up 3.5%) and schemes in which the nature of the transaction was misrepresented (up 0.6%).

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