Stilianos (Stan) Mavroulis, 67, and his son, Kyriakos (Kirk) Mavroulis, 30, both of Baltimore, Maryland, pleaded guilty (Stan guilty plea, Kirk guilty plea) to embezzlement and unlawful conversion of government property in connection with a scheme to defraud the Government National Mortgage Association (GNMA) of $1.3 million.
According to their plea agreements, Stan Mavroulis was owner and president, and Kirk Mavroulis was the vice president of Fidelity Home Mortgage Corporation (FHMC), 1012 North Point Road, Baltimore. From 2007 to October 2008, the defendants defrauded the GNMA by diverting to their own benefit the proceeds of Federal Housing Administration (FHA) claims from mortgage loans that were due the GNMA.
Specifically, the Mavroulises admitted that they received $1.3 million in FHA claim funds for 11 defaulted mortgage loans, which were deposited in a FHMC clearing account between June and August 2008. Claim funds are insurance proceeds paid by FHA to the lender when a FHA insured mortgage goes into default. The defendants failed to forward the FHA claim funds within 48 hours, as required by GNMA regulations, from the FHMC clearing account to GNMA, which would have, in turn, used the funds to pay off the investors of mortgage backed securities (MBS).
The defendants caused false reports to be made to GNMA which omitted the fact that FHA had paid out claims on defaulted loans and that FHMC had not paid over the proceeds as required. The defendants used the proceeds of the FHA claim funds for their own benefit, including the payment of legal fees, salaries and other business expenses at FHMC, and for other purposes. As a result of the Mavroulis‘ conversion of the FHA insurance proceeds and failure to forward the funds to GNMA for payment to MBS investors, in November 2008, GNMA as guarantor of the MBS, paid approximately $1.3 million to the affected investors.
As part of their plea agreements, the defendants will be required to pay restitution in the full amount of the loss, which the government maintains is $1,342,118.72, but which the defendants believe is less. The final amount of loss will be determined at sentencing.
The defendants face a maximum sentence of 10 years in prison and a fine of $250,000. U.S. District Judge Marvin J. Garbis has scheduled sentencing for both on February 21, 2012 at 10:00 a.m.
Stan and Kirk Mavroulis were previously convicted of filing a false individual income tax return and failure to file a return, respectively, in connection with a six year scheme in which the Mavroulis‘ diverted funds from FHMC to pay for personal family expenses. These personal expenses were classified as “other expenses” on FHMC‘s books, which diminished the company’s gross income and resulted in a tax loss of between $200,000 and $400,000.
This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement 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.
The guilty pleas were announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Kenneth R. Taylor, Jr. of the Housing and Urban Development Office of Inspector General – Office of Investigations.
United States Attorney Rod J. Rosenstein thanked Assistant U.S. Attorney Sean B. O’Connell and First Assistant U.S. Attorney Stephen M. Schenning, who are prosecuting the case.