Stilianos (Stan) Mavroulis, 68, was sentenced by U.S. District Judge Marvin J. Garbis to 40 months in prison, and his son, Kyriakos (Kirk) Mavroulis, 31, both of Baltimore, Maryland, to a year and two days in prison, each followed by three years of supervised release, for embezzlement and unlawful conversion of government property in connection with a scheme to defraud the Government National Mortgage Association (GNMA) of $1.3 million. Judge Garbis ordered that they pay restitution of $1,342,118.72.
According to their plea agreements, Stan Mavroulis was owner and operator, of Fidelity Home Mortgage Corporation (FHMC), a mortgage lending company located at 1012 North Point Road, Baltimore. Kirk Mavroulis was an employee of FHMC. From June through August of 2008, the defendants defrauded the GNMA by diverting to their own benefit the proceeds of Federal Housing Administration (FHA) claims on foreclosed mortgages that were due to GNMA investors.
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 the investors of mortgage backed securities. 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 the mortgage backed securities investors, in December 2008, GNMA as guarantor of the mortgage backed securities, paid approximately $1.3 million to the affected investors.
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 Mavroulises 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.
The sentences were announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Joe Clarke of the Housing and Urban Development Office of Inspector General – Office of Investigations.
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.
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 prosecuted the case.