October 5, 2011 / 10:22 PM / 8 years ago

Developer gets 9 years for $98 million mortgage fraud

NEW YORK (Reuters) - A New York real-estate developer jailed for laundering bribes for former Congressman Randy “Duke” Cunningham was sentenced to nine years in prison Wednesday for playing a lead role in what a federal judge called “one of the largest mortgage origination frauds on record.”

Thomas Kontogiannis, 62, received an initial sentence of 12 years 10 months, which was then reduced by U.S. District Judge Kiyo Matsumoto to nine years, to be served concurrently with the remainder of the eight-year sentence he received in 2008 for laundering money given to Cunningham, a former member of the U.S. House of Representatives who admitted to taking $2.4 million in bribes.

Kontogiannis, a U.S. citizen born in Greece, pleaded guilty in October 2010 to conspiring to commit bank and wire fraud. He faced up to 30 years in prison on that charge.

During the sentencing hearing in Brooklyn federal court, Matsumoto called Kontogiannis’ scheme “one of the largest mortgage-origination frauds on record” in the United States.

“The offense is extremely serious, especially in light of the staggering losses,” Matsumoto said.

From 2003 until 2007, Kontogiannis sold to Washington Mutual WAMUQ.PK and DLJ Mortgage Capital Inc, a subsidiary of Credit Suisse AG CSGN.VX, mortgages he had fraudulently obtained on properties he owned in the New York boroughs of Queens and Brooklyn, according to federal prosecutors in Brooklyn.

Prosecutors said Kontogiannis arranged for family members, friends and employees to pose as straw buyers, taking out mortgages repeatedly on the properties. The mortgages, financed by entities controlled by Kontogiannis, were then sold to secondary buyers at the banks.

The banks lost a combined $98 million when payments stopped coming in on the fraudulent mortgages, prosecutors said. Kontogiannis has been ordered to pay that sum back to the banks in full.

Kontogiannis was arrested in June 2009 along with eight other individuals charged in the fraud. So far, seven of his co-defendants have pleaded guilty, according to the U.S. Attorney’s Office.

An attorney for Kontogiannis, Gregory O’Connell, declined to comment.

The case is U.S. v. Kontogiannis et al., in the U.S. District Court for the Eastern District of New York, no. 09-360.

For Kontogiannis: Gregory O’Connell and Philip Patterson of DeFeis O’Connell & Rose.

For the U.S.: Assistant U.S. attorneys Shannon Jones and Claire Kedeshian.

Reporting by Jessica Dye, editing by Bernard Orr

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