Real estate agent sentenced in flipping scheme

Perry Hall man ordered to pay HUD $342,341, gets home detention

October 19, 2001|By John B. O'Donnell | John B. O'Donnell,SUN STAFF

A Perry Hall man who admitted using falsified information to obtain government-backed mortgages for buyers of 88 flipped houses was sentenced yesterday in federal court to six months of home detention and ordered to pay $342,341 in restitution.

George A. Schiaffino, 48, and his real estate firm, Kayhouse Realty Inc., pleaded guilty in July to a single count of making false statements in connection with an application for a mortgage that was insured by the Federal Housing Administration. A co-defendant, William Dennis White, who was an unlicensed real estate agent at the firm, also pleaded guilty and is to be sentenced today.

U.S. District Judge Andre M. Davis ordered Schiaffino to begin making monthly payments of at least $6,000 within 60 days. He also told him to make a lump sum payment of $62,001 within six months, representing proceeds from his sale of the real estate firm's assets last year.

Schiaffino sold the assets of Kayhouse, which was part of the Century 21 network, after the U.S. Department of Housing and Urban Development barred him and the firm from all dealings with the federal government for three years. That meant the firm could not be involved in house sales financed with mortgages insured by FHA, an agency of HUD.

Davis also placed Schiaffino on probation for five years but said that term could be shortened if he finishes making restitution payments sooner.

A "statement of facts" said Schiaffino and his firm "caused a total of about 88 loan applications that contained false information to be submitted and accepted by HUD." It said prosecutors focused on 16 fraudulent deals they knew about July 1, 1999, when Schiaffino disclosed information about others as part of plea negotiations.

That often happens in federal cases, said Kathleen O. Gavin, an assistant U.S. attorney who prosecuted Schiaffino. "Part of the incentive for a defendant to come in is usually the government is willing to stop at that point in terms of a loss calculation or prosecution of further crimes," she said.

She said HUD's loss on all 88 deals has not been calculated.

The $342,341 that Schiaffino was ordered to pay to HUD represents an estimate of the agency's loss on the 16 loans after paying defaulted mortgages and selling the houses.

Gavin told Davis that the figure has risen to $446,261 because HUD has received less money for the houses than anticipated. But she recommended that the original figure be used to figure Schiaffino's obligation.

Davis indicated that White would have to share restitution responsibilities but said he "appears far less able to pay" than Schiaffino.

Gavin said a pre-sentence report showed that Schiaffino has "a net worth of almost $1 million."

Schiaffino told Davis that he regretted his actions, calling them the result of "poor judgment - and I'm paying the price."

He added, "I hope that what comes out of this is that real estate people and mortgage officers learn what the rules are and stay within the parameters."

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