Man pleads guilty to fraud in property flipping case

Home mortgage lenders lost up to $2.5 million

November 03, 2001|By Dennis O'Brien | Dennis O'Brien,SUN STAFF

A 38-year-old Owings Mills man charged with operating a property flipping scheme that defrauded home mortgage lenders of up to $2.5 million pleaded guilty in federal court in Baltimore yesterday to mail fraud in connection with the scheme.

Leon Wilkowsky pleaded guilty before U.S. District Judge J. Frederick Motz to a single count of mail fraud in connection with his 1998 purchase and quick resale of an East Baltimore rowhouse.

In a statement of facts submitted to Motz yesterday, Assistant U.S. Attorney Joseph Evans said that Wilkowsky's company, B&S Management Inc., bought a house in the 1700 block of N. Patterson Park Ave. for $14,000 on Feb. 17, 1998, and sold it the next day for $53,000.

Wilkowsky secured a $37,100 first mortgage from Amerifirst Mortgage Corp. of New York to finance the sale by using inflated appraisals of the property. He also submitted papers to Amerifirst showing that he took a second mortgage from the buyer for $10,600, Evans said in the statement.

But Evans also said Wilkowsky's second mortgage was a "sham" to inflate the value of the property and ensure an inflated selling price.

Wilkowsky forgave the second mortgage and even gave his buyer an unspecified amount of cash at settlement as an inducement to buy the house, the statement said.

The two-story brick rowhouse was one of a number of houses that Wilkowsky bought at low prices and then "rapidly resold at fraudulently inflated values," according to the statement.

Wilkowsky bought a number of low-cost city properties between 1997 and 2000 and quickly resold them to numerous investors at prices two and three times their market value, according to court papers filed by federal prosecutors.

When Wilkowsky's buyers defaulted on the mortgages, the lenders who financed Wilkowsky's sales lost between $1.5 million and $2.5 million because of the inflated mortgages, according to the court papers.

Wilkowsky faces a maximum sentence of five years in prison and a $250,000 fine when Motz sentences him Feb. 8.

Motz said yesterday that under federal sentencing guidelines, Wilkowsky's sentence will be based on the total amount of the losses caused by the scheme and not just losses incurred on the North Patterson Park Avenue home.

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