MANCHESTER — A Manchester man who duped banks out of millions in a scheme that targeted people facing foreclosure was sentenced to six years in federal prison on Monday.
At times tearful, Michael Prieto told a federal judge that his wife had divorced him and moved away with their two children, his mother has mortgaged the family home to pay his legal bills, and he has nothing.
“I did not intend for this business to be part of any crime,” Prieto said at U.S. District Court in Concord. “I stand before you sorrowful, humiliated, defeated.”
Last year, a jury convicted Prieto of mail fraud. His companies convinced homeowners facing foreclosure to sign over their deeds with the expectation they could stay in their house for reduced rent, get their finances in order and buy back the house.
In actuality, he flipped the house to straw buyers, who received $5,000 to apply for second mortgages on the properties. Prieto took the cash from the mortgages, stripping the homes of any equity. When he stopped paying the mortgages and the banks foreclosed, the original owners had no idea what had taken place.
His lawyer, defense attorney Michael Iacopino, has argued the business model would have worked had real estate values kept climbing at 10 to 15 percent a year.
“The market was very hot. Most of the lending institutions pretty much threw caution to the wind,” Iacopino said about the 2000s, when the scheme was at its height.
In court papers, prosecutors said Prieto’s effort involved 54 properties; banks and mortgage companies lost $5.6 million.
But Iacopino said the figure was much less. Using another calculation, Iacopino put the losses at $2.37 million. District Court Judge Steven McAuliffe based restitution on that number, and left it open for further revision.
McAuliffe chastised Prieto for saying he did not intend to commit a crime. He called Prieto’s actions calculated, organized and persistent.
“You knew what you were doing,” McAuliffe said. He said others were injured who won’t benefit from restitution. The straw buyers ended up with ruined credit. And homeowners lost an opportunity to reclaim their homes.
Prosecutors have said the banks ended up with heavily mortgaged properties with little equity. They included RBS, Wells Fargo, Bank of America, Citibank, Chase and SunTrust.
Prieto, who plans to appeal the verdict, will have to pay restitution at the rate of $200 a month once he is freed from prison. He was ordered to report to federal prison on April 5, but he could be granted his freedom while the case is on appeal.
Many of his extended family members — he grew up in a Nashua in a family of 10 brothers and sisters — attended Monday’s hearing. Many relatives wrote letters vouching for Prieto. They include his brother Joseph, a Manchester lawyer, and his uncle, the Rev. Vincent Tobin, a Catholic priest who presided at Prieto’s wedding at St. Peter’s Basilica in 2001.