More than a year after Michael David Scott was charged with running a massive mortgage scam, the Mansfield developer works as a licensed broker selling distressed properties, raising concerns among other Massachusetts real estate professionals about his continued involvement in the industry.
Scott, 46, is awaiting trial after pleading not guilty in US District Court in Boston in 2010 to 68 charges related to allegations that he cheated mortgage lenders. The charges involve the sales of dozens of Dorchester and Roxbury condominiums between 2006 and 2008. Federal prosecutors say that he, two out-of-state recruiters, and others obtained funds to finance deals through “false and fraudulent pretenses’’ in a scam involving the conversion of multiple-family homes into condominiums, many of which went into foreclosure.
Meantime, Scott has started a new company, The Crawford Group LLC. On its website, he says the firm enjoys “a very high success rate with short sales.’’ A short sale allows a property owner to sell his home for less than what is owed on the mortgage, with approval from the lender.
Massachusetts law does not prohibit a real estate broker under criminal indictment from working while his case moves through the court system, but the state does have the power to suspend or revoke a license based on its own finding of wrongdoing.
Dan Rosenfeld, communications director for the state Office of Consumer Affairs and Business Regulation, which oversees licensing of brokers, said the state launched an investigation into Scott’s business practices shortly after the indictments were unveiled. Rosenfeld said the agency “voluntarily stayed our investigation not to risk creating complications for the criminal case,’’ which he called standard practice.
Neither Scott nor his attorney, William H. Kettlewell, responded to requests for comment for this story.
Of more than 26,000 licensed real estate brokers in Massachusetts, Scott is the only one under criminal indictment, according to Rosenfeld. Since last July, he said, the state has suspended 113 licenses for reasons that included misappropriation of funds and failure to complete education requirements.
Several local real estate professionals have lodged complaints with the Division of Professional Licensure, saying Scott shouldn’t be allowed to buy or sell homes until his case is settled. At the least, they say, Scott’s license should note his legal predicament.
“Many innocent people have been used and abused,’’ said Melvin Vieira Jr., an agent with Re/Max Landmark Realtors in Milton. He represented an out-of-state client who says Scott lured him into buying a condominium under false pretenses. “There is something wrong with the system,’’ Vieira said.
Jessie Cuddy, a real estate agent with Boston Bayside Properties in Dorchester, said she has written several letters to the licensing board about the situation.
“It is a disgrace to the real estate professionals in this town and to this industry as a whole that Michael David Scott is still walking around practicing real estate with a license that appears to be in good standing,’’ Cuddy said.
US Attorney Carmen M. Ortiz’s office declined to comment on the state’s decision to stay, or suspend, its investigation into Scott’s practices.
But Kathleen C. Engel, a professor and mortgage specialist at Suffolk University Law School, said the state should not wait for the charges against Scott to be resolved to take action.
“It is the state’s responsibility to protect its residents,’’ Engel said. “If there is reason to believe this broker may have engaged in unlawful - perhaps even criminal - activities in the past, there is good reason for the state to investigate.’’
The 2010 federal indictments came months after a Boston Globe investigation detailed complaints from buyers that they had been scammed by Scott, ruining their credit and leaving them with properties they never could have afforded.
Some of the condos he sold to them needed major renovations, but were never made inhabitable.
Prosecutors say that as part of the alleged scheme, Scott and his partners recruited people to purchase units as investments. Buyers were allegedly told they wouldn’t be responsible for down payments or closing costs, that the mortgage would be covered by rents, and that they would share in profits when the properties were sold.
Lenders, in turn, were given financial information that inflated the buyers’ assets, overpriced properties, and falsely indicated the new owners planned to live in the homes, prosecutors say.
Eventually, most of the condos went into mortgage default and Scott made off with the sale proceeds, some of which he passed on to his partners, the government alleges.
There are several separate cases related to Scott currently moving through state and federal courts.
In January 2011, a Framingham real estate attorney who handled closings for many of Scott’s sales, pleaded guilty in US District Court to multiple counts of wire and bank fraud and money laundering. Michael R. Anderson is scheduled to be sentenced in August. He could be facing decades in prison.
Three years ago, Bank of America Corp. sued Scott, two former bank employees, and three others in Suffolk Superior Court alleging that they were involved in a check-cashing scheme that defrauded the bank of $1.5 million. The civil case is scheduled for trial in September.
Officials at Bank of America declined to comment for this story.
And in US Bankruptcy Court, Scott’s 2009 Chapter 7 filing was recently dismissed after Scott claimed that other court proceedings prevented him from being able to give testimony. The dismissal came after Warren Agin, the trustee in charge of the bankruptcy case, objected to Scott’s request to discharge debts. Agin said Scott concealed records and knowingly made false statements in connection with the filing.
Despite the bankruptcy claim, Scott apparently still has some discretionary income. Last month, he was given permission by a federal judge to go to St. John in the US Virgin Islands with his wife and three children during February school vacation week. US District Court records show that the family planned to stay at the Westin St. John Resort and Villas, billed as a “47-acre tropical hideaway’’ with rooms priced at more than $500 a night. It’s unclear whether the Scott family actually took the trip.
In Dorchester, where many of Scott’s properties were located, his ongoing role in the real estate business frustrates people such as local developer Michael Stella, who has toured foreclosed and abandoned homes Scott once sold at hefty prices. He questions why the state is allowing Scott to work under the circumstances.
“This is someone who clearly orchestrated a huge scheme,’’ Stella said. “The message sent is: do what ever you want.’’
Jenifer B. McKim can be reached at firstname.lastname@example.org.