The online headlines were splashy, but none of them were true, according to the Massachusetts attorney general’s office.
In their first criminal cyber-harassment case, state prosecutors allege that the developer of a failed condominium project in Revere fabricated press releases and news articles designed to harm the reputation of a creditor to whom he owes more than $30 million.
Steven C. Fustolo, 57, was arraigned Friday in Woburn District Court, accused of using fake names to publish online posts falsely claiming that Connecticut investment adviser John C. Howe and his company, the Patriot Group LLC, were in trouble with the Internal Revenue Service and the Securities and Exchange Commission.
“We will not tolerate people hiding behind their computer screens and committing criminal intimidation or harassment,” Attorney General Maura Healey said in a statement.
Nearly a decade ago, Fustolo planned a luxurious, 242-unit condo project on Revere Beach called the Ocean Club. He secured presale deposits on roughly 100 units, including a $3.25 million penthouse.
The Patriot Group was among his lenders, according to court documents in the criminal case, backing him with $12.7 million in 2007.
Fustolo defaulted on the loan a year later, as support for such ambitious development efforts dried up amid a national financial crisis. Including interest, his debt now exceeds $30 million, the attorney general’s office said.
An attorney for Fustolo, Ingrid Martin, said that as the case proceeds, “it will be clear that no law has been broken.” Fustolo pleaded not guilty Friday and was released on personal recognizance.
An attorney for Howe, who is fighting a related case against Fustolo in US Bankruptcy Court in Boston, did not respond to a request for comment.
Beginning last year, Fustolo allegedly orchestrated an elaborate scheme to defame Howe and the Patriot Group in an attempt to pressure them into settling the debt. According to court filings, Fustolo hired a Web developer to create a site called Whistle Blowers International, where he used various pseudonyms to write damaging online posts about Patriot that he also paid to have published on other sites.
For example, a press release last August declared Howe was under investigation for tax fraud by the Internal Revenue Service. An ensuing fictitious news article reported that Howe and his company had been turned in by “a Boston whistleblower.”
Court documents depict a nightmarish saga for Howe — and a frightening tale for other business owners — that unfolded almost exclusively on the Internet, with no way to stop it. Another New England company, RR Auction Co. of Amherst, N.H., claimed in a suit last month to be the victim of similar attacks by a former customer.
To ensure maximum exposure, Fustolo’s Web developer allegedly used a technique called “search engine optimization” to push the posts to the top of Google searches for Howe and the Patriot Group. A Google search for “John Howe Patriot Group” on Friday afternoon produced several posts about tax fraud investigations that appeared on the first page of results.
Fustolo also allegedly mailed his articles to Howe’s business associates and neighbors. The attack “caused significant financial and emotional distress,” Healey said. She added that State Police searched Fustolo’s office and home on Thursday, and the investigation continues.
Fustolo’s next court date is a pretrial hearing on Sept. 11.