Monday, April 04, 2016

Ex-FDIC Lawyer Gets 12 Months For Orchestrating Sham Short Sale Of Her Underwater Home To Her Live-In Boyfriend, Falsely Certifying That Deal Was Made At Arms-Length; Defendant Also Pocketed $3K In Relocation Assistance Despite Not Actually Moving Out While Duping Lender Into Taking $300K 'Haircut'

From the Office of the U.S. Attorney (Alexandria, Virginia):
  • Michelle M. Borzillo, 59, of Bristow, was sentenced [] to 12 months and one day in prison, followed by two years of supervised release, for defrauding Wells Fargo Bank in connection with the sham short sale of her home to her live-in boyfriend. She was also ordered to pay $288,497 in restitution and to forfeit the proceeds of her offense.

    Borzillo pleaded guilty on Nov. 17, 2015 to committing bank fraud. According to court documents, the defendant was a senior attorney at the Federal Deposit Insurance Corporation (FDIC) until September 2014. In 2007, she purchased a home in Nokesville for $850,000, with mortgages totaling $807,500 from Wells Fargo Bank. In 2013, she engineered the short sale of her Nokesville home to her boyfriend, who had been living with her at the property for several years.

    In order to induce Wells Fargo Bank to approve the short sale and relieve the defendant of her mortgage obligations, the defendant falsely represented to her lender that the sale of the property was an arm’s-length transaction to someone with whom she had no close personal relationship. She also falsely certified that she was moving out of the property, and claimed she was suffering a financial hardship due to the then-federal pay freeze.

    In reality, as the defendant has admitted, she had no intention of moving out of the property, despite accepting $3,000 in relocation assistance in connection with a federal program designed to assist financially distressed short sellers. As a senior FDIC employee, the defendant also had not been subject to the federal pay freeze, and her base annual pay had steadily increased during the time she owned the home, to $230,000 at the time of the short sale. As a result of the fraudulent short sale transaction, Wells Fargo Bank was required to write off nearly $300,000 in losses.

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