A couple of days ago the Massachusetts Appeals Court issued its decision in Commonwealth v DeGennaro, a case involving theft, real estate fraud and embezzlement. As a factual backdrop the Court found the following:
In one instance, over a six week period the defendants received over forty eight thousand dollars in two installments from the victim. This money constituted the deposit for the construction of a new home. The defendants represented to the victims that the money would be kept in an interest bearing escrow account. Instead, the defendants deposited the money into their commercial checking accounts. They wrote checks from the account and depleted the money. None of the expenditures pertained to the victim’s home construction. The construction never took place. The money was never returned. No home was built.
In another transaction the victim tendered checks in an amount more than fifty-five thousand dollars. Again, the victim understood that the defendants would use the money as a down payment for the construction of a house. In less than two months that account too was depleted. As with the first case, construction delays were negotiated and yet again no construction took place. The deposits were never returned to the victim.
In another matter, DeGennaro hired a subcontractor to install plumbing and heating for homes that he had built. The first check tendered to this victim by the defendants bounced. A subsequent check cleared. The victim continued to perform services but was never paid. This pattern repeated itself relative to another property where this victim was providing the same services for the defendants.
It is no surprise to me that the defendants in these cases were convicted. What does surprise me is that these cases were prosecuted criminally in the first place. These cases almost never get presented to law enforcement. The reason for that is simple. If the victim is correct and he was actually defrauded by the contractor the sum of money taken from him will motivate the district attorney to look for jail time after a conviction. There are not many defenses to cases with these fact patterns. Money was moved from one shell LLC to another. The funds were depleted not for construction purposes but for the enrichment of the defendants. No work was performed. This was nothing more than a scam that was repeated several times with several customers. Yet victims in these cases who consult lawyers will realize very quickly that if they go to law enforcement with their complaints a prosecution will ensue, there will likely be a felony conviction involving jail time and restitution will never be made. The victim will never get back his deposit. So what happens? Usually the builder will continue with his scheme, paying off one victim with funds stolen from another. If he gets lucky, in a good real estate market he might get a windfall with a construction project or housing development and be able to pay everybody back. Rarely do the builders come to the end of their rope as happened with DeGennaro. In his decision, Justice Sikora put it best when he wrote “This appeal requires interpretation of a seldom litigated criminal statute”. It is seldom litigated because the victims know that they will never get paid if the defendant gets prosecuted.