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Mark Hayward's City Matters: No rescue for victims of house swindle

New Hampshire Union Leader

September 04. 2013 7:32PM

Remember that sinking feeling we felt five, six years ago? Jobs were harder to come by. Our credit cards were maxed out. Houses no longer accumulated value like a gambler on a winning streak.

By the fall of 2008, the panic was on. We lost jobs, dreams and houses. (Of course, banks got bailed out.)

Although it's taken five years, Manchester schemer and financier Michael Prieto will soon lose his freedom. Prieto was convicted of a fraud charge last month in federal court. Prosecutors say he made an estimated $5 million in a scheme that took advantage of struggling homeowners in the early stages of the real estate bust.

Prieto is no Wall Street genius who designed fancy credit-default swaps that helped to tank the economy. Rather, he is a low-grade white-collar criminal who worked out of an Elm Street office and crafted a scheme to fleece bank and homeowner alike.

However, the irony in this case is unsettling. Federal law enforcement found out about Prieto only when the little guy — beleaguered homeowners — complained. But prosecutors said banks and investors were the real victims, and restitution will go to them.

First, a rundown of the crime.

Prieto and his fellow crooks found their victims from newspaper foreclosure notices.

Days away from foreclosure, homeowners signed over the deed to their house to a Prieto company. The promise was that the homeowner could stay in their house (which had plenty of equity), pay a reduced rent, get their finances in order and buy back the house.

Unknown to them, Prieto flipped the house to a straw man. Prieto's companies then mortgaged the property to the hilt, duping banks with the straw man's name and financial history.

The straw man got $5,000, according to paperwork in federal court. Prieto netted thousands from refinancing — $475,000 for a house in Ossipee, $300,000 for a house in Nashua, $256,000 for a house in Chester, $389,500 for a house in Litchfield. The list goes on and on.

At the same time, he was collecting monthly rent checks from homeowners.

"We thought this was our saving grace," said Patricia, a Manchester school teacher who lives in Nashua and asked that I not print her last name. Her son was sick, her husband had lost his warehousing job, and the Prieto deal avoided the discomfort of asking family for help.

Nearly two years later, a real-estate agent approached her out of the blue. The house was in foreclosure, and they would soon have to leave their home of 20 years.

"My knees were like jelly; I was in shock," she said in the dining room of her apartment.

Prieto was the last of six people to be convicted in the scheme, said Mark Zuckerman, the federal prosecutor who handled his case. The other five pleaded guilty and testified against Prieto. They received sentences of 14 months in prison to probation.

Prieto's attorney, Manchester lawyer Michael Iacopino, wouldn't comment for this article, noting a pending sentencing hearing in two months.

The conviction doesn't leave a happy ending.

Zuckerman said the actual victims are the banks, or to be more precise whoever ended up holding the mortgage-backed securities that included the defaulted loans.

He admits that sounds cold and calculating, but the homeowners ended up staying in their homes for a couple of years for reduced rent.

"There was certainly a level of deception that went on with some of the homeowners, but they would have lost their homes sooner than they did," Zuckerman said.

Of course, the original lenders sold the mortgages as fast as they lent the money, Zuckerman said. The paper got wrapped into mortgage-backed securities. The eventual security holders didn't know about the fraud until prosecutors contacted them for information to build the case, Zuckerman said.

To add further insult, the New Hampshire Banking Commission caught up with Prieto in 2006 and said he was an unlicensed mortgage lender. Prieto reached a settlement with the Banking Commission in early 2007. He stopped using liens, paid a $10,000 fine, retooled his scheme and continued roping in homeowners.

Ingrid White, deputy banking commissioner, said the commission turned the case over to the New Hampshire Attorney General's Office in 2007. That apparently went nowhere. In 2010, the Attorney General's Office received a new complaint, the Banking Commission helped investigate and eventually turned it over to the feds.

Of course, this is no solace to Patricia. She teared up while discussing the most difficult part of the ordeal — telling her grown children the family home was gone.

To this day, she reads about the Prieto case online. The agent she dealt with, Richard Winefield, received three years probation and six months house arrest. At one point, Winefield tried to have his real estate license restored, which upsets Patricia. His efforts eventually foundered.

Winefield will have to find a new job, like she had to find a new home, Patricia said.

She wants to see Prieto go to prison for a long time. His lawyer has requested a new trial.

"We thought we were doing the right thing," Patricia said. "If we still had the house in our hands, it would have never been in foreclosure."

Mark Hayward's City Matters appears Thursdays in the New Hampshire Union Leader and He can be reached at

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