Let’s give a nod to the Real Housewives TV franchise. Few TV shows have exposed as many fraudsters as Real Housewives. It’s even more interesting since that’s not the show’s intent.
We’ve looked at Girardi Keese. Up this time is Joe and Teresa Giudice. This story was all over the news, especially in entertainment news. Joe and Teresa both did jail time, but entertainment news outlets are often thin on details. We’ll try to fill in a few.
Joe was the self-employed owner of G&G Stucco. Over several years Joe and Teresa submitted false W-2s and tax returns as part of multiple mortgage applications, typically indicating that Teresa was employed and listing a large salary. In reality, Teresa was unemployed or working for Joe at a much lower salary.
Documents were submitted to banks via email or U.S. mail resulting in wire fraud and mail fraud charges. These tend to be easy charges to convict on so we them a lot in fraud cases. In total, Joe and Teresa are accused of fraudulently obtaining a little over $4.5 million. This isn’t a complicated fraud, but you can’t accidentally fake W-2s. From my standpoint, the problems here are analogous to issues granting credit to customers.
These frauds took place from 2001-2008. If the mortgage company had properly obtained tax return copies from the IRS, this fraud could have been prevented. My wife used to be a title agent, and in Florida, this is a standard control. Somehow this was missed in New York. Having appropriate controls on customer credit is important. Any business needs to make sure that credit is appropriately matched to the risk of a particular customer. It’s easy to push for the sale or extended terms only to get burned later.
What’s missing in all the news stories and the indictment is the why. What was the end game here? We’ve seen straight-up thefts. People stole money, lived crazy lifestyles, and thought they wouldn’t get caught. Joe and Teresa borrowed money fraudulently and that’s a difference. Lenders know the money is out there and they are going to come looking for it, sooner rather than later. I don’t know what the end game was here. Even the bank fraud we looked at earlier was to try to save a business. Theoretically you save the business and can pay back the loan, there is at least a justification. Joe and Teresa don’t seem to have had much of an end game.
After their fraud came crashing down and they declared bankruptcy, the pair was also accused of hiding assets in bankruptcy. This included misrepresenting the amounts paid by Real Housewives and hiding some of Teresa’s businesses.
Teresa was ultimately sentenced to 15 months in prison. Joe got 41 months and was deported back to Italy following his prison term.