Even as the real estate market slowed in late 2005 and 2006, the two-story house in St. Petersburg's Shore Acres neighborhood had no problem finding buyers. In less than a year, it sold three times at ever-increasing prices.
Now, federal prosecutors have an explanation: At least one of the sales was part of a mortgage fraud conspiracy first revealed by the St. Petersburg Times.
In information filed this month in U.S. District Court in Tampa, Clearwater real estate investor Mark L. Lepzinski is accused of conspiring with felon Victor Clavizzao to obtain mortgages on the Huntington Street property and another St. Petersburg house, even though Lepzinski lacked sufficient income.
Clavizzao, acting as a mortgage broker though not licensed as such, "worked with Lepzinski to pick an amount specifically so that the income would be sufficient to induce the lender to part with the money,'' court records show.
"These material misrepresentations allowed Lepzinski to borrow money for properties that he simply could not afford,'' defrauding lenders of a total of $889,600, the records say.
Lepzinski, who declared bankruptcy in February with $1.55-million in debts, has agreed to plea guilty to conspiracy to defraud. He faces a maximum of five years in prison and $250,000 in fines.
Neither Lepzinski, who turns 51 today, nor his lawyer returned calls seeking comments.
Clavizzao, who pleaded guilty in August in the same conspiracy, is free on bail while awaiting sentencing Jan. 14. He too could get five years, though he must pay up to $11.9-million in fines and restitution.
Over the past year and a half, the Times has detailed numerous transactions involving Clavizzao, who has a long prison record for fraud and grand theft, and Lepzinski, who left a $112,000-a-year job as a Merrill Lynch financial adviser in 2004 to try his hand at flipping houses when the market began to boom.
Among the suspect deals were three quick sales of the house at 4825 Huntington St. NE in Shore Acres.
In late 2005, the owners thought they were selling to Clavizzao only to discover at closing that the real buyers were Lepzinski and his wife, Peggy. The Lepzinskis paid $535,000 but mortgaged the house for $599,000, leaving them with tens of thousands of dollars in extra cash for renovations that were never made.
Clavizzao, then working for McNulty First Lending in St. Petersburg, rented the house from the Lepzinskis. Records show that in August 2006 they sold it for $650,000 to an airline pilot who was friends with a former McNulty partner. Three months later, the pilot sold the house for $700,000 to Walter and Barbara Norton, grandparents of Clavizzao's girlfriend.
The Nortons told the Times that Clavizzao had pressured them into putting their names on the purchase documents, claiming he would lose his job if they didn't sign.
In all, prosecutors say, Clavizzao fraudulently obtained nearly $6-million in mortgages on 13 homes and condos throughout Pinellas County. Among them is a house on 62nd Street N in St. Petersburg where he helped Lepzinski obtain a $189,000 mortgage from BNC Bank, a subprime subsidiary of Lehman Bros., which collapsed in September in the biggest bankruptcy in history.
As of July, when the Times reported on Lepzinski's own bankruptcy, he was touting his services as a "private financial adviser'' and still pitching real estate as a good investment. "When you fall off the horse, you get back up,'' he said at the time.
Meanwhile, the house on Huntington Street NE sold in August for $329,000 — $270,000 less than what Lepzinski mortgaged it for and a 53 percent drop from its peak 2006 price.
Susan Taylor Martin can be contacted at firstname.lastname@example.org.