Three Sentenced For Multi-Million Dollar Fraud Scheme

Editor's note: This press release was provided by the U.S. Attorney's Office of the Eastern District of Pennsylvania. [Link added]

PHILADELPHIA–Dennis Nicholas, 62, Bernadette Nicholas, 64, both of Newtown Square, PA, and Kevin McAllister, 59, of Drexel Hill, PA, were sentenced on Feb. 13 for engaging in schemes to defraud Wilmington Trust Federal Savings Bank and Malvern Federal Savings Bank that involved properties valued at more than $35.5 million. 

Dennis Nicholas was sentenced to 72 months in prison; Bernadette Nicholas was sentenced to 42 months in prison; McAllister was sentenced to 20 months in prison. In addition to the prison terms, U.S. District Court Judge Legrome D. Davis ordered Bernadette Nicholas and Kevin McAllister to jointly pay restitution to Wilmington Trust in the amount of $2.5 million; ordered Bernadette Nicholas to pay restitution to Malvern Federal Savings in the amount of $2.5 million; and ordered Dennis Nicholas to pay restitution to Malvern Federal Savings in the amount of $2,755,909.27.        

Bernadette Nicholas was a mortgage broker who intentionally misrepresented material facts to Wilmington Trust about borrowers’ income and assets, the potential rental income and accurate appraisals of properties. She falsified borrowers’ tax returns and documents relating to the true source and amount of the down payments being made by borrowers, and forged borrowers’ signatures on loan documents.         

Kevin McAllister was a loan officer with Wilmington Trust working in conjunction with Nicholas to approve mortgage loans for borrowers who did not meet Wilmington Trust’s criteria for income, assets, and credit scores, in return for bribes and kickbacks from Nicholas. As a result, Nicholas and McAllister caused the approval of loans totaling more than $30 million.        

Bernadette Nicholas received a mortgage broker’s commission equivalent to approximately two to three percent of the total amount of a funded loan at the time of loan settlement. During the years 2004, 2005, and 2006, Bernadette Nicholas received approximately $1.2 million as the result of the loans funded by Wilmington Trust.

She deposited the money into accounts maintained by Dennis Nicholas who then paid Kevin McAllister equivalent to approximately one percent of the amount of the funded loan, which was a kickback/bribe for getting the questionable loan approved and funded.  McAllister made $379,075 in kickbacks.  None of the defendants reported the income on their taxes.         

Dennis Nicholas was convicted at trial on July 19, 2012 of bank fraud, bank bribery, loan application fraud, and filing false and fraudulent income tax returns.  Bernadette Nicholas pleaded guilty to those same charges on October 31, 2011.  McAllister pleaded guilty on October 31, 2011 to bank fraud, bank bribery, loan application fraud, and tax evasion.        

Another defendant, Wayne Rosen, who was charged in a scheme with Bernadette Nicholas to defraud Malvern Federal, will be sentenced February 25, 2013. Nicholas brokered the sale of an apartment building between Rosen and mortgage clients and sought a $1.6 million loan from Malvern Federal for her clients. Nicholas altered the borrowers’ income tax returns prior to submitting them to Malvern Federal and falsely represented the borrowers’ income, the amount of the borrowers’ down payment, and the details of a subordination agreement between Rosen and the borrowers on the borrowers’ loan application and supporting documents. 

At settlement on the apartment building, Dennis Nicholas, Bernadette Nicholas and Rosen falsely represented to Malvern Federal that the borrower had made a down payment. Bernadette Nicholas and Rosen applied for a $3.5 million loan to refinance an existing loan that they had on a medical building. 

In order to influence Malvern Federal’s actions, Bernadette Nicholas, Dennis Nicholas and Rosen prepared and caused to be prepared fraudulent leases which misrepresented the potential rental flow income of their medical building and caused these leases to be submitted to Malvern Federal. The case was investigated by the Federal Bureau of Investigation and the Internal Revenue Service. It is being prosecuted by Assistant United States Attorney Anita Eve.