DeRosa admits to role in mortgage fraud

Oct. 29, 2010

Patrick E. Litowitz
New Castle News

PITTSBURGH — Nicholas DeRosa’s plea agreement effectively ends the federal government’s fraud probe of a defunct Lawrence County housing agency.

DeRosa represents the fourth of five parties to admit guilt in a mortgage scam involving Affordable Housing of Lawrence County.

The 65-year-old New Castle resident appeared in federal court yesterday afternoon to change his original plea on four charges. He then pleaded guilty to single felony counts of bank fraud, mail fraud and conspiracy to commit money laundering. A second count of mail fraud will be dismissed at DeRosa’s sentencing, scheduled for March 1.

“Public corruption, mortgage fraud and financial fraud are important priorities of this office,” said U.S. Attorney David J. Hickton, representing the Western District of Pennsylvania.

“At issue here was the misuse of government funds intended to be used for the benefit of low-income citizens in need of housing. We are making serious progress in the fight for hard-working Americans who play by the rules by protecting vulnerable families and communities from financial predators.”

PLEA ACCEPTED

Senior U.S. District Judge Gustave Diamond accepted the retired city school administrator’s plea during the 50-minute session.

The former city councilman faces jail time, probation, restitution, forfeiture of assets and fines. The prosecution agreed to a prison term of no more than three to four years. However, Diamond will decide DeRosa’s punishment after a presentence investigation is concluded.

“The really unique aspect from my perspective was the intermingling of the financial crime with the sort of undertow of political corruption,” Assistant U.S. Attorney Brendan T. Conway said.

“It’s pretty amazing to me the sort of influence DeRosa was able to have despite the lack of a real, actual political position or even a position on the board of any of these entities. Yet, he was able to pull off this scam.”

DeRosa remains free on $10,000 unsecured bond.

DeRosa’s attorney, Efrem Grail, did not respond to a request for comment after the hearing.

The centerpiece of the Affordable Housing case was a $250,000 loan fraudulently obtained from First Commonwealth Bank. The government said Robert Ratkovich, who worked as Affordable Housing’s consultant, recommended seven properties, four of which were either owned or co-owned by DeRosa. Ratkovich, through DeRosa’s instructions, asked the bank to use Castle Realty Appraisal Services Inc.

The Neshannock Township firm then submitted inaccurate and inflated appraisals to First Commonwealth, which relied upon them to approve the loan. A company representative pleaded guilty Wednesday to one felony count of bank fraud. Castle Realty, which admitted to no wrongdoing, will pay $75,000 in restitution.

KICKBACKS

Prosecutors said Affordable Housing served as an instrument for DeRosa, Ratkovich, former county Treasurer Gary Felasco and a fourth unnamed co-conspirator to collect kickbacks and additional unearned income. Felasco helped create Affordable Housing in 2003 in his role of chairman of the Lawrence County Housing Authority.

The authority provided $200,000 in federal funds and laundry concessions to the nonprofit group.

Ratkovich, who collected nearly $61,000 as an Affordable Housing consultant, pleaded guilty to bank fraud, mail fraud and money laundering conspiracy. Felasco admitted guilt to one count of failing to file a 2005 federal tax return.

New Castle contractor Michael Trover faces three counts of lying to a grand jury.

Conway said the government will pursue the return of funds taken from First Commonwealth and the housing authority. He estimated the overall restitution at $350,000.

Conway added he doesn’t expect more charges to be filed.

“We feel like this is an appropriate resolution to this case — to get the people responsible.”