Homeowners Defrauded, North Providence Man Indicted: DOJ

NORTH PROVIDENCE, RI — A North Providence man is accused of conspiring to defraud distressed Rhode Island homeowners in a scheme involving false statements, fake real estate listings, insider short sales, and property-flipping.

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Federal prosecutors say John DiFruscio, Jr., 68, worked with Johnston real estate investor Gregory Aloisio, 60, to separate distressed homeowners from their properties while fraudulently collecting fees, commissions, and other income. It’s alleged that between 2011 and 2017, the two purchased properties in short sales and illegally “flipped” them for personal gain. The two are also accused of defrauding financial institutions.

DiFruscio held himself out to be a negotiator on behalf of struggling homeowners but was in fact acting on behalf of Aloisio and his real estate investment corporation, a March 5 federal indictment states.

Prosecutors say DiFruscio pretended to represent the interests of homeowners while actually setting up short sales to Aloisio Group, LLC at the lowest possible price. Little or no open marketing took place. The two would arrange to have a house listed on Multiple Listing Service, then immediately have the listing reflect “sale pending,” ensuring a quick cheap sale to the Aloisio Group. The co-conspirators then arranged to sell, or “flip,” the properties at a much higher price, sometimes to an insider, the indictment alleges.

A short sale is a sale of real estate where the proceeds fall short of covering what’s owed. If all lien holders agree to accept less, the sale can go through.

According to the indictment, some homeowners were convinced to transfer title of their homes to DiFruscio as a trustee of a family trust. Other homeowners and prospective homeowners were convinced to participate in a fraudulent “rent-to-own” program. It is alleged that DiFruscio and Alioiso used the rental income for their own benefit.

DiFruscio and Aloisio are accused of defrauding banks and lending institutions. They allegedly filed false affidavits and documents representing that no commercial relationship existed between the parties and that there was no agreement to “flip” or rent the properties after the short sale. Prosecutors say documents falsely reflected the identity of the seller, the buyer, and cash paid to the parties at closing. The victim lenders are listed as JPMorgan Chase, Wells Fargo Bank, Citizens Bank, Bank of America, and PNC Bank. 21st Mortgage Corporation is also listed as a victim.

The indictment identifies by initials (F.B. and A.C.) two licensed real estate brokers or agents in Rhode Island and says they listed the properties on MLS for Aloisio after the Aloisio Group had already agreed to buy them. The indictment also says a lawyer identified as “R.M.” conducted real estate closings on behalf of Aloisio Group. The agents and lawyer are not charged in the March 5 criminal indictment.

The indictment unsealed in U.S. District Court in Providence charges Gregory Aloisio, Aloisio Group, LLC, and John DiFruscio, Jr., with conspiracy to commit bank fraud and wire fraud, bank fraud, wire fraud, and money laundering. The charges were announced by Acting U.S. Attorney Richard B. Myrus, the Office of the Inspector General for HUD, and the FBI.

When a house purchased with an FHA-insured mortgage is sold on a short sale, the lender may submit a claim to the FHA for reimbursement of its loss, the indictment spells out. The U.S. Dept. of Housing and Urban Development provides mortgage loan insurance to qualifying individuals with low or moderate incomes.

The case is being prosecuted by Assistant U.S. Attorney Sandra R. Hebert and Myrus.

Editor's note: A misspelled name has been corrected