Weston Couple Arraigned in Connection with Section 8 Public Housing Fraud and Mortgage Fraud
Defendants Allegedly Defrauded Public Housing Subsidy Program of Tens of Thousands of Dollars and Mortgage Lenders of Hundreds of Thousands of Dollars
WOBURN – A Weston couple has been arraigned in connection with fraudulently obtaining tens of thousands of dollars in Section 8 public housing subsidies, and defrauding mortgage lenders of more than $250,000, Attorney General Martha Coakley announced today.
Paulo Montenegro, age 45, and his wife, Rosana Pereira, age 48, were each arraigned on charges of Larceny by False Pretense (3 counts) and Conspiracy to Commit Larceny by False Pretense (3 counts), in connection with fraudulently obtaining Section 8 public housing benefits and fraudulently obtaining mortgage loans from financial lending institutions.
The Section 8 Public Housing program is a government program that provides safe and affordable rental housing for eligible low-income families. The U.S. Department of Housing and Urban Development (“HUD”) administers federal aid to local housing authorities, including the Cambridge Housing Authority, to manage housing for low income residents at rents that they can afford. Program participant eligibility and the amount of monthly rent that participant tenants are required to pay are determined based on several factors, including income and family composition. Program participants must re-certify periodically to establish continued eligibility.
Authorities allege that Montenegro and Pereira misrepresented material information to the Cambridge Housing Authority and HUD to obtain the benefit of Section 8 public housing subsidies. According to authorities, Pereira, in conspiracy with Montenegro, under-reported her income and assets, and reported that she was unmarried, when in fact she was married to, living with, and sharing finances with Montenegro. As a result of such misrepresentations, Pereira and Montenegro received the benefit of renting a three bedroom apartment in Cambridge at a greatly reduced rate, while the Cambridge Housing Authority and HUD covered most of the rent. Authorities further allege that for two years during the period when Pereira and Montenegro fraudulently benefited from Section 8 public housing subsidies, they were not even living in the Cambridge apartment that they rented at a reduced rate; instead, they were living in a home in Weston that Montenegro had purchased for $860,000. During the period of the alleged fraud, Montenegro listed the address of the apartment in Cambridge that he and Pereira rented in Pereira’s name with the Secretary of the Commonwealth as the address of Montenegro’s business.
Authorities further allege that when Pereira misrepresented to the Cambridge Housing Authority that she had minimal income, she, with Montenegro, also represented to financial lending institutions that she earned at least $12,000 monthly in order to obtain hundreds of thousands of dollars in mortgage loans to purchase properties in Somerville and Medford.
Authorities allege that the couple profited from the purchase and sale of properties to and from each other. Pereira, working with Montenegro, misrepresented in two separate transactions that she was purchasing the properties as her primary residences, claimed that she was unmarried, and failed to disclose any connection with Montenegro, who was the owner of each property. According to authorities, the lenders relied on these and other material misrepresentations to loan 100% of the purchase price to Pereira to finance the purchases of the properties, and unbeknownst to the lenders, Montenegro and Pereira shared the profits.
Authorities allege that while Pereira and Montenegro profited by more than $250,000 from these transactions, Pereira, in conspiracy with Montenegro, made just a minimal number of mortgage payments on one of the properties, and none on the other, instead allowing the properties to quickly fall into foreclosure. During the time of the alleged fraud, Pereira continued to live in Weston with Montenegro and never moved into the properties.
A Middlesex Grand Jury returned indictments against Montenegro and Pereira on January 31, 2012. The defendants were arraigned today in Middlesex Superior Court where each pleaded not guilty and were released on personal recognizance. Montenegro and Pereira were each ordered to surrender their passports at arraignment. The defendants are due back in court on March 28, for a pre-trial conference. Clerk Magistrate Michael Sullivan presided over the arraignments.
This case is being prosecuted by Assistant Attorney General Brendan O’Shea of AG Coakley’s Insurance and Unemployment Fraud Division with the assistance of the U.S. Department of Housing and Urban Development, Office of Inspector General.