TAX NEWS - June 2010

Rhode Island Tax: State Sen. Maselli indicted on bank fraud charges

PROVIDENCE –– State Sen. Christopher B. Maselli has been indicted on federal charges that he falsified his bank and federal tax documents to get mortgages and an auto loan worth a total of more than $1.5 million.

The federal case came down Thursday, just a few months after the Johnston Democrat sponsored legislation to let the Senate police itself on ethical issues, rather than have oversight by the Rhode Island Ethics Commission. After Maselli's indictment on seven counts of bank fraud, Common Cause Rhode Island pushed Friday to have the General Assembly reconvene and pass legislation to let voters decide whether to expand the Ethics Commission's jurisdiction.

Maselli, a self-employed real estate lawyer, is accused of inflating his annual income dating to 2005, and of submitting phony and altered bank statements and IRS tax returns when applying for mortgages, a home-improvement loan and a loan to buy a 2005 Lexus SUV.

Maselli denied the accusations of fraud through his lawyer. The senator didn't respond to messages left with his staff at Maselli Law Associates in North Providence on Friday, or answer the door at his house in Johnston.

The indictment says the scheme began in late 2007, about a year after Maselli was elected to the Senate.

In a bit more than another year — and several mortgages and loans later — Maselli was living a larger lifestyle.

Property records show that he upgraded his family's home, moving his wife and two children from a three-bedroom house in Johnston into a house double the size, with six bedrooms and a tennis court. Maselli also bought a two-family rental property in North Providence, got a $25,000 home-improvement loan, and purchased the luxury vehicle.

The U.S. Attorney's office said that Maselli financed these purchases by submitting false documents in applying for the mortgages and the auto loan, totaling $1,525,027.

"The allegations in this indictment are particularly disturbing in that an attorney, who is trusted to provide sound legal advice and to conduct real estate transactions in a fair and honest manner, used his expertise to fraudulently obtain his own mortgages," U.S. Attorney Peter Neronha said in a statement.

In response, Maselli's lawyer, William H. Kettlewell, of Boston, said in a statement that several of the loans had been repaid, and those remaining are being paid.

"The banks have not lost a cent," Kettlewell stated. "In short, there was no fraud, there is no fraud and we believe there will never be a determination of fraud concerning these loans."

The 14-page indictment lays out how Maselli applied for mortgages and loans.

In December 2007, it says, he applied for a mortgage of $283,000 for his family's house at 32 Golden View Drive in Johnston. In his application, Maselli said his monthly income was $9,365 and that he had $11,756 in his bank account. Copies of his 2005 and 2006 income tax returns said his annual income was $113,818 and $112,384, respectively. The indictment says the tax returns and income declarations were fraudulent.

In April 2008, Maselli applied for a mortgage of $157,781 for an apartment house at 58 Peckham Ave., North Providence. In his financial statement filed with the Rhode Island Ethics Commission, Maselli listed himself and his wife as joint tenants. Maselli again used the 2005 and 2006 tax returns, and said he had $15,531 in the bank, all of which the indictment says were fraudulent.

In May 2008, Maselli sold the house on Golden View Drive for $315,000, according to property records.

Three months later, Maselli applied to another bank for a $160,000 mortgage for the rental property on Peckham Avenue. That same month, he also applied for a $448,467 mortgage for the family's new home at 131 Winsor Ave., in Johnston.

On the Peckham Avenue application, Maselli said his monthly income was $9,183 and he had $16,000 in the bank. Along with the 2006 tax return, Maselli submitted a tax return from 2007, which said his annual income was $108,030. Those were fraudulent, the indictment says.

Maselli used the same tax returns for his application for the Winsor Avenue property, but said his monthly income was $10,258.

In October 2008, Maselli applied for a $23,518 loan to buy a three-year-old Lexus SUV. Maselli said his monthly income was $9,000, and his monthly mortgage payment for the house on Winsor Avenue was $1,500. He also submitted the 2007 tax return.

In November 2008, Maselli applied for a $25,000 home-improvement loan, using the tax returns from 2006 and 2007 that were allegedly fraudulent.

In March 2009, Maselli applied to refinance the mortgage on Winsor Avenue for $452,081. The indictment said Maselli falsely claimed his monthly income was $10,258.

Maselli, 38, was first elected to the Senate in November 2006. As chairman of the Senate Committee on Rules, Maselli backed a proposal this session to let the Senate adopt and enforce its own rules on conflict of interest. After heated criticism, the proposal died.

Maselli is also secretary of the Senate Judiciary Committee and a member of the education committee. His wife, Joy, is a teacher in Lincoln.

Senate President M. Teresa Paiva Weed did not return calls left at her home or with a spokesman on Friday. But State Rep. Edwin Pacheco, the new chairman of the state Democratic Party, called Maselli's indictment "disheartening."

While noting that Maselli has not been convicted, Pacheco said: "Stuff like this is unacceptable. People need to realize that public office is an honor and a privilege and to be in one of those positions, we have to be the standard bearers. We have to be the ones to make sure we set the example for people throughout Rhode Island … and that is something that should never be betrayed in any way, shape or form."