A Metairie woman was sentenced Wednesday in Baton Rouge to a 30-month federal prison term for her admitted role in a $1.1 million property-flipping scheme.
Lynne Fruchtnicht, 68, also was fined $5,000 by U.S. District Judge Frank J. Polozola.
Fruchtnicht must report to prison on Aug. 29.
“This is an extraordinary case,” Polozola said. The judge added that no victims, including mortgage lenders, would come forward to claim reimbursement for the $1.1 million in losses.
Fruchtnicht was an owner, director and officer of Title Depot of Eastbank Inc., a title company that worked with buyers and sellers to close real estate transactions.
According to a charge filed in Baton Rouge by Assistant U.S. Attorney Richard L. Bourgeois Jr., Fruchtnicht destroyed records of property sales sought by the FBI through a grand jury subpoena.
In a plea agreement signed with Bourgeois and her Harahan attorney, Provino Mosca, Fruchtnicht admitted destroying the records. She also admitted her participation “in a property-flipping scheme to defraud various mortgage lenders.”
The term “property-flipping” refers to the rapid and repeated resale of property at increasingly inflated prices. It becomes illegal when false appraisals are used to justify bloated loans from lenders. Schemers know the loans eventually will go into default.
The practice led to the nationwide collapse of the savings-and-loan industry after it was deregulated in the early 1980s.
In the Baton Rouge and New Orleans areas in 2006, Fruchtnicht admitted, schemers used straw buyers “who were paid to get a loan and put property in their names.”
She added: “The straw purchaser was supposed to relinquish ownership of the home to the ‘real buyer.’”
Both houses and raw land were traded during the scheme, according to Fruchtnicht’s plea agreement and written admission.
Bourgeois, the prosecutor, told Polozola investigators could not trace the bulk of the scammed funds.
“There’s somebody out there who profited with a lot of money,” Bourgeois said.
“She knew, had to know, what was going on was not legitimate,” Polozola said of Fruchtnicht.
“You didn’t get it all,” Polozola told Fruchtnicht.
Fruchtnicht’s guilty plea and prison sentence also ended a related felony case filed against her in New Orleans federal court.