Ex-Club Owner Pleads Guilty in Mortgage Scams

The former owner of a string of Washington area nightclubs and restaurants pleaded guilty yesterday to federal mail fraud and false-testimony charges relating to a series of real estate scams that netted him more than $3.8 million.

John A. Tsiaoushis, 40, formerly owned the now-defunct Shark Club nightclubs in Centreville, Merrifield and Bethesda, the Acropolis and Cloud restaurants in the District and the short-lived Chics n Wings restaurant in Tysons Corner. Tsiaoushis filed for bankruptcy in October 2005.

But by that time, he had begun a series of mortgage frauds in which he repeatedly sold or refinanced two houses in Vienna and in the Fort Hunt area of Fairfax County.

In May 2006, Tsiaoushis sold a house on Chadwick Avenue in Fairfax. The next day, court records show, he told a bankruptcy judge that he had not sold the house and wouldn't do so without the judge's permission.

"We all pay the price for mortgage fraud, and we will prosecute it wherever we unearth it," U.S. Attorney Chuck Rosenberg said after yesterday's hearing. He said mortgage companies that absorb such losses often pass the cost on to consumers. The case is one of the largest mortgage frauds prosecuted in eastern Virginia, Rosenberg said.

Pending his sentencing hearing July 18, Tsiaoushis's attorneys, Blair D. Howard and Plato Cacheris, declined to say why Tsiaoushis (pronounced shy-OH-shis) got involved in mortgage fraud.

"He's acknowledged that he's made mistakes," Howard said. "There were circumstances that don't excuse, but will explain, that certain financial problems occurred. A series of financial problems. People do things when they have serious financial difficulties."

Tsiaoushis told U.S. District Judge Liam O'Grady that he had agreed to help federal investigators. O'Grady said Tsiaoushis's sentence could be reduced if he cooperates.

Prosecutors said Tsiaoushis faces a possible sentence of seven to nine years in prison, according to federal guidelines, but O'Grady can deviate from that.

Much of Tsiaoushis's activity centered on a 3,200-square-foot house on Pennycress Lane.

In January 2005, while Tsiaoushis owed more than $588,000 on the mortgage, he sold the house without repaying it. Court records show he created documents purportedly from the mortgage company, opened a post office box in Beltsville and had the settlement company send checks totaling $586,000 to the "mortgage company's" post office box, which Tsiaoushis then deposited.

Using friends and associates, Tsiaoushis helped refinance the house for subsequent buyers. In each case, checks settling the transactions were sent to post office boxes opened by Tsiaoushis, court records show, after he presented phony documents indicating that all liens had been resolved.

Court records show that CitiFinancial of Falls Church paid more than $670,000 in a refinancing scam; Accredited Home Lenders of San Diego paid $891,000 to "buy" the house; and Wells Fargo in Alexandria lent $585,000 in a refinancing scheme. First Franklin Financial of San Jose, which made the original, legitimate mortgage on the house, is owed $588,000, court records show.

Using the same scheme, Tsiaoushis sold his house on Chadwick Avenue to a friend for $937,500 even though the bankruptcy court had ordered him not to sell it. When a title abstractor discovered the bankruptcy, Tsiaoushis provided the title company with a false order saying that his case was dismissed. Tsiaoushis, using post office boxes with the names of actual lenders, then collected more than $780,000.

Tsiaoushis agreed to make restitution for the losses, which the government said total more than $3.8 million.

All of those involved in the phony transactions are thought to be friends or business associates of Tsiaoushis, court records said. Khalil Salim Arbid was sentenced last month to 16 months in prison for his role in one of the phony transactions.