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State falls down in policing real estate broker

The Boston Globe published a troubling but important story in its Business section on Sunday (subscription required). The article, by Jennifer McKim, revealed that a Mansfield man, Michael David Scott, continues to operate a busy real estate business focused on properties in Dorchester and Mattapan even as he awaits trial in a federal court for 68 charges of mortgage fraud.

Most disturbingly, the Globe report detailed that Scott continues to conduct business with the official approval of the Commonwealth of Massachusetts, which has not moved to suspend or revoke his license to broker real estate deals, despite the many serious accusations lodged against him.

While Scott has not yet been convicted of a crime, the case brought against him by the US Attorney’s office constitutes what may be the most sweeping and egregious example of alleged mortgage fraud in the city of Boston in recent years. Scott is alleged to have partnered with straw buyers to defraud mortgage lenders by using “false and fraudulent” means, according to the September 2010 indictment, which detailed abuses at more than a dozen properties, all but one of them in Dorchester.

As US Attorney Carmen Ortiz said, “Frauds of this kind line the pockets of unscrupulous schemers at the expense not only of mortgage lenders, but of so many homeowners who saw property values in whole neighborhoods decimated.”

The fact that our state government decided to allow Scott to continue his activity with state approval reeks of poor decision-making or simple indifference within the Patrick administration. A spokesman for the state’s Office of Consumer Affairs and Business Regulation told the Globe that the agency began an internal investigation of Scott when it learned of the 2010 indictment against him. But the spokesman told the Globe that the office “voluntarily stayed our investigation [so as] not to risk creating complications for the criminal case.”

But what about the Commonwealth’s duty to protect consumers? As Scott’s trial date looms off on the distant horizon, the still-licensed broker has been doing a brisk business under a new company name, The Crawford Group LLC. In recent months, his renewed sales activity in Dorchester has generated several complaints — most urging the state to at least suspend Scott’s license until his case is resolved.

Jessie Cuddy, a local real estate professional who is among those who alerted the state to Scott’s recent activities, told the Globe: “It is a disgrace to the real estate professionals in this town and to this industry as a whole that Michael David Scott is still walking around practicing real estate with a license that appears to be in good standing,’’ Cuddy said.

Cuddy is right. It’s not as if the state doesn’t sanction other license holders. In fact, they routinely suspend licenses of brokers for minor lapses— including any failure to complete professional development classes. The Globe reported that 113 licenses have been suspended since last July. And yet, Scott’s ticket to sell has not been stripped, even though he is the only broker among the state’s 26,000-plus license holders to be under criminal indictment right now.

Everyone — Michael Scott included — is entitled to their day in court. But in the meantime the state has a responsibility to protect homeowners, potential buyers, and the community at large from individuals who they suspect have been working outside the bounds of the law. The Patrick administration has failed mightily in this case and its cavalier attitude sends the wrong message to both the industry and consumers alike.