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Cop Avoids Mortgage Fraud Prosecution with Guilty Plea for Unfiled Tax Return

Barry Buchignani pleads guilty to misdemeanor in federal fraud case

July 25, 2011

By JENNIFER HEWLETT The Lexington Herald-Leader - McClatchy-Tribune Information Services

A former Lexington, Ky., police officer, accused of taking part in a conspiracy to defraud mortgage companies of more than $2 million, has pleaded guilty to failing to file an income tax return for 2005. The case has already yielded guilty pleas from a mortgage broker and an attorney who owned a title company.

Barry Buchignani, 52, in the binding plea agreement, agreed with federal prosecutors to a sentence of one year's probation, with that year to be spent in a halfway house.

The guilty plea and sentencing came Wednesday in U.S. District Court in Lexington.

Buchignani, son of former Fayette County Sheriff Harold Buchignani, initially was accused of giving lending institutions false information on loan applications for the purchase of six homes, which resulted in loans being obtained that were larger than the prices of the homes, between 2004 and 2006. He could have received up to 20 years in prison if convicted on the original charges.

Lawyer Kim Allen Clay, contractor James Davis and mortgage broker Warren Reid previously pleaded guilty for their involvement, along with others who have been accused, in the scam.

According to federal prosecutors, Buchignani, who ran a home remodeling and construction company, and Davis agreed to use the extra money from the loans to improve the homes, and planned to hold the homes, sometimes renting them out, then resell them at a profit. Prosecutors claimed that Clay, who owned and operated Universal Title Service in Lexington, falsified loan closing documents, and Reid prepared or reviewed some of Buchignani's loan applications.

In the plea agreement, Buchignani agreed with prosecutors that between Feb. 14, 2005, and April 28, 2005, he, with help from Clay and Davis, acquired ownership interests in six homes in Fayette County valued at almost $2 million. Buchignani agreed that some of the homes were rented out during 2005, producing income for him. And he agreed that he failed to file a tax return for 2005 by the lawful deadline, and thereby failed to timely disclose his ownership interest in and income from the homes.

The misdemeanor to which Buchignani pleaded guilty carries a maximum punishment of a year in prison, a fine of $25,000, and a year of supervised release. The court was bound to impose the probated sentence with the halfway residency requirement agreed to in the plea deal, but had discretion in crafting additional conditions of probation, according to the plea agreement document.

Under the plea deal, the federal government and the Fayette Commonwealth's Attorney's Office agreed they would not bring additional tax, fraud, money laundering, or false statement charges against Buchignani based on evidence in their possession at the time the agreement was carried out, unless Buchignani breaches the agreement.

The federal government also agreed to forgo the forfeiture of two vehicles seized in connection with the case.

Reid and Davis have not been sentenced.

Clay pleaded guilty to fraud charges in 2007 and was sentenced to 18 months in prison and ordered to pay $417,849 in restitution.

While he was a Lexington police officer, Buchignani was suspended more than once for unbecoming conduct, insubordination and incompetence.

Reporter Bill Estep contributed to this article.

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