Thursday, March 25, 2010

Massachusetts AG Scores $3B In Loan Modifications For Homeowners Nationwide In Settlement Of Countrywide Lawsuit

From the Office of the Massachusetts Attorney General:
  • As part of her office’s ongoing initiative to combat predatory lending practices that contributed to our nation’s economic crisis, Attorney General Martha Coakley [] reached a significant settlement with Countrywide Financial Corporation (Countrywide) that will provide an estimated $18 million in loan modifications for Massachusetts homeowners, $3 billion in loan modifications for homeowners across the country, and a $4.1 million payment to the Commonwealth. Countrywide is now owned by Bank of America.

For the entire Massachusetts AG press release, see AG Coakley Secures $3 Billion in Loan Modifications for Homeowners Nationwide in Agreement with Mortgage Lending Giant Countrywide ($18 million in relief for Massachusetts homeowners; $4.1 million payment to Commonwealth).

For copies of the Massachusetts AG's lawsuit against Countrywide and the settlement filed by the Attorney General's Office, see:

BofA To Begin Cutting Loan Balances On Underwater Homes? Massachusetts AG "Arm-Twists" Lender Into Agreeing To Offer Debt-Reduction Workout Plan

The Wall Street Journal reports:
  • Under pressure by Massachusetts prosecutors, Bank of America Corp. said Wednesday it would reduce mortgage-loan balances as much as 30% for thousands of troubled borrowers, in what could presage a wider government effort to encourage banks to offer debt reduction to ease the mortgage crisis.

***

  • The bank's move is part of an agreement to settle claims over certain high-risk loans made by Countrywide Financial, which the bank acquired in mid-2008. The Massachusetts Attorney General's office, which was negotiating with the bank, said it was prepared to file suit had the agreement not included principal reductions.(1)

For more, see BofA Bows to Pressure to Cut Loan Balances.

See also:

(1) For the Massachusetts Attorney General press release, see AG Coakley Secures $3 Billion in Loan Modifications for Homeowners Nationwide in Agreement with Mortgage Lending Giant Countrywide ($18 million in relief for Massachusetts homeowners; $4.1 million payment to Commonwealth).

For copies of the Massachusetts AG's lawsuit against Countrywide (now owned by Bank of America) and the settlement filed by the Attorney General's Office: see

Lender VP Blows Whistle On Employer On Loan Mods; Says Bank Not Interested In Working Out House Payments; Homeowners Get Runaround On Toll-Free Number

ABC World News reports:
  • A vice president for one of the nation's biggest banks claims customers looking for help in lowering their mortgage payments are often told to call an 800 number -- where he says representatives then give homeowners the runaround. David Muir gets answers from a vice president of one of the biggest banks. The bank executive spoke to ABC News on the condition that ABC News not show his face or name him, because he feared coming forward would cost him his job.

For more, see Whistle-Blower: Banks Give Homeowners the Runaround (800-Numbers Lead to Runaround as Banks Refuse to Modify Mortgages).

Title Insurer's Escrow Officer, Local Office Supervisor Played Roles In Pulling Off $30M Fraud, Says Convicted Mastermind Who Headed Scam

In San Diego, California, BusinessWeek reports:
  • Employees of Fidelity National Financial Inc.’s Chicago Title Corp. unit helped carry out a $30 million fraud, the convicted mastermind of the scheme said at the start of a civil trial against the title insurer. Rollo “Rick” Norton, a financial planner who pleaded guilty to mail fraud in connection with the scam, told a San Diego Superior Court jury that an escrow officer and a local office supervisor at Chicago Title knew what they were doing was wrong and “I was part of it.”

  • Chicago Title and Chicago Title Insurance are accused, together with Norton, of conspiracy and fraud by 19 people who say they lost their investments in a San Diego condominium project through sham real estate transactions. The investors claim insiders at Chicago Title helped Norton prepare and sign fraudulent documents.

For more, see Chicago Title Assisted San Diego Fraud, Mastermind Tells Jury.

BofA Files Suit To Pin Title Insurer With $500M+ In Loan Losses For Providing Unconventional Lien Protection Plan

The Los Angeles Times reports:
  • During the subprime loan era, it's well documented that lenders took all kinds of shortcuts -- such as failing to verify borrowers' employment or income -- to sell mortgages. Now Bank of America Corp., the nation's biggest mortgage lender, is saying the nation's second-largest title insurer did much the same thing and should be on the hook for more than $500 million in losses.

  • In a lawsuit filed earlier this month, BofA alleged that First American Corp. in Santa Ana relied on home buyers to tell them about liens on their properties and other matters, rather than conducting traditional title searches. The shortcut was part of a program called QuickClose that BofA said in its suit did not require "title searches in connection with loans processed under the program." The bank said in the suit that the insurer has not made good on more than 5,000 mortgages it was supposed to protect.

***

  • The bank's efforts to curb its losses in the mortgage fallout are indicative of what's going on in the industry, said banking analyst Bert Ely. "Every time you have a disaster everybody sues everybody else, and mortgage financing was a disaster," he said. "You have lots of losses floating around, and companies are looking to others to eat their losses."

***

  • The title insurance policies that First American sold to Bank of America were uncommon in the industry, Ely said. "The American Land Title Assn. has openly opposed these types of lien protection plans," Ely said. "First American was offering a product that at least more than a few in the industry weren't comfortable with."

For the story, see BofA seeks to pin losses on title insurer (The banking giant sues First American Corp., alleging that it failed to do proper title searches. That led to $500 million in mortgage losses, the suit says).

Atlanta Man Cops Plea In Attempt To Use Stolen IDs To "Buy" His Own "Underwater" Investment Homes In Short Sale Scam

In Atlanta, Georgia, The Atlanta Journal Constitution reports:
  • An Atlanta man pleaded guilty Tuesday to bilking the FDIC of $2.2 million in a bogus real estate short-sale scheme. Brent Merriell, 37, admitted in federal court to lying to the FDIC and selling 14 homes he owned facing foreclosure to identities he’d stolen, court authorities said.

***

  • When he defaulted on all 14 home loans in October 2009, Merriell put the homes on the market as a short sale, asking the FDIC to forgive $2.2 million in loan payoffs so his “buyers” could purchase them at a greatly reduced price.

***

  • But Merriell tried to give forged and counterfeited sales contracts and loan commitment letters – generated from seven stolen identities – to the FDIC to complete the sales. He was arrested before the sales went through and before his actions could affect the credit of his seven victims, authorities said.

For the story, see Atlanta man guilty of "cheating FDIC" in short sale scam.

Wednesday, March 24, 2010

FTC, California & Missouri AGs Slam "Lawyer Renting" Loan Modification Racket; Score $980K In Seized Assets, Put Outfit Out Of Business

The Federal Trade Commission announced:
  • The operators of a mortgage foreclosure “rescue” company will be banned from selling mortgage relief services under a settlement with the Federal Trade Commission and the states of California and Missouri, which sued them in 2009 as part of a federal-state crackdown on mortgage loan modification and foreclosure relief scams.

  • Boasting a “proven track record” and the “highest standards of business ethics,” U.S. Foreclosure Relief Corp., George Escalante, Cesar Lopez, and Adrian Pomery falsely claimed they helped 85 percent of their clients get their loans modified, and that they would get loan modifications to make consumers’ homes much more affordable, according to the FTC complaint. They also allegedly violated state laws against charging advance fees for foreclosure consulting services. The court immediately barred the practices and froze the defendants’ assets.(1)

  • The FTC has added as defendants H.E. Servicing, Inc., Brandon L. Moreno, and his law firm, Cresidis Legal, and charged all of the defendants with two more law violations: falsely claiming a lawyer would negotiate the terms of consumers’ home loans, and falsely promising refunds if they failed. The settlement order resolves the case against the original defendants and H.E. Servicing. The case continues against Brandon L. Moreno and Cresidis Legal, a professional corporation.

For the FTC press release, see Defendants Banned from Mortgage Foreclosure 'Rescue' Business (Surrendered Cash, Jewelry, and Vehicles for Consumer Refunds).

For earlier post on this story, see Report: Loan Modification Firm Used Craigslist To Round Up "Lawyer Renting" Prospects; "Rents" Ranged Between $125-$300 Per File.

For links to available court documents, see FTC, et al. v. U.S. Foreclsoure Relief Corp., et al.

Go here for other posts on "lawyer renting" loan modification rackets (ie. a loan modification outfit that uses an attorney or law firm as a "front" for its activities where the attorney does little or no work, and has little or no contact with the financially distressed client desiring a loan modification, typically used to avoid prohibitions under law against clipping homeowners for upfront fees).

(1) According to the press release, the order imposes a $8.6 million judgment against George Escalante and his two companies, U.S. Foreclosure Relief and H.E. Servicing. The judgment will be suspended except for $980,000 in cash, jewelry, and vehicles that Escalante and his companies have surrendered to lenders or the court-appointed receiver. The order also imposes $3.3 million and $3.4 million judgments against Cesar Lopez and Adrian Pomery, respectively, which will be suspended due to their inability to pay. The full amount will become due immediately if they are found to have misrepresented their financial condition.

For information about refunds to victims, please visit the court-appointed receiver’s Web site, http://www.heservicingreceiver.com.

Minnesota AG Tags Two Out-Of-State Outfits With Civil Suits Alleging Upfront Fee Loan Modification Ripoffs

From the Office of the Minnesota Attorney General:
  • Minnesota Attorney General Lori Swanson today filed two lawsuits against separate out-of-state mortgage modification companies for violating a 2009 state law that prohibits companies that offer to negotiate or modify the terms or conditions of an existing home mortgage from requesting advance payments from homeowners. These are the first lawsuits filed under the new law.

  • Homeowners who contact their lenders to modify their mortgages often face unreturned phone calls, lost paperwork, and other red tape. This and the bad economy have created an opening for mortgage modification companies to swoop in and take advantage of people,” said Attorney General Swanson.

  • The lawsuits were filed against: American Modification Consultants, LLC of Philadelphia, Pennsylvania, d/b/a American Mitigation Consultants; and INQB8 LLC of Scottsdale, Arizona, d/b/a Discount Mortgage Relief.(1)

For the Minnesota AG press release, see Attorney General Swanson Files Two Lawsuits Against Mortgage Modification Companies For Violating New State Law (Lawsuits Are First Ones Filed Under 2009 Law Designed To Protect Consumers From Abuses By Mortgage Modification Companies).

(1) The lawsuits allege that the companies violated Minnesota law by charging advance fees to homeowners and then failed to deliver the promised services. American Mitigation Consultants charged homeowners advance fees of up to $1,250; and Discount Mortgage Relief charged homeowners advance fees of up to $3,000, according to the Minnesota AG's press release.

Minnesota Regulator Initiates Action Against Unlicensed Loan Modification Operator; Says Outfit Failed To Pay Promised Refunds On Failed Workouts

In St. Paul, Minnesota, Finance & Commerce reports:
  • The Minnesota Department of Commerce has initiated civil disciplinary action proceedings against a St. Louis Park firm for allegedly offering loan modification services without a license. Last week, the department sent a “notice of and order for hearing” to Todd Jacobson of LMS and Associates, listed to an office on Wayzata Boulevard in St. Louis Park. A prehearing conference is scheduled for May 5 before an administrative law judge.

***

  • Over a six-month period last year, the Department of Commerce charges, the firm sent out invoices for roughly $251,000 on 105 files and collected nearly $139,000. The Department of Commerce contends that the firm was not doing what it said it could do: “The Department’s investigation revealed that Respondent was not successful in performing the services as represented and failed to issue refunds as represented in the contracts that the customer signed.”

For the story, see Allegations aimed at local loan-mod firm (Commerce department says company had no license).

Loan Servicer Cries Foul; Says Its Being Squeezed By Hedge Fund's Attempt To Jam Foreclosure Suit On 11,000 Unit Complex

In New York City, the New York Post reports:
  • The company that controls troubled Manhattan apartment complex Stuyvesant Town-Peter Cooper Village told hedge fund Appaloosa to back off [], saying the New Jersey bondholder has no right to try to scuttle the property's foreclosure proceedings.

  • In a brief filed with Manhattan federal court, CW Capital -- which represents holders of the $3 billion defaulted mortgage -- argued that the hedge fund must gain the support of 25 percent of bondholders to have a say in the foreclosure.

  • CW also accused Appaloosa of trying to hold up the foreclosure to "maintain its stream of payments" on its bonds, which were bought "at a steep discount" when it was clear foreclosure was coming.(1) Late last month, David Tepper's hedge fund filed a motion to stop recent foreclosure proceedings on StuyTown, saying the move would hurt its investment.

Source: CW Capital: Back off, Appaloosa.

For the follow-up to this story, see The New York Observer: Hedge Fund to Special Servicer: Stop the ‘Revisionist History’ On Stuy Town:

(1) Until the foreclosure process is completed, the loan servicer is typically required to continue coughing up monthly payments to the investors in the mortgage backed securities, despite the fact that it no longer collects the mortgage payments from the complex's defaulting landlord. The longer the foreclosure process drags out, the longer the loan servicer gets squeezed.

Tuesday, March 23, 2010

Jailed Connecticut Man Awaiting Trial On Related Larceny Charges In Upfront Fee Ripoff Ordered To Pay $230K In State AG Civil Suit

From the Office of the Connecticut Attorney General:
  • Attorney General Richard Blumenthal has won a judgment compelling a Hartford loan company owner to pay $230,150 in restitution and penalties for allegedly taking money and failing to provide promised loans and services. The settlement bans Michael Petriccione from the commercial loan business in Connecticut and obligates him to pay $165,150 in restitution to 13 consumers and $65,000 in penalties to the state.

***

  • Blumenthal sued Petriccione and his two companies, Mediations, Inc. and Innovations NE, LLC, in April 2008 for allegedly collecting more than $165,000 in deposits and upfront fees, but never delivering promised loans or services. The judgment empowers Blumenthal’s office to seek seizure of property and other assets that Petriccione has or may acquire in the future.

***

  • Petriccione is currently in jail awaiting trial on separate larceny charges stemming from the case. [...] Through his companies, Petriccione claimed to provide investment loans of $100,000 to $700 million and “mediation services.” His companies also claimed to have legal and “placement” skills, and Petriccione represented that he was a Connecticut attorney. He is not licensed to practice law in Connecticut.

For the Connecticut AG press release, see Attorney General Wins $230,000 Judgment Against Hartford Loan Company Owner.

Coalition Of Advocates, Gov't Agencies, Law Enforcement Launch Website Targeting Scams Involving Loan Mods, Sale Leasebacks, Phony Re-Fi Rackets, Etc.

The Sarasota Herald Tribune reports:
  • This month, a coalition of government agencies, law enforcement offices and advocates known as the Loan Modification Scam Prevention Network(1) is attempting to push back against the fraudsters by launching a Web site called preventloanscams.org.

  • "Homeowners at risk of foreclosure can be easy prey for home loan-modification scammers," said John Trasvina, assistant secretary for fair housing and equal opportunity at the U.S. Department of Housing and Urban Development, in a statement. "Often, dishonest individuals lure vulnerable homeowners into foreclosure rescue scams by making false promises. Scammers frequently claim they can lower mortgage payments or stop the foreclosure process."(2)

For more, see New Web site aims to track fraud in loan modifications.

(1) According to its website, the lead organizations of the effort include Fannie Mae, Freddie Mac, the Lawyers' Committee for Civil Rights Under Law (Lawyers' Committee) and NeighborWorks America, among others, with representatives from key governmental agencies, such as the Federal Trade Commission, the U.S. Department of Housing and Urban Development (HUD), U.S. Department of Justice, the U.S. Treasury Department, the Federal Bureau of Investigation, and state Attorneys General offices, as well as leading non-profit organizations from across the country.

This new, broad coalition includes a two-part response. First, NeighborWorks is leading a national media and outreach campaign to educate homeowners and the public on potential scams. (Please visit the NeighborWorks' website on this effort http://www.loanscamalert.org/.)

Second, the Lawyers' Committee is leading an effort to increase reporting and prosecution of alleged scammers to support ongoing enforcement efforts at the federal, state and local levels.

(2) According to its website, the mission of the Loan Modification Scam Prevention Network is to target the unscrupulous and sometimes criminal third-party scammers, con-artists, and thieves who target financially distressed homeowners. Some of these operators, individuals and companies posing as "loan modification specialists," are the very people who previously peddled subprime loans. While waiting for the promised relief, homeowners not only lose their money but often fall deeper into default and lose valuable time. Among the various scams employed by the alleged "rescuers" are:

  • phantom foreclosure counseling,
  • lease-back or repurchase scams,
  • fraudulent refinance,
  • fraudulent loan modification,
  • bankruptcy foreclosure, and
  • reverse mortgage fraud.

Florida Regulator Moves To Shut Down Unlicensed Loan Mod Outfits Throughout State; Hammers Seven Firms & Their Principals With C&D Orders

In Tampa, Florida, The Tampa Tribune reports:
  • State regulators cracked down on loan modification businesses [], serving one Tampa company with a cease and desist order. The company, Clear Image Financial Group, Inc., is located [...] in Tampa. Its principals, Jeff S. Stampfli, Christopher Jones, and Tasha Armstrong Merkling, were served by Florida's Office of Financial Regulation with orders to stop work immediately.(1)

***

  • The orders charge that the company is acting in violation of Florida laws that prohibit unlicensed businesses or individuals from providing loan modification services. The state also accuses the company of charging money upfront for services, which is against Florida law.(2) [...] Regulators say they planned to issue another cease and desist order to another Tampa company.(3)

For the story, see State cracks down on loan modification companies in Tampa.

For the Florida Office of Financial Regulation press release, see Tampa Loan Modification Company & Their Principals Served With Immediate Final Order To Cease & Desist.

(1) In other recent actions by the Florida Office of Financial Regulation, see:

  • Fort Myers Loan Modification Companies and Their Principals Served with Immediate Final Order to Cease and Desist (The Florida Office of Financial Regulation (OFR) issued and served an Immediate Final Order to Cease and Desist all loan modification services to:

    The Elite Financial Management Group, Inc., HPA AKA Home Protection Agency, Capital Group and Associates, Inc. of 9200 Bonita Beach Road, Suite 210, Bonita Springs, FL 34135 and its principals Michael Poka and Steven K. Itwaru.
    Modification Consulting Services, L.L.C., SWFL Consulting & Marketing, L.L.C. of 4760 Tamiami Trail North, Suite 27, Naples, FL 34103 and its principals Lake M. Walton, III, Juan Jimenez and Abby L. Jelley.),

  • Orlando Loan Modification Companies and their Principals Service with Immediate Final Order to Cease & Desist (The Florida Office of Financial Regulation (OFR) issued and served Orders to Cease and Desist all loan modification services to:

    Loan Modification Rescue Team, 132 East Colonial Drive, Orlando, Florida 32801, and its principals Marijo Bilobrk, Alicia Sanchez, and Kasey Creighton.
    Homeownership Preservation Group, at 1801 Sandy Creek Lane, Orlando, Florida 32826, and its principals Barney W. May, Donald A. Morris, and Gabrielle Hatfield.
    LendAmerica, at 111 E. Monument Avenue, Suite 316, Kissimmee, Florida 34741, and its principals Marino Pena, and Yesenia Rosario.)
    .

The orders charge that the companies are acting in violation of Florida laws (F.S. Chapter 494) prohibiting unlicensed businesses or individuals from providing loan modification services.

(2) According to the story, Stampfli, co-founder and CEO, said his company has reached out to state regulators to make sure the company is in compliance and that the state has not communicated well. Stampfli and others at the company have the proper license, but other employees do not, the state agency said. As for the upfront fees, Stampfli said his attorneys have assured him the company is in compliance with that part of the law, too. The law states that fees can't be charged until "material benefits" have been delivered. Stampfli said that's a legal interpretation and that he feels his clients receive that benefit before they pay, the story states.

(3) The other Tampa company is Home Loan Crisis Center, LLC, of 6207 North 40th Street, Tampa, FL 33610 and its principals Guy Travis Wilson, II and Sunnie E. Finkle, according to a Florida Office of Financial Regulation press release.

South Florida Feds Squeeze Plea Deals From Pair In Vacant Land Sale Scam That Reeled In 1000+ Victims, Netted $10.6M

From the Office of the U.S. Attorney (Miami, Florida):
  • Jeffrey H. Sloman, United States Attorney for the Southern District of Florida, [and others] announce[] that defendants Daniel Stephen and Patricia De Pons pled guilty to conspiracy to commit mail fraud in connection with a vacant land sale scheme that defrauded more than 1,000 victims out of $10.6 million.

For more, see Fraudsters Plead Guilty To $10.6 Million Land Sale Scheme (More than 1,000 victims defrauded).

Monday, March 22, 2010

Low-Ball Property Appraisals, "Double Escrow" Flipping/Flopping Arrangements Lead To Massive Ripoffs Of Underwater Lenders In Short Sale, REO Deals

In Stanislaus County, California, The Modesto Bee reports:
  • The hottest form of mortgage fraud in the Northern San Joaquin Valley involves bogus property valuations. [Interthinx vice president of industry relations Anne] Fulmer said a lot of the fraud involves the resale of foreclosed bank-owned homes and "short sales," in which homes facing foreclosure are sold for less than their outstanding mortgage. [...] Fulmer said there are "flopping" schemes going on involving short sales and bank-owned homes. These essentially trick banks and lenders into agreeing to sell homes for substantially less than what they're worth.

Here's one way that scheme works, according to Fulmer:

  1. A bank repossesses a home, then hires a real estate agent to resell the property.
  2. That agent secretly creates a limited liability corporation that offers to buy the property for a very low price.
  3. Meanwhile, other interested buyers also submit bids for the home, offering considerably more than the LLC's bid.
  4. But the dishonest agent tells the seller (which in this case is the bank) only about the low bid from the LLC. It illegally keeps the other bids secret.
  5. Figuring that the LLC's bid is the best deal available, the bank agrees to sell for the low price just to get the foreclosed home off its books.
  6. Then the agent immediately resells the house on behalf of the LLC to one of the other bidders for the house.
  7. Say the home's fair market value is $150,000. The agent and LLC persuade the bank to sell it for $100,000. Then the legitimate home buyer pays the agent and LLC $150,000, netting the agent and LLC a quick $50,000 at the bank's expense.

  • "We call that double escrow," said Craig Lewis, president of Prudential California Realty in Modesto. "It is happening. ... These listing agents are not disclosing all the offers to the seller." Or at least that's the widespread suspicion.(1)

For more, see Stanislaus County tops for cheaters targeting lenders.

(1) According to the story, real estate agents who suspect their clients' home purchase offers never were presented to sellers rarely investigate or report their suspicions to the state Department of Real Estate or their board of Realtors. They can't call the seller because it's a violation of the Realtor's Code of Ethics to call the seller directly, the story states.

Agents can file complaints about suspected fraudulent activity by their colleagues, the story states, but they almost never do, according to Chuck Bukhari, president of the Central Valley Association of Realtors. "All the agents are complaining verbally (about other agents involved in short sales and bank-owned properties). Unfortunately, nobody is willing to report it in writing," Bukhari said. "I'm shocked as much as you are. Nobody is coming forward. As president, it bothers the heck out of me." Bukhari said "there are a few names everybody's mentioning" when real estate agents discuss fraud among themselves. But rather than filing formal complaints, he said, honest agents simply "avoid these people."

Oregon AG Scores 1st Conviction Under New Law Targeting Loan Modification Scams, Mortgage Fraud; Defendant Gets 61 Months, Ordered To Pay $469K

From the Oregon Department of Justice:
  • Oregon Attorney General John Kroger [] announced the conviction and sentencing of a Salem mortgage broker on mortgage fraud, theft, identity theft and tax evasion charges.(1) [...] Julian James Ruiz III (DOB: 4/28/1971) was sentenced to 61 months in prison after pleading guilty to 2 counts of Aggravated Theft in the First Degree; 1 count of Aggravated Identity Theft in the First Degree; 1 count of Identity Theft in the First Degree; 1 count of Mortgage Fraud; 1 count of Forgery in the First Degree; 1 count of Tax Evasion; and 1 count of violating House Bill 3630, which prohibits collecting advance fees for loan modifications.

  • Ruiz was stripped of his mortgage license and permanently barred from working in the industry. The judge also ordered Ruiz, manager and owner of American Home Modifications, a Salem-based loan modification company, to pay $469,500 in restitution to more than 100 victims.(2)

For the Oregon AG press release, see Mortgage Broker Sentenced To Prison (Julian James Ruiz III pleads guilty to multiple counts of theft, mortgage fraud and tax evasion and is sentenced to 61 months in prison).

(1) This is the first criminal case completed by the Attorney General's new Mortgage Fraud Task Force. The Mortgage Fraud Task Force was created by Attorney General Kroger in late 2009 to combat fraud in the mortgage and foreclosure relief industries.

(2) See also, the Statesman Journal: Mortgage fraud costs man his freedom (Dealings will send him to prison and ban him from license):

  • Several of Ruiz's former clients spoke at the sentencing. "He took advantage of our trust because we did not know English. We considered him a friend," said Veronica Villasana, who addressed the court in Spanish with the help of an interpreter. "He promised to help me, but he did not," said Julian Ortiz, who also spoke through an interpreter. Ortiz said he was charged $2,500 for loan modifications services and is now on the verge of losing his home.

Indiana Court Denies Bank BFP Status; Leaves It Holding The Bag As Unrecorded Rights Of Occupant In Possession Trumps Lender's Recorded Mortgage

The following facts have been extracted from a recent ruling by the Indiana Court of Appeals:
  1. Benjamin purchased his home in Gary, Indiana in 1965 and has lived there ever since.
  2. In July of 1987, as part of his retirement planning, Benjamin conveyed his home to son David Thomas by quit claim deed with the understanding that it remained Benjamin's home and that he could recover title at any time upon request.(1)
  3. In October of 1995, David conveyed Benjamin's home by quit claim deed to another of Benjamin's sons, Richard Thomas.
  4. Benjamin and Richard agreed that Richard would return title to the home to Benjamin upon request.
  5. At no time did Benjamin relinquish possession of the home.
  6. In June of 2001, following a family dispute, Benjamin requested that Richard convey title of the home back to him, but Richard refused to do so.
  7. On August 1, 2001, Benjamin filed a notice of intention to hold a mechanic's lien on the home for $200,000.
  8. On September 12, 2001, Benjamin filed a quiet title suit against Richard but did not record a lis pendens notice at the time or at any time thereafter.
  9. On December 6, 2001, Richard obtained a $118,000 loan from Trustcorp in exchange for a mortgage on the home. Richard was unemployed and living in Georgia at the time and, in connection with the loan application process, submitted a release of mechanic's lien that bore what purported to be Benjamin's signature but was not.
  10. Additionally, the release instrument indicates only the presence of Richard as signatory and refers to the lien instrument as bearing the designation "2001 003334" when the actual designation on the notice was "2001 060516."
  11. Trustcorp did not contact Benjamin regarding the purported release, and the loan agreement was completed.
  12. As it happened, Richard never made any payments on the mortgage loan.
  13. On July 3, 2002, Benjamin filed suit to foreclose his mechanic's lien on the home, a suit that included Trustcorp as a defendant.

Question:

Does Trustcorp's recorded security interest in Benjamin's home as a mortgagee have priority over Benjamin's earlier acquired, but unrecorded, interest in the home that he has occupied since 1967 (remember that Benjamin is not the owner of record, and he failed to record a lis pendens against the home when he initiated an action to quiet title in order to recover the title from his deadbeat son, Richard, who was the title holder of record)?

Answer:

Even though Trustcorp presumably had no actual knowledge of the oral understanding between Benjamin and his sons about the ownership of the home, and presumably had no actual knowledge of Richard's intent to drain the equity out of the home by pocketing the proceeds of the Trustcorp mortgage loan (and thereby screwing over his father out his home equity that had been built up over 35+ years), the Indiana appeals court affirmed the lower court in ruling that Trustcorp was not entitled to the protection of the recording statutes as a bona fide purchaser. Accordingly, the court ruled that Benjamin's earlier-acquired, but unrecorded, ownership rights in the home pursuant to the oral understanding he had with his sons trumped Trustcorp's later-acquired recorded mortgage, and further ruled that Trustcorp's mortgage was invalid.

For the longer version of this post, with excerpts from the court ruling applying Indiana law in this case, see Failure To Inspect Property & Inquire Into Rights Of Parties In Possession Prior To Making Loan Leaves Indiana Lender With Voided Mortgage.(2)

For case law in other states addressing the effect of possession and a real estate purchaser's or lender's duty to inquire into the rights of the occupants when seeking the protection of the recording statutes as a bona fide purchaser, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

For some of the basics on the bona fide purchaser doctrine, generally, see The Bona Fide Purchaser for Value of a Legal Estate Without Notice.

(1) While this ruling doesn't explicitly say it, courts have typically held that this type of oral arrangement gives rise to a trust implied by law, commonly referred to as a "resulting trust," where the grantee is deemed to hold title to the property on behalf of the grantor/beneficiary, even though there is nothing in writing to this effect.

(2) For other court cases on the application of the bona fide purchaser doctrine where real estate buyers/lenders end up screwing themselves by failing to inspect the subject property and inquiring into the rights of persons in possession prior to closing on the purchase/mortgage loan (and risked having their interests ultimately voided), see:

Loan Officer Gets Five Months In Sale Leaseback, Foreclosure Rescue Scam; Equity Stripping Victim Hopes To Recover Title To Home

In Honolulu, Hawaii, KITV-TV Channel 4 reports:
  • It’s been nearly five years since the Fagaragan family of Ewa Beach realized that the people who promised to save their home from foreclosure had actually stolen it. Thursday, one of the people involved in that mortgage fraud case was sentenced to prison while the Fagaragans still hope to regain full ownership.

  • The family was nearly evicted by the mortgage con, and has been living in limbo ever since. Theirs was one of the first homes stolen in what became a common scheme. Mortgage companies promising to save a family from foreclosure actually fooled them into signing title over to a straw buyer and then sucked out the equity with more loans against the property.

  • Debbie Aurelio Fagaragan was in court Thursday as one of the thieves, 31-year-old Vance Yukio Inouye, was sentenced to five months in prison with four months of the time to be served on weekends.(1)

***

  • Debbie Aurelio didn't comment to reporters Thursday. Her Legal Aid attorney hopes the defendants will pay enough restitution to satisfy the banks. The judge Thursday ordered Inouye to pay $274,000. Of that, $200,000 will go to GMAC to pay off a loan the Inouyes took out on the house, the other $74,000 for the Fagaragan family. “They want their home back is what they really care about,” said Legal Aid attorney Russ Awakuni.(2)

For the story, see Mortgage Fraud Defendant Gets 5-Month Sentence (Vance Inouye Brokered Mortgage And Put Wife On Title).

(1) According to the story, Inouye’s wife, Patricia Inouye, who is still the official title holder of the Fagaragan home, has never been charged. Still be to be sentenced are Inouye's bosses, John and Julie Dimitrion, owners of "Mortgage Alliance." They pleaded guilty to the Fagaragan fraud and two other similar straw buyer schemes.

(2) Awakuni said the family still must negotiate with the Inouyes' attorneys to get Patricia Inouye to sign the home's title back to the Fagaragans and negotiate with banks to arrange affordable loans, the story states.

Sunday, March 21, 2010

More On FHLB Of San Francisco Suit To Void Purchases Of Billion$ In Residential Mortgage Backed Securities

In Northern California, The New York Times reports:
  • LAST week, the Federal Home Loan Bank of San Francisco sued a throng of Wall Street companies that sold the agency $5.4 billion in residential mortgage-backed securities during the height of the mortgage melee. The suit, filed March 15 in state court in California, seeks the return of the $5.4 billion as well as broader financial damages.

  • The case also provides interesting details on what the Federal Home Loan Bank said were misrepresentations made by those companies about the loans underlying the securities it bought.

For more, see Pools That Need Some Sun.

For the FHLB of San Francisco press release issued last week, see Statement Regarding PLRMBS Litigation.

NY Appeals Court Says "No Way!" To "Overage-Chasing Surplus Snatcher" In Attempt To Grab Excess Sale Proceeds From Jailed Homeowner Facing Foreclosure

From a recent ruling by a New York intermediate appeals court:
  • While incarcerated, Hernandez was visited by a retired New York City detective representing GALF [Gotham Asset Locators Fund, Inc.], who induced him to sign an agreement providing that GALF would receive 50% of any surplus obtained by Hernandez after the foreclosure sale of Hernandez's apartment located in plaintiff's condominium, even if it performed no services for Hernandez.
  • At the time, Hernandez already had counsel who was acting on his behalf. The agreement required that Hernandez consent to be represented by GALF's in-house counsel. Hernandez also signed a letter advising his counsel to cease all activity on his behalf.
  • Two days later, Hernandez wrote his counsel that he had signed the agreement because GALF's representative "bombarded" him with "doomsday scenarios," made false statements, and offered him cash and commissary packages. He stated that GALF was not authorized to act on his behalf. Hernandez moved to void the agreement and GALF cross-moved to enforce it and for sanctions against Hernandez's counsel for certain statements in her affirmation in support of the motion.
  • The contract is unenforceable since it was entered into under false pretenses (see generally King v Fox, 7 NY3d 181, 191 [2006]).(1) It is also unconscionable in that it provides for the payment of a substantial sum of money to GALF even though GALF has provided no services to Hernandez.
  • There is no ground for an award of sanctions. There was no showing that the statements of Hernandez's attorney were completely without merit, were made primarily to harass or maliciously injure, or falsely asserted a material fact (see 22 NYCRR 130-1.1[c]). GALF's counsel admitted a close association with his client, and even if this was overstated, intervenor [ie. GALF] has demonstrated no prejudice.
For the ruling, see Parkchester S. Condominium Inc. v. Hernandez, 2010 NY Slip Op 02008 (NY App. Div., 1st Dept. March 16, 2010).

(1) In King v Fox, the New York Court of Appeals was asked to address three questions:
  • whether New York law permits a client to ratify an attorney's fee agreement during a period of continuous representation;
  • whether such ratification is possible if attorney misconduct has occurred; and
  • whether a client can ratify an unconscionable fee agreement.

Homeowner Gets Clipped For $1500 On Failed Loan Modification; Loses Home To Foreclosure, Then Gets Run-Around From Operator On Promised Refund

In Bakersfield, California, KBAK-TV Channel 29 reports:
  • During the foreclosure crisis many homeowners turned to companies to get their home loans modified. One of those homeowners is Zuleyka Ruiz of Bakersfield. Her home was in foreclosure and had a sale date of December 12, 2009.

  • On December 6, Ruiz went to Mortgage Solutions which is located inside the law offices of Julio Jaramillo [...].(1) "They asked me for $1500 for paperwork to pay the people, to stop the sale date," she said. Ruiz paid the money, however, a law passed on October 11, 2009 makes it illegal for companies to charge for home loan modifications upfront.

  • We spoke with the owner of Mortgage Solutions, Ricardo Melgoza, about why he charged Ruiz even though it was illegal. Melgoza said Ruiz wasn't getting a home loan modification so he could charge her. But Ruiz's paperwork says she was getting a modification. Regardless, Mortgage Solutions couldn't save her home, and on December 29 she called the company about getting her money back.

  • Ruiz said she spoke to Melgoza who promised to give her a refund during the first week of January. [...] After Eyewitness News approached Melgoza about Ruiz's refund, he said Ruiz would get her money the first week of March. That didn't happen. Melgoza told Eyewitness News if this story made him look bad he wouldn't pay. Meanwhile, Ruiz is still out $1,500. "It's a lot of money and it's a lot of money that is not mine," she explained. "I got the people from other people that want to help me to keep my house."

  • To prevent future clients from not paying for his services Melgoza said he plans to up his prices from $2,000 to $4,000-5,000.

For the story, see Homeowner wants refund for loan modification that didn't happen.

(1) An upfront fee loan modification outfit located inside someone's law office??? This arrangement sounds like it could be similar to the numerous "lawyer renting" loan modification rackets that authorities like The State Bar of California and others are currently busting up. See, for example, Southern California attorney arrested for loan modification activities.

NC Federal Bankruptcy Judge Rips Lawyer For Alleged Pattern Of Ripping Off Vulnerable Consumers Seeking Chapter 13 Protection & Other Rules Violations

In a recent ruling from a Federal bankruptcy court in North Carolina, bankruptcy attorney William T. Batchelor was called to the carpet by Judge J. Rich Leonard for allegedly engaging in a pattern of ripping off financially strapped consumers, primarily by charging more for his services in Chapter 13 proceedings than is allowable under local bankruptcy court rules.(1)

In addition, Batchelor was accused of making unprofessional comments to some of his clients, according to the following excerpts from the ruling:
  • Batchelor informed the debtors that in order to have work completed correctly they would have to "learn to kiss his secretary's [expletive]."

***

  • On one occasion in particular, Mr. Batchelor told the Boscos they, "were nag, nag nagging him [and that] he doesn't need any of this [expletive]."

Judge Leonard ordered Batchelor to refund all fees paid by the five clients who testified in court on this matter, and instructed the Bankruptcy Administrator to investigate all other of Batchelor's pending bankruptcy cases to determine if "further egregious billing practices have occurred," in which case the Administrator, "in her discretion may seek additional disgorgement."(2) Batchelor has also been barred from filing any new petition in this court until April 15, 2010, according to Judge Leonard's ruling.

For the ruling, see In re Daniels III (and other debtors).

(1) According to Judge Leonard (bold text is my emphasis added, not in the original text):

  • The evidence of record is clear that numerous violations of the Bankruptcy Code and the local rules of this court were committed. First and foremost, there appears to be a flagrant disregard of compensation and disclosure requirements. Pursuant to 11 U.S.C. §329, an attorney must file with the court a statement of the compensation agreed to be paid. Section 330(a)(4)(B) authorizes the court in a chapter 13 case to "allow reasonable compensation to the debtor's attorney for representing the interests of the debtor in connection with the bankruptcy case . . . ."

  • In furtherance of these Code sections, the local rules of this court have elaborately laid out the means by which a professional may charge fees. E.D.N.C. LBR 2016-1. The standard base fee in a chapter 13 case is $3,000.00. E.D.N.C. LBR 2016-1(a)(1). As proscribed by the local rules, the standard base fee is intended to cover all services that are reasonable and necessary for proper administration of a case in the first year.

  • While additional fees, known as non-base fees, may be required for services outside of that which is considered "standard," such compensation must be applied for, noticed to the parties, and awarded by the court. E.D.N.C. LBR 2016-1(a)(4)-(5). Even when a non-base fee is presumptively reasonable, it must be applied for and noticed to the debtors, trustee, and bankruptcy administrator before automatic court approval is granted. E.D.N.C. LBR 2016-1(a)(6). Each attorney who undertakes the representation of a debtor in a chapter 13 case is charged with the responsibility of disclosing to the debtor these procedures of awarding fees. E.D.N.C. LBR 2016-1(a)(7).

  • From the testimony of the former clients, it is evident that Mr. Batchelor routinely acted in contravention of one or more of the subsections under Local Rule 2016-1. Often, full disclosure was not made to clients regarding billing practices and procedures. In fact, the court finds that the proscribed billing structure of this court was generally ignored. Clients sought the services of Mr. Batchelor believing they would be charged the standard base fee, only to discover that additional monies were required before services were rendered. Disclosure statements filed with the court do not reflect these additional amounts, nor does it appear that the appropriate applications were filed to seek such compensation. Instead, Mr. Batchelor imposed his own renegade billing structure, which is entirely impermissible.

  • Moreover, based upon the testimony at the hearing, problems also exist with the lack of professionalism Mr. Batchelor exhibits. Such problems include the clients inability to access their attorney, the level and quality of advice being offered, inappropriate delegation of work to staff members, and an overall lack of professional demeanor. These actions and inactions are suspect, and cut across multiple rules of professional conduct. However, the serious problems posed by Mr. Batchelor's behavior can generally be labeled as a failure to "strive to attain the highest level of skill, to improve the law and the legal profession, and to exemplify the legal profession's ideals of public service." N.C. Rules of Prof'l Conduct R. 0.1[10] (2006).

  • The court finds that based on the incidents described, Mr. Batchelor has repeatedly acted in a manner that is unbecoming of a lawyer. In doing so, he has failed to improve the legal profession or exemplify this profession's mores. This court holds itself to the highest of standards. The members of the bar that appear before this court are generally exemplary. When one member of the bar acts in a way that tarnishes the established reputation of excellence, the court cannot sit idly by. Those problems illuminated by the motion to show cause and motion for examination under Bankruptcy Rule 2017 must be remedied.

(2) The Bankruptcy Administrator also chimed in on Batchelor, according to the following excerpt from Judge Leonard's ruling (bold text is my emphasis added, not in the original text):

  • The Bankruptcy Administrator also entered into evidence a reprimand issued against Mr. Batchelor by the North Carolina State Bar on August 6, 2007. The reprimand discusses fees that Mr. Batchelor charged in a case filed in Wake County. In that case, Mr. Batchelor quoted his client a flat fee of $1,250. As the case progressed, however, Mr. Batchelor charged his client an additional $4,450 to continue representation.

  • Due to the clients inability to acquiesce to the request for additional fees, Mr. Batchelor withdrew as counsel. The reprimand highlights Rule 1.5 of the Rules of Professional Conduct. Rule 1.5 states that once a fee agreement is reached between an attorney and a client, the attorney has an ethical obligation to fulfill the contract regardless of whether an unfavorable bargain was struck.

  • Furthermore, if an attorney renegotiates the fee agreement, the attorney may not abandon or threaten to abandon the client to coerce additional or higher fees.

Georgia Supremes Rip State Bar For Proposed Handslap For Wayward Lawyer Who Used Stolen ID, Phony Documents To Rip Off Employer Of Nearly $500K

In Atlanta, Georgia, Business Insider reports:
  • The Georgia Supreme Court called out the State Bar on Monday for its meek punishment of a fraudulent lawyer, calling the proposed sanction "troubling" in its unanimous rejection of his petition for voluntary suspension.(1) The Bar had agreed to a six month to one year retroactive suspension for Michael J.C. Shaw for using fake identities to bilk Greenberg Traurig(2) of nearly $500,000 by posing as a third-party vendor on invoices.

***

  • The firm uncovered the misconduct in the summer of 2009. He was fired and subsequently cooperated with the firm's investigation and coughed up $526,922 to the firm, per their request. Shaw requested a retroactive six to 12 month suspension, to which the Georgia State Bar agreed. He is not charged with a crime.

Source: Georgia Supreme Court Chews Out Former Greenberg Traurig Partner And State Bar.

See also: ABA Journal: Ga. Supremes Want Tougher Sanction for Ex-Greenberg Traurig Associate.

(1) At the risk of appearing like I'm piling on, I provide below the entire concurring opinion of Justice David Nahmias, who ripped the Georgia State Bar and Shaw for the suggested sanction for this guy after getting bagged for ripping off his employer of nearly $500K:

  • In my view, Michael J. C. Shaw is fortunate not to be incarcerated in a state or federal prison for the half-million-dollar fraud he perpetrated against his employer, along with related crimes such as identity theft and misuse of someone else's social security number. His multi-year, multi-faceted scheme ended only when he was caught. I join the Court's unanimous decision rejecting Shaw's petition for voluntary discipline of a six to twelve month suspension, "preferably retroactive" to the date he stopped practicing law, which occurred when his law firm discovered his scheme and terminated him. I write to express how troubling I find it that Shaw and, even worse, the State Bar apparently believe that such a short "break" from practicing law is appropriate discipline for his extended, extensive, and serious misconduct, notwithstanding the factors he presents in mitigation. I expect that most members of the Bar, and almost every citizen in this State, would be equally disturbed by that concept of attorney discipline. I am authorized to state that Presiding Justice Carley joins in this concurrence.

Source: In The Matter Of Michael J. C. Shaw, No. S10Y0571 (March 15, 2010).

(2) For other stories on alleged "follies" connected to this law firm, see:

Apartment Bldg Maintenance Man Accused Of Pocketing $100K+ In Tenants' Rent, Leaving Them Facing The Boot & Screwed-Over Landlord Facing Foreclosure

In Trenton, Michigan, WDIV-TV Channel 4 reports:
  • Police are looking for a man accused of scamming dozens of downriver apartment tenants out of their rent money. Police said Paulo DiMaggio,(1) the former maintenance man at the Morningside Apartments on Marie Street in Trenton stole more than $100,000 from more than 60 tenants. For months, DiMaggio convinced the residents to pay their rent to him and he would relay the payments. Sometimes, he promised discounts and deals in exchange for cash payments, said tenants.

***

  • Dozens of evictions were under way, but before the tenants were booted, most were able to prove to authorities that they thought they were legitimately paying their rent. The Morningside Apartment building owners said they too were a victim of DiMaggio's scam because they lost income that would have gone to pay for the building's mortgage. The building has slipped into foreclosure.

  • DiMaggio, who sometimes goes by the alias name of Paul Agusa, was also able to convince local stores to cash money orders and checks made out to the apartment building owners, according to investigators.

  • Detectives discovered the scams in December and arrested DiMaggio. But shortly before his arraignment, police said he faked a heart attack and was taken to an area hospital. He escaped from the hospital and has not been found. DiMaggio is wanted for similar crimes in Oakland and Macomb counties.

Source: Police Search For Rent Scammer (DiMaggio Scammed Apartment Building Owner Out Of $100,000).

24-Story Pile Of F'closure Papers Threatens To Topple Miami Courthouse??? "We Have 125,000 Open Files!!!" Says Clerk Of Court As He Sends Out SOS

Over on West Flagler Street in beautiful downtown Miami, Florida, Miami New Times reports:
  • There was a time — say, last summer — when no clerk wanted to enter a certain room on the 15th floor of 140 W. Flagler St., a drab Miami-Dade County municipal building downtown. Inside lurked a multi-ton beast made of dead trees: the collection of pending foreclosure case files for the county. Since the economy began its nosedive, roughly 8,000 foreclosures have been filed per month, which is about the number the county used to have in a year, according to Clerk of the Courts Harvey Ruvin: "We have 125,000 open files. If you piled all of them on top of each other, it would make a 24-story building."

  • "You could hear the floors creaking under all the weight," says a female clerk who asked not to be named. "Everybody was joking about how if one of us fell through that floor, it would be the lawsuit of the century."

***

  • Nonetheless, last July, the clerk's employees began moving the files the half-block to a scavenged judge's quarters on the seventh floor of 73 W. Flagler St., a task they didn't complete until February. But the insatiable monster has continued to grow, and Shabazz says of the new file room: "It's getting unruly in there." "It's going to blow," says an older female clerk, who, like her colleague, requested anonymity. "You go in there? Do a Hail Mary first."(1)

For the story, see A pile of foreclosure papers threatens to topple a downtown Miami courthouse.

See also, "It's Going to Blow!": Miami-Dade's Leaning Tower of Debt Haunts Clerks' Dreams.

(1) Go here to view the foreclosure file room that the clerks are deathly afraid of entering.

Judge: No "Clanging Of The Prison Gates" For POA-Abusing Lawyer Who Swindled Ailing Mom, Stiffed Nursing Home; Upcoming Afghan Gig Earns Him Free Pass

In Guildford, Surrey (United Kingdom), the Telegraph reports:
  • Paul Mowbray, 38, who works as a solicitor, admitted draining more than £10,300 from his mother's bank account after she was admitted to a care home and gave him control of her finances. Judge Peter Moss told Guildford Crown Court such cases normally demanded a prison sentence but said he would not even force Mowbray to do community service because of his service in Afghanistan would be so testing.

  • The court was told the former lawyer, a long term member of the TA [Territorial Army] and currently training to become a regular soldier, abused his position holding power of attorney over his mother's affairs.

  • Leila Gaskin, prosecuting, said Mowbray began his crime after Sigtrud Mowbray, 87, went to stay in a care home, Esher, in 2007 after she had a fall and broke her hip. When Mowbray failed to pay the £92,000 bill, social services were contacted and officials discovered large amounts of money had been leaving her account, so they contacted police. The court heard the defendant had been taking an average of £1,400 a month from his mother's account.

  • Judge Moss said: "Normally a solicitor committing this sort of offence could expect to hear the clanging of the prison gates. "But no amount of unpaid work imposed by this court could match those conditions." Mowbray, a lance sergeant with the honourable artillery company, had originally denied fraud but later changed his plea.

  • The court was told that Mowbray, from Leatherhead, Surrey, had already repaid £7,752 and he was ordered to repay the balance of £2,643, plus £1,200 in costs.

Source: TA sergeant stole £10k from mother (A Territorial Army sergeant who stole over £10,000 from his mother was given a conditional discharge because a judge said no penalty could compare with his upcoming stint in Afghanistan).

Louisville Man Charged In Alleged Attempt To Fleece 81-Year Old Dementia Victim Of Home, Other Assets By Duping Him Into Signing Legal Documents

In Louisville, Kentucky, WHAS-TV Channel 11 reports:
  • Police say an elderly Louisville man with dementia was the victim of a $150,000 theft scheme. Richard Pearson, 70, of Louisville is charged with exploitation and theft by deception.

  • Police say Pearson convinced the 81-year-old victim to place him as his power of attorney and had him sign a last will - giving Pearson all of his personal possessions, including his home. Pearson also allegedly told the victim he was signing paperwork to allow Fifth Third Bank and the VA Hospital to help him with his finances.

Source: Man charged with scamming elderly Louisville man with dementia.

Daughter Gets 16-20 Months For Ripping Off Elderly Mom; Abused POA, Pocketing Proceeds From Sale Of Home, Draining Bank Accounts, Cashing In Annuities

From the Office of the Nebraska Attorney General:
  • Attorney General Jon Bruning [] announced that Annigje (Ann) Perkins was sentenced to 16 to 20 months in prison by the Douglas County District Court for stealing $43,214.40 from her elderly mother. Perkins, of Sacramento, Calif., pled guilty to Theft by Unlawful Taking in December of 2009.

  • Between November 2005 and September 2008, Perkins, acting as her mother’s power of attorney, took money from bank accounts, cashed in two annuities and sold her mother’s trailer home, keeping the proceeds for herself. "Ms. Perkins abused her mother’s trust to line her own pockets," Bruning said. "We depend our family members to protect us, not take advantage of us in our time of need." The case was investigated by the Nebraska Medicaid Fraud and Patient Abuse Unit and was handled by its director, D. Mark Collins.

For the Nebraska AG press release, see Bruning: Theft From Elderly Mother Lands Daughter in Prison.

Saturday, March 20, 2010

Ex-Ontario Attorney Gets 22 Months For Manufacturing Forged Mortgage Used To Swindle 85-Year Old Man Out Of $150K

In Barrie, Ontario, the Toronto Sun reports:
  • A Barrie-area lawyer was sentenced to 14 months in jail yesterday after being convicted fraud and forgery. Justice Amy Mullins imposed a 22-month sentence on Myles McLellan, 56, a real estate lawyer, but gave him credit for time already served in prison, leaving him facing a 14-month jail term.

  • McLellan was charged in 2006 after he forged his office clerk’s signature, Janet Laurin, and convinced an 85-year-old Toronto business man, Sam Klaiman, to loan him $150,000 for the false mortgage, which he deposited into his own bank account. At the time, McLellan, who has since been disbarred because of the charges, ran a legal service called the Law Store with offices in Barrie and Innisfil that offered mortgage financing services.(1)(2)

For the story, see Lawyer jailed for fraud.

(1) According to another story (see Lawyer sentenced 22 months for fraud), The Law Society of Upper Canada has disbarred McLellan from practicing law. In all, he was found to have misappropriated approximately $423,000 of trust funds belonging to four clients. McLellan will return to a Toronto court May 31 for preliminary hearing in connection with trust fund frauds.

(2) If an Ontario, Canada attorney or paralegal, either in the course of representing you or acting as a fiduciary, screws you out of money or property through dishonest conduct, check out the The Law Society of Upper Canada Compensation Fund for information on how to recover some or all of your losses from the fund.

Elsewhere in Canada, check the Canada Client Protection Funds Map for the attorney compensation fund for client protection available in your province.

In the United States, see:

Maps available courtesy of The National Client Protection Organization, Inc.

Santa Maria Elderly Swindles: R/E Agent Suspected In $300K Ripoff Of 69-Year Old Victim; Landscaper Pockets $50K From Seniors For Unperformed Services

In Santa Maria, California, edhat.com reports:
  • More care must be taken to protect elderly residents from unscrupulous people who are hired to help them. As recently as March 4, a 59-year-old Santa Maria man was arrested for bilking an elderly woman out of hundreds of thousands of dollars in a fraudulent real estate deal, the Santa Barbara County sheriff office reported.

  • Deputies said the man convinced the 69-year-old victim to invest $300,000 for the purchase of a commercial property and promised the woman 12 percent interest on her investment. He even paid the first six months interest up front. Sheriff's detectives began investigating the incident last year. At that time, the woman reported that aside from receiving a payment for the first six months of interest, which was pulled from the $300,000 she had invested, the man had never paid her anything.

  • Deputies said the woman trusted the man because he is a Realtor whom she had worked with before. The man was booked into county jail on suspicion of [financial] elder abuse, and authorities said more charges could be filed before the investigation is finished.

***

  • And in [another case in] Santa Maria, a landscaper pleaded no contest to charges he charged elderly homeowners for services he never performed. He was ordered to pay $50,000 in restitution and sentenced to eight years in prison.

Source: Op Ed: Elder Abuse.

1st Time Offender Could Dodge Convictions; Charged w/ Forgery, Unlawful Use Of POA To Pocket Reverse Mortgage Proceeds On 90-Year Old Mom's Home

In Greenville, South Carolina, the Anderson Independent Mail reports:
  • Former Clemson City Council member Elouise James, facing multiple felony charges, will be entering a pretrial intervention program. [...] Pretrial intervention provides first time offenders with the opportunity to avoid prosecution and a criminal history. [...] For applicants who complete the program, charges are dropped and they can seek to have their arrest records pertaining to those charges expunged.

  • James was charged in September with two counts of forgery and one count of obstruction of justice in Greenville County and two counts of obtaining goods by false pretenses and one count of financial exploitation of a vulnerable adult in Pickens County.

***

  • On the [] charge of taking financial advantage of a vulnerable adult, investigators say James unlawfully used a power of attorney to obtain a reverse mortgage on her 90-year-old mother’s home. The [South Carolina Law Enforcement Division] report says James used $15,451.60 obtained from the mortgage to pay an outstanding balance of restitution fees related to her daughter’s probation. The payment reportedly occurred a few days before Kristyn James’ scheduled probation revocation hearing.

For the story, see Former Clemson council member enters pretrial program.

Son Gets Six Months In Life Savings Swindle Of Dementia-Stricken Mom; Need To Meet Nursing Home Expenses Makes Sale Of Family Farm Likely

In Hennepin County, Minnesota, the Star Tribune reports:
  • Anna Sitte lost her life's savings to swindle, her ability to recognize family members to dementia and, at 78, is about to lose what's left of the farm her family settled a century ago. "What she has is a measure of dignity," her son Jimmy said. "There are lots of ways to measure justice, but I tell the prosecutors that they did something good."

  • The family, however, has been torn apart. Jimmy's brother, Steven Carl Sitte, 53, of New Hope, is serving six months in the Hennepin County workhouse after pleading guilty to swindling their mother, who has Alzheimer's disease. He was turned in by Jimmy.

  • Anna Sitte is expected to be moved within weeks to a nursing home in Wahpeton, along the Minnesota border and 12 miles from her North Dakota farm. It's an assisted-living complex that Jimmy said Anna really can't afford. Jimmy said he will probably sell the three remaining acres of the 188-acre family farm to help the state of Minnesota pay for his mother's assisted-living home. With her medication, Anna's monthly living expenses are expected to reach $7,000, he said.

  • "The judge ruled that my brother owed my mother $274,000 in restitution, but I doubt they're ever going to see a penny of it because he's broke," said Jimmy Sitte, a musician who lives modestly.

For the story, see She lost the farm, but found a new life (A victim of an elder abuse scheme is about to go to a home, while one son serves time and another tries to make sense of a family divided).

Nephew Dodges Hard Time After Copping Plea To Abusing POA In $98K Ripoff Of Care Facility-Bound Aunt, Leaving Nursing Home Costs Unpaid

In Canton, Ohio, the Canton Repository reports:
  • A man convicted of improperly using funds from his aunt’s estate must repay more than $98,000, a judge said Wednesday. Stark County Common Pleas Judge Lee Sinclair also placed Lawrence V. Kline Jr., 57, [...] on probation for three years. Any violation could send Kline to prison for up to 18 months. Kline pleaded guilty last month to unauthorized use of property.

  • Defense attorney Jeffrey Jakmides said Kline is the victim’s sole heir. Assistant Stark County Prosecutor Lewis Guarnieri said Kline had power of attorney over the victim, who is in a nursing home and now has a court-appointed guardian. Kline was supposed to pay the victim’s nursing home expenses, but didn’t and money was missing from her account, Guarnieri said.

Source: Lake Twp. man must pay $98,000 in restitution.

Niece Overcomes Authorities' Initial Reluctance To Prosecute Cousin For Stealing Aunt's Life Savings As Man Cops Plea To $53K+ Embezzlement

In Sylva, North Carolina, the Asheville Citizen Times reports:
  • Ann Buchanan isn't one to give up. And that trait served her and her family well as she pushed to have a cousin charged and ultimately convicted of stealing her 89-year-old aunt's life-savings. Marc Jeffery Hawk, a 54-year-old former county maintenance supervisor, pleaded no contest to four counts of embezzlement and one count of exploitation of an elder for taking $53,438 from his aunt's bank account.

***

  • He is the first person in Western North Carolina to go to jail under a law aimed at protecting the elderly from financial exploitation. But the conviction wasn't easy for [the 89-year old widow's] family. At first, authorities didn't want to prosecute the case, and throughout the process, Buchanan said, officials suggested it should be handled in civil court. Now she's hoping others will take notice of potential elder abuse and use a 2005 law aimed at protecting North Carolina's oldest residents. “Be persistent,” she said. “And don't take no for an answer.”

***

  • The nature of exploitation makes winning a criminal case hard, said Michael Rich, director of the 30th Judicial Alliance, a group that advocates for victims of abuse in the state's seven western counties. Often, he said, family members are the criminals and families don't want to bring charges against their own or spend the time it takes to get through the criminal court process. And the victims often aren't good witnesses because of disabilities such as Alzheimer's or dementia.

***

  • Buchanan said throughout the process, officials suggested the case should be handled in civil court. But that's not what the family wanted. “We weren't after money for us,” she said. “We were after justice for Aunt Mae. We were just so afraid that this case was going to be eventually dismissed.”

  • Rich said her experience is common. “When it comes to financial issues, it appears to many in law enforcement and in the court system that these are civil rather than criminal issues,” he said. “Criminal charges mean an investigation that might involve hard work. A civil case means that the victim and his abuser are responsible for following through.”

***

For the story, see Jackson County man Marc Hawk convicted of stealing $53,000 from 89-year-old relative.

Daughter Charged w/ Putting Herself On Title To Now-Deceased Stroke Victim's Home, Then Mortgaging Property To Drain $134K+ In Equity

In St. Paul, Minnesota, the Star Tribune reports:
  • Anacleto Adamez raised 10 children in his small 1 1/2-story home on St. Paul's West Side. After suffering a stroke in August 2000, he gave his son Jesus power of attorney over his affairs. Unknown to the rest of the family, his daughter Alma Adamez-Randle filed a quit-claim deed on Aug. 15, 2000, making herself co-owner of her father's home. She then took out three mortgages, the last in 2006, for more than $134,000, according to court documents.

  • She also allegedly helped herself to his bank account, making large withdrawals after she moved into his house to help him with daily living, the documents said. Anacleto Adamez died Sept. 28 at age 82.

  • Alma Adamez-Randle, 46, was charged Monday in Ramsey County District Court with one felony count of theft by swindle. She must appear in court April 7. Adamez-Randle is a lieutenant at the Shakopee women's prison.

For more, see Daughter accused of swindling ailing St. Paul father (Alma Adamez-Randle is accused of taking thousands of dollars by mortgaging his home, draining bank accounts).

Two Busted In Alleged Door-To-Door Handyman Racket Targeting Elderly Homeowners For Easy Ripoffs; Cops Seeking 3rd Suspect

In Waterville, Maine, the Kennebec Journal reports:
  • Police arrested two men Tuesday and are looking for a third man in connection with what they said are scams against older people. The men reportedly were knocking on doors and asking to rake, trim trees and seal driveways and then perform inadequate work, according to police Chief Joseph Massey. In one case, one of the men reportedly stole 40-milligram OxyContin pills, Massey said.

  • "You want to be very suspicious of contractors who approach you to do work and they want to start immediately," Massey said Wednesday. "It's just amazing. There's always somebody willing to steal you blind in a heartbeat."

  • Arrested Tuesday were Jason Donald Bolduc, 32, of Kennebunk, and Jean Louise Beaulieu, 39, of Biddeford. Both were charged with violation of seller's performance, a law that requires contractors to wait three days before doing work to give customers time to cancel a contract. The men also were summonsed for a second charge of violating a contract, and Bolduc was summonsed and charged with stealing drugs, Massey said.

  • Additionally, Beaulieu was charged with violation of conditions of release. District Attorney Evert Fowle said Wednesday that he later was charged with violation of consumer sales solicitation and violation of registration, as he was not registered to do such work in Maine.

***

  • Fowle started a program in Kennebec and Somerset counties to educate health care facility workers and others about scams targeting the elderly. The program takes inventory of every case in which a victim is older than 60, and those cases receive heightened scrutiny, Fowle said.

For more, see Police arrest pair in reported scam.

Home Handyman Ripped Off Elderly Woman Physically Unable To Care For Herself, Say Louisville Cops

In Louisville, Kentucky, WDRB/WMYO-TV Channel 41 reports:
  • A man who acted as an elderly woman's handyman has been arrested and charged with exploitation and forging checks. A police report and a warrant obtained by Fox 41 News indicate that for five months beginning in Sept. 2008, 43-year-old Tracy McCoy did chores around the house for a 67-year-old woman who was physically unable to care for herself.

  • During this period, she was hospitalized and McCoy was charged with the upkeep of her home and bringing her mail to the hospital. While his employer was away from her home, police allege that McCoy cashed six of her checks and kept the money for himself, stealing roughly $11,200.

Source: Louisville Police arrest "handyman."

Caregiver/Handyman Cops Plea To $600K+ Ripoff Of 93-Year Old Pennsylvania Woman

In Cambria County, Pennsylvania, The Tribune Democrat reports:
  • A Windber man admitted in Cambria County Court Thursday that he had ripped off an elderly West Hills woman for more than $600,000 while working for her as a handyman and caregiver. Frank A. Solensky Jr., 56, [...] pleaded guilty to nine felony counts of theft by deception and one count of forgery. [...] Solensky agreed that at the time of sentencing, he would make $100,000 on the restitution owed to the victim, who is now 93 years old. Tulowitzki said at the time of sentencing he will determine the exact amount of restitution owed, although a forensic audit showed that $680,000 is the amount due from 2000 into 2008.

  • Assistant District Attorney Wayne Langerholc said that Solensky, while working for the victim, was reimbursed by the woman at greatly inflated purchase prices for various household repairs, equipment and goods.(1) Langerholc and [police detective George] Musulin said that the case is a warning to senior citizens and their families to closely monitor any financial accounts handled by a caregiver.

For more, see Caregiver admits $600,000 theft.

See also: Violating trust is one of the worst crimes.

(1) Accotrding to the story, examples included a $950 charge for salt for the woman’s driveway and seven garage-door openers for $2,500 each, said George Musulin, the West Hills police detective who investigated the case. The remote-control openers can be purchased for less than $40 each, he said.

Friday, March 19, 2010

FHLB Of San Francisco Sues To Void $19.1B+ Purchase Of Crappy Mortgage-Backed Securities; Says Dealers BS'd About Quality Of Underlying Home Loans

The Federal Home Loan Bank of San Francisco announced:
  • [T]he Federal Home Loan Bank of San Francisco(1) (Bank) filed complaints in the Superior Court of California, County of San Francisco, against nine securities dealers in relation to certain of the Bank’s investments in private-label residential mortgage-backed securities (PLRMBS). The Bank is seeking to rescind its purchases of 134 securities in 113 securitization trusts, for which the Bank originally paid more than $19.1 billion. The Bank’s complaints allege that the dealers made untrue or misleading statements about the characteristics of the mortgage loans underlying the securities. All of the PLRMBS in the Bank’s mortgage portfolio, including those identified in the complaints filed today, were rated AAA when purchased, based on the information provided by the securities dealers.

For the entire press release, see Statement Regarding PLRMBS Litigation.

Thanks to Rob Harrington for the heads-up on the press release.

(1) According to its website, the Federal Home Loan Bank of San Francisco helps meet the borrowing needs of communities by providing wholesale credit products and services to member financial institutions. The Bank is privately owned by its members, which include commercial banks, savings institutions, credit unions, thrift and loan companies, and insurance companies headquartered in Arizona, California, and Nevada. We are part of a network of 12 regional Federal Home Loan Banks chartered by Congress in 1932 to provide low-cost credit to residential housing lenders.