Saturday, January 30, 2010

Florida Homeowner Faces Financial Ruin As City Seeks To Enforce $27K+ "Parking Ticket"

In North Port, Florida, the Sarasota Herald Tribune reports:

  • The used car was a blessing, a gift from her church to help Diane Pearson, a single mother with three children and a long commute to work. And after receiving the 1998 Mercury from her church, Pearson found her drive to Sarasota a bit less stressful. But Pearson lives in North Port, a city that has targeted citizens for violating rules regulating everything from how often you mow your grass to the cars in your driveway.

  • North Port took Pearson to court this month over fines of more than $27,000 for keeping her old car in the driveway without a license plate. If the city wins its case, Pearson could be facing bankruptcy. "It's been a nightmare," said Pearson, 49, who works two jobs to stay afloat as she raises three teenagers. Pearson is one of dozens of North Port residents caught in the city's crackdown on code violations.(1) Officials promised to ease up last year, following complaints that the get-tough approach was too heavy-handed in a community slammed by the recession.

For more, see North Port code net snags another.

(1) A November, 2009 Sarasota Hearld Tribune story reports on another incident where the City of North Port attempts to force the sale of a house to pay $45,500 in city fines that began accruing years ago after a homeowner put up a canopy tent without a $30 permit. The homeowner reportedly also had code violations on a second property that stem from roofing work and enclosing a lanai without permits. Combined, North Port said the homeowner owed $123,000 in fines. For this story, see Code violation fight may cost woman her home.

The City of Northport offered to settle the $123,000 in fines for about $25,000.

Man Gets 90 Days In Home Repair Ripoff Victimizing Senior Out Of $21K

In Chatham, Ontario, The Chatham Daily News reports:

  • A 48-year-old Chatham man who bilked an elderly man out of more than $21,000 will spend 90 days behind bars. William Joseph MacDonald pleaded guilty [...] to fraud over $5,000. "You preyed upon and you stole from an ill and vulnerable person," said Superior Court Justice Edward Ducharme. "You did it not once or twice, but repeatedly over a long period of time."

  • Assistant Crown attorney Fred Creed told the court the victim, a 76-year-old Ottawa man, took over management of his elderly sister's Chatham properties in 2006. Creed said the man had an agreement with Do It Right Handyman, owned by MacDonald, to take care of the eight houses. "Much of the work that had been paid . . . had never been completed or started," he said. The Crown said between September of 2006 and April of 2007, MacDonald billed, and received payment for, a variety of home improvements he didn't do. The improvements ranged from new roofs and siding to cleaning and painting and totaled $21,662.

For the story, see Elderly man defrauded out of $21,000 .

Landlord Accused Of Using "Self-Help" Eviction Tactics; Shut Off Heat & Power, Trashed Toilet & Crib In Attempt To Coax Woman, Baby To Vacate

In Brooklyn, New York, the New York Post reports:

  • A landlord from hell was busted for shutting off a tenant's power and heat and tossing her toilet out into the street to try to get her to move out of his Crown Heights building, sources said. Mario Eugene, 46, ordered the woman and her baby to vacate the Buffalo Avenue apartment near St. John's Place, but she wouldn't budge, sources said. So, at 10:30 a.m. Wednesday, he took her door off the hinges, shut off the electricity and radiators, trashed the baby's crib, removed the toilet and left it in front of the building. They argued again the next day -- and she finally called the cops, who got Eugene to admit that he took her belongings to force her to move. He was charged with burglary and criminal mischief, sources said.

Source: NYPD Daily Blotter - Brooklyn.

Murder-Suicide Suspected Involving Homeowner Facing Foreclosure; Reportedly Gave Up After Failed Attempts To Negotiate Workout With Lender

In Spencer, Massachusetts, the Worcester Telegram & Gazette reports:

  • Police believe a man facing a foreclosure auction yesterday took his own life after shooting his sick wife, shooting their horse, setting fire to the home they shared and torching his pickup truck. Michael S. Khoury, 69, and his wife, Joyce M. Khoury, 66, owned the house at 19 Woodchuck Lane, which was scheduled to be auctioned at 10 a.m. A neighbor called 911 to report the house fire. When police arrived they found the burning truck in the driveway and the house ablaze.


  • A former employer said yesterday he had talked to Mr. Khoury [recently] and he said Mr. Khoury told him he was facing the imminent loss of his house — and his wife. Vincent P. Iuliano, owner of American Reclamation of Charlton, said Mrs. Khoury had terminal cancer. “He told me Joyce was real bad. He wanted to move to Florida but because of the foreclosure of the house, there was nothing left,” Mr. Iuliano said. “He could not move out. Joyce was too ill to move,” he said.

  • According to Mr. Iuliano, Mr. Khoury tried to negotiate with the bank. “He tried, but they would not accept the deal, and that was last week, so he gave up,” Mr. Iuliano said. North Brookfield Savings Bank President and Chief Executive Officer Donna L. Boulanger did not return a telephone call from a reporter seeking comment yesterday.

For the story, see Couple found dead hours before foreclosure auction (Losses loomed for Spencer pair).

Friday, January 29, 2010

West Virginia AG Obtains $214K In Refunds For Consumers In Connection With Alleged Debt Settlement Ripoffs

In Charleston, West Virginia, The West Virginia Record reports:

  • Attorney General Darrell McGraw's office has announced it has reached settlements with three debt relief companies.The settlements, according to a press release from McGraw's office, equal $214,000 in refunds for 226 state consumers. The companies are Clear Financial Solutions of Orlando, Fla., and its owner, Chris Rubini; Financial Freedom of America, Inc. of Dallas, Texas; and Financial Solutions Legal Center, of West Palm Beach, Fla. The three companies also agreed to discontinue providing debt relief services in West Virginia in the future.

For more, see McGraw reaches settlements with three debt relief companies.

Condo Associations, HOAs Facing Perfect Storm?

The Providence Journal reports:

  • The worst housing crisis and economic crash since the Great Depression have created a dangerous financial storm that threatens to destroy thousands of Shared Ownership Communities (condos, co-ops and Home Ownership Associations) across America. The danger is quiet, but staggering — over 60 million Americans live in SOCs, or almost 20 percent of the population.

For more, see Perfect storms could sink condos.

BofA, Countrywide Strike Again; Mistakenly Seize Another Home Misidentified As A Foreclosure, Says Homeowner

In New Bedford, Massachusetts, WCVB-TV Channel 5 reports:

  • A Massachusetts couple says their son's homecoming from Iraq was spoiled when Bank of America/Countrywide foreclosed on their Florida home, which they owned free and clear, according to a lawsuit. Homeowner Charlie Cardoso, of New Bedford, was shocked to hear that the bank, with whom he never had a mortgage, foreclosed on his Spring Hill, Fla., home, despite telling the bank it had the wrong house.

  • The Cardoso's tenant was forced to leave the Florida home, and the bank seized the home, changed the locks and removed personal property from the house and garage, the family claims. They said Bank of America's foreclosure spoiled the couple's plans to welcome home Cardoso's wife's son, who had just completed his third tour of duty in Iraq. Upon notice of the seizure, Charlie Cardoso drove to Florida to protect his house, missing the homecoming.


  • When Cardoso arrived in Florida with his deed for the property, the police denied him access to his house. Only after a later meeting at the police station was Cardoso able to convince the police that Bank of America/Countrywide had foreclosed on the wrong home. At that point, he was allowed to break down the door to his house, remove the locks and enter it, only to discover that the electricity had been turned off, that the pipes had frozen(1) due to the unseasonably cold temperature in the Tampa area, and that possessions stored in the house and garage had been removed, attorneys for the family said.

  • Court records indicate that this is not the first time that Countrywide foreclosed on the wrong home. A 2008 decision by the Nevada Supreme Court(2) upheld a jury verdict on behalf of a Nevada couple when Countrywide foreclosed on the wrong Las Vegas condominium unit in 2003.

For the story, see Iraq Homecoming Spoiled After Bank Forecloses On Wrong Home (Bay State Couple Says Bank Took Possession Of Wrong Home In Florida).

For a follow-up story, see Couple: Bank Foreclosed On Wrong House (New Bedford Couple Suing Bank Of America):

  • A New Bedford couple is suing Bank of America for $500,000 because of what they call a foreclosure nightmare. [...] The Cardoso's don't have a mortgage on the home that was supposed to be their retirement spot and despite repeated pleas to the bank, telling officials they had the wrong house, the bank forced their tenants out, stripped the house and changed the locks. [Charlie] Cardoso is a construction worker. He and his wife are suing the Bank of America for loss of the home, personal property and the tenants whose rent helped balance the bills. The federal lawsuit was filed this week.

For other stories on Bank of America or Countrywide being accused of improperly seizing or foreclosing on homes, see:

(1) For another recent story where the power in a vacant BofA foreclosure was shut off, see Power Shutoff In BofA-Owned Foreclosed Condo Leads To Frozen, Burst Pipes; Elderly Couple With Downstairs Unit Left With Flooded Apartment.

(2) Countrywide Home Loans v. Thitchener, 192 P.3d 243; 2008 Nev. LEXIS 79; 124 Nev. Adv. Rep. 64 (September 11, 2008).

Accounting Clerk For Mortgage Lender Gets 30 Months For Ripping Off Employer Out Of $1 Million Attributable To Loan Payoffs At Real Estate Closings

In New Orleans, Louisiana, The Associated Press reports:

  • A Houston woman who worked for a New Orleans mortgage lender has been sentenced to 30 months in federal prison for stealing more than $1 million from the company. U.S. District Judge Frederick Block also on Thursday ordered 34-year-old Jodie Hoang to pay $1,017,701 in restitution to Standard Mortgage Corp., where she was an accounting clerk. Hoang pleaded guilty to a computer fraud charge in September. Prosecutors said she used the company's computer system to change deposit codes for payments customers made at mortgage closings, then created checks payable to herself or her credit card providers.

Source: Houston Woman Gets Prison for $1M Computer Fraud (Houston woman sentenced to federal prison after pleading guilty to $1M computer fraud charge).

For the U.S. Attorney's Office press release, see Former Standard Mortgage Corporation Clerk Sentenced To 30 Months In Federal Prison For $1 Million Computer Fraud.

Thursday, January 28, 2010

Landlord To Deed Over Title To 11,000 Rental Units As Attempt To Restructure $4.4B Debt On $1.8B Complex Fails; Equity Held By Pensions Appears Doomed

In New York City, The Wall Street Journal reports:

  • A group led by Tishman Speyer Properties has decided to give up the sprawling Peter Cooper Village and Stuyvesant Town apartment complex in Manhattan to its creditors in the collapse of one of the most high-profile deals of the real-estate boom. The decision comes after the venture between Tishman and BlackRock Inc. defaulted on the $4.4 billion debt used to help finance the deal. The venture acquired the 56-building, 11,000-unit property for $5.4 billion in 2006—the most ever paid for a single residential property in the U.S. The venture had been struggling for months to restructure the debt but capitulated facing a massive debt load and a weak New York City economy that has undercut rents and demand for high-priced apartments.(1)


  • By some accounts, Stuyvesant Town is only valued at $1.8 billion now, less than half the purchase price. By that measure, all the equity investors—including the California Public Employees' Retirement System, a Florida pension fund and the Church of England—and many of the debtholders, including Government of Singapore Investment Corp., or GIC, and Hartford Financial Services Group, are in danger of seeing most, if not all, of their investments wiped out.

For more, see Tishman Venture Gives Up Stuyvesant Project (High-Profile Purchase of Manhattan Complex Collapses Under Debt Mountain).

(1) According to the story, the property's owners signaled they would be unable to reach a deal with lenders and instead decided to allow creditors to proceed with what amounts to an orderly deed-in-lieu of foreclosure, which means a borrower voluntarily gives the property back to lenders to avoid a foreclosure proceeding.

More Confusion Surrounds Short Sales As Maryland Municipality Clips Consumers For Additional Recording Taxes On Forgiven Debt

In Anne Arundel County, Maryland, The Baltimore Sun reports:

  • The real estate industry is up in arms about an Anne Arundel County decision to collect taxes on certain types of home sales based not on what the buyers paid, but on what the sellers owed on their mortgages as the deal was struck. What's at issue are short sales, which are homes that change hands for less - sometimes far less - than the balance due on the loans. The county policy may be unique in the country, according to the American Land Title Association, which represents companies involved with home sale settlements.


  • Anne Arundel County said it is charging its recordation tax of $3.50 for every $500 on the sales price plus any forgiven debt.(1) If the lender has indicated that it will go after the seller for the remainder owed, then the county will tax just the contract price, as it does with regular home sales. Richard Drain, the Anne Arundel County controller, said it isn't a new policy and the county is simply following state law. [...] Drain said the county's attorneys agreed last week that forgiven short-sale debt is taxable.


  • A complicating factor is that it is often unclear at the settlement table what lenders will do about unpaid debt. They frequently don't issue the sort of documentation the county wants as proof that they will seek repayment from the borrower - a promissory note, for instance - but also don't formally let the borrower off the hook. "They say, 'I'll allow the sale to occur,' but they reserve the right to chase the seller for the deficiency," said Andrew Levy, executive vice president and general counsel for Capitol Title Insurance Agency in Crofton.

  • Drain said the county would accept taxes on the fair market value instead, but only if the parties provide proof, such as a recent appraisal, along with a hardship letter from the seller to show financial difficulty.

For the story, see Arundel tax move angers real estate industry (County taxing forgiven debt in short sales).

Thanks to Bill Collins of Crossroads Abstract, Rochester, NY for the heads-up on this story.

(1) This confusion regarding charging recording taxes/documentary stamps in short sale transactions is not unique to Anne Arundel County, Maryland. At one time, the State of Florida operated with the same belief that debt forgiveness should be considered in the recording tax calculation, as evidenced by this informal letter issued by an employee of the Florida Department of Revenue. To their credit, the Florida DOR subsequently receded from this position by clearly stating, among other things, that:

  • The cancellation of all or a portion of the remaining amount of debt after receipt of the proceeds remaining from the purchase price is not part of the taxable consideration in a short sale transaction since the seller’s debt to the lender was incurred in a prior, unrelated transaction.

See Florida Department of Revenue Technical Assistance Advisement No. 09B4-001 Documentary Stamp Tax – "Short Sales" of Florida Real Property, Section 201.02(1), F.S.

Now-Disbarred Attorney Gets 6 Months House Arrest, 3 Years Probation For Ripping Off Client/Foreclosing Lender Of $66K Proceeds From Public Auctions

From the Office of the U.S. Attorney (Indianapolis, Indiana):

  • Brian L. Nehrig, 43, Fishers, Indiana, was sentenced to three years' probation today by U.S. District Judge Sarah E. Barker following his guilty plea to mail fraud. This case was the result of a investigation by the Federal Bureau of Investigation.

  • During 2005 and 2006, Nehrig worked as a foreclosure attorney doing foreclosure work for Citifinancial. Citifinancial required Nehrig to submit a bid at sheriff’s sales for foreclosed houses, sell the houses at arm’s length transactions, and then submit the proceeds if the home sold to a third party. Instead, Nehrig sometimes submitted inflated bids and had arrangements with friends and associates to buy the properties. Nehrig did not tell Citifinancial about the side deals, which were usually for a few thousand dollars more than the minimum bid requested by Citifinancial. Nehrig did not send Citifinancial the profits. The Court determined the loss to Citifinancial to be $66,000. Citifinancial has been paid through an insurance claim.

For the press release, see Former Attorney Sentenced in Fraud Case.

(1) According to Assistant U.S. Attorney Gayle L. Helart, who prosecuted the case for the government, Judge Barker also imposed six months' home confinement, and a requirement that Nehrig perform eight hours of community service per month for each of the 36 months that he is on probation. Nehrig was fined in the amount of $2500. Judge Barker noted that Nehrig’s law license was previously revoked and ordered that he not be self-employed and give full disclosure of this felony conviction to any future employer.

Judge Faces Charges Of Forging Docs To Obtain Mortgage Loan On Home Co-Owned With Another

In Elsa, Texas, The Monitor reports:

  • Municipal Judge Hilda Caceres has been indicted on charges that she forged a signature on a loan application, an accusation her supporters say is politically motivated. An indictment handed down in late December and unsealed [earlier this month] charges the public official with four counts of forgery and three counts of tampering with a government record.


  • Hidalgo County Sheriff Lupe TreviƱo has said his office’s investigation centers on a piece of real estate that Caceres shares with Nora Delgado and used as collateral for the loan. Caceres allegedly forged Delgado’s signature before a notary public to obtain authorization for the loan. [...] The seven-count indictment filed Dec. 23 alleges Caceres forged Delgado’s signature on three documents on May 14: a deed of trust, an assignment of leases and rents, and an affidavit of identity.

For more, see Grand jury indicts justice of the peace candidate on forgery charges.

Wednesday, January 27, 2010

Non-Profit Law Firm Extracts Unwitting Illinois Couple Out Of Sale Leaseback Foreclosure Rescue Mess; Effort Restores Homeowners' Equity, Foils Ripoff

In Round Lake Beach, Illinois, the Lake County News Sun reports:

  • Denied refinancing from their bank and running out of money, a local couple was desperate to lower their mortgage payments. Concerned about providing for their four children and keeping their house, Kevin and Heather Funk turned to a mortgage broker for help. Unfortunately, the mortgage broker almost succeeded in evicting them from the house Kevin grew up in. Thanks to nonprofit law firm Prairie State Legal Services, the Funks were able to retain the deed to their house. "We are seeing more and more of these cases as people in trouble seek out a quick fix," said Larry Smith, managing attorney of the PSLS office in Waukegan.


  • The Funks wanted to take advantage of low mortgage interest rates and refinance their 15-year mortgage to a 30-year plan. However, their bank denied their loan request because they had filed Chapter 7 bankruptcy. They selected a mortgage broker from the Yellow Pages, and he assured them that he could help. He kept the Funks waiting for several weeks while promising he would find a lender.

  • "He had us backed into a corner and we were behind on our payment because he told us not to pay the bank. He came up with his plan to steal our home," Heather said. The lender, whose name was not released for legal reasons, suggested that his father purchase the home and the Funks could pay him back. They agreed to this. However, the lender's father was not making the loan payments, even though the Funks were paying him.

  • They received a foreclosure notice, at which point "big time red flags and some bells and whistles" went off and the Funks contacted PSLS. The Funks came close to being evicted, but their mortgage and equity were restored, Smith said.

For the story, see Nonprofit firm battles mortgage fraud (Round Lake Beach family pulled back from brink).

Connecticut Man Cops Plea To Peddling Bogus "Accountant Letters" Used In Mtg. Fraud Scam To Obtain "Liars' Loans" From Lenders On Behalf Of Homebuyers

From the Office of the U.S. Attorney (Hartford, Connecticut):

  • Nora R. Dannehy, United States Attorney for the District of Connecticut, today announced that JOSE I. FLORES, 50, of Fairfield Avenue, Stamford, waived his right to indictment and pleaded guilty yesterday, January 20, before United States District Judge Christopher F. Droney in Hartford to one count of conspiracy to commit wire fraud stemming from his participation in a mortgage fraud scheme.

  • In pleading guilty, FLORES, an accountant, admitted that from approximately 2004 to 2008, he conspired with others to defraud mortgage lenders by causing so-called “accountant letters,” which contained materially false information about the loan applicant, to be submitted to lending institutions on behalf of applicants for residential real estate mortgages.(1)

For the U.S Attorney press release, see Stamford Accountant Admits Involvement In Conspiracy To Defraud Mortgage Lenders.

(1) According to court documents and statements made in court, FLORES, who did business as a tax preparer and accountant under the name Harvard Financial Services in Stamford, was approached by the owner of a real estate and mortgage broker in Stamford to create fraudulent accountant letters. Under a mortgage program offered at the time by certain mortgage lenders, mortgage applicants could apply for a so-called “stated income loan,” which did not require income verification [ie. liars' loans]. Through this program, lenders required a letter from the applicant’s accountant or tax preparer verifying, among other things, the applicant’s employment status, particularly for applicants claiming to be self-employed. FLORES agreed to write accountant letters containing false information for the owner of the mortgage brokerage and its loan officers knowing that the letters would be used in connection with loan applications to mortgage lenders. Over the period of several years, FLORES was paid up to $100 per letter by the mortgage brokerage to provide numerous false accountant letters.

More On Zombie Debt Buyers

A recent press release from the Federal Trade Commission announced that it has ordered the nation’s largest consumer debt buyers (ie. zombie debt buyers) to turn over information about their practices in buying and collecting consumer debt, which the FTC intends to use for a study of the debt-buying industry.

For resources that provide insights on defending consumers in cases involving attempts to collect zombie debt, see:

Help Guide For Connecticut Homeowners Representing Themselves In Foreclosure

In Hartford, Connecticut, NewsTimes reports:

  • A shortage of legal aid for the thousands of homeowners facing foreclosure has prompted one nonprofit organization to publish a guide on self-representation that might help people save their homes. The Hartford-based Connecticut Fair Housing Center(1) began mailing Tuesday its free foreclosure guide, a 72-page document that details what to expect and what to file when a bank starts foreclosure proceedings. The document includes tips on the need to keep a diary and log everything that happens in the process. It's important, the housing center says, to track the names of people you talk to, who they represent, what you talked about and when you spoke. The guide also includes forms the borrower can fill out in response to a bank's filings.

  • "People in foreclosure do not have money for lawyers," said Erin Kemple, the group's executive director, adding that there also is a shortage of free help for families facing foreclosures as the financial crisis enters its third year in the state. She said her group has one attorney on staff handling some cases and the hope is this guide will provide assistance to those who need it most. The guide can be downloaded from the housing center's Web site, [...] or ordered by mail or phone from the group. There is no charge.

For more, see Foreclosure fighters offer self-help guide.

For the self-help guide, see Representing Yourself in Foreclosure: A Guide for Connecticut Homeowners.

(1) According to their website, the Connecticut Fair Housing Center is a statewide non-profit organization dedicated to ensuring that individual choice, and not discrimination, determines where people live in Connecticut.

Tuesday, January 26, 2010

Disbarred Lawyer, Two Others Charged With Grand Theft By False Pretense, Conspiracy For Allegedly Screwing 400+ Struggling Homeowners In Loan Mod Scam

In Orange County, California, The National Law Journal reports:

  • An ex-lawyer in Irvine, Calif., has been arrested on charges of defrauding more than 400 victims in a $1.25 million loan modification scam targeting struggling homeowners. According to the Orange County, Calif., district attorney's office, Christopher Lee Diener, 42, along with two business partners, defrauded homeowners by promising loan modification services in exchange for advance payments. The trio allegedly told customers that they would guarantee their loan modifications, negotiate lower rates with lenders, reduce the principal on their mortgages and have lenders forgive second mortgages or late fees.

  • The accused, who were neighbors, operated under the names Home Relief Services LLC, U.S. Loan Mod Processing, HRS Communications, The Diener Law Firm and Diener Law Group, according to the district attorney's office. Diener allegedly served as the attorney in the scheme. Also arrested was one of Diener's business partners, Terrence Green Sr. Diener and Green are each being held on $1.5 million bond and are expected to be arraigned on Tuesday in Santa Ana, Calif. Each faces one count of conspiracy to commit grand theft and 97 counts of grand theft by false pretense -- both felonies. They face a state prison sentence of up to 70 years. A $1.5 million warrant has been issued for the arrest of the other business partner, Stefano Joseph Marrero.

  • Diener lost his license to practice law in October after the State Bar of California found that his conduct posed "a substantial threat of harm to his clients or the public." California Attorney General Jerry Brown has filed a civil suit against all three defendants.(1)

Source: Former Attorney, Business Partners Charged in Loan Modification Scam.

For the Orange County District Attorney press release, see Lawyer And Business Partnet Arrested On Charges Of Defrauding Over 400 Homeowners In $1.25 Million Loan Modification Scam (A warrant has been issued for a third co-defendant in this case).

(1) According to the Orange County DA's press release on this case, Diener and Green are being held on $1.5 million bail each. They must prove the money is from a legal and legitimate source before posting bond. A $1.5 million warrant has been issued for Marrero. This case has been a collaborative effort between the Orange County District Attorney’s Office, the State Bar of California, the Department of Real Estate, and the California Attorney General’s Office.

Calif. State Bar Probers Have Hands Full With Loan Mod Ripoff Complaints; 1200 Probes Pending; Attorney Scams Begin To Drain Client Security Fund

In Northern California, The Fresno Bee reports:

  • [A]mid the real estate free-fall and shady loan-modification programs that sprang from it, some lawyers saw an easy way to make money. The State Bar is investigating more than 300 California lawyers involved in loan-modification rip-offs. Typically, homeowners facing foreclosure complain that they paid attorneys who then did nothing to help them keep their homes.

  • The loss to the public from loan-modification cases is in the millions of dollars, State Bar officials say. Most of the attorneys under investigation are from Southern California, but many of the victims live in the central San Joaquin Valley, enticed by loan-modification companies that advertised on the Internet. "It's the most disturbing thing I've seen in the legal profession practicing for more than half a century," said Howard Miller, president of the California State Bar.


  • The State Bar is investigating 1,200 loan-modification cases. As of mid-January, it had resignations from 13 lawyers, and three trials were pending at the State Bar Court, [one Bar investigator] said. Settlements have been reached with lawyers in five cases to accept discipline, he said. There was hope that loan-modification complaints would dwindle when Gov. Arnold Schwarzenegger signed legislation in October that prohibits lawyers from taking advance payments from homeowners. But complaints from people keep coming. "My answering machine is full every day," [he] said.


  • The glut of discipline cases involving loan modifications is "really sort of impacting the bar and the fund specifically," said Lori Meloch, senior counsel for the Client Security Fund.(1) Miller, the State Bar president, said his office is aggressively pursuing cases against lawyers. What has occurred is a "violation of every responsibility that lawyers owe their clients," he said. "This is a tough economy for lawyers, as it is a very tough economy for everyone," he said. But when it comes to the actions of lawyers who prey on clients, Miller said, "there's no excuse or explanation."

For more, see Valley lawyers turn to crime in tough times.

(1) The California State Bar's Client Security Fund compensates people who have been victims of acts of theft by a California attorney. According to the story, in 2008, the Client Security Fund paid more than $4.6 million on 479 claims. A client can receive up to $100,000 in compensation. The fund is supported by fees from lawyers. A bill to authorize collection of the fees for this year is on the governor's desk. He has until Monday to sign it. It typically takes about a year for a client to be compensated by the bar for a lawyer's theft. This year the wait could be longer.

For those ripped off by dishonest attorneys in other states and Canada, see:

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

Nevada AG Bags 3 In Alleged Upfront Fee Foreclosure Rescue Scam; Outfit Accused Of Clouding Title To Homes w/ Bogus Liens To Impede F'closure Process

In Las Vegas, Nevada, the Las Vegas Sun reports:

  • Three men have been indicted on theft charges in an alleged foreclosure rescue scam that bilked people out of thousands of dollars to modify loans, the state Attorney General’s office announced [...]. Jason Todd Wilhite, Ronald Quilang and Benjamin Moraleda allegedly operated a document preparation and loan modification business called Rescorp between June 2008 and January 2009 in Las Vegas. Rescorp charged between $1,200 and $2,200 “for loan modification and document preparation services and misled customers by falsely claiming that their services would prevent foreclosures on their homes and/or that they would obtain loan modifications,” according to a statement released by Nevada Attorney General Catherine Cortez Masto.(1)


  • Prosecutors claim the services were never performed, but they also say customers were further defrauded when the men had them sign false documents that gave the men liens on the victims’ homes. Cortez Masto’s office said the documents, which were bogus promissory notes, falsely claimed loans had been made on the properties when in fact no loans had been made. This process allegedly was used to “cloud the title to the home and prevent the legitimate lenders from foreclosing on the victims’ properties.”

For the story, see 3 indicted in alleged foreclosure rescue scam.

For the Nevada AG press release, see Attorney General announces Indictments In Foreclosure Rescue Scam.

(1) Reportedly, Wilhite and Quilang were indicted on three counts of theft by obtaining money in excess of $2,500 by material misrepresentation in violation of state statutes; Moraleda was indicted on four counts of theft by obtaining money in excess of $2,500 by material misrepresentation in violation of state statutes.

"Repeat Offender" Foreclosure Rescue Operator Gets 22 Years For Scamming Homeowners Facing Foreclosure, Banks Out Of $5M

In Orlando, Florida, the Orlando Sentinel reports:

  • Convicted once before in New York of mortgage fraud, Garry Martin moved to Orlando to bilk homeowners and banks out of more than $5 million in recent years, according to the U.S. Attorney's Office. On Friday, U.S. District Judge Anne C. Conway sent Martin, 36, to federal prison until 2032 and ordered the real estate broker to pay more than $1 million to his victims, U.S. Attorney's spokesman Steve Cole said.


  • Martin had been convicted in 2006 for similar crimes and prohibited from dealing in real estate. But he obtained a real estate sales agent license and a real estate broker's license upon moving to Central Florida. He created Antigua Housing and Management Inc., Antigua Abstract LLC and several other companies on South Semoran Boulevard. "Through Antigua H&M, Martin obtained money from people facing foreclosure by promising that Antigua would bring their past mortgages current through refinancing and forward their payments to their lenders," a report states on his sentencing. "He then used the foreclosure payments himself and did not pay the banks."

For the story, see 2nd conviction for mortgage fraud gets Orlando man 22 years in federal prison.

Homeowner Credits Media For Help Getting Refund From Loan Modification Outfit After Fearing Ripoff

In Atlanta, Georgia, WGCL-TV reports:

  • Beth Hall wasted no time cashing a refund check for $1,495 from the Mortgage Relief Group in Tucker. "I couldn't have done it by myself. I wasn't getting anywhere," said Hall. She received the refund only after CBS Atlanta News began asking the company the tough questions about their questionable business practices. "I thought it would work. They made all kinds of promises saying it would work, but they didn't live up to those promises," said Hall.

  • Hall said the Mortgage Relief Group offered to help her avoid foreclosure on her home in September by lowering her payments. They also claimed to be 100 percent effective, but Hall said it never happened. CBS Atlanta paid a visit to the Mortgage Relief Group a few days ago and no one would discuss the issue on camera. CBS Atlanta was able to speak with the owner over the phone and he agreed to refund Hall's money. "Well if it wasn't for you I don't think I would have gotten the check back. I was trying to do it all on my own and I wasn't getting anywhere," said Hall.

Source: Atlanta Family Gets Mortgage Relief (Mortgage Relief Group Issues $1,495 Refund Check).

Monday, January 25, 2010

Recession Drives Uptick In Cheating, Stealing By Lawyers, Say Calif. Bar Officials; Some Fail To Pay Back Cash "Borrowed" From Client Trust Accounts

In Northern California, The Fresno Bee reports:

  • The recession has driven an increasing number of California lawyers to cheat and steal, say State Bar officials, who expect to discipline or expel hundreds of them in coming months. Financial pressures are behind the increase in lawyer wrongdoing, they say. Complaints are coming from clients who say their lawyers illegally withheld settlement money or charged them for work they didn't do -- especially those who promised help modifying mortgages.

  • This recession has been especially hard on lawyers, said Carol Langford, a San Francisco lawyer who defends lawyers before the California State Bar Court in disbarment cases. [...] Langford said she has seen an uptick in lawyers mishandling client trust funds.

  • Lawyers are required to keep funds in separate accounts for clients. They're supposed to turn over money to a client if a case settles. Attorneys who steal from clients often start off by "borrowing" money from their clients' trust accounts. They put a little bit of the money back, but not all. After a while, they end up being unable to repay, said Andrew Kaufman, a professor of legal ethics at Harvard Law School.

  • Langford said lawyers often are in denial. They believe they can pay the money back. "Probably 65% to 75% of the time, they're wrong," she said. An attorney in Fresno County who misappropriated more than $180,000 from seven clients is an example of what can happen. Timothy Raymond Gelegan said he thought he would reimburse his clients. "That's how I was rationalizing it -- that it was going to be paid in full," he said, when asked recently about what led to his disbarment in March 2009.

  • Gelegan said he was having family problems and alcohol issues, as well as depression. He stopped practicing in 2007 and reported himself to the bar. The bar sought disbarment, and Gelegan stipulated to 12 acts of misconduct and misappropriation of funds from the seven clients. He made restitution of more than $108,000 to two of the clients. The others received more than $94,000 from the bar's Client Security Fund that compensates people who have been victims of acts of theft by an attorney.(1)

For the story, see Valley lawyers turn to crime in tough times.

(1) According to the story, in 2008, the California State Bar's Client Security Fund paid more than $4.6 million on 479 claims. A client can receive up to $100,000 in compensation, the story states. The fund is supported by fees from lawyers licensed in California. It typically takes about a year for a client to be compensated by the bar for a lawyer's theft. This year the wait could be longer.

For Client Security Funds that are intended to soften the blow for those ripped off by dishonest attorneys in other states and Canada, see:

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

Closing Agent Gets 35 Months In $777K Ponzi-Style Escrow Ripoff; Feds Credit 'Katrina' For Foiling Scam; Restitution To Title Underwriter Ordered

In New Orleans, Louisiana, The Times Picayune reports:

  • Hubert Ellzey Jr. secretly bilked clients out of $777,000 before Hurricane Katrina put an end to his scheme. When the storm hit Aug. 29, 2005, all real estate closings in the New Orleans area halted for a time, upsetting the Metairie title agent's practice of converting clients' mortgage money to his personal use then covering the misappropriation with money from future mortgage payments.(1) As a result, he pleaded guilty Sept. 23 to wire fraud, and U.S. District Judge Eldon Fallon sentenced him Thursday to almost three years in prison. Ellzey, 68, worked nine years as an independent agent for Commonwealth Land Title Insurance Co.


  • "The scheme was discovered when, after Hurricane Katrina hit New Orleans ... all closings came to a halt and Ellzey was unable to cover some of the funds converted to his own use and to close the pending mortgages," said a statement from the U.S. attorney's office. [... Judge Eldon] Fallon [...] sentenced Ellzey to 35 months in prison, followed by three years' probation. He also ordered restitution to Commonwealth.

For the story, see Metairie title agent imprisoned for $777,000 wire fraud.

(1) Go here for a description of the mechanics of the swindle on the six specific deals involved in this prosecution.

Iowa Attorney Faces Charges Of Illegally Dipping Into Trust Account Cash Intended For Clients' Real Estate Transactions

In Des Moines, Iowa, The Des Moines Register reports:

  • A Des Moines attorney has been accused of theft in a real estate fraud investigation. Kristine Corcoran Frye, 51, faces two counts of first-degree theft for allegedly pocketing some $30,000 in one real estate transaction and $58,000 in another one.


  • Randall Archer of Archer Construction Inc., one of the victims listed on a Des Moines police report, gave Frye a $40,000 cashier's check from Bankers Trust on Jan. 12, 2009, police said. The check was made payable to Kristine Corcoran Frye's trust account. Police said only $10,000 of the total amount owed on the West Des Moines property was paid. The police report says, "Suspect took the remaining $30,000 from the victim and at no time did the suspect repay the victim or pay the debts she was suppose to in the first place." Archer allegedly had to make up for the missing money by taking it out of his own pocket.


  • The other alleged victim is Edward Jones Mortgage of Minneapolis. Police said in a report the company was working with Frye to refinance a home [...] last February. Some $115,000 was placed in Frye's trust fund so the deal could go forward, according to Detective Tarry Pote. But Edward Jones Mortgage received just a little over $15,000. Two weeks later Edward Jones received just over $50,000. Together, the two amounts were still short of what was needed."They contacted (Frye) and said that that was not the right amount," Pote said. "She told them to wire back the amount that was sent and she would send them the correct amount." Pote said Frye tried again, but the amount was still some $58,000 shy of the mark required for refinancing and the amount she was given.(1)

Source: Lawyer faces theft charges in real estate fraud case.

(1) If an Iowa attorney screws you out of money or property through dishonest conduct, contact the Iowa Client Security Commission for information on the qualifications to recover some or all of your losses from their fund. Their fund reimburses clients of lawyers who have misappropriated or lost a client's money. According to their website, the purpose of the fund is to prevent defalcations by members of the Iowa bar, and insofar as practicable, to provide for the indemnification by the profession for losses caused to the public by the dishonest conduct of members of the bar of this state. The claim form to be used to apply for compensation from the Commission may be downloaded here: In Rich Text Format; In PDF Format.

For other states and Canada, see:

NJ Law Seeks To End Illegal "Bulldozing" Of Tenants Out Of Foreclosed Homes; F'closure Purchasers Now Required To Inform Renters Of Right To Stay Put

In Trenton, New Jersey, The Philadelphia Inquirer reports:

  • A bill passed by the New Jersey Legislature [last week] would give tenants living in foreclosed buildings a better understanding of their rights. Part of a push by Public Advocate Ronald Chen's office, the bill requires that when a property is sold at a foreclosure sale, the buyer must notify tenants of their right to stay in their homes and explain to whom they should pay rent. The bill, which goes to the governor's desk, also makes lenders responsible for maintaining a property between the time a foreclosure filing is made and the sale. New Jersey law does not allow tenants to be evicted simply because of foreclosure.(1)

Source: Bill to aid tenants in foreclosed buildings passes.

(1) According to a recent story in The Star Ledger [see Tenants take fall for unpaid mortgages], there was an apparent urgent need for this law in New Jersey:

  • "Realtors, lenders and property managers are all taking advantage of the fact that tenants don't know their rights," said state Public Advocate Ronald K. Chen, whose office handled complaints from more than 200 tenants, [...] who said they were unfairly treated in foreclosure cases last year. "It's all over the state. Realtors seem to be the biggest offenders in the suburbs and rural areas, and lenders, lawyers and management companies" are misinforming tenants in the cities, Chen said. "When we challenge them, they claim they didn't know they were violating tenants' rights. That is inexcusable."

  • In a Housing and Urban Development survey last year, 2,000 New Jersey adults said they were homeless because they had been forced from their apartments. While some, no doubt, had been evicted legally for nonpayment, the HUD survey concluded foreclosure-based evictions accounted for much of the 70 percent increase in the number of homeless former renters.

  • "A lot of homeless people are being shoved out of their buildings, and it is even worse for new immigrants who may have trouble with English and don't have leases," said Victor Salvo, director of Newark NOW, [a] storefront nonprofit referral agency [...]. "They feel they have no choice but to leave."


  • Most tenants [in New Jersey] don't know that, unless the new owner of their building is moving in, they not only can stay but can renew their leases. In New Jersey -- which, Chen says, has the strongest tenant-protection laws in the country -- new owners can evict only with cause, such as nonpayment. No lease? Tenants are still protected under whatever arrangement they had before the property changed hands. When a property reverts to the lender, any responsibility for tenants' security deposits is conveyed with the property, Chen says. If the apartment is sold, the deposit liability passes on to the new owner. Chen adds: "We know there are people out there still telling tenants -- wrongly -- to sue the former owner."

Sunday, January 24, 2010

Would-Be Renter Stumbles Into Home Hijacking Scam; DA's Fraud Investigator: "These Crooks Are Really Brazen"

In Vallejo, California, the Vallejo Times Herald reports:

  • The tip-off, Jennifer Casey said, was when her e-mailed application to rent the Vallejo property was approved within 20 minutes of sending it. "He never asked for a Social Security number, or bank account numbers, but he did ask for references. But that's not enough time to check anything, so I knew it was a scam then," said Casey, a divorced mother of four living in Vallejo. An ad on Craigslist offered the Vallejo house for $800 per month, plus a $200 deposit. It appeared directly above another ad, for the same property, for significantly more. And that's how Krystle Murphy of Vallejo's Krystle Property Management, Inc. said she discovered what appears to be a case of fraud. She still doesn't know if anyone's fallen for it, she said.


  • "These crooks are really brazen, especially in Vallejo," [Solano County District Attorney's Office real estate fraud investigator Sonny] Ash said. "They keep an eye on the place to make sure it's empty long enough. They change the locks, print up a rental agreement and just rent the place out. It happens everywhere. [...]."

For more, see Property manager, prospective renter foil apparent scam.

Loan Officer Found Guilty For Stealing Ex-Client's I.D. To Help Another Buy $589K Home; Two Co-Defendants Cop Plea On Eve Of Trial

From the Office of the Queens County, New York District Attorney:

  • Queens District Attorney Richard A. Brown [...] announced that a Queens Village woman who is a loan officer has been convicted of stealing the personal identity of a former client to help another client purchase a house in Brooklyn. [...] District Attorney Brown identified the defendant as Janet Salazar, a.k.a.Yanet Salazar, 37, of [...] Queens Village. She was convicted yesterday of first-degree identity theft, third-degree unlawful possession of personal identification information and third degree criminal possession of stolen property following a jury trial [...].(1)


  • The District Attorney said that the investigation began in August 2007 when Queens resident Aurora Solano received notice in the mail indicating that a mortgage for $589,000 had been issued in her name and that a monthly payment of over $5,000 was due on September 1, 2007. Solano, who did not apply for a mortgage or authorize anyone to use her personal identification, reported the incident to the police. District Attorney Brown said that, according to the trial testimony, Solano provided her personal identification information to Salazar and Garcia in early 2007 for a loan application for a property in Queens. The deal subsequently fell through and the sale did not go forward.

For the Queens DA press release, see Loan Officer Convicted In Identity Theft Fraud Scheme (Stole Identity of Former Client To Purchase $589,000 Property).

(1) According to the press release, her co-defendants, Elba Garcia and Olga Espinal, pleaded guilty at the start of the trial. Garcia, 53, of Elmhurst, who is a realtor, pleaded guilty to first-degree identity theft, third-degree unlawful possession of personal identification information and third degree criminal possession of stolen property. She will be sentenced on January 21, 2010. Espinal, 46, of Corona, who impersonated the victim, pleaded guilty to third-degree identity theft. She will be sentenced on February 1, 2010. Garcia and Espinal are expected to be sentenced to community service. Garcia additionally faces probation and restitution of $20,381.

Mtg Broker Gets Six Years For Conning 86-Year Old Woman Out Of $140K Reverse Mortgage Proceeds; Coughs Up $50K Restitution, Agrees To Pay Back Balance

In San Francisco, California, KPIX-TV Channel 5 reports:

  • A former Southern California mortgage broker was sentenced to six years in prison [last] Friday for defrauding an 86-year-old San Francisco woman out of $140,000. The unusual case began in February 2008, when the woman responded to a mailing from a company in Orange County that was advertising reverse mortgages. The woman ended up agreeing to obtain a legitimate reverse mortgage from the company through one of its employees, John McTaggart.

  • According to prosecutors, McTaggart then convinced the woman to sign over $140,000 she received from the reverse mortgage to his company in order for them to invest it for her in annuities through an insurance company. [...] However, instead of investing the money, McTaggart deposited the money into his own bank account, prosecutors said.

  • Within a month, he quit his job at the mortgage company and moved to Memphis, Tenn. McTaggart continued to send the woman monthly $500 "dividend" checks using the money she had invested, but according to prosecutors, she soon caught on to the scheme when she noticed the checks were from McTaggart's account and not from the insurance company. Police arrested McTaggart and returned him to California on March 13 of last year.

  • In December, McTaggart pleaded guilty to one count of first-degree burglary. Prosecutors were able to charge burglary because McTaggart visited the woman in her home when he negotiated the mortgage and annuity deals. As part of the plea, McTaggart gave a $50,000 check to the woman Friday and has agreed to pay her the remaining $90,000.

Source: 6 Years For Mortgage Broker In SF Elderly Fraud.