Tuesday, February 14, 2012

Closing Attorney Gets Year & Day For Role In Escrow Account Ripoffs In Real Estate Deals; Losses Total $2.8M+; Title Insurer Left Holding $1.7M Bag

From the Office of the U.S. Attorney (Baltimore, Maryland):

  • U.S. District Judge William M. Nickerson sentenced Stephen J. Troese, Sr., age 72, of Davidsonville, Maryland, [] to a year and a day in prison followed by three years of supervised release for wire fraud arising from a scheme to defraud lenders and a title insurance company of $2,838,231.


  • According to his plea, Troese practiced as a title attorney and was variously an owner, part owner, or the controlling figure of a number of title companies that did business in the Baltimore, Annapolis and Washington, D.C. metropolitan areas, including Troese Title Services, Inc. (Troese Title), located in Camp Springs, Maryland; and [other entities].


  • Troese Title and Troese/Hughes, which Troese formed in 1994 with co-defendant James Kevin Hughes, shared a joint escrow account for the receipt and disbursement of funds in connection with real estate closings carried out by both title companies.


  • By 2005, the joint escrow account had developed a shortfall of more than $2 million, partly as a result of several major employee errors and embezzlements. [...] In approximately 2006, the real estate industry started to slow, resulting in a steep decline in business for Troese Title and Troese/Hughes, further aggravating the problem of the shortfall in the escrow accounts.

  • In 1994, Troese had refinanced his home, claiming that the $655,000 loan would be used to pay off the previous first and second mortgages. In fact, the mortgages were not paid off. In February 2006, Troese again refinanced his home, representing that the loan of $964,533.26, would be used to pay off the two existing mortgages. Again, the mortgages were not paid off, but instead the funds were used to help cover the existing shortfall in the Troese Title escrow account.

  • Troese concealed the fact that the mortgages were not paid off by continuing to make the monthly mortgage payments on all three loans. The resulting loss to Chicago Title was $937,183.47, which it was required to pay to satisfy the two previous mortgages and pass clear title to the new lender.

For more of Troese's handiwork, and the entire U.S. Attorney press release, see Owner of Troese Title Companies Sentenced to Prison In $2.838 Million Mortgage Fraud Scheme.

No comments: