Wednesday, August 28, 2013

Court Nixes Ex-Wife's Belated Attempt To Invoke California's $100K Homestead Exemption To Justify Pocketing Tax Refund Proceeds That Victims Of Convicted, Ponzi-Scheming Ex-Hubby Were Entitled To

In Monterey, California, The Monterey Herald reports:

  • When convicted embezzler Jay Zubick signed over all his assets to the victims of his $16 million Ponzi scheme in 2007, the agreement meant every penny, a judge ruled Friday.

    Judge Lydia Villarreal rejected a bid by Zubick's ex-wife to retain a $43,000 income tax refund she had received before Zubick's conviction.

    Suzanne Zubick, who was unaware of her husband's crimes and has since divorced him, reasoned that she signed over her Monterra house under duress and without knowing she had the right to invoke a statutory "homestead exemption." The exemption would have allowed her to keep $100,000 of the proceeds from the house's sale.

    Villarreal said the time for her to claim the exemption would have been in 2007 and the tax refund belongs to Jay Zubick's 29 victims.
  • She said her life was turned upside down by the discovery of her husband's deceit. In one day, she went from believing her husband was dying to knowing he was a thief. She received telephone calls threatening her children, whose schools had to take measures to protect them.

    On the advice of her husband's criminal attorney, the Zubicks signed over all assets, including the Monterra house. They were allowed to take only the clothes on their backs and one change of clothing. The investors denied a request for the children's beds.

Tuesday, August 27, 2013

Bay State Homeowner Ordered To Demolish Newly-Constructed Home Over Zoning Violations After Discovery That Town Issued Building Permit In Error; Family Estimates Losses Close To $500K

In Rockland, Massachusetts, MyFoxBoston reports:

  • A Rockland man claims he was given the green light to build his three-bedroom house, but now he's being ordered to tear it down because of an alleged mistake made by the town.

    In 2010, Robert Del Prete reportedly purchased a lot at 320 Concord St. in Rockland from his father and uncle to make it useful. The land to the back of it, their old farm, was sold to make a golf course, and other family members live next door.

    "As far as the building inspector was concerned it was a grandfathered lot and he gave us the permit," Robert Del Prete told FOX 25.

    Del Prete and his wife Sheree say they sunk approximately $400,000 into building the home on the lot and even had a buyer lined up for the property.

    The potential buyer told the Del Pretes they were going to use the home to house adults with disabilities; however, around that same time, the town told the Del Pretes they gave the permit in error.

    And now, about three years after getting building and occupancy permits, the town is threatening to tear down the Del Prete's house and says Building Inspector Thomas Ruble shouldn't have issued the permits in the first place.

    Rockland town officials say the Del Pretes are in violation of zoning laws because they're about 3,700 square feet shy of the minimum buildable lot size in town.

    The lot also needs an extra 12 ½-feet of road frontage to comply with the law; however, Del Prete claims his abutter refuses to sell him the land.

    "The land doesn't comply for area. It didn't comply for frontage. And the property was not grandfathered," Rockland Town Administrator Allen Chiocca said.

    The Del Pretes estimate their losses on the home total about half a million dollars with legal bills. They've lost their business and they were forced to move into the Concord Street house after their personal home went into foreclosure.

    The town says they created their own hardship.

    The matter will be back in housing court later in August.

Court Nixes Ex-Wife's Belated Attempt To Invoke California's $100K Homestead Exemption To Justify Pocketing Tax Refund Proceeds That Victims Of Convicted, Ponzi-Scheming Ex-Hubby Were Entitled To

In Monterey, California, The Monterey Herald reports:

  • When convicted embezzler Jay Zubick signed over all his assets to the victims of his $16 million Ponzi scheme in 2007, the agreement meant every penny, a judge ruled Friday.

    Judge Lydia Villarreal rejected a bid by Zubick's ex-wife to retain a $43,000 income tax refund she had received before Zubick's conviction.

    Suzanne Zubick, who was unaware of her husband's crimes and has since divorced him, reasoned that she signed over her Monterra house under duress and without knowing she had the right to invoke a statutory "homestead exemption." The exemption would have allowed her to keep $100,000 of the proceeds from the house's sale.

    Villarreal said the time for her to claim the exemption would have been in 2007 and the tax refund belongs to Jay Zubick's 29 victims.
  • She said her life was turned upside down by the discovery of her husband's deceit. In one day, she went from believing her husband was dying to knowing he was a thief. She received telephone calls threatening her children, whose schools had to take measures to protect them.

    On the advice of her husband's criminal attorney, the Zubicks signed over all assets, including the Monterra house. They were allowed to take only the clothes on their backs and one change of clothing. The investors denied a request for the children's beds.

Monday, August 26, 2013

More On "Show Me The Note!"

The following is the abstract of a recent article by law professors Bradley T. Borden & David J. Reiss, and law student William KeAupuni Akina, all of Brooklyn Law School, published in a recent issue of Westlaw Journal Bank & Lender Liability (June 3, 2013):

  • News outlets and foreclosure defense blogs have focused attention on the defense commonly referred to as "show me the note." This defense seeks to forestall or prevent foreclosure by requiring the foreclosing party to produce the mortgage and the associated promissory note as proof of its right to initiate foreclosure.

    The defense arose in two recent state supreme-court cases and is also being raised in lower courts throughout the country. It is not only important to individuals facing foreclosure but also for the mortgage industry and investors in mortgage-backed securities.

    In the aggregate, the body of law that develops as a result of the foreclosure epidemic will probably shape mortgage law for a long time to come.

    Courts across the country seemingly interpret the validity of the "show me the note" defense incongruously. Indeed, states appear to be divided on its application. However, an analysis of the situations in which this defense is raised provides a framework that can help consumers and the mortgage industry to better predict how individual states will rule on this issue and can help courts as they continue to grapple with this matter.
For the entire article, see Show Me the Note!

Toxic Land Titles & Title Insurance

The following is the abstract of a recent article by Molly Rose Goodman, Suffolk University Law School published in a recent issue of Real Estate Law Journal:

  • By failing to properly transfer ownership of loans and mortgages, recording fraudulent documents, and performing unlawful foreclosures, financial institutions and law firms have generated property titles that range from defective to toxic.

    Those actions evince a systemic failure to comply with longstanding principles of real property law and regulations governing financial transactions. Title companies participated in title services and issued title insurance policies throughout the housing boom and although they did not directly cause toxic titles, many title insurers have ultimately assumed the risk for the bad practices that became the industry norms in the last decade.

    In this article, I will discuss how title insurers have exposed themselves to liability for toxic titles.

Sunday, August 25, 2013

Religious Congregation Sues Its Treasurer For Allegedly Draining $1.1M+ Of Equity In Church Property With Multiple Mortgages, Diverting Proceeds For Personal Use While Allowing Loan Collateral To Be Lost In Foreclosure Sale

In Las Vegas, Nevada, Courthouse News Service reports:

  • A Lutheran church sued its treasurer, claiming he embezzled $1.1 million - some of which he spent to buy land from a distant monastery.

    Amazing Grace Lutheran Church, of Las Vegas, sued Gregory R. Olson and Wells Fargo Bank, in Clark County Court. The church claims it hired Olson as its treasurer in May 2005, and he was embezzling before he'd been there a year.

    "From January 3, 2006 to September 18, 2009, defendant Olson without plaintiff Lutheran Church's approval, drew several checks from the account of plaintiff Lutheran Church in the amount of $1,123,279.84 for his own personal use," the complaint states.

    The church claims Olson took out five mortgages against church property without its permission and without notifying it.

    It claims that Olson was involved in a lawsuit about a property he had defaulted on, and he used some of the embezzled money to pay his legal expenses. He also bought a 2.5-acre parcel of land and told Amazing Grace he used his own money, according to the complaint.

    The church claims it lost title to its property through foreclosure, thanks to Olson's embezzlement.

    To top it off, Olson bought land from a monastery with the stolen money, according to the complaint.

Ex-Pastor Charged For Allegedly Using Short Sale Scam To Screw Financially Strapped Homeowner Out Of Nearly $150K While Leaving Existing Mortgage Unpaid

In St. Petersburg, Florida, The Tampa Tribune reports:

  • The former pastor of a south St. Petersburg church who also founded a foreclosure-prevention company was booked into the Pinellas County Jail this week, accused of swindling nearly $150,000 from a Palm Harbor woman who no longer could afford to live in her house.

    Demetrius Antonio Lewis, 38, of Wesley Chapel, was charged with grand theft and money laundering. Bail was set at $200,000.

    Lewis once was the pastor at the Grand Central Progressive Missionary Baptist Church, 1401 18th Ave. S., but it has been years since he officiated there, parishioners say. Records show he also incorporated a business called Help Is Here Foreclosure Prevention and Credit Repair, though state records show the company as inactive.

    The charges against Lewis are just his most recent brush with the law.

    Last year he was charged with tax fraud after investigators maintained he received and cashed fraudulent tax refund checks issued in the names of eight different people.

    And the year before that, he was accused of taking part in a real estate scam in which authorities say he and an accomplice rented vacant properties they did not own.

    In the Pinellas case, Lewis had an alleged accomplice, Eric Leroy Green, the head of the south St. Petersburg charity Everyone’s Youth United, court records state.

    Green was arrested in June on the same charges leveled against Lewis, in what was the latest spin in the charity’s downward spiral. Everyone’s Youth United lost most of its funding in 2008.

    On Wednesday, in a telephone interview, Green distanced himself from Lewis, portraying himself as a victim of one of Lewis’s schemes.

    “We just happened to be in the trail that he, you know, rode down and used us after coming up with one of his schemes ... and unfortunately implicated us as we now know.”

    According to court documents, Green told Pinellas sheriff’s Detective David Kavanagh the two men’s financial arrangement was set in motion after he discussed Everyone’s Youth United’s financial turmoil with Lewis.

    The victim was Dorothea Giordano, who by 2010 no longer could afford to live at her house at 2492 Glenpark Road in Palm Harbor, court documents show. A close friend of Giordano’s, Jack Dvorak, agreed to buy it from her but allow her to continue living there.

    Giordano had been introduced to Lewis, who identified himself as an expert in real estate short sales, and who offered to broker the sale.

    As the deal was progressing, the pastor communicated with a Safety Harbor title company, Online Title Services, which was run by real estate agent Cheryl Slaughter, the court documents state. He introduced a woman to Slaughter as a representative of Giordano’s bank, Allied Home Mortgage.

    The woman, identified as Tamkea Womack, sent Slaughter an email indicating Allied had approved the short sale, as long as the amount to settle the mortgage was $143,500, the documents state.

    The money was to be disbursed to an entity called EYU Inc. EYU was represented as an investor, but is the acronym for Everyone’s Youth United, the documents state.

    After the money changed hands on Sept. 27, 2010, Allied Home Mortgage told Slaughter the woman and the company she supposedly was representing, M Caster Home Finance, were not affiliated with Allied, and the money had been improperly disbursed, the documents state. Slaughter called the sheriff’s office.

    After the $143,500 was transferred, Green wrote checks totaling more than $10,000 — a check for an employee for $1,000 and a check of $9,700 for Construction Specialties, which is owned by his mother, records show.

    He also arranged for his mother to deposit $60,000, telling her the money was a payment to Everyone’s Youth United for a fair he had put on for an organization. Green put the money in his personal account, according to investigative records. Green also got a cashier’s check of $59,000 for Lewis, the documents state.

Saturday, August 24, 2013

Lehigh Valley Man Faces Forgery, Theft/Securing Execution Of Documents By Deception, Other Charges For Allegedly Ripping Off His 93-Year Old Uncle Of $200K+ Cash/Other Assets; Suspect Allegedly Abused POA To Drain Bank Accounts, Home Equity With HELOC While Since-Foreclosed Victim Was Confined In Nursing Home

In Lehigh Valley, Pennsylvania, The Express Times reports:

  • A Pen Argyl man is charged with 17 counts of theft and related crimes for depleting the life savings of his 93-year-old uncle by using power of attorney and converting property and money for his personal use, according to the Lehigh County’s District Attorney’s Office.

    Scott Lee Bartholomew, 52 of the 100 block of Acker Street, is accused of stealing more than $200,000 from his uncle, Wilbur B. Stiles, authorities said. The crimes happened from January 2006 to June 2012, the district attorney’s office said.

    Because he lost his home to foreclosure and his life savings, police said, Stiles is living in a veterans center in the Scranton, Pa., area.

    Bartholomew is being held in Lehigh County Prison in lieu of 10 percent of $200,000 bail.
    An investigation by South Whitehall Township police, with help from the Institute for Protective Services at Temple University, alleged that a minimum of $217,498 had been diverted from Stiles to Bartholomew, authorities said.

    According to an affidavit filed by South Whitehall police Sgt. Michael A. Sorrentino, Sorrentino conducted numerous interviews with agencies and individuals since December 2012 when investigators learned Bartholomew was acting with power of attorney for Stiles.

    Bartholomew did not make the required payments of $6,050 for the care of Stiles from March 2011 to April 2011, while Stiles was a resident of Cedarbrook Nursing Home in South Whitehall, officials said.

    Bartholomew gained control of Stiles’ finances and directed money from Stiles’ accounts to make unauthorized purchases of vehicles, Internet items and gaming purchases, authorities said.

    They allege Bartholomew made cash withdrawals, paid legal fees of an acquaintance, paid tax bills for property not owned by Stiles, and paid for cellphones and cellphone plans not used for Stiles.

    Additionally, police said, Bartholomew used the money on meals and entertainment for himself and others, and operational fees as an owner/operator of a sole proprietorship trucking company. None of it was reimbursed to Stiles’ accounts, police said.

    Investigators allege that Bartholomew converted Stiles’ savings account, insurance policy, retirement income, real estate, motor vehicles, personal property and savings bonds for Bartholomew’s personal use.

    Bartholomew also obtained a home equity line of credit and converted about $133,526 for his personal use, according to police. They also said almost $89,973 was taken from Stiles’ checking account.

    Bartholomew is alleged to have used the equity in Stiles’ residence for his personal gain. The property ultimately was placed into foreclosure, authorities said.

    Bartholomew was charged with four counts of theft by unlawful taking, three counts of theft by deception, five counts of receiving stolen property, one count of theft by failure of to make required disposition of funds and one count of access device fraud -- all third-degree felonies.

    He is also charged with one count of forgery and two counts of securing execution of documents by deception, police said.

Saga Continues For Maine Family Victimized By State Bureaucrats Who Allegedly Used Conservatorship Proceedings To Move In & Hijack Possession, Then Unload, Waterfront Home, Other Assets At Fire-Sale Prices Of Man Who Was Involuntarily Admitted To State-Run Psychiatric Facility While Giving Beloved Pet Date With 'The Euthanizer'

In Rockland, Maine, the Bangor Daily News reports:

  • The sale of a Rockland man’s waterfront home in Owls Head by the state for less than half its value was only the beginning of a nightmare that has seen an undetermined amount of valuable personal items sold for little in return, according to attorneys working on the case.

    “You couldn’t have dreamed this up,” said attorney David Jenny.

    Jenny, who lives in Owls Head and Maryland, is referring to the case that involves the sale of property belonging to William T. Dean Jr. and his sister Claire Dean Perry of Liberty.

    Dean was hospitalized in 2012 at the state-run Dorothea Dix Psychiatric Center in Bangor. He has since been released and lives in a group home in Camden, according to Jenny, who is a longtime friend of both siblings.

    Jenny said that the state has taken a man who had more than $650,000 in assets and virtually assured that he will he become a ward of the state because of its management of his estate.

    Attorney Cynthia Dill, who represents the sister in a lawsuit against the Maine Department of Health and Human Services, said in her legal career she has never seen a case like this.

    Not only does Dill say the state illegally sold the home owned by William Dean at 9 Castlewood Lane in Owls Head, but that it has since hired an auction company to sell the remaining family belongings and has done it with few records to show what has happened to the items or the money received from the sales.

    The Deans’ parents in 1972 bought the Castlewood Lane home, which has since been a place for family outings. Claire Dean Perry had been living in the Owls Head home while her brother resided at 298 Broadway, Rockland, which had been their parents’ primary residence and owned by the Deans since 1957.

    The state obtained conservatorship of Dean’s finances in September 2012, four months after he was involuntarily admitted to the state-run mental health hospital. When the state learned that back taxes were owed on both properties — $5,192 on the Owls Head home and $2,329 on the Rockland property — it sought and received permission from the Penobscot County Probate Court to sell the properties for a fair market price in order to cover those costs.

    An affidavit filed Sept. 5, 2012, in probate court by Janice Archer, a licensed social worker for DHHS who was Dean’s caseworker, stated that there was already a buyer interested in the Owls Head property. The name of the interested party was not listed and a call to Archer early Wednesday has not been returned.

    Claire Dean Perry was kicked out of the house and the locks changed, Dill said.

    Perry and other family members, however, contested the move by the state, saying they could raise the money to prevent both properties from going into foreclosure for nonpayment of the approximately $7,500 in property taxes.

    The state, however, moved ahead quickly and sold the Owls Head waterfront property to James Taylor of Danvers, Mass., and Owls Head for $205,000, less than half the $476,840 value placed on it by the town.

    The human services department moved the date of the sale up by a day to Jan. 9, knowing that the family was going to court the following day to block the transaction, Jenny said.

    The Owls Head property consists of nearly 1 acre with 100 feet of ocean frontage and a two-story, 1,000-square-foot home.

    After selling the Owls Head property, the state turned to disposing of the Rockland home. The state had reached an agreement with a party that was willing to pay $65,000 for the Rockland property that was assessed at $177,200 — again less than half its value. Dill said the potential buyers backed out after learning of the family’s looming legal challenge.

    The state surrendered its conservatorship in March. On Aug. 1, the probate court appointed Dean’s cousin, Pamela Vose of Union, as conservator over his remaining properties.

    But Jenny and Dill said that after the sale of the Owls Head home and before the change in conservatorship, there was a fire sale of possessions owned by both Dean and Perry for reasons they cannot understand.
  • Dill also noted that when state officials took control of Dean’s properties, they had his beloved cat, Caterpillar, euthanized without asking family members if they could care for the animal.

Friday, August 23, 2013

The Payday Playbook: How High Cost Loan Peddlers Fight To Keep Their Consumer Debt Traps Legal

Investigative reporter Paul Kiel writes in ProPublica:

  • [O]utrage over payday loans, which trap millions of Americans in debt and are the best-known type of high-cost loans, has led to dozens of state laws aimed at stamping out abuses. But the industry has proved extremely resilient. In at least 39 states, lenders offering payday or other loans still charge annual rates of 100 percent or more. Sometimes, rates exceed 1,000 percent.

    Last year, activists in Missouri launched a ballot initiative to cap the rate for loans at 36 percent. The story of the ensuing fight illuminates the industry’s tactics, which included lobbying state legislators and contributing lavishly to their campaigns; a vigorous and, opponents charge, underhanded campaign to derail the ballot initiative; and a sophisticated and well-funded outreach effort designed to convince African-Americans to support high-cost lending.
For more, see The Payday Playbook: How High Cost Lenders Fight to Stay Legal.

This article is part of an ongoing ProPublica investigation: Debt Inc.: Lending and Collecting in America (How lenders tempt consumers with high-cost credit products that go far beyond payday loans).

WV Attorneys Providing Free Legal Services To Low-Income Consumers Continue Hammering Banksters With Predatory Lending Lawsuits Alleging Ripoffs In Originating Home Loans

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

  • A lawsuit filed against Nationstar Mortgage LLC alleging predatory lending practices has been removed to federal court. Nationstar is formerly known as Centex Home Equity Company. Mark Greenlee was also named as a defendant in the suit.

    The lawsuit has been removed to federal court because the amount they are seeking exceeds the $75,000 requirement, according to a Notice of Removal filed July 25 in the U.S. District Court for the Southern District of West Virginia at Huntington.

    The loan amount was for $76,500, according to the Notice.

    Greenlee was also “fraudulently joined in this action and, thus, should be disregarded for diversity purposes,” according to the Notice of Removal.(1)

    Adam West first moved into his home in Hurricane in 1998, when he agreed to purchase the home pursuant to a land contract for $55,000, according to a complaint originally filed May 2 in Putnam Circuit Court.

    West claims in November 1999, when the land contract vendor began experiencing financial problems and West’s mother arranged to finance the remaining balance on the land contract.

    In early 2000, West sought to obtain a loan to repay his mother and closed on a loan with UC Lending on April 25, 2000, with a principal balance of $66,700, according to the suit.

    On Aug. 18, 2001, Adam West and Bethany West were married and she moved into the home with him, and the plaintiffs went to Lending Tree, an online service, to find a lender.

    The Wests claim a few days later, Nationstar contacted them to solicit them into a loan for refinancing and they asked for a fixed rate loan and Nationstar informed them an adjustable rate loan would be best for them.

    Nationstar arranged for Greenlee to appraise the Wests’ home, according to the suit, and Greenlee, who has a practice of providing inflated appraisals, provided them with an inflated appraisal and indicated their home was more than $76,000 when it was, in fact, worth approximately $55,800.

    The Wests claim after making payments for one year, they contacted Nationstar about promised refinancing, but Nationstar refused to refinance the loan.

    Nationstar refused to apply payments to the Wests’ account and charged them illegal fees, according to the suit.

    The Wests are seeking compensatory and punitive damages. They are being represented by Colten L. Fleu and Jennifer Wagner of Mountain State Justice.(2)
Source: Nationstar Mortgage suit removed to federal court.

(1) See, generally, Erroneous Removal As A Tool For Silent Tort Reform: An Empirical Analysis Of Fee Awards And Fraudulent Joinder for more on the 'cat-and-mouse' games played by state court plaintiffs and defendants jockeying around to either move or block moves of state court cases into federal court.

See also, Bankster Fails In Attempt To Have Suit Accusing It Of Mortgage Flipping Racket Heard In Federal Court; U.S. District Judge 'Abstains' From Hearing Suit, Boots Case Back To State Court, Saying There's No Pressing Federal Interest To Decide Matter Entirely Involving Unsettled Issues Of WV Law.

(2) Mountain State Justice is a non-profit public interest law office dedicated to pursuing impact and significant litigation on behalf of low-income West Virginians. MSJ provides free legal services in our areas of practice to qualifying individuals. MSJ's work currently focuses primarily on combating predatory lending and abusive debt collection techniques through individual and class action lawsuits..

Thursday, August 22, 2013

NC Appeals Court Leaves Sloppy Lender Holding The Bag By Voiding Wife's Loan Guarantee Given By Hubby Acting As Her Attorney In Fact; Bank Failed To Read Recorded Instrument, Missed 'Surprise' Provision In POA Making Husband's Authority Ineffectual

From a client alert from the law firm Poyner Spruill LLP:

  • On November 6, 2012, the North Carolina Court of Appeals ruled in a unanimous decision that several commercial guaranties were invalid when signed by an attorney in fact, pursuant to a power of attorney which contained a condition precedent that had net yet occurred. This case contains important lessons for lenders regarding transactions with attorneys in fact.

    In this case, the appellant-wife executed a durable power of attorney appointing her husband as her attorney in fact. The power of attorney was properly recorded with the Wake County Register of Deeds.

    After the execution and recordation of the power of attorney, the husband and his business partner, through various business entities, borrowed money from plaintiff-lender. The husband signed a series of commercial notes, unconditional personal guaranty agreements, and a deed of trust in his wife’s name, relying on the power of attorney. The notes went into default, and the lender/plaintiff commenced foreclosure proceedings. The sale of the collateral yielded less than the outstanding obligations, and the plaintiff sued the borrowers and guarantors – including the wife - to recover the deficiency balance. The trial court granted the plaintiff’s motion for summary judgment as to all defendants.

    On appeal, the wife argued that the power of attorney was ineffective, and she should not be bound by the guaranty executed by her husband as her attorney in fact.

    The power of attorney contained a provision titled “RESTRICTIONS ON EXERCISE OF POWERS BY ATTORNEY-IN-FACT” which stated that “the rights, powers, duties and responsibilities herein conferred upon my Attorney-in-Fact shall not be exercised by my Attorney-in-Fact until a physician has certified to my Attorney-in Fact that in his or her opinion I am no longer able…to handle my…affairs.”

    The Court of Appeals reversed the decision of the trial court, holding that no power of attorney ever vested in the husband, that the wife’s guaranty was invalid, and that the plaintiff was not entitled to recover from the wife as a guarantor.

    First, the Court of Appeals agreed with the wife that the power of attorney was ineffective because there was no evidence in the record indicating that the wife had been certified incompetent by a physician, which was a condition precedent to the effectiveness of the power of attorney. Since there was no evidence that the wife was certified incompetent by a physician, no power of attorney ever vested in her husband, and he had no authority to bind her to the guaranty.

    Further, the Court of Appeals held that the plaintiff was deemed to be on notice of any limitation or restriction contained in the power of attorney as it was in writing and “a third party who fails to inspect a POA’s terms does so at his own peril since he is deemed on notice of the limitations and restrictions contained therein.”

    Nor could the plaintiff argue that it justifiably relied on the husband’s representations of authority based upon the broad grant of authority and the third party reliance provisions contained in the North Carolina General Statutes. Despite the broad grant of authority contained in the statutes, the statutes did not override the restriction that the wife be certified incompetent by a physician. Here, the power of attorney conferred no powers upon the husband because the condition precedent never occurred.

    Likewise, statutes which generally protect third parties who rely on the apparent authority of an attorney in fact, did not apply because the plaintiff had constructive notice of the terms of the power of attorney, which was part of the public record, and the power of attorney indicated that there was no apparent authority for the husband to execute the guaranty on behalf of his wife.

Judge To Those Facing (Potentially Faulty) Non-Judicial Oregon Foreclosures: Avoid "Presumption Of Finality" - Don't Sit On Your Rights; Time For Properly-Noticed Homeowner To File Court Challenge Is Before The Sale, Not Afterward

In Portland, Oregon, LegalNewsline reports:

  • A federal judge ruled last month that an Oregon homeowner could not sue following a completed trustee sale of his property.

    Though MERS, the national mortgage registry, was not a party to the action, the plaintiff in the case — Alan Chen — alleged that the foreclosure was wrongful based, in part, on MERS’ role in his deed of trust.

    The named defendants in the suit included: Bank of America N.A., ReconTrust Company N.A. and Federal National Mortgage Association, also known as Fannie Mae.

    In Chen v. Bank of America N.A., Judge Owen M. Panner for the U.S. District Court for the District of Oregon dismissed the complaint with prejudice. He found that, in accordance with the Oregon Trust Deed Act, Chen received proper notice of the sale, which barred his post-sale challenges to the foreclosure.

    “Although plaintiff here had sufficient time to raise any of the current challenges before the sale, he chose instead to raise such challenges after the trustee’s sale and recording of the trustee’s deed,” Panner wrote in his five-page order, filed July 25.

    The judge further held that “plaintiff’s challenges to the trustee’s sale are barred, as plaintiff’s interest in the property was ‘foreclosed and terminated.’”

    Chen asked the court’s permission to amend his complaint to align his allegations with the recent Brandrup v. Recontrust and Niday v. GMAC decisions from the Oregon Supreme Court.

    In both cases, the state’s high court ruled MERS did not meet the statutory definition of trust deed “beneficiary” under Oregon law.

    Panner denied the request, finding an amended complaint “would be futile” because Brandrup and Niday dealt with pre-sale challenges to non-judicial foreclosure sales as opposed to Chen’s post-sale challenges, which are barred under state law.(1)
For the story, see Federal judge dismisses wrongful foreclosure complaint involving mortgage registry.

For the court ruling, see Chen v. Bank of America, N.A., 3:12-cv-194-PA (July 25, 2013).

(1) Judge Panner's discussion on the applicable law follows:
  • After briefings and arguments in this case, I issued an opinion in a case involving similar issues. See Mikityuk v. Northwest Tr. Servs., Inc., 2013 WL 3388536 (D. Or.). There, plaintiffs waited nineteen months after the sale before filing the complaint. Id. at *1. After examining both ORS 86.770(1), which states the trustee's sale "forecloses and terminates" one's property interest in certain scenarios, and the dual objectives of the Oregon Trust Deed Act, I concluded:

    "The legislature provided notice and reinstatement provisions to protect grantors against the threat of wrongful foreclosure. [Staffordshire Investments, Inc., v. Cal-Western Reconveyance Corp., 209 Or. App. 528, 542 (2006).] Voiding the sale here would encourage" grantors who receive notice of a sale to sit on their rights, rather than compelling grantors to bring pre-sale challenges to a trustee's sale. Grantors are wise to raise any challenges to non-judicial foreclosure proceedings, including challenges based on ORS 86.735, before the statutory presumption of finality contained in ORS 86.780. Post-sale challenges run the risk of being barred, as is the case here, because the grantors' interest in the property was "foreclosed and terminated" pursuant to ORS 86.770(1)."

    Mikityuk, 2013 WL 3388536 at *10.

    Like the plaintiffs in Mikityuk, plaintiff's challenges to the non-judicial foreclosure sale here are barred. As plaintiff received advance notice of the sale, his interest in the property was "foreclosed and terminated." ORS 86.770(1). Plaintiff's argument that notice here was ineffective because it was not signed and dated by a notorial officer is meritless. The time to make such a challenge is long passed. As discussed in Mikityuk, the notice provisions of the Oregon Trust Deed Act reflect the legislature's intent to provide those whose property interests could be affected by a trustee's sale sufficient time to act to protect those interests before the sale. 2013 WL 3388536 at *6 (citing Staffordshire Investments, Inc. V. Cal-Western Reconveyance Corp., 209 Or. App. 528, 542 (2006); NW Property Wholesalers, LLC v. Spitz, 252 Or. App. 29, 34 (2012)).

    Although plaintiff here had sufficient time to raise any of the current challenges before the sale, he chose instead to raise such challenges after the trustee's sale and recording of the trustee's deed. Plaintiff's challenges to the trustee's sale are barred, as plaintiff's interest in the property was "foreclosed and terminated." Mikityuk, 2013 WL 3388536 at *10; ORS 86.770(1). For the reasons discussed in Mikityuk, this action is dismissed, with prejudice.

    Additionally, plaintiff's request for leave to file an amended complaint [#46] is denied.. Plaintiff seeks to amend the complaint, purportedly to align with the recent Oregon Supreme Court opinions in Brandrup v. ReconTrust Co., 353 Or. 668 (June 6, 2013) and Niday v. GMAC Mortgage, LLC, 353 Or. 648 (June 6, 2013). Those opinions concerned MERS and the Oregon Trust Deed Act. An amended complaint, however, would be futile. Brandrup and Niday dealt with pre-sale challenges to non-judicial foreclosure sales. Neither case affects the outcome here, where plaintiff's claims are barred due to ORS 86.770(1). See Mikityuk, 2013 WL 3388536 at *1 n.2.

Saturday, August 17, 2013

Fair Housing Feds' Probe Triggered By HUD Complaint Filed By Legal Guardian For Intellectually Disabled Ward Leads To $80K Settlement With St. Peters In Suit Accusing City Of Discriminatory Zoning Practices

From the U.S. Department of Justice (Washington, D.C.):

  • The Justice Department announced [] that the city of St. Peters, Mo. will pay $80,000 and make changes to its zoning laws to settle a lawsuit alleging that the city violated the federal Fair Housing Act (FHA) and Title II of the Americans with Disabilities Act (ADA) when it denied a zoning request to operate a group home for four women with intellectual disabilities.

    The lawsuit is part of the Justice Department’s continuing effort to enforce civil rights laws that require states and municipalities to end discrimination against, and unnecessary segregation of, persons with disabilities. The settlement was filed [] and must be approved by the U.S. District Court for the Eastern District of Missouri.

    “The Fair Housing Act and the Americans with Disabilities Act ensure that municipalities cannot enforce discriminatory land use policies that restrict the rights of their residents to live in the housing of their choice,” said Jocelyn Samuels, Acting Assistant Attorney General for the Civil Rights Division. “This important settlement compensates the individuals who were harmed by the city’s practices and will prevent future housing discrimination against the city’s residents who have disabilities.”

    Zoning ordinances that unjustifiably keep group homes out of neighborhoods violate the Fair Housing Act,” said Bryan Greene, U.S. Department of Housing and Urban Development’s (HUD) Acting Assistant Secretary for Fair Housing and Equal Opportunity. “HUD and the Department of Justice will continue to work together to ensure that everyone, including persons with disabilities, has access to the kind of housing that meets their needs.”

    The settlement resolves the United States’ claims that the city violated the FHA and ADA when it adopted and enforced a facially discriminatory 2,500 foot group-home spacing requirement and when its Board of Adjustment refused, without justification, a variance petition to allow Community Living Inc. (CLI) to operate a group home for four women with disabilities.

    The complaint also alleges that the city refused to make reasonable accommodations to the city’s rules, policies, practices or services that were necessary to afford the residents an opportunity to use and enjoy their home.
  • The case began when a legal guardian for a resident of the group home filed a complaint with HUD after the Board of Adjustment denied the group home’s variance petition. HUD referred the complaint to the Justice Department, which conducted an investigation.

Civil Rights, Brooklyn Feds Score Settlement Agreement In ADA Suit Accusing NYS Of Unnecessarily Segregating/Institutionalizing Thousands With Mental Illness In Adult Homes

From the U.S. Department of Justice (Washington, D.C.):

  • The Justice Department’s Civil Rights Division and the U.S. Attorney’s Office for the Eastern District of New York announced [] that they, along with plaintiff adult home residents, entered into a comprehensive settlement agreement with the state of New York under the Americans with Disabilities Act (ADA).

    The settlement agreement will provide relief to thousands of people with mental illness unnecessarily segregated in 23 adult homes in New York City. Adult homes are institutional, segregated settings that house large numbers of people with mental illness.

    Under the settlement agreement, New York will offer supported housing to people with mental illness currently residing in adult homes. Supported housing is apartments scattered throughout the community for which the state provides rental assistance and housing-related support services. Supported housing residents have access to community-based services and supports that promote their inclusion, independence, and full participation in community life. The settlement agreement has been filed with the U.S. District Court for the Eastern District of New York for the court’s approval.

    The Supreme Court made clear in its landmark decision Olmstead v. L.C,(1) that people with disabilities have a civil right under the ADA to receive services in the most integrated setting appropriate to their needs. The state worked cooperatively with the department and private plaintiffs to negotiate a settlement that resolves the allegations that the New York mental health service system violates the ADA by relying on large, institutional adult homes instead of supported housing units that are scattered throughout the community. A state is responsible for segregation when it designs and implements a system that unnecessarily relies on institutional facilities, regardless of whether they are privately owned and operated.
  • Over the next five years, New York will provide scattered-site supported housing to at least 2,000, and potentially more than 4,000, adult home residents. New York has also committed to providing people moving to supported housing with the community-based services and supports that will allow them to thrive in the community. The agreement also will ensure that adult home residents have the information they need to make an informed choice about where to live. If they choose to move to supported housing, they will participate in a person-centered, transition planning process. An independent reviewer with extensive experience in mental health systems will monitor the state’s compliance with the agreement.

    Because of this agreement, people like Ilona Spiegel, one of the named plaintiffs, will get the opportunity to live independently and “become emancipated” after 15 years in an adult home. Spiegel lived independently in her own apartment until she received psychiatric treatment in a hospital in 1998.  When she left the hospital, her only discharge option was to move into an adult home. In the adult home, Spiegel shares a small room with a roommate, has scheduled mealtimes and no opportunity to cook for herself, has little privacy as staff have entered her room without permission and finds living in the adult home extremely isolating. Spiegel has said that she cannot wait to live in her own apartment again and have autonomy over her life, including doing her own cooking, cleaning and shopping, have personal privacy in her home, and be free from intrusion into her personal belongings.

    Loretta E. Lynch, U.S. Attorney for the Eastern District of New York stated: “With this agreement, thousands of New Yorkers will be able to leave the shadow of institutional living and instead live in and contribute to their communities. Because of this cooperative effort, their lives will be immeasurably better and our communities all the richer for their presence.”

    The individual plaintiff adult home residents, on behalf of themselves and a class of adult home residents with mental illness, are represented by Paul, Weiss, Rifkind, Wharton & Garrison, LLP; Disability Advocates Inc.; Bazelon Center for Mental Health Law; New York Lawyers for the Public Interest; MFY Legal Services Inc.; and Urban Justice Center.

Civil Rights Feds Tag Florida In ADA Suit Alleging State Unnecessarily Segregates Children With Disabilities In Nursing Facilities Rather Than Placing Them In Their Families' Homes Or Other Community-Based Settings

From the U.S. Department of Justice (Washington, D.C.):

  • The Justice Department announced [] that it has filed a lawsuit against the state of Florida alleging the state is in violation of the Americans with Disabilities Act (ADA) in its administration of its service system for children with significant medical needs, resulting in nearly 200 children with disabilities being unnecessarily segregated in nursing facilities when they could be served in their family homes or other community-based settings.

    The lawsuit, filed in federal district court in Fort Lauderdale, Fla., further alleges that the state’s policies and practices place other children with significant medical needs in the community at serious risk of institutionalization in nursing facilities.

    The ADA and the Supreme Court’s decision in Olmstead v. L.C.(1) require states to eliminate unnecessary segregation of persons with disabilities. The department’s complaint seeks declaratory and injunctive relief, as well as compensatory damages for affected children.
  • “Florida must ensure that children with significant medical needs are not isolated in nursing facilities, away from their families and communities,” said Eve Hill, Deputy Assistant Attorney General for the Civil Rights Division. “Children have a right to grow up with their families, among their friends and in their own communities. This is the promise of the ADA’s integration mandate as articulated by the Supreme Court in Olmstead. The violations the department has identified are serious, systemic and ongoing and require comprehensive relief for these children and their families.”

    Since late 2012, the department has met with Florida officials on numerous occasions in an attempt to resolve the violations identified in the findings letter cooperatively. While the state has altered some policies that have contributed to the unnecessary institutionalization of children, ongoing violations remain. Nearly two hundred children remain in nursing facilities. Deficient transition planning processes, lengthy waiting lists for community-based services and a lack of sufficient community-based alternatives persist. The department has therefore determined that judicial action is necessary to ensure that the civil rights of Florida’s children are protected.

Brooklyn Landlord Finds Itself In Crosshairs In Federal Fair Housing/Race Discrimination Suit Accusing It Of 'Failing Black/White Test' In Its Treatment Accorded Black Testers As Opposed To Their White Counterparts

In New York City, the Fair Housing Justice Center(1) recently announced:

  • On August 2, 2013, the FHJC and four African American testers filed a lawsuit in federal district court (E.D.N.Y.) alleging that the owners and managers of apartment buildings located in Brooklyn discriminate against African Americans.

    The case resulted from an investigation conducted by the FHJC in which African American and white testers posing as prospective renters were deployed to two rental buildings located at 592-596 E. 22nd Street in Brooklyn to inquire about apartments.

    The investigation was commenced after the FHJC was contacted by the Flatbush Development Corporation. The lawsuit claims that the defendants, East 22nd Street Towers LLC, East 22 St. Realty LLC, Coney Management LLC, Kalman Zimmerman, Samuel Fleischman, Joseph Lichtman, and Mayer Fishman engaged in racially discriminatory practices in violation of fair housing laws.

    The complaint alleges that the rent stabilized buildings on E. 22nd Street were neglected and in serious disrepair when they were occupied almost exclusively by Black tenants. When the defendants acquired the properties, units were eventually remodeled, but it appeared that Black tenants who remained in the building did not receive the same quality of renovations. Concern was expressed by tenant organizers that the owners were seeking to rent newly remodeled units to tenants who were not Black. In response to this concern, the FHJC conducted an investigation.

    According to the lawsuit, African American testers were treated less favorably than their white counterparts on four tests. In stark contrast to the treatment accorded white testers, comparably qualified African American testers met with misinformation, discourtesies, and discouragement when inquiring about apartments for rent.

    On one test, a white tester was told about four apartments that were coming available in several weeks and, on the same day, an African American tester was told no apartments were available and none would be available for a couple of months.

    On the second test, an African American tester was informed that no apartment was available and that it could be “four to six weeks” and none would be available by October 1st. The same day, a white tester was shown an available apartment that was “just about ready” and that would be ready by October.

    On another test, an African American tester was treated rudely and quoted a security deposit requirement that was twice as much as the amount quoted to his white counterpart.
For the press release, see Flatbush Landlord Accused of Racial Bias (FHJC Investigation Documents Race Discrimination In Gentrifying Buildings).

(1) The Fair Housing Justice Center, Inc. (FHJC) is a regional fair housing organization based in New York City. The FHJC provides a full-service fair housing program to New York City and the seven surrounding New York counties of Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk, and Westchester.

NYC Fair Housing Advocates Score $130K In Damages, Legal Fees From Queens Landlord Accused Of Having Policy Of Stiffing Prospective Black Renters Looking For Available Apartments In Favor Of Whites

In New York City, the Fair Housing Justice Center(1) recently announced:

  • On June 27, 2013, Federal District Judge Roslynn R. Mauskopf approved a settlement resolving a fair housing lawsuit filed by the Fair Housing Justice Center (FHJC) and three African American testers against the owners and managers of an apartment building located at 41-41 46th Street in Sunnyside, Queens.

    The lawsuit, filed in December 2012, alleged that Nasa Real Estate Corporation (“Nasa”) and its agents were discriminating based on race and color in the rental of housing in violation of fair housing laws. The complaint was based on the results of a systemic testing investigation conducted by the FHJC in which matched pairs of African American and white testers inquired about renting apartments at the 107-unit apartment building.

    According to the complaint, an agent informed African American testers that no apartments were available, while informing comparably qualified white testers about available apartments and showing them apartments.

    The agreement provides a general injunction requiring that Nasa and its employees abide by fair housing laws. One of the defendants, Irfan Bekdemir, who was tested by the FHJC, acknowledged in the agreement that he told African American testers that no apartments were available and did not show them any apartments while informing white testers about available apartments and showing them vacant units.
  • [Among other terms], the agreement provides that Nasa will pay a total of $130,000 to the plaintiffs for damages, attorney’s fees, and costs. The plaintiffs were represented by Elizabeth S. Saylor, Diane L. Houk, and Vasudha Talla with the law firm of Emery Celli Brinckerhoff & Abady, LLP.
For the press release, see Sunnyside Race Discrimination Case Settled (Agreement Extends Remedy To Other Rental Buildings In NYC).

(1) The Fair Housing Justice Center, Inc. (FHJC) is a regional fair housing organization based in New York City. The FHJC provides a full-service fair housing program to New York City and the seven surrounding New York counties of Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk, and Westchester..

Friday, August 16, 2013

Disbarred Florida Closing Attorney Who Got Bar Boot For Exposing Title Insurance Fund To $10M+ In Claims Exposure For Allegedly Failing To Record At Least 17 Deeds & 21 Mortgages Continued To Practice Law, Now Receives A 2nd "Permanent" Boot

The South Florida Sun Sentinel reports:

  • Okechukwu Josiah Odunna of Lauderhill was permanently banned after he first was disbarred in 2010 for appearing to be "causing great public harm."

    Odunna was accused of failing "to record at least 17 original deeds and 21 original mortgages, exposing a title insurance fund to more than $10 million in claims exposure," according to Florida Bar records. "A Florida Bar compliance audit of Odunna's trust accounting records determined that he misappropriated more than $370,000 in client funds."(1)

    This year he was found to still be practicing law. Odunna could not be reached for comment [].
Source: 3 South Florida attorneys permanently banned.

(1) The Florida Bar's Clients' Security Fund was established to reimburse clients who have suffered a loss due to misappropriation or embezzle­ment by a Florida-licensed attorney.

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:
Maps available courtesy of The National Client Protection Organization, Inc.

84-Year Old Attorney Ingloriously Ends 50+ Year Career By Getting Double Bar Boot After Ripping Off Dead Client's Estate, Then Continuing To Practice Law After Initial Disbarment

The South Florida Sun Sentinel reports:

  • Robert Joseph Friedman of Hallandale Beach had been practicing law since 1958 but got into trouble when he was named a personal representative for a client's estate, according to Florida Bar records. When the beneficiary attempted to cash a check from the estate, he couldn't because there wasn't enough money in the account, the Bar reported. Friedman then "admitted that he misappropriated trust funds," staffers for the Florida Bar wrote.(1)

    This spring, Friedman got into more problems when the judicial watchdog found he had continued to practice law and tell clients he was an attorney despite being disbarred in May. The Florida Supreme Court then found him in contempt and banned him from ever practicing law. Otherwise, he would have had a chance to reapply for his license in five years, said Bar spokeswoman Karen Kirksey.

    Friedman said in a brief telephone interview, "I resigned." He said he was no longer practicing law and had no further comment. The Florida Bar had honored him five years ago for being a 50-year member.(2)
Source: 3 South Florida attorneys permanently banned.

(1) The Florida Bar's Clients' Security Fund was established to reimburse clients who have suffered a loss due to misappropriation or embezzle­ment by a Florida-licensed attorney.

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:
Maps available courtesy of The National Client Protection Organization, Inc.

(2) I wonder what the punishment is if this guy again gets caught practicing law. A triple bar boot???

Florida AG: Tampa Attorney Ran Nationwide Loan Modification Racket That Duped Homeowners Into Paying Illegal Fees By Using Websites That Mimicked Gov't Sites, Other Deceptions, Then Stiffed Them On Promised Services

From the Office of the Florida Attorney General:

  • Attorney General Pam Bondi’s Office [] sued Tampa lawyer Eric Mader, alleging he ran a nationwide foreclosure-rescue operation that charged illegal fees and failed to provide promised assistance to consumers.

    Some of the allegations include that Mader and his firm, Mader Law Group, lured consumers with websites mimicking government sites, misrepresented that consumers would be enrolled in government assistance programs or could get loan modifications from lenders, and charged fees for services never rendered.

    Mader allegedly offered refunds to some consumers only if they would withdraw their complaints about him to the Florida Bar, which regulates lawyers.

    “We will not allow scam artists to defraud Florida’s homeowners who are seeking financial relief,” stated Attorney General Pam Bondi.

    Among other things, the lawsuit seeks an order to prohibit Mader and his firm from charging up-front fees for foreclosure-rescue services and to require them to comply with Florida's foreclosure-rescue law. The lawsuit is also seeking restitution for consumers.
For the Florida AG press release, see Attorney General Bondi's Office Sues Tampa Law Firm for Foreclosure Rescue Operation (go here for the Spanish version of the press release).

For the lawsuit, see State of Florida v. Mader, et al.

(1) The Florida Bar's Clients' Security Fund was established to reimburse clients who have suffered a loss due to misappropriation or embezzle­ment by a Florida-licensed attorney.

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:
Maps available courtesy of The National Client Protection Organization, Inc.

Georgia Lawyer Faces Unlicensed Practice Of Law Complaint Over Loan Modification Solicitations Mailed To Rhode Island Homeowners; Letters Contained Non-Existent Local Address; Calls To Local Phone Number Were Redirected To Atlanta

In Providence, Rhode Island, the Providence Journal reports:

  • A lawyer from Atlanta, Ga., is in hot water with the Supreme Court's disciplinary counsel for soliciting Rhode Island residents facing mortgage foreclosures while having no office or license to practice law in this state.

    According to David Curtin, chief disciplinary counsel for the Rhode Island Supreme Court, Georgia lawyer Daniel J. Saxton "caused solicitation letters to be mailed" to about a dozen Rhode Island residents in February, advising them that their properties were going to be auctioned "on the Providence County Courthouse steps" on a particular date and "suggested that the recipient immediately contact [him] for assistance in mortgage negotiation and settlement."

    One of the property owners was offended by the solicitation, Curtin said, and contacted a Rhode Island lawyer who anonymously forwarded the mailing to Curtin's office.

    Curtin said the lawyer's solicitation letter listed a local phone number and a firm address of 20 Weybosset Street, an address that does not exist. If someone called the Rhode Island number, the phone was answered at Saxton's law firm in Atlanta, Freeman Saxton P.C., Curtin alleged.

    In his disciplinary complaint, Curtin said that on Feb. 28 of this year, a telephone call was placed to the phone number listed on the solicitation and the caller was put through to someone named "Roberto" who insisted that Freeman Saxton P.C. was located at 20 Weybosset St., but that the caller could not come to the office because he did not have an appointment.

    Saxton, a partner in the Atlanta firm of Freeman Saxton P.C., faced a public hearing July 23 before the court's disciplinary board, which could recommend a sanction ranging from censure to disbarment. It will be up to the justices of the Rhode Island Supreme Court to make a final decision on the punishment to be meted out, if any.

    "By offering to provide legal services to Rhode island residents while not being authorized to do so," Saxton not only violated the Supreme Court Rules of Professional Conduct but he also violated state law "which makes it a criminal offense to practice law without a license or falsely hold oneself out as a lawyer," Curtin wrote in his disciplinary complaint.

    Curtin said Wednesday that bar overseers in Georgia are awaiting the Rhode Island disciplinary board's decision.(1)
For the story, see Georgia lawyer faces disciplinary proceedings for soliciting RI residents facing mortgage foreclosure.

(1) The Clients' Security Fund of the State Bar of Georgia (Part X of the state Bar rules handbook) was established to provide a public service and to promote confidence in the administration of justice and the integrity of the legal profession by providing some measure of reimbursement to victims who have lost money or property because of theft or misappropriation by a Georgia attorney.

In Rhode Island, the Rhode Island Bar Association's Client Reimbursement Fund was established to provide a public service and to promote confidence in the administration of justice and the integrity of the legal profession by providing some measure of reimbursement to victims who have lost money or property because of theft or misappropriation by a Rhode Island attorney, and occurring in Rhode Island during the course of a client-attorney relationship.+

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:
Maps available courtesy of The National Client Protection Organization, Inc.

Thursday, August 15, 2013

Mississippi Attorney Gets 46 Months For Bankruptcy Scheme Used To Hide His Fraudulently Snatching Of Property Co-Owned With Business Partner, Then Pocketing Proceeds From Subsequent Refinance

From the Office of the U.S. Attorney (Jackson, Mississippi):

  • Michael E. Earwood, 61, an attorney from Madison, Mississippi, was sentenced [] in U.S. District Court to 46 months in prison, followed by three years of supervised release, for bankruptcy fraud, announced U.S. Attorney Gregory K. Davis, [and others]. Earwood was also ordered to pay restitution in the amount of $792,228.53.

    Earwood previously pled guilty to devising and executing a scheme to obtain money from a business partner by falsely representing that the money would be used to maintain real property owned by Kinwood Capitol Group.

    He admitted transferring title to the real property assets of the business without the knowledge and consent of his business partner, who held a majority interest in the assets of the business.

    Earwood admitted that he transferred these assets to his own company named Northlake Development. He then used that property as collateral for bank loans to Northlake Development but still continued to solicit money from the business partner for a period of time.

    Earwood admitted that when the bank attempted to foreclose on the Northlake Development loan, he placed Northlake Development into bankruptcy and continued to conceal the unauthorized transactions from his business partner and the banks from which he had obtained loans.(1)
For the U.S. Attorney press release, see Madison Attorney Sentenced in Bankruptcy Fraud Scheme.

(1) Don't feel bad for the business partner who co-owned the property with this thief. As it turns out, the deed used to snatch the property was found to be void and having no legal effect (as opposed to merely voidable). Consequently, the business partner dodged the financial hit, and it was the bank that made the loan (and/or the title insurance company that issued the title policy) that was left holding the bag. For more, see Voidable Or Void Ab Initio (Or "Void Unless & Until Later Ratified")?

Self-Proclaimed President Of Sovereign Citizen Nation Gets 18 Years For Peddling Seminars Teaching Attendees How To Create Phony Bonds To Pay Income Taxes, File Retaliatory Liens Against Gov't Officials Who Interfered With Processing The Fictitious Instruments

From the U.S. Department of Justice (Washington, D.C.):

  • The Justice Department, the Internal Revenue Service (IRS) and the FBI announced [] that James Timothy Turner, also known as Tim Turner, was sentenced to serve 18 years in federal prison for conspiracy to defraud the United States, attempting to pay taxes with fictitious financial instruments, attempting to obstruct and impede the IRS, failing to file a 2009 federal income tax return and falsely testifying under oath in a bankruptcy proceeding.

    In March 2013, following a five-day jury trial, Turner was convicted on 10 counts in the U.S. District Court for the Middle District of Alabama.

    Based on the evidence introduced at trial and in court filings, Turner, the self-proclaimed “president” of the sovereign citizen group Republic for the united States of America (RuSA), traveled the country in 2008 and 2009 conducting seminars teaching attendees how to defraud the IRS by preparing and submitting fictitious bonds to the U.S. government in payment of federal taxes, mortgages, and other debt.

    The evidence at trial revealed the bonds are fictitious and worthless but witnesses testified that Turner used special paper, financial terminology and elaborate borders in an effort to make them look authentic and more likely to succeed in defrauding the recipient. Turner was convicted of sending a $300 million fictitious bond in his own name and of aiding and abetting others in sending fifteen other fictitious bonds to the Treasury Department to pay taxes and other debts.

    The evidence at trial also established that Turner taught people how to file retaliatory liens against government officials who interfered with the processing of fictitious bonds. Turner filed a purported $17.6 billion maritime lien in Montgomery County, Ala., Probate Court against another individual.

    This investigation began after Turner and three other self-proclaimed “Guardian Elders” sent demands to all 50 governors in the United States in March 2010 ordering each governor to resign within three days to be replaced by a “sovereign” leader or be “removed.” The FBI immediately began investigating Turner and IRS- Criminal Investigation (IRS-CI) joined the investigation soon thereafter.

Sovereign Citizen Charged In Alleged Attempt To Title-Hijack Multi-Million $ Memphis Mansion Refuses Judge's Order For Mental Evaluation; Wants To Represent Self

In Memphis, Tennessee, WREG-TV Channel 3 reports:

  • Tabitha Gentry, accused of squatting in a multi-million dollar east Memphis home, was in court Monday. Gentry was recently indicted on charges of theft of property more than $250,000 and aggravated burglary.

    “I’m Abka Rey Bey, Moore American national,” said Gentry as the judge read the charges she was indicted on.

    At issue Monday was a mental evaluation the court has ordered.

    “That is not in my best interest to take any kind of mental or forensic evaluation and there is nothing in the American Constitution of 1791 that you can hold, force me to take a mental evaluation,” said Gentry in court.

    Judge James Lammey asked for another mental evaluation Thursday and then for Gentry to appear back in court on August 13th. “The state of Tennessee cannot bring charges against a flesh-and-blood being,” said Gentry.

    Claiborne Ferguson, who is Gentry’s court-appointed attorney, said Gentry cannot be forced to take a mental evaluation. "They will try one more time and at some point she will either be allowed to represent herself or the court will have to find that she is unable to present herself. At some point the court will have to hold a hearing to determine whether she is competent or not to represent herself,” said Ferguson.

    If found guilty of the theft charge, Gentry faces a minimum 15 years in prison and she faces three to 15 years on the aggravated burglary charge.

Wednesday, August 14, 2013

Ex-Fugitive Foreclosure Rescue Operator Gets 132 Months For Running Fractional Interest Deed Transfer Scam Involving Use Of Bogus Bankruptcy Filings To Fraudulently Delay, Postpone Public Auctions For 800+ Financially Distressed Homeowners

From the U.S. Department of Justice (Washington, D.C.):

  • Glen Alan Ward, 48, a former Los Angeles resident who fled to Canada and was a federal fugitive for 12 years, was sentenced [] to serve 132 months in prison for aggravated identity theft and bankruptcy fraud in connection with his leading role in a nearly 15-year foreclosure-rescue scam that fraudulently postponed foreclosure sales for more than 800 distressed homeowners.
  • According to the plea agreement, Ward led a scheme that solicited and recruited homeowners whose properties were in danger of imminent foreclosure. Ward promised to delay their foreclosures for as long as the homeowners could afford his $700 monthly fee.

    Once a homeowner paid the fee, Ward accessed a public bankruptcy database and retrieved the name of an individual debtor who recently filed bankruptcy. Ward admitted that he obtained copies of unsuspecting debtors’ bankruptcy petitions and directed his clients to execute, notarize and record a grant deed transferring generally a 1/100th fractional interest in their distressed home into the name of the debtor that Ward provided.(1)

    Then, after stealing the debtor’s identity, Ward faxed a copy of the bankruptcy petition, the notarized grant deed and a cover letter to the homeowner’s lender or the lender’s representative, directing it to stop the impending foreclosure sale due to the bankruptcy.

    Because bankruptcy filings give rise to automatic stays that protect debtors’ properties, the receipt of the bankruptcy petitions and deeds in the debtors’ names forced lenders to cancel foreclosure sales. The lenders, which included banks that received government funds under the Troubled Asset Relief Program (TARP), could not move forward to collect money that was owed to them until getting permission from the bankruptcy courts, thereby repeatedly delaying the lenders’ recovery of their money for months and even years.

    In addition, if a distressed homeowner wanted to complete a loan modification or short sale, they were left to the mercy of Ward to send them forged deeds, supposedly signed by the debtors, to re-unify their title as required by most lenders.

    As part of the scheme, Ward delayed the foreclosure sales of approximately 824 distressed properties by using at least 414 bankruptcies filed in 26 judicial districts across the country. During that same period, Ward admitted to collecting from his clients who paid for his illegal foreclosure-delay services more than $1.2 million.
For the Justice Department press release, see Former Federal Fugitive Sentenced in California for Nationwide Foreclosure Scam (Collected More Than $1.2 Million from More Than 800 Distressed Homeowners).

(1) See Final Report Of The Bankruptcy Foreclosure Scam Task Force for a discussion of fractional interest deed transfer scams and other foreclosure rescue rackets involving the abuse of the bankruptcy courts.

Sale Leaseback Peddler Gets 96 Months In Connection With Foreclosure Rescue Equity Stripping Racket That Targeted Financially Strapped High-Equity, No-Cash Homeowners

Fed Up & Fighting Back blog reports that Felix Daniel, an alleged foreclosure rescue operator based in Michigan and who did business as RYM Technology Holdings ("Rymtech" was sentenced in a Chicago, Illinois Federal court to 96 months in federal prison and five years parole and over $4 million in restitution/forfeiture)  in connection with a fraudulent scheme involving the equity stripping from homes of high-equity, no-cash homeowners through the peddling of bogus sale leaseback arrangements.(1)

Source (includes original indictment): Felix Daniel Guilty.

Go here for the Memorandum Opinion & Order denying Daniel's motion for a new trial.

Go here for the Illinois Secretary of State's Order of Prohibition addressing Daniel's racket in an earlier, unrelated administrative proceeding.

Thanks to Linda Spak for the heads-up on the conviction.

(1) For more on this type of foreclosure rescue ripoff, see:

Foreclosure Rescue Operator Gets Five Years For Role In Racket That Clipped 250 Financially Distressed Homeowners Seeking Loan Modification Help Out Of $675K In Upfront Fees

In Phoenix, Arizona, the Phoenix Business Journal reports:

  • A San Diego man has been sentenced to five years in federal prison from his role in a mortgage foreclosure rescue scam that took place in Arizona and California. But his two co-conspirators have fled to Mexico, according to federal investigators.

    Frank Becerra Campos, 66, previously pleaded guilty to federal charges of defrauding 250 distressed homeowners out of $675,000 worth of up-front mortgage modification assistance fees.

    Federal prosecutors and the FBI accused Campos and two other men, Miguel Carrera and Oswaldo Esqueda, of targeting Spanish-speaking homeowners in Arizona and California and promising them mortgage modification help. The scheme promised to reduce mortgage payments by 25 percent and sometimes the trio encouraged homeowners to file for bankruptcy protection to delay losing their homes.

    The trio operated under businesses called Gold Capital Investments LLC and Foreclosure Home Savers LLC.

    Federal prosecutors and the FBI claim Carrera and Oswaldo fled to Mexico. They also claim Carrera may be working in real estate there under the name Mike Beltran.

Tuesday, August 13, 2013

Pennsylvania Appeals Court: OK To Void Assignee Bankster's Mortgage, Promissory Note When Homeowner Raised TILA Rescission, Other Issues Involving Originating, Now-Defunct Lender's Pre-Assignment Conduct As Foreclosure Defenses; FIRREA Liability Limitation Involving Certain Asset Transfers Between Financial Institutions Applies Only To Counterclaims

In Philadelphia, Pennsylvania, Law360 reports:

  • The Pennsylvania Superior Court ruled Thursday that federal law does not prevent judges from voiding mortgage agreements through counterclaims brought during foreclosure proceedings, affirming a lower court's ruling voiding the mortgage agreement for a woman whose closing agent absconded with nearly $80,000.

    In a precedential ruling, a three-judge panel found that while the federal Financial Institutions Reformation, Recovery and Enforcement Act — or FIRREA — prevented a Clearfield County judge from voiding a mortgage agreement as part of a declaratory judgment bid brought by a homeowner...(1)
For more, see Judges Can Void Some Foreclosed Mortgages, Pa. Court Says (requires subscription).

For the ruling, see Sass v. Amtrust Bank, 2013 PA Super 230 (August 8, 2013).

(1) When applicable, FIRREA (apparently? - as best as I can figure it, anyway) deprives courts of subject matter jurisdiction to impose liability on a successor financial institution for pre-assignment conduct by the predecessor institution without exhaustion of administrative remedies before the Federal Deposit Insurance Corporation (but don't quote me on this!).

In this case, the 3-judge panel first explained the distinction between defenses/affirmative defenses and counterclaims, and then decided whether the FIRREA limitations on imposing liability on a successor financial institution for pre-assignment conduct by the predecessor institution precluded a trial judge from voiding the homeowner's home mortgage and associated promissory note when a rescission defense (based on both the Truth In Lending Act and other theories) was raised by the homeowner/defendant against a financial institution in a foreclosure action:
  • Courts are well suited to determine whether the merits of a stated defense, affirmative defense, or counterclaim bring it within the ambit of the jurisdictional bar of the FIRREA, and may not premise a determination merely on the label a pleading may carry. See id.

    Thus, “[c]ourts should not allow parties to avoid the procedural bar of § 1821(d)(13)(D) by simply labeling what is actually a counterclaim as a defense or affirmative defense.” Id.

    Similarly, courts must retain a healthy degree of skepticism in applying the bar to assertions pled as defenses merely because their application would compromise the value of assets assumed by a successor bank under FIRREA.

    “[A] claim (or a counterclaim) is essentially an action which asserts a right to payment.” Id.

    Consequently, the court must consider whether the disputed assertion of a party’s pleading stems from the desire to establish a right to payment and collect on the resulting debt, or from an explanation of why the debt is not valid or collectible.

    Consistent with this rational, courts have generally accepted the proposition that a defense of rescission is an affirmative defense—not a counterclaim―as it does not seek payment of any sort, but operates to invalidate a contract based on circumstances that render enforcement unlawful. See id. at 394, n.26.

    Although the net effect of such a defense in reducing sums payable by a defendant may be equivalent to that wrought by a counterclaim for damages, the mechanism by which that effect is achieved is entirely distinct.

    While a counterclaim naturally sets off damages awarded to its claimant against those due on the underlying claim, the affirmative defense of rescission more directly nullifies the contractual basis for the claim.

    Thus, we need not hesitate in concluding that Sass’s assertion of an entitlement to rescission of the mortgage contract is an affirmative defense beyond the reach of section 1821(d)’s jurisdictional bar and subject fully to the jurisdiction of the trial court.

    That defense makes no claim on Nationstar for an award of damages, but merely posits that based on a multiplicity of circumstances, including the conduct of the closing agent in absconding with the proceeds of the loan and the failure of AmTrust to comply with various statutory prescriptions at closing, the terms of the contract cannot be enforced.

    Thus, the defenses and affirmative defenses so characterized in Sass I are exactly that and, as such, are not subject to the jurisdictional bar of section 1821(d).

    We conclude accordingly, that while the declaratory judgment action Sass commenced in Sass II is plainly barred by FIRREA, Sass’s attempts, by way of defense and affirmative defense to nullify, rescind, or otherwise invalidate the contract in response to Nationstar’s mortgage foreclosure action in Sass I are not.

Federal Appeals Court Kiboshes Bankster's "Heads I Win, Tails You Lose" Method Of Offering Trial Period Loan Modification Plans To Financially Strapped Homeowner; Judge: Wells Fargo's Continuing Option Of "Modifying The Loan Or Stiffing Him ... Is A Fraudulent Coin Toss"; Court Says HAMP "Seems To Have Created More Litigation Than It Has Happy Homeowners!"

In San Francisco, California, Reuters reports:

  • Wells Fargo must face lawsuits by homeowners who claim the largest U.S. mortgage lender refused to offer them permanent mortgage modifications for which they had qualified, a federal appeals court ruled on Thursday.

    The 9th U.S. Circuit Court of Appeals said Wells Fargo was required under the federal Home Affordable Modification Program to offer loan modifications to borrowers who demonstrated their eligibility during a trial period.

    Reversing the dismissals by a San Francisco federal judge of two lawsuits seeking class-action status, the appeals court rejected the argument that Wells Fargo became bound only upon sending borrowers signed modification agreements.

    The court said this would create "unfettered discretion" for the San Francisco-based bank to reject modifications "for any reason whatsoever—interest rates went up, the economy soured, (or) it just didn't like the borrower."

    While a federal appeals court in Chicago reached a similar conclusion last year,(1) the 9th Circuit decision applies in several western U.S. states—among them California, Arizona, and Nevada—that have been particularly hard-hit by foreclosures.(2)

    Wells Fargo said it had $352 million of loans under HAMP in a trial modification period as of June 30.

    "The 9th Circuit did not rule on the merits of the underlying cases, and found only that the district court should consider the arguments put forth by the plaintiffs," the bank said in a statement. "Wells Fargo has strong defenses to those arguments, and is prepared to present its case."

    'Heads I win, tails you lose'

    Unveiled by the Obama administration in 2009, HAMP pays mortgage lenders and servicers to rewrite loan terms for borrowers who cannot afford their payments.

    While steps have been taken to broaden HAMP's reach, fewer loans than expected have been modified, and both Democrats and Republicans have complained that many borrowers who get help default on their modified mortgages.

    The program has also spawned other litigation, and the 9th Circuit said it "seems to have created more litigation than it has happy homeowners."

    In a separate lawsuit in Massachusetts, homeowners accused Bank of America Corp of offering employees financial incentives to stall HAMP applications because foreclosures or in-house loan modifications could be more profitable.

    A judge is considering whether to make that case a class action.

    One of the Wells Fargo cases was brought by Phillip Corvello, who claimed he complied with a written trial period plan for a HAMP modification, and the other by Jeffrey and Karen Lucia, who claimed to comply with an oral plan.

    The Lucias' home was sold at foreclosure in August 2010, but they kept possession of the property, Wells Fargo said.

    Both the unsigned majority opinion and a concurring opinion by Circuit Judge John T. Noonan faulted Wells Fargo's drafting of the trial period plan, saying that to rule in the bank's favor would render the benefits for borrowers illusory.

    "No purpose was served by the document Wells Fargo prepared except the fraudulent purpose of inducing Corvello to make the payments while the bank retained the option of modifying the loan or stiffing him," Noonan wrote.

    "'Heads I win, tails you lose' is a fraudulent coin toss. Wells Fargo did no better."
Source: Wells Fargo can be sued over mortgage modifications.

For the court ruling, see Corvello v. Wells Fargo Bank, N.A., No. 11-16234 (9th Cir. August 8, 2013).

See also, Public Citizen Consumer Law & Policy blog: Ninth Circuit to Wells Fargo: keep your promises on loan modification.

(1) Wigod v. Wells Fargo Bank, NA, 673 F. 3d 547 (7th Cir. 2012).

(2) The 9th Circuit Court of Appeals also covers Washington, Oregon, Idaho, Montana, Alaska, Hawaii, Guam, & the Northern Mariana Islands.

The 7th Circuit Court of Appeals covers Illinois, Indiana, and Wisconsin. 

For other U.S. Courts of Appeals, see the U.S. Circuit Court of Appeals Locator Map.