Saturday, May 18, 2013

Ohio AG Indicts Seven In Home Repair Scam Primarily Targeting Seniors Mostly In Their 80s & 90s; Two Suspects Tied To Similar Earlier Racket That Landed Them Prison Time 10+ Years Ago

From the Office of the Ohio Attorney General:

  • Ohio Attorney General Mike DeWine stood beside Central Ohio law enforcement officers to announce the indictments of seven people who ripped off elderly victims in Fairfield, Franklin, Pickaway, and Ross counties with their door-to-door home improvement scheme.

    “These scammers preyed on people mostly in their 80’s and 90’s,” said DeWine. “They not only preyed upon them once, but in most cases, they continued their lies to get more money. And that has added up to a loss of $102,000 for more than a dozen victims. We know there are more victims, which is why this investigation is not over.”

    The suspects typically would approach a homeowner with a story about something that needed to be fixed like a roof or chimney. The homeowner would agree to the work, only to learn later the bill was much higher than expected and little or no work was performed. Sometimes the suspects would approach a homeowner declaring they’d already fixed the issue on the home (without permission), and they were owed money for the work.

    After the payment check was written, the suspects would return later saying they’d overcharged the homeowner. They’d ask for a second check to be written, ensuring the homeowner that they hadn’t cashed the first check when, in fact, they had. The suspects pulled the check story scam over and over. One 89-year-old woman wrote 14 checks totaling $23,400. One 86-year-old man lost nearly $50,000 writing 29 checks.

    Bruce McFarland, Herschel Mumaw, Mark Christman, Mark Kitchen, Michael Fausnaugh, David Ramey, and Thristian Harding, all from the Circleville area, were indicted in Fairfield County on multiple felony counts including: Engaging in a Pattern of Corrupt Activity; Conspiracy; Money Laundering, and Theft from an Elderly Person.

    McFarland and Mumaw, both of whom were sent to prison as part of the “Circleville 30” convictions more than a decade ago, now face a maximum of 57 years in prison if convicted.

    “Twelve years ago, the Attorney General’s Office sent more than thirty people to prison for robbing senior citizens in this same kind of scam,” Attorney General DeWine said. “When we learned that some of the same people had served their prison time, gotten out, and were continuing their hunt for elderly victims in a new home repair scam, our investigators, along with so many other law enforcement detectives, worked tirelessly to put a stop to this.”

    The “Circleville 30” was a group of relatives and friends who stole hundreds of thousands of dollars from elderly homeowners, after claiming they’d done some type of home improvement work. In 2000, a taskforce led by the Attorney General’s Office convicted more than 30 people.

Disbarred Attorney Indicted For Allegedly Ripping Off 83-Year Old Woman Of $400K+ In Connection With Complex Real Estate Deal

From the Office of the Ohio Attorney General:

  • Ohio Attorney General Mike DeWine and Hamilton County Prosecutor Joseph Deters announced [] the indictment of a disbarred attorney who allegedly stole more than $400,000 from an 83-year-old woman from Morrow, Ohio.

    William G. Goetz, of Cincinnati, was indicted Tuesday by a Hamilton County grand jury on two counts of Theft from the Elderly, two counts of Money Laundering, and one count of Tampering with Records. If convicted, Goetz faces a maximum of 31 years in prison.
  • According to investigators, Goetz prepared legal documents and participated in a complex real estate transaction for the homeowner.

    He allegedly took more than $400,000 from the homeowner that was intended for future tax payments stemming from the land deal. Goetz is accused of depositing the funds into his business accounts for his own personal use.

    As part of the deception, Goetz also created a fake letter from the Ohio Attorney General's office to further his crimes.

    Goetz was disbarred by the North Dakota Supreme Court in 1991 for fraudulent dealings with his clients. He is not and has never been an attorney admitted to the practice of law in Ohio. The Ohio Supreme Court sanctioned Goetz for unauthorized practice of law and fined him $30,000 in 2005.

    A warrant has been issued for Goetz's arrest.

Stockbroker, Hubby Get Seven Years For Conning Dementia-Stricken, 94-Year Old Woman Into Signing Over Control Of Her $10M Estate

In Fort Lauderdale, Florida, the South Florida Sun Sentinel reports:

  • A Hollywood stockbroker and her husband will spend the next seven years in prison after a jury found them guilty of conning a 94-year-old friend into signing over her $10 million estate to them.

    Cynthia Franke, 52, and her husband, Tyrone Javellana, 48, were convicted on March 19 of exploitation of the elderly, a charge that carries a maximum 30-year prison term. The couple were accused of befriending Josephine Troisi, then becoming her financial advisers.

    According to prosecutors and witnesses, Franke and Javellana persuaded Troisi to disinherit her own family members and turn her fortune over to them.

    But Troisi, who suffered from dementia, lacked the capacity to make sound decisions when Franke took her to an attorney to change her will and her trust in 2009.

    Troisi's son, John, had been keeping track of his mother's finances and contacted police when he noticed payments to Franke and Javellana ranging from $500 to $5,000. In all, police said the couple tricked Troisi and her sister, Mary Teris, out of more than $100,000 and set themselves up to inherit even more.

Friday, May 17, 2013

Would-Be Tenant Gets Quick Boot After Paying Thousand$ To Rent Four Bedroom Home From Foreclosed Owner/Real Estate Agent

In Fort Lauderdale, Florida, WPLG-TV Channel 10 reports:

  • "I'm angry... I'm really angry. I'm so frustrated and so exhausted," Jeff Sandler said while packing.

    On his moving day, while surrounded by movers, Sandler still had baggage that wouldn't fit into any box and anger that he couldn't keep a lid on. "It's a huge financial and emotional drain," he told Local 10's Ross Palombo. The drain, though, began as a dream.

    It started when he found a half-million dollar, four-bedroom, three-bath, 3,000-square-foot home to rent in Fort Lauderdale. Owner and realtor Sheri Edewaard leased it to him for $2,700 a month. "And, I rented the home from her. I did everything I was supposed to do legally," Sandler said.

    He thought the deal was signed, sealed, and delivered until something else arrived: an eviction notice.

    "I had a very abrupt knock at my front door... They demanded I leave the premises in 24-hours," Sandler said. The demand came from a "Writ of Possession." He was being evicted because the house was foreclosed upon. "She didn't tell me that her house was in foreclosure and I had been evicted," he added.

    Court records show that the bank began foreclosure in February 2012. By October, a judge finalized the foreclosure. According to the lease obtained by Local 10, Edewaard then signed an agreement in November to rent that house to Sandler. "I just feel ridiculously violated and I don't understand how people can get away with that," Sandler said.

    State record show that Edewaard has been a licensed real estate agent for 13 years and has no formal history of complaints. Local 10 tried several times to locate her at her home and office without success and left several messages asking for her side of the story. Edewaard never agreed to an interview to tell her side of the story.

    The one person who did call to comment was the man who she works with: successful realtor John Castelli. "You don't believe your agent did anything wrong?" Palombo asked. "I don't believe she knowingly did anything wrong," Castelli said.

    "You don't think a licensed realtor should have know that her home was, one, in foreclosure and, two, foreclosed upon? You don't think she should have known that as a realtor before she signed a lease with someone?" "I don't believe she knew it was in foreclosure," Castelli said several times.

    Edewaard, he said, still works with him.

    Assistant State Attorney Al Guttmann can't speak directly about that case, but said Broward County has seen plenty of foreclosure cases. "Broward has had more than its share of foreclosure and fraud," Guttmann said.

    Foreclosures are on the rise in Broward, according to the County Clerk's office. There were 19,651 in 2011 and 24,076 in 2012, an increase of 18 percent.

    "You're entitled to rent in foreclosure," Guttmann said. "But, here's the catch... you've got to tell your renter." If you don't, he said, it could be fraud or felony fraud. "It's unfortunate. It's a shame, and it could be a crime," Guttmann said.

    "Is that something your office would prosecute?" Palombo asked. "We'd certainly take a look at it," Guttmann replied.

    Edewaad herself hasn't formally been accused of any crime. But S andler is speaking with prosecutors and the state agency that granted Edewaard her license. "Something should be done about it," Sandler said.

    For him, though, nothing could be done in time. After spending thousands of dollars on moving and attorneys, there is now nothing left for him to do but move on. "Unbelievable that we have no rights," Sandler said. "I absolutely feel helpless. I just don't get how we're not protected."
Source: Renter evicted from half-million dollar home (Man evicted because Fort Lauderdale home was foreclosed upon).

Vet Who Claims He Was Victimized By Local Police Dept. Employee In Land Contract Ripoff That Led To Foreclosure Says Latter Allegedly Invited Her Co-Workers To Loot Premises While He Was Out-Of-Town; Cops Then Placed Alleged Victim Under Arrest For "Misuse Of 911" Saying Reported Burglary Is Only A Civil Matter

In Mt. Pleasant, Michigan, reports:

  • U.S. Navy veteran Ted Visner and his wife, Kathy Smith of Mt. Pleasant, Michigan, have been living out a nightmare. It started two and a half years ago, when the family fell victim to an apparent real estate scam by a local sheriff's department employee.

    Ted Visner says they bought their former home on a land contract, only to learn seven months later, that the seller, Isabella County Sheriff's Dept. employee Shelly Sweet, was not making monthly payments on the house. A bank foreclosed on the property, all unbeknownst to the Visner/Smith family.

    Ted Visner, who builds custom homes for a living, said, "Although we were paying Sweet every month on the purchase of the property, she had not been paying the underlying mortgage and the home fell into foreclosure." I asked Visner if he had records of those payments, he said he does, including canceled checks. You won't believe what happened next.

    "On a weekend Sweet knew that we would be out of town, she offered the contents of our home to her friends and coworkers at the Isabella County Sheriff’s Department, claiming we had abandoned the home. Many took her up on her free offer deal and took over $55,000 dollars worth of our personal property."
  • The story seems blatantly criminal in nature, with police banding together to help off their property in its entirety. Visner said, "She just put a sign out and let anybody have what they wanted, she didn't remember who was there. In her own disposition she admits to giving our stuff away."

    Visner says Sweet told her employer, the sheriff's department that Visner and his wife weren't making payments, while Visner is able to prove via canceled checks to Sweet that they were indeed paying. "It was blatantly untrue," Visner added. "There is no evidence to support what the county did, it all shows what we are saying though."
  • Visner, Smith and their kids, returned from their weekend away on Monday September 27, 2010, to discover that they were locked out of their own home. Visner called the law enforcement agency that Sweet worked for. [...] It would take a day before the family was allowed to go back inside of the home, and that is when Smith and Visner learned that 95% of the home's contents had been stolen.

    "A sheriff deputy named 'Steinert' came to our home three times that day and only assisted his coworker while the under-sheriff, sheriff and PA refused to help us after they recognized the totality of the situation," Visner said, adding that the "situation" was 6+ coworkers of Sweet having entered their home and receiving stolen property, which for anyone else in the world is Theft.

    Instead, Visner was arrested for "Misuse of 911" on the deputy's third visit. "The county investigated the crime for almost four months and during this time, I moved my family out of Isabella County for safety, I could not move with them because my indefinitely delayed arraignment still loomed over my head."

    Visner says after losing the home he shared with his family, and 95% of their belongings to the sheriff's department, that the prosecutor's office ignored their complaints and still refused to investigate "their employees". In his words, "Over two and a half years have passed now with law enforcement officials doing nothing except covering for one another."

Texas-Based Real Estate Slum Operator Notorious In Houston & Buffalo For Peddling Crappy Rent-To-Own Deals To Unwitting Wanna-Be Homebuyers Hit With Baltimore Suit Alleging His Business Model Presents Nuisance That Threatens Communities' Well-Being

In Baltimore, Maryland, Baltimore City Paper reports:

  • Backed by the non-profit Community Law Center,(1) six Baltimore neighborhood associations have sued a Texas-based property speculator for $8 million, saying his business model presents a nuisance that “threatens the well being of the communities.”

    The defendant, Scott Wizig, owns about 140 city properties, plus dozens more in Houston, where he is based. In the early 2000s he was charged criminally by the state of New York and dubbed “Buffalo’s worst slumlord,” eventually settling the case for several hundred thousand dollars. He started buying in Baltimore in 2001; City Paper took note of him three years later and not much has happened in the nine years since then.

    He first got our attention with the ‘We buy houses’ signs,” says Kristine Dunkerton, the Community Law Center’s executive director. “He racked up quite a bill with the city for posting the signs. But he never did anything with the properties.”

    (Baltimore city strengthened its ordinance against so-called bandit signs in 2006. The city’s housing department enforces the ban, though with difficulty according to this 2009 City Paper story).

    Wizig buys run down houses via tax sales, paying just a couple thousand dollars each for houses that are arguably worth even less, because most need expensive rebuilding to be habitable. In the early 2000s he was renting them to tenants for about $500 a month through a local property manager. City Paper found tenants who said promised repairs were never made. The manager and Wizig blamed each other and Wizig said he was getting out of the rental business then: “We don’t anticipate doing any more rentals with new customers [in Baltimore], but we are certainly going to look into and make sure the existing customers are being taken care of.”

    In Buffalo and Houston, Wizig’s business model revolved around a lease-to-own contract, often one that required the lessee to rent for a couple of years before being able to exercise their option to buy the property. Houses Wizig picked up for a couple grand would routinely be sold for ten times that—though the buyers often defaulted, beginning the cycle anew.

    New York prosecutors called the scheme deceptive; Wizig eventually pleaded guilty to hundreds of violations of state housing laws there. The Houston Press, an alternative weekly, wrote about Wizig’s deals in Houston, though he has apparently faced much less legal trouble there.

    Land records indicate that Wizig has sold many houses in Baltimore, financing the purchase through one of his companies. It is unclear in the documents whether these are rent-to-own deals. But Wizig’s buyers do not always fare well, and Wizig is himself a defendant in five open foreclosure actions listed in Baltimore courts. The oldest, filed in August of 2011, involves 4046 Park Heights Ave., which a Wizig company called Compound Yield Play sold to Joan E. Lilly in 2008 for $43,200. Wizig had bought the property two years earlier for $2,202.

    Another house Wizig sold to Lilly, 1419 E. Federal St., is now in receivership after city action. Wizig’s bought it for $4,396 in 2006 and sold it to Lilly in 2008 for $39,900.

    Wizig did not return City Paper’s phone call.

    Wizing’s buyers and business partners are not party to the suit. Instead, neighbors of the dilapidated properties are suing under a law called The Community Bill of Rights. The law is more than a decade old, but amended only last year to make it usable to community associations, Dunkerton says. “We decided with the new Community Bill of Rights legislation . . . to put the community in the shoes of code enforcement.”

(1) Community Law Center, a nonprofit law firm, provides legal services to community and nonprofit organizations throughout Maryland to promote stronger nonprofits and more vibrant neighborhoods.

Thursday, May 16, 2013

Nevada AG Bags Four For Allegedly Running Racket That Peddled Forensic Audits, Other Scams Purporting To Help Financially Strapped Consumers Obtain Their Homes Free & Clear Of Mortgages

From the Office of the Nevada Attorney General:

  • Nevada Attorney General Catherine Cortez Masto announced that three Nevada residents and one California resident have been indicted by a grand jury on several felonies in connection with their operation of a mortgage lending fraud scam.

    A 15 count indictment was returned by a grand jury on April 22, 2013, charging the following individuals:

    Lynda Finch-Estrada, 54, of Las Vegas, Nevada
    William Chrissikopoulos, 43, of Las Vegas, Nevada
    Alan Dornhuber, 63, of Las Vegas, Nevada
    William Patterson, 51, of El Monte, California

    “Mortgage and foreclosure rescue scams continue to threaten Nevadans and their homes,” said Masto. “Our office cannot investigate or prosecute cases like this without hearing from possible victims. I encourage potential fraud victims to submit complaints to our office.”

    Operating under the name USFP, Estrada, Chrissikopoulos, Dornhuber, and Patterson pushed a so-called “forensic audit” promising clients that if a “forensic audit” of their mortgage uncovered one or more “Real Estate Settlement Procedures Act (RESPA)” violations, clients would be entitled to a legal remedy resulting in the elimination of their mortgage obligation.

    Defendants also peddled an “administrative process” by falsely claiming that sending documents to various entities signed and fingerprinted in accordance with specific instructions including the use of multi-colored inks had legal significance which would result in clients obtaining their home free and clear of their mortgage.

    Finally, defendants sold a program whereby clients would obtain their home free and clear of their mortgage by quitclaiming their home to a nonprofit, “American Home Rescue”, paying rent to the alleged nonprofit for a period of time, and then having the nonprofit deed the home back to the clients.

Florida Foreclosure Mill Lawyers Yet To Face Serious Sanctions Over Robosigning Rackets Despite 100s Of Complaints; State Bar Drags Feet While State AG Does Nothing

In Orlando, Florida, The Associated Press reports:

  • Since Florida's mortgage crisis began about six years ago, banks have agreed to pay millions of dollars to settle allegations that they wrongfully foreclosed on thousands of homeowners. Prosecutors have charged loan servicers with filing fraudulent documents on behalf of banks.

    But the law firms and lawyers that homeowners and judges contend took part in those same practices? Some critics are accusing Attorney General Pam Bondi and the Florida Bar of not going after them hard enough.

    More than two years after wrongdoing by lawyers caused banks to stop foreclosures temporarily, these lawyers and their firms, which handled hundreds of thousands of foreclosures, have been accused of falsifying documents through fake signatures and backdating records and not giving homeowners proper notice that they faced foreclosure. Yet they continue to practice without facing any type of discipline, either from the criminal justice system or the Bar.

    Bondi says her attorneys' hands were tied after an appellate court blocked an investigative subpoena from her office, saying it lacked authority under the state's unfair trade practices law. Because of the court decision, she said any discipline would have to come from the Bar, which so far has initiated disciplinary proceedings against two attorneys out of more than 330 cases it has investigated.

    Attorneys for homeowners say there are other ways Bondi could go after firms that engaged in fraudulent practices other than using the unfair trade practices act. State prosecutors could have gone after subsidiaries of the law firms or pursued criminal investigative subpoenas.

    "The door was left wide open and the AG did nothing," said attorney Tom Ice, who has represented homeowners who say they were cheated.

    Added attorney Matt Weidner, "You have an attorney general shrugging her shoulders and walking away. How is this allowed to occur?"

NYC Judge 'Green-Lights' Jilted Wife's Effort To Score Punitive Damages In Divorce Case Where Hubby Is Accused Of Duping Her Into Refinancing $26M Park Avenue Apartment For Some Extra Cash To "Tide Them Over Thru Bad Market"; He Then Allegedly Used Loot To Pay Down Business Debts, Stopped House Payments, Left Her & Kids w/out Support & Home In Danger Of Foreclosure

In New York City, the New York Daily News reports:

  • A real estate big who accused his estranged wife and her family of having forged his name to pocket $270,000 in insurance checks is now being accused of “wanton dishonesty” himself.

    A Manhattan judge is allowing Kent Swig’s wife, Elizabeth, to go after him for punitive damages in their divorce case, after his financial shenanigans nearly cost her her $26 million apartment at 740 Park Ave.

    In papers filed in Manhattan Supreme Court, Elizabeth Swig said her husband convinced her they should take out a $12.5 million loan on their pricey pad that would be used to pay off an earlier $5 million loan and give them enough cash to “tide them over through the bad market.”

    Instead, Swig, a developer who was hard hit by the real estate crash, used the money to pay off some of his other business debts. He then stopped making payoffs on the loans in June 2009 — leaving the apartment in one of the city’s swankiest addresses in danger of foreclosure, court papers say.

    He also stopped paying cash to support Elizabeth and their two kids, leaving her to turn to her parents, real estate giant Harry Macklowe and his wife, for financial help, court papers say.

    Swig later filed for divorce, and has since been ordered to pay $7,000 a month in support for his wife and kids, plus an unspecified amount to make up for the time he was not paying.

    Elizabeth said her hubby’s deception in the loan deal was so outrageous that she should also be entitled to punitive damages in their divorce.
For the story, see Estranged wife of real estate big sues for punitive damages over $12.5 million loan (Kent Swig’s wife, Elizabeth, was allowed by a judge to go after her husband for punitive damages in their divorce case relating to a million-dollar loan the couple took out to pay for their $26 million Park Ave. apartment).

Foreclosure Screw-Up Leads Subsequent Unwitting Purchaser To Buy Land Bank Never Actually Owned; Error Discovered A Few Years Later On Attempted Resale; Agency Originally Insuring Title Hangs Up Phone When Questioned About Problem

In Lehigh Acres, Florida, WFTX-TV Channel 4 reports:

  • If you've ever owned property, you know how it's supposed to work.

    You pay for it, you get the title. And you would think that property's yours, right? Not so fast.
    Four In Your Corner's Liza Fernandez introduces us to a couple who bought a lot in Lehigh Acres that's now in legal limbo.

    This Lehigh Acres house was supposed to be a dream retirement home for Kathy and Gerry Powers. "All the paperwork and everything came through, and we basically had the the two half-acre lots and the house," Kathy tells us by phone.

    Snagged at a great price in a 2009 foreclosure, the Indiana couple then decided to sell when their retirement plans changed a few years later. They felt lucky to find a buyer.

    "Then we got a call. Their title insurance company discovered an error that the half acre that was supposed to accompany our home did not actually legally belong to us. And it could not be sold," Kathy explains.

    You better believe it -- the couple attorney Todd Allen shows us the documents.

    "Countrywide (mortgage company) never had a mortgage on that lot. They had a mortgage on this lot the one that the house is on. But somehow in the foreclosure process, they included lot #9 as part of the foreclosure proceeding," says Allen.

    The initial foreclosure action document shows only one lot. But later documents do, in fact, show the lot in question had somehow been added to the paperwork in the process. So when the Powers bought the foreclosure, they thought they were getting both lots.

    "You could point fingers at the bank for not doing its due diligence, you could point finger at the judge, for not reviewing the legal description when they completed the foreclosure. And you could point the finger at the title company for not catching it when they insured the transaction," says Allen.

    As for the Powers: "Basically what it's done is, it put everything on hold. We weren't able to pursue everything we want to do, and it has strapped us financially. It's definitely put our life on hold," says Kathy.

    The original mortgage company, Countrywide, is now out of business. But 4 In Your Corner contacted the law firm out of Tampa that handled the transaction and the company the Powers bought from -- Freddie Mac. Reps for both say they're looking into it. The title company that insured the transaction hung up when we explained the problem.

Wednesday, May 15, 2013

Bible-Thumping Suspect Pinched For Allegedly Targeting Homes In Foreclosure, Hijacking Title & Possession Through Forged Grant Deeds, Then Pocketing Cash By Renting Them Out To Unwitting Tenants; Early Homeowner Complaints To Cops Met With "It's A Civil Matter!" Dodge

In San Bernardino, California, The Press Enterprise reports:

  • A man who authorities say persuaded potential renters to trust him by writing Bible verses on fake grant deeds is scheduled to appear in court in San Bernardino on Monday, May 6, for a preliminary hearing.

    Bob Frierson, 42, has been charged with six counts of recording a false document, six counts of forgery and one count of residential burglary. An arrest warrant was put out March 27. He was arrested by San Bernardino County district attorney investigators assigned to the Real Estate Fraud Prosecution Unit.

    Senior Investigator Ed Nyberg said in an interview that Frierson drove around North Fontana, Rancho Cucamonga and Victorville the past three years to find vacant homes that were in foreclosure. Frierson would then forge fake grant deeds and show them to unsuspecting renters as proof that he owned the properties, Nyberg said.

    The Bible verses, which Nyberg said he saw on seven fake grant deeds, were often two or three sentences and contained themes of personal rights of staying on a property or giving property to other people.

    “I’ve never seen anything like that,” Nyberg said. “This guy is just a con artist. I think he was using (the verses) as a lure.”

    Frierson would collect rent until the properties were foreclosed on, and the banks would then evict the renters, who would lose their deposits, he said.

    Also, the true property owners in some cases lost their homes to foreclosure because they could not evict the tenants in time to sell the homes. Homeowners seeking evictions would call police, but the officers, unaware of what the DA is calling a criminal scam, would tell the homeowners to pursue the evictions through the civil courts, Nyberg said.

    Some of the property owners had been seeking loan modifications in hopes of keeping their homes, Nyberg said.
Source: Forgery defendant used Bible to lure rent victims, DA says.

For the San Bernardino County District Attorney press release, see Rental Scam Artist Arraigned on Forgery and Burglary Charges.

For the Felony Complaint, see People v. Frierson.

Settlement Agent, Hubby, Son All Cop Pleas In Scam Involving Illegally Pocketed Proceeds From Repeated Residential Refinancings Without Paying Off Prior Loans; Duped Lenders Clipped For $12M+

From the Office of the U.S. Attorney (Denver, Colorado):

  • Alois Craig Weingart, age 59, of Castle Rock, Colorado pled guilty to one count of making a false statement to a bank, U.S. Attorney John Walsh, IRS Criminal Investigation Special Agent in Charge Stephen Boyd and FBI Denver Acting Special Agent in Charge Steven Olson announced.
  • In the same case, Waunita Weingart pled guilty to two counts of wire fraud on March 13, 2013 and is scheduled to be sentenced on June 17, 2013. John Gallegos pled guilty to one count of making a false statement to a bank and is scheduled to be sentenced on May 6, 2013.

    According to the stipulated facts contained in Waunita Weingart’s plea agreement, beginning in 2000 and continuing through 2008, she devised a scheme to defraud lenders that funded residential mortgage loans. She was an experienced mortgage broker, settlement agent, and licensed title insurance producer. Alois Craig Weingart is her husband; John Gallegos is her son.

    As part of her scheme, she, John Gallegos, and Craig Weingart each repeatedly obtained mortgage loans for their properties in Castle Rock and Boulder, Colorado, pledging the same properties again and again as collateral to each successive lender without paying off the prior loans.

    Waunita Weingart used her mortgage brokerage, G-4 Holding, as well as two escrow/title companies she controlled, Colorado County and Community Title and Real Estate Title, to facilitate her fraud.

    For each new loan, Waunita Weingart made it appear as though the lender would obtain a first priority security interest in the property, knowing that it would not. In preparing the loan applications and providing information to the lenders for the applications, she incorporated false representations as necessary to assure that the borrowers would qualify for the loans.

    Each application substantially overstated the borrower’s true income, falsely representing that he or she had high monthly earnings from employment at another company Waunita Weingart controlled. Each application also falsely represented that the borrower owned numerous properties that he or she did not in fact own. As a result of her scheme, lenders lost over 12 million dollars.
For the U.S. Attorney press release, see Third Defendant In Real Estate Fraud Case Pleads Guilty.

Attorney Ripoff Reimbursement Fund Coughs Up $38.4M In Connection With R/E Settlement Proceeds Pilfering, Despite Scheme Being Masterminded By Non-Lawyer; 10,000 BC Bar Members Get Clipped With Special Assessments To Fund Payout Necessitated By Rogue Closing Counsel's Handiwork In Scam

In Vancouver, British Columbia, The Vancouver Sun reports:

  • Vancouver property developer Tarsem Singh Gill, whose fraudulent activity cost B.C. lawyers nearly $40 million and placed immeasurable stress on dozens of homebuyers and lenders, has entered an 11th-hour guilty plea.

    During a 45-minute appearance in B.C. Supreme Court on Friday, Gill pleaded guilty to defrauding 77 homebuyers and 30 lenders of $31,165,111 from 2000 to 2002. [...] With a guilty plea in hand, Judge Terry Schultes adjourned the matter until May 17, at which time he will set a date for a sentencing hearing.
  • Gill perpetrated his crimes through Vancouver lawyer Martin Wirick. Homebuyers entered into agreements to buy properties from Gill-controlled companies or Gill nominees. They sent their money to Wirick, who was acting on Gill's behalf, on his undertaking to pay off the existing mortgages and deliver clear title.

    However, instead of using the money as promised, he remitted the funds to Gill, who used them for his own purposes.

    In a similar vein, lenders - nearly all well-known financial institutions, most notably Vancouver City Savings Credit Union - forwarded money (on behalf of their borrowing clients) to Wirick on his undertaking to clear off existing mortgages and register their charge in first position on the property.

    Once again, Wirick failed to discharge his duties and instead diverted the funds to Gill, who used them for his own purposes.

    The charges do not appear to capture the entire amount of the fraud. The B.C. Law Society, which ensures the public against lawyer fraud, paid out $38.4 million in claims on account of Wirick's participation.(1)

    Sorting out the claims, many of which were overlapping, took hundreds of man hours. And to finance the payouts, the society had to impose a special assessment on its 10,000 lawyer-members.

    If there was one consolation to Wirick's conduct, it was that he almost immediately went into mitigation mode.

    When the scheme was uncovered in May 2002, Wirick resigned from the law society, admitted his part in the scheme and agreed to permanent disbarment. And when the case came to court in June 2009, he pleaded guilty and was sentenced to seven years in jail.

    Many of the victims were new Canadians who suffered the initial shock of learning that prior mortgages on their homes had not been discharged, then the anxiety of living in homes that were laden with debt not of their own making.

    Although the law society eventually compensated them, the experience took a heavy emotional toll:

    "It was only with tremendous effort that we were able to purchase a new condominium in 2002," one person stated in a victim impact statement at Wirick's sentencing

    "Since it had been nearly 10 years (since our last holiday), we joined a tour to Disneyland. ... But we received the letter from the court a few days prior to our departure. That night, my wife and I cried in each other's arms. And the days thereafter were full of sorrow and sadness."

    Another victim described the wrenching psychological impact: "Under constant threat of foreclosure and lawsuit, sleep was impossible and escalating episodes of panic, despair and hours of uncontrollable sobbing alternated with periods of complete numbness."

    While Wirick mercifully expedited the proceeding, Gill not only maintained his innocence, he played a game of musical chairs with his lawyers.
For more, see Vancouver property developer pleads guilty to massive fraud (Tarsem Singh Gill defrauded 77 homebuyers and 30 mortgage lenders of $31.2 million from 2000 to 2002).

(1) The Lawyers' Insurance Fund of the Law Society of British Columbia was established to reimburse clients who have suffered a loss due to misappropriation or embezzle­ment by an attorney licensed in British Columbia.

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other Canadian provinces and states throughout the U.S., see:

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

Settlement Agent Cops Plea To Siphoning Off Closing Proceeds From R/E Deals, Failing To Pay Off Existing Liens; Bag-Holding Title Underwriter Expected To Cough Up On $ubtantial Claims

From the Office of the U.S. Attorney (Pittsburgh, Pennsylvania):

  • A resident of Butler, Pa., pleaded guilty in federal court to charges of conspiracy and money laundering, United States Attorney David J. Hickton announced[]. Jeffrey Garbinski, 44, pleaded guilty to two counts before United States District Judge Cathy Bissoon.

    In connection with the guilty plea, the court was advised that Garbinski owned and operated the Closing Company of PA ("Closing Company"), which closed residential real estate transactions.

    Sabrina Spetz was an attorney who closed many of the transactions at issue. Garbinski also operated a mortgage broker business called Main Street Mortgage Services, which did business as Asset Mortgage and Financial Services, Inc., and he was a title insurance agent.

    Closing companies have trust accounts. What is supposed to happen is that the money from the lenders funding the loans goes into the trust account. At or shortly after the closing, those funds are disbursed consistent with the lender's instructions and the settlement statements. Most significantly with regard to this case, is that liabilities associated with the collateral are supposed to be paid immediately. Thus, the liens related to the property are paid and the lender stands in first lien position.

    Rather than immediately paying the liabilities, Garbinski, with Spetz's knowledge and assistance, siphoned money from the company for years to support his lifestyle and for other business ventures.

    He would then use the money from the next transactions to pay the liabilities from the previous transactions.(1)

    He would pay the monthly mortgage payments on the outstanding mortgages that should have already been paid to avoid discovery of his fraud.(2) Eventually, the liabilities grew so large that Garbinski was no longer able to pay the liabilities and he filed for bankruptcy.

    Although Garbinski committed this scheme regarding customers of the Closing Company, he also committed this scheme with his own personal residence. Dollar Bank funded a $600,000 loan to Garbinski arranged through his mortgage broker business and closed by the Closing Company.

    Basically, the loan through Dollar Bank was a typical refinance transaction in which all of the liabilities associated with the collateral, which was Garbinski's personal residence, were supposed to be paid off. Garbinski submitted a loan application that failed to report two significant mortgages on the property, and he also arranged to submit fraudulent title search records that did not reveal the two mortgages.

    Long after the loan closed, Dollar Bank discovered that they were in third lien position rather than first lien position. Now that Garbinski has filed for bankruptcy, Dollar Bank expects to suffer a total loss on that loan because the sale of the collateral is unlikely to pay off the first two liens on the property.

    Ultimately, the title insurance company will likely have to pay substantial claims because of this fraud. The Closing Company was a representative of Fidelity National Title Insurance Company ("Fidelity").

    Fidelity conducted an audit of the Closing Company of PA pursuant to the title insurance contract between Fidelity and the Closing Company. As part of that audit, Fidelity requested and obtained from Spetz bank statements that did not show the fraudulent withdrawals because the statements had been altered by Spetz at Garbinski's direction.
For more, see Butler Man Pleads Guilty In Mortgage Fraud Scheme.

(1) This maneuver is commonly referred to as a Ponzi scheme.

(2) These payments, typically made in the context of a Ponzi scheme, are often referred to as "lulling payments," intended to delay the discovery of the fraud by "lulling" the unwitting scam victims into a sense of security (lulling the victim to sleep, so to speak), in an effort to conceal the true nature of the scheme.

Tuesday, May 14, 2013

Sleazy Bankster Backs Down When Confronted On Use Of Dubious Foreclosure Paperwork; Abruptly Withdraws Action In Apparent Attempt To Dodge Pro Se Homeowner's Constitutional Challenge To Provision In Colorado Foreclosure Law By Rendering The Controversy Moot

In Denver, Colorado, The Denver Post reports:

  • US Bank on Friday backed down from its efforts to foreclose on an Aurora woman whose federal court battle against it has taken on the constitutionality of Colorado's foreclosure laws.

    Just days after lawyers for the bank told a federal judge they've always had the original documents necessary to foreclose on Lisa Kay Brumfiel's tri-level house legally — and U.S. District Judge William J. Martínez said to produce them — the bank rescinded the whole thing.

    Despite the move to make a nearly two-year nightmare to save her house go away, Brumfiel on Friday insisted she's pressing on.

    "I would rather risk losing my house again than to selfishly watch this corrupt process continue for others," said Brumfiel, a 43-year-old part-time saleswoman who took on the court battles without a lawyer. "I know too much, and I don't want the blood of it on my hands."

    But the ultimate decision might now be out of her hands.

    US Bank on Friday told the Arapahoe County public trustee to withdraw the foreclosure case it filed in September 2011, then filed a request with Arapahoe County District Court Judge J. Mark Hannen to dismiss the order he signed last December to sell Brumfiel's house.

    Closing the foreclosure case is automatic. The motion to the judge is not.

    The bank's move could be a tactical one, legal experts said, designed to make not just Brumfiel's foreclosure go away, but her federal lawsuit, too.

    Theoretically, US Bank could get Hannen to dismiss his order — whether Brumfiel agrees or not — and then ask for the federal case to be dismissed. Should Martínez agree, the bank could start a new foreclosure case against Brumfiel, forcing her into a whole new cycle of court battles.

    But Martínez could also choose to ignore the request and move ahead with Brumfiel's claim that Colorado foreclosure law violates her constitutional right to due process.

    Brumfiel's federal lawsuit initially sought to enjoin the county foreclosure sale of her house. To obtain that, Brumfiel must first prove she's in danger of imminent harm if the sale occurred.

    Martínez issued an interim preliminary injunction Monday and scheduled a hearing for Wednesday. But with no foreclosure, there might be no case.

    "It's a tactic that would allow you to argue there's no longer any immediate harm because there's no longer a foreclosure," Keith Gantenbein, a foreclosure lawyer not involved in the case, said of the bank move to rescind.

    "But then you turn right around and file again, forcing the homeowner to go through it all for another two years. It's designed to wear you down," he said. "Sadly, it happens a fair bit." Attorneys for the bank refused to comment.(1)
  • In an order filed Thursday, Martínez told US Bank that he wanted to see original endorsements on the note and deed of trust by Friday. Endorsements are the signatures that appear on the back of the documents showing the chain of ownership.

    The bank told the court Friday that it had only the blank undated indorsement on the loan from First Franklin.
For the story, see US Bank walks away from foreclosure on Aurora woman.

See also, Banks' right to foreclose in dispute (The bank foreclosing on an Aurora woman challenging the constitutionality of Colorado's foreclosure laws did not formally own the right to take her house until a month after it filed its case to do so, public real-estate records reviewed by The Denver Post show).

(1) It appears that by rescinding the foreclosure, the bankster is attempting rendered moot the homeowner's Constitutional challenge to the relevant provision in the Colorado foreclosure law at issue. If so, the bankster could then argue that no actual case or justiciable controversy is left to be decided and, consequently, would ostensibly leave the federal court without jurisdiction to hear the case. To go forward and hear the case at this point may lead to a judicial pronouncement that does not affect the rights of the litigants in the case before it, but merely represents an impermissible advisory opinion.

See, for example,  North Carolina v. Rice, 404 U.S. 244 (1971), in which the U.S. Supreme Court made this observation in this regard:
  • Early in its history, this Court held that it had no power to issue advisory opinions, Hayburn's Case, 2 Dall. 409 (1792), as interpreted in Muskrat v. United States, 219 U. S. 346, 351-353 (1911), and it has frequently repeated that federal courts are without power to decide questions that cannot affect the rights of litigants in the case before them. Oil Workers Unions v. Missouri, 361 U. S. 363, 367 (1960).

    To be cognizable in a federal court, a suit "must be definite and concrete, touching the legal relations of parties having adverse legal interests. . . . It must be a real and substantial controversy admitting of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts." Aetna Life Ins. Co. v. Haworth, 300 U. S. 227, 240-241 (1937).

    However, "[m]oot questions require no answer." Missouri, Kansas & Texas R. Co. v. Ferris, 179 U. S. 602, 606 (1900). Mootness is a jurisdictional question because the Court "is not empowered to decide moot questions or abstract propositions," United States v. Alaska S. S. Co., 253 U. S. 113, 116 (1920), quoting California v. San Pablo & Tulare R. Co., 149 U. S. 308, 314 (1893); our impotence "to review moot cases derives from the requirement of Article III of the Constitution under which the exercise of judicial power depends upon the existence of a case or controversy." Liner v. Jafco, Inc., 375 U. S. 301, 306 n. 3 (1964). See also Powell v. McCormack, 395 U. S. 486, 496 n. 7 (1969).

    Even in cases arising in the state courts, the question of mootness is a federal one which a federal court must resolve before it assumes jurisdiction. Henry v. Mississippi, 379 U. S. 443, 447 (1965). Liner v. Jafco, Inc., supra, at 304.

On the other hand, if it can be demonstrated that the bankster's withdrawal of the foreclosure is nothing more than a blatant attempt to abort the homeowner's challenge to the bankster's allegedly illegal or unconstitutional conduct and thereby evade judicial review, the case may not be considered moot.

In United States v. WT Grant Co., 345 US 629 (1953), the U.S Supreme Court made these comments in this regard:
  • Both sides agree to the abstract proposition that voluntary cessation of allegedly illegal conduct does not deprive the tribunal of power to hear and determine the case, i. e., does not make the case moot. United States v. Trans-Missouri Freight Assn., 166 U. S. 290 (1897); Walling v. Helmerich & Payne, Inc., 323 U. S. 37 (1944); Hecht Co. v. Bowles, 321 U. S. 321 (1944).

    A controversy may remain to be settled in such circumstances, United States v. Aluminum Co. of America, 148 F. 2d 416, 448 (1945), e. g., a dispute over the legality of the challenged practices. Walling v. Helmerich & Payne, Inc., supra; Carpenters Union v. Labor Board, 341 U. S. 707, 715 (1951).

    The defendant is free to return to his old ways.[4] This, together with a public interest in having the legality of the practices settled, militates against a mootness conclusion. United States v. Trans-Missouri Freight Assn., supra, at 309, 310.

    For to say that the case has become moot means that the defendant is entitled to a dismissal as a matter of right, Labor Board v. General Motors Corp., 179 F. 2d 221 (1950). The courts have rightly refused to grant defendants such a powerful weapon against public law enforcement.[5]

    The case may nevertheless be moot if the defendant can demonstrate that "there is no reasonable expectation that the wrong will be repeated."[6] The burden is a heavy one. Here the defendants told the court that the interlocks no longer existed and disclaimed any intention to revive them. Such a profession does not suffice to make a case moot although it is one of the factors to be considered in determining the appropriateness of granting an injunction against the now-discontinued acts.

    Along with its power to hear the case, the court's power to grant injunctive relief survives discontinuance of the illegal conduct. Hecht Co. v. Bowles, supra; Goshen Mfg. Co. v. Myers Mfg. Co., 242 U. S. 202 (1916).

    The purpose of an injunction is to prevent future violations, Swift & Co. v. United States, 276 U. S. 311, 326 (1928), and, of course, it can be utilized even without a showing of past wrongs. But the moving party must satisfy the court that relief is needed. The necessary determination is that there exists some cognizable danger of recurrent violation, something more than the mere possibility which serves to keep the case alive.
See also, ACLUM v. Conference of Catholic Bishops, 705 F. 3d 44 (1st Cir. January 15, 2013) (discussing the 'voluntary cessation doctrine which provides for an exception to mootness):
  • The voluntary cessation exception "traces to the principle that a party should not be able to evade judicial review, or to defeat a judgment, by temporarily altering questionable behavior." City News & Novelty, Inc. v. City of Waukesha, 531 U.S. 278, 284 n. 1, 121 S.Ct. 743, 148 L.Ed.2d 757 (2001).

    This is to avoid a manipulative litigant immunizing itself from suit indefinitely, altering its behavior long enough to secure a dismissal and then reinstating it immediately after. See Already, LLC v. Nike, Inc., ___ U.S. ___, ___, 133 S.Ct. 721, ___ L.Ed.2d ___, 2013 WL 85300, No. 11-982, slip op. at 4 (U.S. Jan. 9, 2013); Brown, 613 F.3d at 49; see also United States v. W.T. Grant Co., 345 U.S. 629, 632, 73 S.Ct. 894, 97 L.Ed. 1303 (1953) (noting that if a court declares the case moot, "[t]he defendant is free to return to his old ways").

    As the Supreme Court stated last term, "[s]uch ... maneuvers designed to insulate a decision from review ... must be viewed with a critical eye" and, as a result, "[t]he voluntary cessation of challenged conduct does not ordinarily render a case moot." Knox v. Serv. Emps. Int'l Union, Local 1000, ___ U.S. ___, 132 S.Ct. 2277, 2287, 183 L.Ed.2d 281 (2012) (citation omitted).

    However, even in circumstances where the voluntary cessation exception applies, a case may still be found moot if the defendant meets "the formidable burden[[9]] of showing that it is absolutely clear the allegedly wrongful behavior could not reasonably be expected to recur." Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 190, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000) (citing United States v. Concentrated Phosphate Exp. Ass'n, Inc., 393 U.S. 199, 203, 89 S.Ct. 361, 21 L.Ed.2d 344 (1968)); Parents Involved in Cmty. Sch. v. Seattle Sch. Dist. No. 1, 551 U.S. 701, 720, 127 S.Ct. 2738, 168 L.Ed.2d 508 (2007).
Go here for links to other cases discussing the stringent test in determining mootness in cases where the party alleged to have engaged in illegal conduct voluntarily ceases said conduct under threat of a pending lawsuit.

Ex- Homeowner Who Lost Home To Foreclosure Nearly 20 Years Ago Discovers He May Be Victim Of Recently-Revealed NYC Surplus-Snatching Scam

In Brooklyn, New York, WNYC News reports:

  • William Easterling and his wife used to own 165 Forbell Street, a two-family home in Brooklyn on the border of Cypress Hills and Ozone Park. The couple raised their four kids there. But they haven’t lived there in almost 20 years.

    Easterling had been violently mugged on his way to work in 1992 and his wife said, "enough." They moved. But his troubles didn't end there. He had to file for bankruptcy and was forced to surrender the Brooklyn property.

    What he didn't know was that his old property was listed in the indictment against Senator John Sampson, who's accused of keeping money that came from the foreclosure sale.

    He also didn’t know that years ago he may have had a right to claim some of the $80,000 Sampson reported from the sale of 165 Forbell Street.

    “Otherwise I would have the attorney looking into it with all the money I had to spend, plus with the money I lost in the home,” he said. “But I had no idea, no.”

    Sampson is accused of embezzling $440,000 from the foreclosure sales of four properties. In each case, he was appointed by the courts to serve as the referee. In that role, he was overseeing the foreclosure auction and making sure that any surplus funds were returned to the Kings County clerk for disbursement. Sampson is accused of keeping that money for himself. He has pleaded not guilty to the charges.

    Josh Zinner, co-director of NEDAP, a nonprofit that works on economic justice issues, says the extra money from foreclosure sales often represents the families' leftover equity — and possibly their only source of wealth after they had lost their homes in foreclosure.

    Easterling thinks someone should have told him there was money out there owed to him.

    “I'm 70 years old, okay. I wasn't born yesterday. I mean I look in the mirror and I don't think I look that stupid,” he said. “If I should have been owed something, I feel like it should have been up to the court to inform me.”

    A spokesman for the Office of Court Administration admitted there is no system in place to make sure referees actually deposit surplus funds from a foreclosure sale to families. And, technically, it wasn't up to the court to notify Easterling.

    Even if Easterling had known he should claim it, prosecutors are saying, the money wasn't there to give. Sampson allegedly kept it.(1)
Source: Sampson Corruption Scandal Hits Home for One Family.

(1) According to the indictment, by helping himself to the surplus proceeds, Sampson, an attorney, allegedly violated a fiduciary duty to the Brooklyn Supreme Court. If true, and if the funds ultimately cannot be recovered, and assuming that only licensed attorneys can act as court-appointed referees in New York, it may be that the violation of this duty may be enough to enable the court, as well as the ultimate victims (ex-homeowners and subordinate lien holders of the four foreclosed homes) to recover some or all of the pilfered proceeds from The Lawyers’ Fund For Client Protection Of the State of New York, the state's attorney ripoff reimbursement fund.

For information on "attorney ripoff reimbursement funds" in other states and Canada, see:

Missing S. Florida Lawyer's Antics Cost Client His Home; Victim Loses $72K Held In Trust, Another $40K Non-Refundable Deposit On Residence Being Bought On Rent To Own Basis

In Fort Lauderdale, Florida, the South Florida Sun Sentinel reports;

  • The day before Boca Raton attorney Timothy McCabe disappeared last month he blindsided a Broward County couple with a request to wire him $60,000 to complete their deal to buy a new home, the couple's attorney said Wednesday.

    George and Lori Miquel didn't send the money because they thought they had enough cash in McCabe's trust account — up to $72,000 — for the closing. They soon discovered the money was gone and so was McCabe, said the Miquels' attorney, H. Dohn Williams.

    The Miquels have become the first to file what is anticipated to be a series of lawsuits related to McCabe's April 2 disappearance. The Florida Bar has alleged that more than $3 million is missing from his law firm's trust account and his title company's escrow account.
  • The Miquels knew McCabe's family through North Broward Preparatory School in Coconut Creek, where the attorney's three daughters go to school, Williams said.

    The couple had been depositing money in a trust account controlled by McCabe since April 2011 with some of it to be used to buy a new home, according to the Palm Beach County Circuit Court lawsuit. The Miquels recently had moved into a house near North Broward Preparatory with an agreement to lease it before buying, Williams said.

    They put down a $40,000 nonrefundable deposit for the home, Williams said.

    With McCabe's disappearance, the deal to buy the house collapsed, they lost the deposit and they had to quickly move out, Williams said.(1)

    The April 29 lawsuit, seeking $112,000 plus punitive damages, is not only against McCabe and his law firm, but also names McCabe's wife, Donna, and his law partner, Steve Samiljan, as defendants. Williams alleges that some of the Miquels' missing trust money was used to pay off a $386,000 mortgage on the McCabes' Boca Raton home.(2)

    Samiljan said Wednesday that he had not seen the lawsuit. He said he hasn't heard from McCabe since the April 2 email and he's unaware if McCabe was trying to get clients to wire him money before he left.
For the story, see Boca Raton attorney's disappearance leads to lawsuit.

(1) The victimized client may be able to assert an equitable claim against the home seller that a lease-purchase, contract for deed, installment land sale contract, rent-to-own, or any other similar such arrangement where the victim and his family paid a substantial deposit and has already taken possession of the premises constituted an equitable mortgage, whereby the victimized client would be deemed the equitable owner.

In the event a court deems the arrangement an equitable mortgage, the home buyer will be treated as the holder of equitable title and the home seller's only recourse to recover said title and possession of the premises would be to file a full blown foreclosure action; a simple landlord tenant eviction procedure would legally not be sufficient to recover equitable title & possession..

See, generally., H & L Land Company v. Warner, 258 So. 2d 293 (Fla. App. 2d DCA 1972):
  • The doctrine of equitable conversion is established in Florida. See Arko Enterprises, Inc. v. Wood, Fla.App. 1966, 185 So.2d 734, and cases cited therein. If a land sale contract is specifically enforceable, and is free of equitable imperfections, the vendee becomes the equitable owner of the land and the vendor holds legal title as security for the vendee's performance.

    Moreover, we concur with the decision of the District Court of Appeal for the First District in Mid-State Investment Corporation v. O'Steen, Fla.App. 1961, 133 So.2d 455, holding that an installment land sale contract is in essence a mortgage, and pursuant to Fla. Stat. § 697.01, F.S.A., the safeguards for the debtor and the remedies for the creditor are the same as those between a mortgagor and mortgagee.

    Appellant urges us to disregard the Mid-State holding, on the ground that the installment seller in that case was really no more than one who financed the buyer's purchase from a third party, whereas in the case now before us the installment seller made a direct sale to the buyer. We are unwilling to declare that the Mid-State reasoning is inapplicable here.

    By way of dictum, the Supreme Court of Florida in Huguley v. Hall, Fla. 1963, 157 So.2d 417, recognized that in Florida a defaulting purchaser pursuant to a contract for deed is ordinarily entitled to an opportunity to redeem (sometimes inaccurately called an "equity of redemption"), subject to the protection of a court of equity.
See also, Henry v. Ecker, 415 So. 2d 137 (Fla. App. 5th DCA 1982):
  • [A]s between the parties, when no rights of a third party are involved, such equitable title and interest in the land should not be summarily terminated as forfeited, nor should it be adjudicated in a possessory action at law, but should be terminated only by an action in equity, in which action the purchaser, even one who has defaulted, is always judicially given one last fair equitable opportunity to redeem his right in equity to a conveyance of the legal title to the property by payment of all sums due and by himself "doing equity" as may be necessary.
Go here and go here for a non-all-inclusive survey of some Florida case law on the court-created doctrine of equitable mortgage.

(2) 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.

Banksters, Other Wrong-Doers Continue Making Gov't Look Stupid When Collecting On Financial Settlement Deals; Feds Response: Merely Announcing Big Monetary Penalties Deters Wrongdoing More Effectively Than Collecting Them Would!

From an op-ed column from ThompsonReuters News & Insights:

  • Uncle Sam may be good at many things - but collecting fines and paying them out isn't one of them. U.S. federal agencies corral only a small fraction of the penalties they levy. Foreclosure-abuse settlements with domestic banks show they're just as bad at doling out lawsuit proceeds to victims. Government glitches are always to be expected. But such widespread incompetence only encourages scofflaws.

    The latest blooper involves beneficiaries of more than $9.5 billion in settlements that the Federal Reserve and the Office of the Comptroller of the Currency struck with the mortgage servicing units of Goldman Sachs, JPMorgan Chase and other big financial institutions. Some of the borrowers received less than owed under the deals designed to compensate them for improper home foreclosures and other processing mistakes. The snafu comes a month after a number of compensation checks bounced.

    The culprit may actually be the private firm that manages the checks, but regulators bear blame for hiring it. And these aren't the only instances of the federal government mucking up the follow-through on payments extracted from alleged wrongdoers.

    Though more than $65 billion in monetary penalties are owed to U.S. agencies, only pennies on the dollar are ever paid, according to a study published in the Yale Law & Policy Review. America's chief mining regulator has collected about 5 percent of fines levied; Customs, about 31 percent. And the payment rate for criminal court judgments has been a measly 4 percent.

    Agency officials argue that merely announcing big monetary penalties deters wrongdoing more effectively than collecting them would. Perhaps, though deterrence can be a problem even when the amounts are paid. Consider the New York state attorney general's recent allegations that Wells Fargo and Bank of America have failed to comply with their obligations under a separate, $25 billion mortgage-servicing settlement with five banks last year.

    The issue under the most recent settlements, however, isn't deterrence, but compensation for borrowers whose homes were, in some cases, wrongly repossessed. Having won such compensation, the feds should at least make sure it gets properly paid. The failure to do so risks giving miscreants - as well as their victims - yet another reason not to take law enforcement seriously.

Use Of Flawed 'Honor System' Approach To Oversight In Connection With Judge-Appointed Lawyers & Their Handling Of Million$ In NY Foreclosure Sale Surplus Proceeds Now Under Review By State Office Of Court Administration

In New York City, the New York Daily News reports:

  • The case of a Brooklyn state senator charged this week with embezzling $440,000 in escrow funds has exposed a stunning flaw in how sales of foreclosed properties are handled.

    Lawyers appointed by judges to oversee foreclosure cases are handling millions of dollars, with no oversight.

    Stunned by the indictment of state Sen. John Sampson (D-Brooklyn), charged with embezzling $440,000 from sales of foreclosed properties, the state Office of Court Administration launched a review Tuesday of how foreclosure sales are handled.

    Changes are likely.

    “Clearly there is a statutory weakness that needs to be strengthened for greater accountability,” said OCA spokesman David Bookstaver. “In the interim, we’re examining ways to add accountability.”

    Prosecutors say Sampson, an attorney, was appointed by Brooklyn judges to serve as a referee in several foreclosures.

    His job was simple: to receive the proceeds from sales of foreclosed properties, and then pay off the mortgage, lawyers and any other creditors. Any remaining money was supposed to be turned over to the homeowner.

    But beginning in 1998, prosecutors say, he kept surplus funds from four foreclosure sales — $440,000 in all — and used some of it to bankroll a failed campaign for Brooklyn district attorney in 2005.

    Courthouse insiders say the honest disbursement of this surplus cash is up to the lawyers appointed as referees. There are no audits. “We rely on the referee to be truthful about the amount of surplus funds,” said Brooklyn County Clerk Nancy Sunshine.(1) “The clerk has no authority to question that. It’s on the homeowner and creditor to check on what’s left over.”
Source: State Sen. John Sampson embezzled $440G in foreclosure funds: prosecutors (Sampson has been indicted for taking the funds from sales of foreclosed properties as the state Office of Court Administration reviews the process. Sampson was an attorney and appointed referee to handle foreclosure sales).

(1) While the "honor system" may have a place when one deals with 5-year olds in a kindergarten classroom,  it generally tends to be somewhat less ineffective when dealing with other "grown-ups," especially if they're handling substantial sums of money, in my view.

Monday, May 13, 2013

Steady Stream Of Lawyers Pour Out Of Woodwork Offering Pro Se Homeowner Free Help After Judge 'Green-Lights' Her Constitutional Challenge To Colorado Foreclosure Laws; She Finds Sudden Turn Of Events "Mildly Amusing" But Is "Grateful"

In Denver, Colorado, The Denver Post reports:

  • More than a dozen lawyers have surfaced with offers to help an Aurora woman in her constitutional challenge of Colorado's foreclosure laws, a case she has battled on her own for about two years.

    After a federal judge's temporary injunction Monday that looks to take on whether homeowners facing foreclosure are treated unfairly, Lisa Kay Brumfiel said her solo plight is finding new followers.

    "There's just been a steady stream of them," the 43-year-old part-time saleswoman said of the attorneys offering to take on her case for free.

    She says she's not bitter that they weren't there to help her before — "Everyone wanted to be paid, but you're facing foreclosure because you can't even meet your house payments," she said — and hopes she can have a team of them take on Colorado's foreclosure process.

    U.S. District Judge William Martinez issued an interim preliminary injunction stopping the foreclosure auction of Brumfiel's four-bedroom house, saying she had prevailed enough to challenge the constitutionality of state law.

    That law allows a lender to foreclose with only the signature of its lawyer saying it has the right to do so. That happens with only a photocopy of the mortgage — which in Colorado is called a note — not the original or even a certified copy, and the lender doesn't have to prove it owns the note.

    Brumfiel said that lawyer's signature, called a statement of qualified holder, violates her constitutional rights to due process under the 14th Amendment. The bank should be required to provide proof that it owns the note and the right to foreclose, she said, not just possess a copy.

    "This theory of 'show me the note' has been tried in many courts without success, but Colorado law is unique in that a lawyer's signature is simply good enough," said Keith Gantenbein, an attorney who has offered to help Brumfiel. "This is an extremely important chance to change a very bad law."

    Martinez set a hearing for May 15 to take on the issue.

    Said Brumfiel: "I find it mildly amusing (the lawyers) show up now, but I'm grateful the table is turning and they're interested."

Brooklyn Feds Frog-March Once-Powerful Local Pol/Lawyer For Allegedly Snatching $440K In Foreclosure Sale Surplus Proceeds While Acting As Court-Appointed Referee, Then Using Loot To Fund Failed Campaign To Head County DA's Office

In Brooklyn, New York, the New York Daily News reports:

  • They've been charged with taking bribes, lying under oath, even trying to buy their way into office — but until now, there has never been a political corruption case in New York like this.

    State Sen. John Sampson was charged Monday with embezzling $440,000 and using some of it to bankroll a bid for one of the highest law enforcement jobs in the city, Brooklyn district attorney. And when he feared getting caught, he told an associate he could track down informants and “take them out,” according to an indictment unsealed Monday.

    Brooklyn U.S. Attorney Loretta Lynch called it “one of the most extreme examples of hubris and arrogance we have ever seen.” She said Sampson even pressed a high school friend working in her office, paralegal Sam Noel, to uncover information that might ease his mounting legal troubles.

    For Sampson, 47, it was an incredible fall from grace. He was once one of the most powerful politicians in New York, as Democratic conference leader of the Senate. After surrendering Monday to the FBI, Sampson pleaded not guilty — but he already had incriminated himself, according to the indictment.

    In July, when FBI agents questioned Sampson in the driveway of his Flatlands, Brooklyn, home, they told him he was lying. His response was self-destructive. “Not everything I told you was false,” the indictment said.

    According to the indictment, Sampson’s crimes began in 1998 when he started embezzling money from foreclosure sales he oversaw as a court-appointed referee.

    Sampson, a lawyer, then siphoned some of the money into his 2005 Democratic primary campaign against Brooklyn District Attorney Charles Hynes, the indictment said. But Hynes prevailed, beating Sampson, 41% to 37%.

    The following year, a worried Sampson got a Queens businessman, Edul Ahmad, to “loan” him $188,500 so he could put some of the money back, prosecutors said. But the loan allegedly had no written terms and Sampson never repaid it.

    Things got worse for Sampson in 2011 when Ahmad was arrested on mortgage fraud charges.

    Worried Ahmad would reveal the secret “loan,” Sampson offered to track down witnesses against Ahmad and “take them out,” the indictment said.

    What Sampson didn’t know is that Ahmad was already cooperating with the feds and recorded the conversation.

    The FBI later discovered a handwritten list of informants against Ahmad on the desk of Noel, the paralegal who was Sampson’s mole in the U.S. attorney’s office. Noel was fired and is now cooperating with investigators.

    Officials said they found no evidence that Sampson ever followed through on his “take them out” threat.

    Sampson was charged with embezzlement, obstruction of justice and lying to FBI agents. He was offered a plea deal calling for 36 to 47 months in prison, but entered a not-guilty plea in federal court. He faces up to five years in prison if the case goes to trial.
For the story, see Another state lawmaker busted: Brooklyn state Sen. John Sampson surrenders to FBI on charges of embezzlement and obstruction of justice (Indictment says Sampson was recorded as saying he would track down an informant and "take them out").

For the U.S. Attorney press release, see State Senator From Brooklyn Charged With Embezzlement And Obstruction Of Justice (Former State Senate Minority Leader Used Embezzled Escrow Funds to Finance DA Campaign).
  • Beginning in the late 1990’s, Sampson served as a court-appointed referee for foreclosure proceedings conducted by the Kings County Supreme Court. As referee, Sampson controlled escrow accounts holding proceeds of foreclosure sales of Brooklyn properties.

    Between 1998 and 2008, Sampson embezzled approximately $440,000 in surplus funds from the foreclosure sales of four Brooklyn properties.

    The prior owners of the Brooklyn properties, and other parties with a lawful interest, had a right to receive the funds embezzled by Sampson.(1) Sampson indicated that he had illegally diverted the stolen funds to pay expenses arising from his unsuccessful run for Kings County District Attorney in 2005.
For the Indictment, see U.S. v. Sampson.

(1) According to the indictment, by helping himself to the surplus proceeds, Sampson, an attorney, allegedly violated a fiduciary duty to the Brooklyn Supreme Court. If true, and if the funds ultimately cannot be recovered, and assuming that only licensed attorneys can act as court-appointed referees in New York, it may be that the violation of this duty may be enough to enable the court, as well as the ultimate victims (ex-homeowners and subordinate lien holders of the four foreclosed homes) to recover some or all of the pilfered proceeds from The Lawyers’ Fund For Client Protection Of the State of New York, the state's attorney ripoff reimbursement fund.

For information on "attorney ripoff reimbursement funds" in other states and Canada, see:

Hawaii Class Action Names 32 Trial Judges As Defendants For Alleged Failure To Conduct Evidentiary Hearings To Determine Fair Value When Calculating Deficiency Judgments After Foreclosure Sales

In Honolulu, Hawaii, Courthouse News Service reports:

  • A Hawaii family and a developer filed a federal class action against every Circuit Court judge in Hawaii, accusing them of using "ancient judge-made procedures" to enforce foreclosure judgments.

    Jerry Agbannaoag, Ke Kailani Development et al. claim the judges' practice fostered the "flipping" of properties and unjustly enriched lenders. [...] They sued the honorable judges of the First, Second, Third and Fifth Circuits of Hawaii - all 32 judges.

    "Hawaii courts matter-of-factly merely assume routinely when determining and enforcing foreclosure deficiency judgments that the confirmed sale price minus the net proceeds of sale controls and mathematically determines by subtraction the monetary deficiency amount," the complaint states. "This procedure completely ignores reality," the plaintiffs say. They call it an "arbitrary and mechanical method" that fails to protect borrowers.

    The plaintiffs claim other states have passed laws against the practice. "Today, many state legislatures have passed anti-deficiency statutes, requiring that after a foreclosure auction, state courts must hold a separate, evidentiary hearing to determine the 'fair value' of the foreclosed property, which is not necessarily the 'auction price,'" they say in the complaint.

Sunday, May 12, 2013

Colorado Federal Judge Temporarily Slams Brakes On Foreclosure Sale To Allow Pro Se Homeowner To Pursue Legal Issue Over Whether State Law-Sanctioned Use Of Unsworn Statements By Banksters In Process Of Taking Homes Violates Constitution's Equal Protection Clause

In Denver, Colorado, The Denver Post reports:

  • A federal judge on Monday made the rare move to stop the foreclosure auction of an Aurora woman's house in a case that squarely takes on the constitutionality of Colorado's foreclosure laws.

    U.S. District Judge William Martinez issued a preliminary injunction against the sale of Lisa Kay Brumfiel's four-bedroom home, scheduled for Wednesday in Arapahoe County, until the judge can decide whether parts of state law are unfair to homeowners facing the loss of their house.

    At issue is a provision in state law that allows lawyers to assert that their client, typically a bank, has the right to foreclose on a property even though they might not have the original mortgage paperwork to prove it.

    What makes the case compelling isn't just that a federal judge was persuaded to step into an issue involving state law — extremely difficult to do — but the plaintiff in the case is a part-time saleswoman who has taken on the battle without a lawyer.

    Brumfiel, 43, says she didn't know a thing about the law. Despite fumbles in decorum and formal court procedure, she has taken on U.S. Bank and Larry Castle, one of Colorado's most powerful foreclosure lawyers.

    Despite several setbacks and outright losses, she has made it farther than many lawyers. "There's an issue of fundamental rights, and I won't back down," Brumfiel said after Martinez's decision.

    Though Martinez's ruling gives Brumfiel until May 15 to argue why Colorado's law violates the equal-protection clause of the 14th Amendment to the U.S. Constitution, he gave early glimpses to his thinking.

    "Colorado is the only state in the country that allows an unsworn statement by an attorney for a foreclosing party — without any penalty — to say, 'Trust me, judge, these guys are the qualified holder for this deed of trust,' " Martinez said. "Is there another state that has lowered the bar for a foreclosure any lower?"
  • How U.S. Bank came to hold the note was in question, and Brumfiel wanted proof. Banks often sell mortgages to one another and, rather than record those transfers at the county recorder of deeds — an expensive process — they self-track them via the Mortgage Electronic Registry System.

    Though many states allow MERS to be the assignee of a mortgage and foreclose when homeowners default, Colorado doesn't. MERS often assigns ownership of the note to the foreclosing bank.

    But there's no proof in public records of those transfers in ownership, because they're never recorded.

    County public trustees auction foreclosed houses, but that can't happen until a district-court judge authorizes it. That occurs at a Rule 120 hearing, named for the court procedure that governs it.

    Before signing, a judge is to answer two questions: Is the homeowner in default, and are they in the active military?

    The judge's decision is final, cannot be appealed and allows for no discovery. Homeowners misunderstand the rule to the extent that Rule 120 hearings are rarely held. And any challenge to the decision must be taken up as a separate lawsuit, which critics say is unfair since homeowners facing foreclosure are unlikely to have the money for a lawyer.

    In 1989, the Colorado Supreme Court ruled that judges must also consider at a Rule 120 hearing whether a bank has the right to foreclose, known legally as having standing.

    As banks sold mortgages more and more, and MERS was to track who owned which, coming up with original paperwork to prove standing became difficult.

    Then, when the mortgage crisis hit along with the economic meltdown, the flood of foreclosures made it virtually impossible to keep up.

    With the backing of the state's public trustees, who are to oversee the foreclosure process impartially, Castle and other foreclosure lawyers in 2006 drafted legislation, HB 1387, that made a critical change to foreclosure rules.

    Lawyers could now sign a document, called a statement of qualified holder, that was their guarantee — without the need to provide proof — that their bank client had the right to foreclose.

    Critics say it takes away a homeowner's rights to due process guaranteed in the Constitution. But none has succeeded in making a challenge until Brumfiel.

    "It's great the federal court is invoking fundamental constitutional principles to reviewing a foreclosure process that obviously needs to be fixed," said attorney Stephen Brunette, who has tried to change the law since.

    Two legislative efforts at changing the law have failed, both by Rep. Beth McCann, D-Denver. And a voter initiative last year stalled for lack of funds to raise the signatures needed to make the ballot.

    Court challenges have also failed, including at the federal level where judges are reluctant to tread on state business.

    Monday's decision, however, sets the stage for a showdown over the constitutionality of the qualified-holder statement.