Pair Gets Multi-Year Prison Stays For Running Straw Buyer Flipping Scams, Rent To Own Ripoffs

From the Office of the U.S. Attorney (Seattle, Washington):

• Two men who engaged in a mortgage fraud scheme that collapsed with the real estate downturn, were sentenced [] to federal prison terms in U.S. District Court in Seattle. ROBERT STRONG, 48, of Bothell, Washington was sentenced to four years in prison and ANTHONY WALDRON, 49, of Kirkland, Washington was sentenced to 42 months in prison. Between 2005 and 2008, the men used fraudulent information to obtain more than $13 million in loans on 30 different properties, primarily in South King County. When the scheme ended and the homes went into foreclosure the lenders had lost more than $2.5 million.

***

• According to records filed in the case, the men recruited straw buyers with good credit to “purchase” the houses. These straw buyers were paid as much as $18,000 for use of their identity and credit score on the loan documents. The men submitted false employment information on the straw buyers, in one case claiming the woman made $22,000 per month working for an entity they created and controlled. Using this false information the men got banks to fund the mortgages on the houses, then the men would quickly “sell” the house to another straw buyer at a higher price to claim the additional mortgage funds. The men also rented the houses on “rent to own” plans, asking the renters to pay an option, ranging from $400-$7000, to purchase the home at a later date and at an increased price. The men also falsely claimed repairs were made to the homes and increased the value of the homes based on those repair bills. Instead they pocketed the money that they claimed went to home improvements.

For the U.S. Attorney press release, see Two King County Men Sentenced To Prison For Mortgage Fraud Scheme (Pair Used Straw Buyers to Buy and “Flip” Houses, Defrauding Banks of more than $2.5 Million).

Title Agent Gets Pinched For Allegedly Converting Real Estate Escrow Cash Into Play Money For Her Own Personal Pleasure

In West Palm Beach, Florida, The Palm Beach Post reports:

• A Wellington title agent faces up to 30 years in prison and $5 million in fines from federal charges filed last week that allege she diverted money from closings to gamble and pay personal expenses. Dawn Herndon, who ran Accurate Title Closings, LLC., was charged Wednesday with five counts of fraud on a financial institution. The complaint says the 46-year-old obtained more than $3.3 million of mortgage monies by falsyfing HUD-1 settlement statements in 32 separate sale closings that occurred between December 2009 and December 2010. Herndon could not be reached Monday, and no defense attorney was listed in federal court documents. A bond recommendation of $100,000 was filed with the complaint. “Contrary to the representations made on the HUD-1s, Dawn Herndon transferred most of the mortgage proceeds from the Accurate Title Closings escrow accounts to the business operating accounts and then used these monies for her personal benefit, that is, to gamble and pay personal and business expenses,” according to the complaint. The five felony charges stem from closings Herndon allegedly conducted on homes in Wellington, Lake Worth, West Palm Beach and Boynton Beach. Florida’s Office of the Chief Financial Officer issued an administrative complaint against Herndon in January alleging she wrote checks on Accurate’s escrow account that bounced, failed to pay $4,882 to the Miami-Dade Tax Collector and failed to maintain the company’s surety bond.

For more, see Wellington title agent accused of using money from closings to gamble faces 30 years in prison, $5 million in fines.

Ohio Supremes Reject 'Internet Method' Of Providing F'closure Notice Where Party's Address Is Known, Easily Ascertainable; Reverses 2 Lower Ct. Rulings That OK'd Cheap, Easy Way To Serve Non-Defaulting Defendants

From Justia.com:

• At issue in this case was whether a county sheriff can meet the constitutional obligation of providing notice of a sheriff's sale to a plaintiff by letter directing the plaintiff's attorney to monitor a website for a listing of the date, time, and location of sale. The court of appeals affirmed the judgment of the trial court in denying plaintiff's motion to set aside the sheriff's sale.
  
  The Supreme Court reversed, holding that constructive notice by publication to a party with a property interest in a foreclosure proceeding via a sheriff's office website is insufficient to constitute due process when that party's address is known or easily ascertainable. Remanded.(1)(2)

Source: PHH Mtge. Corp. v. Prater Opinion Summary.

For the ruling, see PHH Mtge. Corp. v. Prater, 2012 Ohio 3931 (September 6, 2012).

Thanks to Deontos for the heads-up on the ruling.

(1) After its analysis of the applicable U.S. Supreme Court and Ohio case law, the state high court concluded its opinion with this nutshell:

• Constructive notice through the Internet, which is more akin to notice by publication in a newspaper, is simply not sufficient or reasonably calculated to provide actual notice to all nondefaulting parties. Moreover, as noted by Judge Powell, a change in notice requirements in this area would more appropriately be contemplated by local or state rule change.
  
  Accordingly, we hold that constructive notice by publication to a party with a property interest in a foreclosure proceeding via a sheriff's office website is insufficient to constitute due process when that party's address is known or easily ascertainable.
  
  We reverse the judgment of the court of appeals denying PHH's motion to set aside the sheriff's sale.

(2) Among the non-profit, consumer advocate 'friends of the court' who jumped into the litigation to urge the Ohio Supreme Court to reverse the lower court rulings were:

• Southeastern Ohio Legal Services,
• Ohio Poverty Law Center, L.L.C.,
• Community Legal Aid Services, Inc.,
• Legal Aid Society of Columbus,
• Pro Seniors, Inc.

Application Of The 'Wall Street Rule' Provides Protection For Banksters From IRS Enforcement Of Laws Regulating REMICs In Connection With Mortgage Securitization Screw-Ups

From Thomson Reuters News & Insight:

• “They take aggressive positions, and they figure that if enough of them take an aggressive position, and there’s billions of dollars at stake, then the IRS is kind of estopped from arguing with them because so much would blow up. And that is called the Wall Street Rule. That is literally the nickname for it.”(1)
  
  Investors in mortgage-backed securities, built on the shoulders of the tax-advantaged Real Estate Mortgage Investment Conduit (“REMIC”), may be facing extraordinary tax losses because of how bankers and lawyers structured these securities.
  
  This calamity is compounded by the fact that those professional advisers should have known that the REMICs they created were flawed from the start. If these losses are realized, those professionals will face suits for damages so large that they could put them out of business. That is, unless the Wall Street Rule is applied.
  
  The issue of REMIC failure for tax purposes is important in at least three contexts:
  
  (1) in any potential effort by the IRS to clean up this industry;
  
  (2) in civil lawsuits brought by REMIC investors against promoters, underwriters, and other parties who pooled mortgages and sold mortgage-backed securities; and
  
  (3) state and federal prosecutors and regulators who consider bringing criminal or civil claims against promoters, underwriters, and other parties who pooled mortgages and sold MBSs.

For more, see Wall Street Rules Applied to REMIC Classification (or go here for the research paper by Brooklyn Law School Professors Bradley T. Borden and David J. Reiss.).

(1) From a Monday, September 22, 2003 oral presentation given at a financal industry conference by Emily A. Parker, the then-Acting Chief Counsel for the Internal Revenue Service in discussing the Wall Street Rule:

• Even in Dallas, Texas – where I practiced law for 28 years prior to joining the IRS – we had heard of the Wall Street Rule. Some might say that is not surprising because Dallas is just Fort Worth trying to be New York. The truth is that the Wall Street Rule is widely known in the tax world and is not limited to issues that originate from, or arise on, Wall Street. The Wall Street Rule may often be cited with respect to publicly traded securities, but the  underlying premises of the Wall Street Rule apply to the tax treatment of a variety of issues and transactions. Therefore, my comments today are not limited to the financial industry or to Wall Street.
  
  There are at least two accepted versions of the Wall Street Rule.
  
  One version is that the IRS cannot attack the tax treatment of any security or transaction if there is a long-standing and generally accepted understanding of its expected tax treatment. This is the “golden oldie” version of the rule.
  
  The second version of the Wall Street Rule is that the IRS is deemed to have acquiesced in the tax treatment of any security or transaction if the dollar amount involved is of sufficient magnitude. This version of the Wall Street rule is primarily premised on the dollars involved and the adverse economic  or market impact of any challenge by the IRS. This is the “golden rule” version of the Wall Street Rule.
  
  When I first started practicing law, a senior lawyer asked me if I knew the “golden rule.” I mumbled something about “do unto others as you would have them do unto you.” He immediately corrected me with the real golden rule. He said: “The person with the gold makes the rules.” That pretty well  summarizes the “golden rule” version of the Wall Street Rule. If the dollars are big enough, the IRS cannot challenge the tax treatment of a transaction or security because the economic or market impact would be too large.
  
  Sometimes, both versions of the Wall Street Rule are invoked simultaneously. But, any version of the Wall Street Rule ultimately is based on the principle of estoppel by laches. This is an equitable principle holding that a claim or right may not be enforced if the plaintiff delayed too long in making the claim or enforcing the right.
  
  One of the basic legal rules I learned in law school, however, was that there is no estoppel against the King. This basic legal rule applies under the tax law. There is no equitable principle of estoppel by laches against the Commissioner under the tax law. The failure of the IRS to issue published guidance on a transaction, and even the failure of the IRS to raise issues regarding a transaction in audits for many years does not prevent the IRS from questioning the tax treatment of the transaction. As a legal matter, there is no such thing as The Wall Street Rule.
  
  As a lawyer, therefore, I must dismiss the Wall Street Rule, whether I represent the IRS or taxpayers. Taxpayers cannot rely upon the Wall Street Rule, since it is not equitably or legally binding on the IRS. Likewise, the Commissioner may challenge positions taken by taxpayers, however longstanding and however many dollars are at stake.
  
  While it is good tax policy and good tax administration to issue published guidance to inform taxpayers of the IRS’s view of the tax consequences of their transactions, the IRS cannot be expected promptly to identify and respond to all transactions. There are institutional and practical limitations on the ability of the IRS to issue published guidance on each and every transaction or issue. That we aspire to issue more, and more timely, published guidance does not give any credibility to the Wall Street Rule.
  
  Even though the Wall Street Rule is not legally relevant, we cannot ignore the widespread acceptance in the tax world of the Wall Street Rule. The widespread assertion of the Wall Street Rule also tells us something about the attitudes of taxpayers and tax practitioners regarding the self-assessment system.

Florida High Court Suspends Two Lawyers From Practice For Their Involvement In Performing Loan Modification Services

The Florida Bar, the state's guardian for the integrity of the legal profession, recently published its periodic 'gossip sheet,' announcing that the Florida Supreme Court in recent court orders disciplined 24 attorneys, disbarring eight and suspending 13. Among those Florida attorneys making this period's hit parade are the following pair for their involvement in the performance of loan modification services:

1. Thomas C. Matevia, 4521 PGA Blvd., No. 254, Palm Beach Gardens, suspended for three years, effective 30 days from a June 29 court order. (Admitted to practice: 1970) Matevia worked at a high volume law firm providing loan modification services, in which he was ultimately unable to meet his payroll and other financial obligations. The financial failure of the law firm caused at least 41 complaints to be filed with The Florida Bar, by clients that paid a retainer fee for Matevia to handle cases for them that he didn’t complete. He also violated Bar rules by paying bonuses to non-lawyer employees for signing up clients for the law firm. Matevia was also ordered to pay restitution of $102,049 to clients. (Case No. SC12-1118).
2. Robert Victor Rossenwasser, 99 N.W. 183rd St., Suite 100B, North Miami, suspended for 90 days, effective 30 days from a June 29 court order. (Admitted to practice: 1992) Rossenwasser is the subject of several Bar disciplinary matters stemming from his involvement in a loan modification business. (Case No. SC12-1120).

Source: Supreme Court Disciplines 24 Attorneys.

Couple Get Prison Stays For Peddling Phony Mtg Reduction Racket Ponzi Scheme; Used Lulling Payments To Lull Investors To Sleep While Living High Life

From the Office of the U.S. Attorney (Chicago, Illinois):

• A Will County couple has been sentenced to federal prison terms for engaging in a brazen investment fraud scheme that swindled more than $1 million from approximately 40 victims, causing some of them to lose their homes and financial security while the couple spent the money primarily on themselves. JAMES PILON was sentenced today to 53 months in prison, while his wife, VERNA PILON, was sentenced last week to 78 months in prison, and they were ordered to pay $967,702 in restitution.

***

• According to court records, the investigation of the Pilons, of Monee at the time, began in 2005 when the Illinois Securities Department ordered them to cease selling investments in the state. Instead of complying, the couple continued to solicit and obtain investment funds through 2005 and 2006. The couple operated numerous nusinesses through which they purported to sell two forms of investment — the Mortgage Acceleration Program, which essentially promised to pay investors’ monthly mortgage payments, completely pay off the outstanding balance in two years, and generate additional returns, and the Private Placement Program, which also promised high-yield returns of as much as 100 percent or more on investments within 90 days. In fact, neither investment program existed and the Pilons used some funds they fraudulently obtained to make Ponzi-type payments to lull some investors, while using the remaining funds for themselves. As a result, some investors’ mortgage payments were never made and their homes were foreclosed.

***

• During court proceedings, Verna Pilon was identified as a member of the so-called Washitaw nation sovereign group and she repeatedly maintained that the U.S. District Court had no jurisdiction over her. Evidence showed that the Pilons were acquainted with many of their victims, including some who testified that the couple preyed upon their religious faith in appealing for investment funds.

For the U.S. Attorney press release, see Will County Couple Sentenced to Federal Prison Terms for Investment Fraud Scheme That Swindled 40 Victims of $1 Million.

NYC Federal Court Green Lights Class Action Certification In Alleged Sewer Service Racket Involving Fraudulently Obtained Default Judgments, Zombie Debt Buyer, Process Server, Law Firm

From a recent client alert from the law firm Ballard Spahr LLP:

• A recent decision by a New York federal court provides yet another example of the documentation-related challenges that creditors and debt buyers are increasingly facing in collection actions involving non-mortgage consumer debts. In its opinion in Monique Sykes v. Mel Harris and Associates, LLC, issued September 4, 2012, the U.S. District Court for the Southern District of New York granted class certification in a case alleging that a debt buyer, law firm, and process service company had engaged in a scheme to fraudulently obtain default judgments against more than 100,000 consumers in debt collection actions filed in state court. The complaint alleged that the process service company had regularly engaged in "sewer service" by failing to serve the summons and complaint. It further alleged that, after a debtor failed to appear in court for lack of notice of the collection action, the debt buyer and law firm would seek a default judgment based on a false "affidavit of merit" attesting to their personal knowledge of the "facts and proceedings" relating to the action and a false affidavit of service. According to the court, the plaintiffs had established that the affidavits of merit were "generated en masse by sophisticated computer programs and signed by a law firm employee who did not read the vast majority of them and claimed to, but apparently did not, have personal knowledge of the facts to which he was attesting." The employee typically did not receive the original credit agreement for a particular debt included in a portfolio of purchased debts. Instead, the employee received a bill of sale for the portfolio that included sample credit agreements and warranties from the portfolio seller. The court noted that even if the credit agreement existed (which it often did not), the employee's standard practice was to rely on the warranties and database information instead of reviewing the agreements before signing an affidavit of merit. The evidence showed that after producing the affidavits of merit in batches of up to 50 at a time, the law firm's employee would do a "quality check" of one affidavit per batch to confirm that the affidavit information matched the database information. If both sets of information matched, he would sign the remaining affidavits without reviewing them. The employee would sign as many as 350 affidavits of merit in any given week. The plaintiffs also alleged that, because the defendants had regularly engaged in "sewer service," the affidavits of service that accompanied the affidavits of merit were also often false. According to the court, evidence showing hundreds of instances of the same process server executing service at multiple locations simultaneously provided substantial support for the plaintiffs' "sewer service" allegations. In addition to claiming that the defendants' conduct violated the Racketeer Influenced and Corrupt Organizations Act and New York's General Business Law and Judiciary Law, the complaint alleged that the defendants had violated the Fair Debt Collections Practices Act by filing false affidavits in the collection actions. The court, in finding that the plaintiffs had satisfied the commonality requirement for class certification, noted that there is conflicting case law on whether making false representations in court, rather than to the debtor, violates the FDCPA.

Source:  New York Federal Court Certifies Class Alleging Fraudulent Collection Practices Based on Documentation Deficiencies. For the court ruling, see  Monique Sykes v. Mel Harris and Associates, LLC,  No. 09 Civ. 8486 (S.D.N.Y.  September 4, 2012).

LA Feds Pinch Three, Seek Another In Alleged Sale Leaseback Equity Stripping Ripoff That Left Homeowners Broke & Straw Buyers Holding The Bag

From the Office of the U.S. Attorney (Los Angeles, California):

• The top two managers at a Westwood-based mortgage brokerage company have been arrested on federal charges relating to a foreclosure avoidance and equity-skimming scheme that targeted distressed homeowners. According to an indictment in this case, the scheme led several mortgage lenders to disburse more than $15 million in loan proceeds – with nearly half of that being lost to the fraud conspiracy. Federal authorities on Tuesday arrested David Singui, 49, of Inglewood, and Aziz Meghji, 35, of Los Angeles, who were, respectively, the principal owner and the second-in-charge at Direct Money Source (DMS), a mortgage brokerage which allegedly operated as an equity-skimming operation that took possession of distressed homeowner’s equity under fraudulent pretenses and also defrauded mortgage lenders. A third defendant in the case – Kiet Truong, 27, of Hawthorne, who worked at DMS, [subsequently] surrendered to authorities [...]. The fourth defendant named in the 42-count indictment – Starr Smith, 31, whose last known address was in Long Beach, is a fugitive currently being sought by authorities. The federal grand jury indictment, which was returned on September 6, charges all four defendants with conspiracy, wire fraud, loan fraud and aggravated identity theft. Singui and Meghji are additionally charged with money laundering. DMS held itself out as a company with a “Fresh Start Program” that was devoted to assisting distressed homeowners avoid foreclosure by arranging to have their homes purchased by so-called “credit investors,” who would hold the properties for 12 months and then sell them back to the original homeowners after they restored their credit ratings. In fact, as alleged in the indictment, DMS was an equity-skimming operation that took possession of distressed homeowner’s equity under fraudulent pretenses. The scheme allegedly defrauded mortgage lenders in connection with loans on approximately 50 different properties.

***

• The distressed homeowners were told that, because they had equity in their homes, DMS would be able to draw down on the equity and make monthly mortgage payments on behalf of the homeowners during the one-year period in which they were to repair their credit. In fact, according to the indictment, DMS took title to more than four dozen properties belonging to the distressed homeowners it targeted and simultaneously misappropriated the existing equity in their homes. Using “straw borrowers” as the “credit investors,” DMS orchestrated loan transactions that allowed DMS to obtain access to the distressed homeowners’ equity. As alleged in the indictment, DMS and its principals falsified the employment, bank account and income information of the straw borrowers on the loan applications. DMS also allegedly fabricated fictitious bank statements to support this false information on the loan applications in order to facilitate the approval of these fraudulent loans. At the conclusion of these transactions, DMS usually ended up with approximately $100,000 equity per transaction, plus around $35,000 in fees and commissions associated with each loan. In the meantime, each of the straw borrowers ended up owing approximately $300,000 or more on loans that went into default because DMS did not make the 12 months of mortgage payments as promised.(1)

For the U.S. Attorney press release, see Principals Of Mortgage Brokerage Arrested In Equity-Skimming And Foreclosure Avoidance Scheme Targeting Distressed Homeowners.

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

• Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals;
• Dreams Foreclosed: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (June 2005).

Michigan Loan Modification Racket Operator Gets 10-20 Years For Screwing 60 Victims Out Of $250K+

From the Office of the Michigan Attorney General:

• Attorney General Bill Schuette [] announced his Corporate Oversight Division has secured a prison sentence for a Holly woman who ran a fraudulent foreclosure-rescue operation that scammed at least 60 victims across the state out of more than $250,000. Tashia Winstanley, 38, of Holly, has been sentenced to 10 to 20 years in prison and ordered to pay $243,474 in restitution [...]. Winstanley and her company, TLW Mortgage Solutions, each pleaded guilty on August 3, 2012 to three felonies for collecting upfront fees while impersonating a mortgage modification company. "Foreclosure rescue scam artists attack Michigan homeowners who are struggling financially and fighting to stay in their homes," said Schuette. "Anyone who exploits struggling homeowners through these scams will be prosecuted to the fullest extent of the law."

***

• Winstanley offered prospective clients mortgage loan modifications for a fee. Winstanley promised victims she would secure a mortgage loan modification for them. Some victims even made their mortgage payments directly to Winstanley instead of their lenders, but instead of remitting those payments to the banks, Winstanley pocketed the funds in order to feed self-proclaimed shopping and drug addiction. The Attorney General Investigation uncovered evidence that Winstanley made no efforts to secure loan modifications for many of the victims. Affected victims reside in the following counties: Grand Traverse, Leelanau, Kalkaska, Roscommon, Oakland, Genesee, Benzie and Macomb. Winstanley and her company, TLW Mortgage Solutions both plead guilty in Grand Traverse County's 13th Circuit Court to the following: One count of Conducting Criminal Enterprises (Racketeering), a felony punishable by up to twenty years in prison; One count of False Pretenses - More than $20,000, a felony punishable by up to ten years in prison; and One count of False Pretenses - $1,000-$20,000, a felony punishable by up to five years in prison and/or three times the value of money or property involved. Winstanley is currently incarcerated in Huron Valley Women's Correctional Facility serving time for previous convictions for Larceny by Conversion - $1,000-$20,000 charged in Leelanau and Kalkaska counties. Citizens who believe they may have been victims of Winstanley or TLW Mortgage Solutions are encouraged to file complaints with the Attorney General's Office at www.michigan.gov/ag by clicking "File a Complaint."

For the Michigan AG press release, see Schuette Announces 10 to 20 Year Sentence For Michigan Foreclosure-Rescue Fraud Scam.

Criminal Prosecutors Jump Into Bed With Debt Collectors, 'Renting Out Their Office Stationery' To Facilitate Cash Recoveries In 'Rubber Check' Cases

The New York Times reports:

• The letters are sent by the thousands to people across the country who have written bad checks, threatening them with jail if they do not pay up. They bear the seal and signature of the local district attorney’s office. But there is a catch: the letters are from debt-collection companies, which the prosecutors allow to use their letterhead.
  
  In return, the companies try to collect not only the unpaid check, but also high fees from debtors for a class on budgeting and financial responsibility, some of which goes back to the district attorneys’ offices.
  
  The practice, which has spread to more than 300 district attorneys’ offices in recent years, shocked Angela Yartz when she was threatened with conviction over a $47.95 check to Walmart. A single mother in San Mateo, Calif., Ms. Yartz said she learned the check had bounced only when she opened a letter in February, signed by the Alameda County district attorney, informing her that unless she paid $280.05 — including $180 for a “financial accountability” class — she could be jailed for up to one year. “I was so worried driving my kid to and from school that if I failed to signal, they would cart me off to jail,” Ms. Yartz said.
  
  Debt collectors have come under fire for illegally menacing people behind on their bills with threats of jail. What makes this approach unusual is that the ultimatum comes with the imprimatur of law enforcement itself — though it is made before any prosecutor has determined a crime has been committed.
  
  Prosecutors say that the partnerships allow them to focus on more serious crimes, and that the letters are sent only to check writers who ignore merchants’ demands for payment. The district attorneys receive a payment from the firms or a small part of the fees collected. “The companies are returning thousands of dollars to merchants that is not coming at taxpayer expense,” said Ken Ryken, deputy district attorney with Alameda County.
  
  Consumer lawyers have challenged the debt collectors in courts across the United States, claiming that they lack the authority to threaten prosecution or to ask for fees for classes when no district attorney has reviewed the facts of the cases. The district attorneys are essentially renting out their stationery, the lawyers say, allowing the companies to give the impression that failure to respond could lead to charges, when it rarely does.
  
  “This is guilty until proven innocent,” said Paul Arons, a consumer lawyer in Friday Harbor, Wash., about two hours north of Seattle.

For more, see In Prosecutors, Debt Collectors Find a Partner.

Mortgage Cancellation Rackets That File Suits To Obtain Default Judgments To Wipe Out Banksters' Liens Gain Steam In Florida

In West Palm Beach, Florida, The Palm Beach Post reports:

• More companies are jumping into the land trust business. At least two new firms in Florida are trying to cancel mortgage debt with lawsuits that lenders call “baseless” and “nonsensical” but that some borrowers say are their last chance at keeping their homes. The companies, including one with a Jupiter address, are in addition to the Fidelity Land Trust Company that opened last year in Boca Raton. Together, they have filed scores of lawsuits statewide and collected hundreds of deeds from homeowners, who are typically solicited by phone because they have underwater mortgages. And desperate borrowers are biting.

***

• [P]roponents of the trusts point to a Levy County case they say proves it works. A press release issued Tuesday by one of the trust referral companies says Boca Raton attorney Howard Feinmel, who is under a Florida Bar investigation for issues relating to quiet title lawsuits, won a judgment in November that canceled a mortgage. It was a default judgment, typically awarded when the defendant fails to respond within 20 to 30 days and can be reopened if there are legitimate reasons for missing the deadline. The plaintiff in the Levy County case was Levy County Partners, which had the homeowner deed his house to it before filing the lawsuit, according to property appraiser records. The deed has since been transferred from Levy County Partners to Fidelity Land Trust Company. The foreclosure lawsuit against the homeowner was voluntarily dismissed in June by the lender. The dismissal was done without prejudice, meaning it can be re-filed. Bank of America, the servicer on the loan, did not respond to a request for comment. Fidelity Land Trust Company, which was incorporated in December and is believed to be one of the first firms to make widespread attempts to cancel mortgages by suing the banks, has amassed about 240 deeds statewide, including 100 in Palm Beach County.

For more, see More Florida companies try to cancel mortgage debt with lawsuits.

Mortgage Servicers' Contractor Cops Plea In $12M Ripoff, Admitting To Fabricating Foreclosure Property Inspection Reports

In Tampa, Florida, the Tampa Bay Times reports:

• As the housing market imploded, Dean Counce's business boomed. Counce's Brooksville company contracted with lenders to regularly inspect properties in foreclosure throughout the state. By 2009, Counce was sending as many as 100,000 inspection reports each month to Bank of America, receiving about $6.50 for each. Bank of America then billed the federal entities that owned or insured the mortgages. At one point, Counce was making as much as $1 million per month. The problem: Half of those reports were fabricated. Now, investigators say, Counce owes taxpayers more than $12 million and faces up to 20 years in prison. On Friday, the 42-year-old Spring Hill resident pleaded guilty in federal court to one count of conspiracy to commit wire fraud. His sentencing date has yet to be set.

***

• As part of a plea deal, Counce agreed to cooperate with an ongoing investigation and testify if necessary. Prosecutors, in turn, will not oppose his request for a prison term on the low end of the sentencing range.

For more, see Spring Hill man pleads guilty to fabricating thousands of foreclosure inspection reports.

Title Insurer Screws Itself w/ Ambiguous Policy Terms; Forced To Calculate Loss On Search Screw-Up By Including Value Decline Based On Market Factors

(This post will probably be of absolutely no interest to absolutely anyone, other than maybe some title insurance industry people, and possibly, a certain anonymous blogger - me. Accordingly, here goes.) The following facts are taken from a recent ruling of the South Carolina Supreme Court:

1. On October 30, 2006, Plaintiff purchased a lot along the Intracoastal Waterway in Myrtle Beach. A mobile home and an out-building were situated on the property at the time of purchase. Plaintiff purchased the lot intending to build a single-family home on the property.
2. Since 1931, the property has been subject to a properly recorded spoilage easement allowing for the construction and maintenance of the Intracoastal Waterway. According to Plaintiff/Landowner, the spoilage easement allows the Army Corps of Engineers to dredge and maintain the Intracoastal Waterway and to dump dredged material on Plaintiff/Landowner's lot at any time.
3. At closing, Plaintiff purchased from Defendant an owner's title insurance policy in the face amount of $410,000—the amount of the purchase price.
4. The existence of the spoilage easement was missed in the title search and therefore was not included as an exception to coverage in the title policy. The existence of the spoilage easement was not known by Plaintiff at the time she purchased the property.
5. In January 2010, Plaintiff sought a building permit from Horry County to construct a home on her property. Through that process, she learned of the spoilage easement, which prevented her from obtaining a building permit.
6. It is undisputed that by 2010, the value of the property had decreased as a result of the downturn in the real estate market, irrespective of the diminution in value caused by the title defect.
7. Plaintiff filed an action seeking damages caused by the existence of the easement. The parties filed cross motions for summary judgment. Defendant argued the value of any loss should be measured as of the date of the discovery of the title defect.
8. Plaintiff moved for summary judgment as to liability only and argued the case presented a jury issue regarding damages. Plaintiff contended that her damages, as measured by the diminution in property value, should be measured as of the date the property was purchased.
9. The United States District Court found Defendant/Title Insurer was liable under the insurance policy and granted summary judgment in favor of Plaintiff.
10. However, as to the issue of damages, because this issue required an interpretation of substantive state law for which the state law precedent may not have been clear, the district court 'punted' on answering that question, instead opting to certify the question to the South Carolina Supreme Court for an authoritative determination.

Despite acknowledging the apparent inequity against the title insurer resulting from its decision, the South Carolina Supreme Court ruled that, because of ambiguous language in the title insurance policy, state law required it to interpret the policy in a light most favorable to the insured. Accordingly, they ruled that the date the property was purchased was the date to be used in measuring the diminution in property value resulting from the screw-up in the title search (when the property was worth much more due to the real estate market 'bubble'), resulting in a greater damages calculation for the landowner than would have been the case had the date of discovery of the title defect been used to calculate damages (when the property value was worth much less due to the subsequent real estate market 'crash' several years later). In recognizing that courts around the country have generally identified three points in time to measure an owner's actual loss (the date the property was purchased, the date the title defect was created, and the date the defect was first discovered), the South Carolina Supreme Court made these comments:

• [W]e are guided by the contract principle that parties may contract as they see fit, provided the contract terms do not offend public policy. In the context of establishing a method of valuation in a title policy, as noted above, "[t]he terms of individual insurance agreements can control the method of valuation." Stanley, 377 S.C. at 411, 661 S.E.2d at 65. The title policy here does not unambiguously set forth a method of valuation in line with the construction Defendant urges us to adopt. Thus, we need look no further than the general rule that ambiguities in an insurance contract must be construed in favor of the insured. In this case, that construction results in a date-of-purchase valuation date. We fully appreciate the equity and inherent logic for valuing the property in this case as of the date of the discovery of the title defect as Defendant suggests. See generally Matthew C. Lucas, Now or Then? The Time of Loss in Title Insurance, 85 Fla. B.J. 10, 15 (2011). Defendant asserts that under a title policy the risk of a decline in the land's market value because of market conditions should be assumed by the purchaser, and the risk of the land's market value being impacted by a title matter should be assumed by the title insurance company. We conceptually agree with Defendant, but we are construing a contract of insurance, not attempting to fashion an equitable remedy. The insurance policy here simply fails to identify the valuation date as the date of discovery of the title defect or otherwise provide clear language that would require a valuation date in line with Defendant's position. The well-established rule concerning construction of ambiguous terms in insurance contracts compels a result adverse to Defendant's position. In sum, although we acknowledge the apparent inequity in our answer to the certified question, the resolution of this question is not a matter of equity. Rather, this Court is faced with the task of construing an insurance policy, and in the presence of an ambiguity we are constrained to interpret it most favorably to the insured. In this case, the date the property was purchased is the proper valuation date.

For the ruling, see Whitlock v. Stewart Title Guaranty Company, Opinion No. 27169 (S.C. September 12, 2012). Thanks to Deontos for the heads-up on the ruling.

Foreclosed, Now Ex-Homeowner Shines Light On Bankster, Local Authorities For Allowing Vacant Meth-Infected Home To Go Back On The Market

In Holden, Louisiana, WAFB-TV Channel 9 reports:

• A house in Livingston Parish that has tested positive for meth is back on the market. The bank foreclosed on the house, but bought it back. Now, the previous owner is taking some serious action to make potential buyers aware.
  
  The small wood-framed house in Holden has been at the center of attention for more than a year.
  
  The graffiti on the front claims the house is being condemned because the soil won't support the house, it is contaminated by meth and mold, has bad electric and a bad foundation. It also lists a YouTube address where anyone can view video of its interior.
  
  Katherine Doughty, the former owner of the house, said she is behind the brazen warnings. "We had our fireplace lit this winter and the doors blew out at 2 a.m., glass shattered all over our living room," Doughty said.
  
  That's what Doughty said last August after learning the house she said she bought from HUD had been exposed to crystal meth and other dangerous chemicals.
  
  Doughty and her family stayed in the house, but have since been taking steps to get it condemned. She said Citi Mortgage suddenly stopped accepting her payments, the house went through foreclosure and she and her family were evicted in July. The house is back on the market.
  
  "I was shocked. I could not believe that they would want somebody else to live in that house. It needs to be torn down," Doughty said.
  
  Last year, Chuck Vincent the building director for Livingston Parish, sent the Doughty family a letter regarding his inspection of the house. He wrote, "There appears to be mold/mildew...the flooring in several of the rooms is rotten to the point of falling in. He added, "after he left his eyes started watering and burning and I developed a headache."
  
  Doughty said she thought the parish was working on getting the house demolished. But now, she is not so sure. "We are not getting our calls returned anymore. We were told to let it go and let someone else deal with the problem," Doughty said.
  
  Doughty said the last letter she got was on April 13, 2012. Sam Digirolamo, Livingston Parish Planning director, wrote, "The house was to be condemned, demolished and disposed of."
  
  Six months later, the house is for sale.
  
  "It's a three-bedroom, two-bath in the Livingston Parish school district. I know it's going to sell to a family and I don't want another family to go through what my family's been through," Doughty explained.
  
  Parish President Layton Ricks said the house was never demolished because the complaint never went to the full council for a vote. He added, the parish is in the process of reworking how it condemns property to speed up the process.
  
  A spokesman for Citi Mortgage, the current owner, said the company is looking into the history of the property.

Source: Previous homeowner warns buyers of meth house.

Ambushed Locksmith's Widow Files Wrongful Death Claim; Says Cops Should Have Done More To Protect Him From Armed F'closed Homeowner Resisting The Boot

In Modesto, California, The Modesto Bee reports:

• Authorities should have done more to protect a locksmith from a distraught, armed homeowner who gunned down the man and a deputy sheriff, the locksmith's widow says in a wrongful death claim against Stanislaus County.
  
  Before they tried to carry out the April eviction, deputies were warned that the homeowner had weapons, the claim says, contradicting Sheriff Adam Christianson's statements since that the men walked into an ambush with no idea that danger lurked inside.
  
  Also, locksmith Glendon Engert paused while disabling the lock on a metal security door when he heard something inside, but deputies directed him to keep drilling, the claim says.
  
  "Mr. Engert was lulled into a false sense of security," the document reads. Moments later, Engert, 35, and deputy Bob Paris, 53, were killed by armor-piercing bullets from an assault rifle fired through the screen door. Deputy Mike Glinskas, 51, was not hit and was honored for bravery last month.
  
  The shooting deaths started an 11-hour standoff that ended as flames engulfed the Chrysler Drive fourplex. The body of Jim Richard Ferrario, who committed suicide, was found inside with an arsenal of weapons.
  
  The deputies "owed (Engert) a duty to protect him," says the claim, filed Aug. 24 by San Francisco lawyers on behalf of Irina Engert and made public by the county Monday. "It's unspeakably sad," said attorney Richard Schoenberger. "She remains devastated. Glendon was her life."

For more, see Modesto locksmith's widow files claim, says deputies didn't protect him.

Go here for Irina Engert's Claim Against Stanislaus County.

Chicago-Area Man Charged With Felony Hate Crime After Allegedly Hurling Racial Slurs, Beer Can, Brick At Man Hired By Bank To Maintain Foreclosed Home

In Chicago, Illinois, the Chicago Tribune reports:

• A Tinley Park man was charged with a felony hate crime for allegedly attacking a man who had been hired by a bank to maintain a neighbor's foreclosed home earlier this month.
  
  Joseph Berndt, 47, allegedly shouted racial slurs at the 51-year-old African-American man as he was working outside a house in the 6200 block of West 179th Street, then threw a beer can and a brick at the man, chased him through the yard while brandishing a pipe and attempted to strangle him, prosecutors said.
  
  The victim said Berndt approached him as he was checking the gas and electric meters at the house, which he had been hired to maintain and had visited several times during the week prior, according to a Tinley Park Police report on the Sept. 1 incident.
  
  "Hey, what are you doing? You are probably breaking in you (expletive)," Berndt said, the report states.
  
  The victim explained he had permission to be at the house, and resumed working in the yard. Berndt left his house, which was adjacent to the foreclosed home, threw a beer can at the man and said "I'm gonna kill your (expletive)," the report states. The man ran behind a fence, but said Berndt threw a "large landscaping brick at him."

For more, see Tinley Park man charged with hate crime for alleged attack (Police say victim had been hired by a bank to maintain a neighbor's foreclosed home and was attacked while at house).

State Bar Files Administrative Charges Against Lawyer Who Allegedly Screwed Over Elderly, Grieving Client Out Of $400K & Left Her With $1.4M Tax Bill

From The State Bar of California:

• The State Bar of California has charged a Glendale attorney with 18 counts of misconduct for his part in a scheme in which an elderly widow was charged excessive legal fees and left with $1.4 million tax bill.
  
  According to the notice of disciplinary charges filed Friday, Joseph Bernard McHugh Jr. (Bar. No. 128665) billed the victim more than $407,000 for bogus estate planning services and worked alongside a convicted felon, who had taken over the woman’s financial affairs.
  
  McHugh is accused of misconduct including charging illegal and unconscionable fees, defrauding the Internal Revenue Service, failing to disclose a conflict of interest to his client and numerous counts of moral turpitude.
  
  McHugh and Naomi Campbell, a self-styled financial adviser who had prior convictions for defrauding the elderly, met with 88-year-old Helen Sprinkle on Oct. 8, 2005, just three days after the death of Sprinkle’s only child, Donna. Sprinkle had also recently lost her sister and pet dog.
  
  Over the course of four months, McHugh, 59, charged Sprinkle thousands of dollars for work he claimed was done to update her estate plan, including $363,882 for supposed paralegal services, much of which went to Campbell and her husband, Ron, neither of whom had any paralegal training.
  
  The following May, according to prosecutors, McHugh made changes to one of the Sprinkle family’s trusts to list the Church of God of the Twin Cities Inc., based in Illinois, as a charitable beneficiary. McHugh also failed to disclose to Sprinkle that Campbell’s relatives served as the church’s president and head pastor, the treasurer and secretary.
  
  McHugh also authorized the sale of stocks and liquidation of other assets in the Sprinkle family trusts to purchase three annuities totaling roughly $5.5 million. The annuities, purchased from Campbell’s husband Ron, who received large commissions, were inappropriate investments for Sprinkle due to her age. As a result of McHugh’s actions, Sprinkle incurred $1,409,809 in federal and state taxes.

For the State Bar press release, see Glendale Attorney Charged With Elder Fraud Misconduct.

North Las Vegas City Manager Allegedly Pocketed 'Cash For Keys' Deal As A Tenant In Foreclosure Home While Concurrently Stiffing Landlord Out Of Rent

In North Las Vegas, Nevada, KSNV-TV Channel 3 reports:

• The city of North Las Vegas may be drowning in red ink but the man in charge knows how to save a buck, or in this case, make one.
  
  Earlier this year News 3 reported on City Manager Tim Hacker failing to pay rent for several months while living in this house he said he planned to buy while he was actually in escrow to buy another home.
  
  Now News 3 has obtained an email from the broker who sold the house confirming Hacker received assistance known as “Cash for Keys” to move out of the home, which was in foreclosure.
  
  The woman who says Hacker owes her rent tells News 3 she's attempting to serve the Hackers with a summons to appear in North Las Vegas court. News 3 attempted to reach Hacker but the city of North Las Vegas is closed on Fridays.

Source: NLV city manager found in 'cash for keys' scheme.

NFL QB Victimized By Abused POA Seeks To Vacate Judgment Obtained By Lender w/ History Of Preying On Football Players By Loaning Cash On Onerous Terms

In New York City, Courthouse News Service reports:

• NFL quarterback Vince Young claims in court that his former financial adviser and sports agent fraudulently took out a nearly $1.9 million loan in his name from a predatory lender.
  
  Young is suing the lender, Pro Player Loan, in New York County Supreme Court in an effort to get the lender off his back.
  
  "Young has never received a penny from the purported Pro Player 'loan' proceeds, nor has he ever communicated with anyone from Pro Player or knowingly executed any loan agreements with Pro Player," the lawsuit states.
  
  Young says the loan was fraudulently obtained by his former financial adviser, Ronnie Peoples, and his former agent, Major Adams II, neither of whom are defendants in the lawsuit. Young says he gave Peoples and his company, Peoples Financial Services, power of attorney to act on his behalf financially.
  
  Peoples and Adams allegedly took out a nearly $1.9 million from Pro Player Funding, which the lawsuit describes as "a predatory lender with a history of loaning funds to football players on extraordinarily onerous terms."
  
  Under the terms of the loan, Pro Player disbursed just 59 percent of the total loan amount after prepaid interest and fees, and demanded 30 percent interest when the loan went into default in June, according to the lawsuit.
  
  Despite Young's insistence that he never took out the loan, "Pro Player has subjected Young -- and his former football team, the Buffalo Bills -- to a barrage of threats and excessive and needless discovery requests in an effort to enforce its judgment."
  
  He says the lender even tried to serve him with papers at the Buffalo Bills' training camp in early August.
  
  Pro Player allegedly won a judgment by confession in July, requiring Young to pay $1.69 million in outstanding principal plus 9 percent interest until the judgment has been paid in full.

***

• The athlete wants the court to vacate the judgment, claiming Pro Player failed to take "reasonable steps to ensure that Young was aware of the transaction, that he authorized it, or that he would benefit from it."
  
  "Indeed, the circumstances of this loan should have given rise to grave suspicions on the part of Pro Player as to whether the transaction was legitimate," Young claims. "Pro Player, however, turned a blind eye to those circumstances, motivated by its rapacious desire to earn the exorbitant profits on the loan."
  
  Young was released from the Buffalo Bills on Aug. 27 and is now a free agent.

For the story, see QB Says He's Not Liable for Bogus $1.9M Loan.

For the lawsuit, see Young v. Pro Player Funding LLC.

Thanks to Deontos for the heads-up on this story.

HOA Prez/Developer Accused Of Creating "Well-Oiled Machine" To Rip Off Homeowners Out Of $500K+ In Dues, Fines Gets The Pinch On Felony Fraud Charges

In Polk County, Florida, the Orlando Sentinel reports:

• Orlando area developer David Meadows was arrested [] on four felony fraud charges after authorities said he stole hundreds of thousands of dollars from owners of his Bimini Bay vacation resort in Davenport.
  
  The Orlando Sentinel in December detailed a wide array of problems at the community just a few miles from Walt Disney World, which was marketed to international investors and others who wanted to be near Orlando's tourist attractions.
  
  The management fees Meadows collected for overseeing the Bimini Bay community had increased tenfold during a time when owners complained about poorly maintained public areas, a condemned clubhouse, illegal trash piles and above-ground cable wiring that failed to meet building codes.
  
  Meadows blanketed owners of Bimini Bay's 200 homes with $100-a-day fines for infractions such as using vertical blinds instead of horizontal ones, the Sentinel reported.
  
  On Tuesday, state investigators reported that the revenues he collected padded Meadows' development company and that he "maintained a dictatorial control" over the homeowners association.
  
  "Meadows made his development company the HOA's primary vendor and engaged in self-dealing contracts for personal benefit," the state attorney's investigative report reads.
  
  A 17-page investigation report released Tuesday by the economic crimes division of the State Attorney's Office for Polk County also charged Meadows with double billing the association for management fees.
  
  The report stated that Meadows transferred $511,538 from the homeowner association into his development company from March 2010 through July 2011 and a "significant portion" of that became evidence of his "scheme to defraud."

***

• Construction started on Bimini Bay in 2000 and proceeded slowly until it halted with the real estate crash of 2007. The project was originally slated to have about 500 townhome-style units. Ultimately fewer than half that amount were built.
  
  Once development stopped, "revenues needed to be generated to cover up expenses," Deanna Meixner, accountant for Meadows from 2002 to 2009, told investigators. During a 3.5-year period that started in April 2008, Meadows' operations filed 509 liens on the 200 units in the development.
  
  And since 2008, the developer failed to pay association fees for his own units and should not have had a position on the association board, but he disregarded bylaws, investigators reported.
  
  One of Meadows' employees told investigators that Meadows created a "well-oiled machine" dedicated to cranking out estoppels letters, foreclosure notices, attorney fees, utility charges and association dues and fees. One owner, Sandra Friedle, faced $31,612 in liens for infractions such as a bent window screen.
  
  Another accountant who worked for Meadows, Sandra Andrews, told authorities that transferring funds from the homeowner association to Meadows companies "occurred on a routine basis." She is quoted in the investigation report saying she felt as though there was a "shell game going on."

For the story, see Bimini Bay developer charged with fraud.

See also, The Lakeland Ledger: HOA president accused of $500,000 theft.

Some City Residents Accuse Key West Of Giving 'Bailout' To Greedy Bankster In Code Compliance Dispute

In Key West, Florida, the Florida Keys Keynoter reports:

• After rejecting a $20,000 code compliance settlement from the Bank of New York Mellon, the Key West City Commission on Wednesday agreed to take $30,000.
  
  Mellon bank via foreclosure bought the house at 923 Eaton Street from the mortgage holder, JP Morgan Chase in 2009. The property fell into disrepair, eventually becoming the subject of action from the city's Code Compliance Department, leading to a $186,750 accrued fine.
  
  Although commissioners on Aug. 21 voted 5-2 to reject the $20,000 offer, City Attorney Shawn Smith said this week he had done more research on the property and found the city's lien on the property could be invalidated.
  
  "The current offer of $30,000 is something the city should accept given the fact there are questions to the validity of the lien," Smith said. "$30,000 certainly is far in excess of the actual cost the city has in this particular issue."
  
  Smith also pointed out that the $30,000 figure equates to the fines related to the 120 days that Mellon owned the house and it was not in compliance with municipal code.
  
  Residents opposing continued to frame their objection in terms of little Key West giving a bailout to a greedy financial giant.

Source: City accepts $30,000 bank settlement.

Possible Influx Of Section 8 Renters Into High-End Community Has One HOA, Some Neighbors 'Running Around With Their Hair On Fire'

In Broward County, Florida, the South Florida Sun Sentinel reports:

• Here's an odd side effect of South Florida's foreclosure crisis: Some immense homes with pools and three-car garages in gated communities are being rented out to unlikely tenants — poor people paying with Section 8 aid.
  
  Among the properties are homes with up to 4,500 square feet of space in private communities with guardhouses and regal names such as "Monarch Lakes" and "Bellagio at Vizcaya."
  
  Some of the owners are teetering on foreclosure and gambling they can earn enough money from the federal housing vouchers to stave off the banks. Others bought the properties cheap in foreclosure auctions and want the guaranteed rental income.
  
  Housing advocates and the government view the turnabout as a win-win for homeowners and the poor, who have access to safer communities and better schools.
  
  But some neighbors are aghast.
  
  After a single mother and her nine children rented a house in the exclusive Isles neighborhood of Coral Springs, the homeowners association adopted an amendment to its governing documents stating: "No Section 8 or government leasing assistance is permitted."
  
  The association is threatening eviction.
  
  Federal law does not expressly outlaw such bans. But the prohibition can't be used as a pretext for other illegal acts, such as denying housing to people because of their race, gender, national origin, disability or number of children.
  
  The owner of the Coral Springs house, Henri-Claude Marcellus, has hired a lawyer to challenge the restriction, claiming his mostly white neighbors are discriminating against him because he is Haitian and his tenants are African-American.
  
  A retired software engineer, real estate investor and radio show host, Marcellus said he confronted the association's officers, demanding to know: "What do you have against blacks?" "I hit a very sensitive nerve," he said in a recent interview.
  
  The association's lawyer and directors did not respond to requests for comment.(1)

For more, see Some fancy neighborhoods open gates to Section 8 tenants.

(1) While Federal law may not prohibit it, the state law of at least one state, Massachusetts, prohibits discrimination against prospective renters on the basis of their receiving public assistance. See, for example:

• Attorney General Martha Coakley's Office Obtains Consent Judgment Against Cambridge Realtor Accused of Discriminating Against Section 8 Recipient.

Closing Agent Admits To Ripping Off Escrow Cash From Real Estate Deals; Failed To Pay Off Existing Mortgages, Leaving Title Insurer On Hook For $1.5M+

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

• Harriet M. Taylor, age 56, of Ellicott City, Maryland, pleaded guilty [] to wire fraud in connection with a scheme to use over $1.5 million in mortgage closing funds for her personal use or to operate her title companies.

***

• According to her plea agreement, Taylor co-owned and managed two title insurance companies, Regal Title Company, LLC and Loyalty Title Company, LLC, located in Columbia, Maryland. Taylor entered into an agreement with a national title insurance underwriter to establish escrow accounts for Regal and Loyalty, separate from company operating accounts, for the purpose of holding and disbursing funds received from lenders for real estate closings.
  
  Beginning in 2009, however, Taylor caused mortgage lenders to wire their funds entrusted for real estate settlements to Regal’s operating account, rather than to the escrow accounts. Taylor also caused funds in Regal’s and Loyalty’s escrow accounts to be transferred back and forth between their respective operating accounts. By using commingled funds throughout 2009, Taylor kept her two businesses afloat, while enriching herself with both company and escrow funds. From January through December 2009, Taylor paid herself $477,877.50 from three company operating accounts.
  
  As shortfalls in the escrow accounts increased, Taylor failed to remit insurance premiums to the title insurance underwriter, Old Republic National Title Insurance Company (Old Republic), pay recording fees for deeds and pay off prior liens, including four of which belonged to the government sponsored entities, Fannie Mae and Freddie Mac.
  
  Old Republic learned of the misuse of settlement funds from a 2009 audit of Regal and an early January 2010 audit of Loyalty. Old Republic terminated its agency relationship with the two companies, but was obligated to satisfy the prior liens against the properties affected by the misuse of settlement funds and to complete other transactions Regal and Loyalty failed to perform.
  
  Accordingly, in January 2010, Old Republic incurred a total loss of $1,518,532 which resulted from paying off prior liens, paying recording fees, and for insurance premiums collected by Regal and Loyalty but not forwarded to Old Republic.

For the U.S. Attorney press release, see Title Company Owner Pleads Guilty in $1.5 Million Fraud Scheme.

Private Company's Attempt To Invoke Eminent Domain Power To Wrestle Property Away From SE Texas Landowners Again At Issue

In Jefferson County, Texas, The Southeast Texas Record reports:

• Southeast Texas landowners will have to wait two weeks before learning if a Jefferson County judge will grant a foreign company’s petition to condemn land for the construction of a crude oil pipeline.
  
  TransCanada Keystone Pipeline filed the petition for condemnation against Texas Rice Land Partners, James and David Holland and Mike and Walter Latta on June 28, 2011. According to its website, TransCanada seeks to build a pipeline to carry crude from Alberta to the Gulf Coast.
  
  A hearing on whether to grant the petition was held Wednesday, Sept. 12, before Judge Tom Rugg, Jefferson County Court at Law No. 1. Rugg did not rule on the matter, but gave the parties until Sept. 21 to reply to a recently filed legal brief.
  
  While the hearing was in progress, several protestors stood outside the Jefferson County Courthouse to show their objection to the overuse of eminent domain. “It’s a concern of this court that the rights of landowners not be trampled,” Rugg said during the hearing. Rugg said he would craft a ruling on Sept. 24.
  
  During the hearing, Terry Wood, the attorney for the rice farmers, attempted to link the TransCanda case to a ruling made by the Texas Supreme Court last August denying Denbury Green common carrier status in a pipeline project of its own.
  
  In that opinion, the court stated “Private property is constitutionally protected, and a private enterprise cannot acquire condemnation power merely by checking boxes on a one page form.”
  
  TransCanada argued that the high court ruling did not apply, since Denbury Green’s pipeline would not have carried crude oil, but would have transported carbon dioxide (CO2) to be injected into oil reservoirs to recover additional crude oil.

Source: Judge to decide fate of eminent domain pipeline dispute by Sept. 24.

Foreclosed Homeowner Who Used Sovereign Citizen Racket In Attempt To Reclaim Title & Possession To Home Cops Plea To Georgia RICO Charges

In DeKalb County, Georgia, The Atlanta Journal Constitution reports:

• One of a dozen so-called sovereign citizens indicted on racketeering charges for essentially stealing 18 high-end homes in eight counties pleaded guilty Monday in court. "I plead guilty because I’m tired,” David B. Graham told DeKalb County Superior Court Judge Courtney L. Johnson. “I’m guilty because I’m guilty.”
  
  Graham was accused of moving back into the Gwinnett County home he lost to foreclosure by illegally using the quit claim process to transfer the deed back into his own name. Graham pleaded guilty to violating Georgia's RICO or influenced and Corrupt Organizations Act, and to conspiracy to violate the RICO Act.
  
  He was one of many in a group that, between January and July 2010, exploited loopholes in the legal property deeding system to gum up an already tedious process. Graham said he was directed to a loosely organized sovereign citizen group to help him save his home.

***

• That scheme, prosecutors say, involved members of the group breaking into more than a dozen properties in DeKalb, Gwinnett, Henry, Spaulding, Fulton, Fayette, Richmond and Newton counties, including a Buckhead strip mall, forging notarized deeds for themselves and one another to file with the respective county clerks, then threatening litigation against the rightful owners if those owners tried to evict the sovereigns or sell the properties. Prosecutors called it putting “a cloud on the title.”

For more, see Gwinnett man pleads guilty to stealing foreclosed home (Attorney: ‘He bought into sovereign citizen scheme’).

Rent Skimming Racket, Use Of Forged Lien Releases To Illegally Pull Cash From Properties Lead To 10-Year Prison Stay For One, Six Years For Another

From the Office of the U.S. Attorney (District of Columbia):

• Bryan W. Talbott, 49, the president of a property management company, was sentenced [] to 10 years in prison for defrauding his clients, mortgage lenders, and the government of more than $2.8 million.

***

• Along with business partner Chester D. Ransom, Jr., 45, Talbott pleaded guilty in January 2012 in the U.S. District Court for the District of Columbia to charges of conspiracy to commit bank fraud, conspiracy to commit mail fraud, and conspiracy to defraud the government. [...] As part of their plea agreements, Talbott and Ransom agreed to criminal forfeiture of the proceeds of their crimes and restitution of more than $2.8 million.
  
  Ransom was sentenced in June 2012 to a six-year prison term.

Rent Skimming:

• As part of their fraudulent scheme, the defendants frequently collected rental payments from tenants but did not pay the bills for the properties, despite falsely representing to the property owners that the bills had been paid.
  
  Instead, the defendants used these funds for their own benefit. In addition, the defendants also sent forged bank statements to some of their clients, misstating the balances in their clients’ accounts. Through this fraudulent scheme, the defendants defrauded at least 54 clients out of a total of $1,269,278.

Use Of Forged Satisfactions Of Mortgages To Pocket Mortgage Proceeds:

• On June 30, 2004, Ransom purchased the property on North Portal Drive NW for $975,000, financing the purchase, in part, with two loans in the total amount of $731,250 from WMC Mortgage Corp., a mortgage lender. Ransom executed two deeds of trust on the property, granting WMC a security interest in the property.
  
  On December 29, 2005, Ransom filed with the District of Columbia Recorder of Deeds two forged Certificates of Satisfaction, purporting to release the WMC liens on the Portal property.
  
  Then, on January 13, 2006, Ransom sold the Portal property to Talbott for $1,110,000. The defendants provided copies of the forged lien releases to the settlement company. Talbott obtained a loan in the amount of $750,000 from Fremont Investment and Loan. Talbott executed a deed of trust on the property, granting Fremont a security interest in the property. Ransom received a check in the amount of $515,034 from the settlement.
  
  Less than a month later, on February 2, 2006, Ransom again “sold” the Portal property to Talbott, this time for $1,250,000, despite the fact that Talbott was already the legal owner. The defendants provided copies of the forged lien releases to the settlement company. Talbott obtained a loan of $890,000 from First National Bank of Arizona. Talbott executed a deed of trust on the property, granting First National Bank of Arizona a security interest in the property. Ransom received a check in the amount of $801,280 from the settlement.

For the U.S. Attorney press release, see President of Property Management Company Sentenced To 10-Year Prison Term For Defrauding Clients, Mortgage Lenders and Government (Scheme Involved More Than $2.8 Million).

L.A. Feds Indict 11 For Roles In Alleged Loan Mod Scam That Screwed 4,000+ Homeowners Out Of At Least $7M; Many Lost Homes To Foreclosure Anyway

From the Office of the U.S. Attorney (Los Angeles, California):

• Federal agents [...] arrested 10 defendants who worked at a Rancho Cucamonga-based business that allegedly offered bogus loan modification programs to financially distressed homeowners. As a result of the scheme allegedly run out of 21st Century Real Estate Investment Corp. and several related companies, more than 4,000 financially distressed homeowners lost at least $7 million in fees they paid to the company, and many homeowners lost their homes to foreclosure.
  
  Those taken into custody [...] were among 11 defendants named in a federal indictment unsealed today following an investigation by the Federal Bureau of Investigation; IRS-Criminal Investigation; the United States Postal Inspection Service; the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP); and the Federal Housing Finance Agency, Office of Inspector General.
  
  According to the indictment, during an 18-month period that began in June 2008, a Rancho Cucamonga woman – Andrea Ramirez – operated 21st Century and several other companies.
  
  According to the indictment, 21st Century “defrauded financially distressed homeowners by making false promises and guarantees regarding 21st Century’s ability to negotiate loan modifications from the homeowners’ mortgage lenders, falsely representing that 21st Century was operating a loan modification program sponsored by the United States government, instructing homeowners to cease communication with their mortgage lenders and to cease making their mortgage payments.”

***

• Ramirez and the other 21st Century employees contacted distressed homeowners through cold calls, newspaper ads and mailings, and various 21st Century-controlled websites that advertised loan modification services.
  
  Once they contacted the distressed homeowners, according to the indictment, Ramirez and other 21st Century employees often falsely told clients that the company was operating through a federal government program, that they would be able to obtain new mortgages with specific interest rates and reduced payments, and that attorneys would negotiate loan modifications with their lenders.
  
  Ramirez and other 21st Century employees regularly instructed financially distressed homeowners to cease making mortgage payments to their lenders and to cut off all contact with their lenders because they were being represented by 21st Century.
  
  On some occasions, Ramirez and other 21st Century employees would tell homeowners that 21st Century was using the fees paid by the homeowner to make mortgage payments, when in fact Ramirez and 21st Century simply were keeping the homeowner’s money.
  
  Christy Romero, Special Inspector General at SIGTARP, stated: “Ramirez and her co-conspirators are charged with fraudulently operating 21st Century to exploit the hardships of homeowners fighting to keep a roof over their head. As alleged, these con artists swindled distressed homeowners by lying about their affiliation with federal housing programs and giving money-back guarantees that the homeowners would get a lower mortgage payment if they paid an advance fee. SIGTARP and our law enforcement partners are committed to shutting down schemes that prey on those who can least afford it by falsely claiming an affiliation with TARP’s housing programs.”
  
  Leslie P. DeMarco, Special Agent in Charge of the IRS-Criminal Investigation’s Los Angeles Field Office, said: “Using the guise of a federally sponsored loan modification program, and the assurance of a qualified legal team, the defendants preyed on financially distressed homeowners allegedly depriving them of much needed money and property. Those who find ways to fraudulently benefit from government programs meant to help struggling homeowners keep their homes will be brought to justice.”
  
  The 11 defendants named in the indictment are:
  
  Andrea Ramirez, who also used the names Andrea Parker and Lisa Evans, 44, of Rancho Cucamonga; Christopher Paul George, 42, Rancho Cucamonga, who surrendered [...] to authorities; Michael Bruce Bates, who also used the names Michael Bruce Myers and Robert Allen Castro, 61, of Moreno Valley; Crystal Taiwana Buck, 37, of Long Beach; Michael Lewis Parker, 34, of Pomona, who is currently a fugitive being sought by federal authorities; Catalina Deleon, 35, of Glendora; Hamid Reza Shalviri, 50, Montebello, who self-surrendered [...] after being contacted by federal agents; Yadira Garcia Padilla, 35, of Rancho Cucamonga; Mindy Sue Holt, 53, of San Bernardino; Iris Melissa Pelayo, 42, of Upland; and Albert DiRoberto, 59, of Fullerton.

For the U.S. Attorney press release, see Grand Jury Indicts Eleven Linked To An Inland Empire Loan Modification Scam That Targeted Financially Distressed Homeowners.

Ventura County Jacks Up Recording Fees For Certain Docs To $10 To Continue Funding For Law Enforcement Efforts Targeting Local Real Estate Ripoffs

In Ventura County, California, the Ventura County Star reports:

• Recording a deed of trust, lease, lien, reconveyance or other real estate transaction now will cost $10 in Ventura County.
  
  The Ventura County Board of Supervisors this week raised the fee from $3 on certain "real estate instruments" filed with the Ventura County Clerk and Recorder's Office.
  
  County officials said the fee increase will help raise funds to deter, investigate and prosecute real estate fraud. The potential revenue from the $10 fee is estimated at about $1 million a year.
  
  "Our homes are the single biggest investment in life, and (real estate fraud) is a crime that many people have suffered and will continue to suffer," County Clerk-Recorder Mark Lunn said. "I think it's a great step to move forward in terms of law enforcement."
  
  California leads the nation in residences pending foreclosure, with almost 40,000. About 2.2 million people, or one-third of all California homeowners, are "upside down" on their mortgages, or owe more than the value of their homes. Fifty percent of nonprofit housing counselors have reported that fraud is "very common."
  
  In a report to the supervisors, District Attorney Greg Totten said foreclosure rescue and related schemes are the most prevalent type of real estate fraud and that older people and those who only speak Spanish are frequently targeted.
  
  In 2005, supervisors authorized a $2 fee for recording of real estate instruments for the fraud deterrent program. The fee later was increased to $3.
  
  The District Attorney's Office also received an approximately $1.6 million federal grant providing money for two prosecutors, two investigators, a legal processing assistant and an investigative assistant for two years. In addition, the California Attorney General's Office awarded $423,573 to the District Attorney's Office.
  
  While the grant and award will temporarily fund some of the real estate fraud program's annual budget of $974,093, "It is abundantly clear that recent annual fee revenue falls well short of this mark" to address more than 100 criminal investigations pending at any time, Totten said.
  
  Assemblyman Jeff Gorell, R-Camarillo, co-authored SB 1342, which gives county supervisors in California the authority to raise real estate transaction fees to $10 to provide a consistent funding stream for law enforcement to fight real estate fraud.
  
  Some of the money also goes to the county Clerk-Recorder's Office to support fraud prevention programs. Totten said the District Attorney's Office would like to hire another investigator for the program.
  
  "Literally, tens of millions of dollars have been stolen in this county from homeowners, sellers. We're trying to do our best to end that," Totten said.
  
  State law mandates that the $10 fee return to the Board of Supervisors for an annual review. The fee does not apply to documents associated with "point of sale" or transfers, such as grant deeds.
  
  Local real estate groups, including the Ventura County Coastal Association of Realtors, support the increase.
  
  Supervisor Peter Foy said the district attorney's approach to tackling the real estate fraud problem in the county is a "model program for the entire state."

Source: County increases real estate filing fees to combat fraud.

'Borrower Fatigue' May Cause Some Homeowners To Trash Legit Bankster Loan Mod Offers; "If It Looks Too Good To Be True, It Actually Might Be True!"

In Las Vegas, Nevada, KLAS-TV Channel 8 reports:

• Some Nevada homeowners may be ignoring valid offers from banks to reduce their mortgages because of "borrower fatigue." Real estate attorneys say many Nevadans are so used to hearing no from lending banks, they might miss out on a valid offer from a bank.
  
  Charmagne Balean didn't like checking her mail for four years because it usually meant bad news from the bank. For four years, her family attempted to get their bank to agree to a loan modification. "This is my pile of hard labor and heartaches," homeowner Charmagne Balean said.
  
  This family of electrical contractors bought their home in 1999. When their bank finally agreed to cut their monthly payments nearly in half, they almost didn't believe it. "You get so confused, you don't even know what to believe, or what not to believe," Balean said.
  
  "The bank, they didn't have an answer. It was confusing at best," homeowner Mark Stuhmer said. He said the bank reduced the amount he owed on his home/office by more than $300,000. He initially thought the offer was fraudulent.
  
  "Oddly enough, today, if it looks too good to be true, it actually might be true," attorney Tisha Black said.
  
  Black deals with homeowners trying to save their homes from foreclosure. She said there are often scams targeting those desperate homeowners.
  
  "There's literally businesses that have copied the stationary of some of the big banks and offer reductions in principal or things like that if they forward some money."

For the story, see 'Borrower Fatigue' Causes Homeowners to Ignore Real Offers.

Arizona AG, Out-Of-State Law Firm Settle Suit Alleging Upfront Fee Ripoffs In Racket That Peddled Loan Mods, Legal Services To Strapped Homeowners

From the Office of the Arizona Attorney General:

• Arizona Attorney General Tom Horne has reached a settlement with The Mortgage Law Group a/k/a Macey Aleman & Searns, a Chicago-based law firm that the State accused, in a consumer fraud lawsuit, of participating in a deceptive scheme designed to collect advance fees from consumers looking for assistance in obtaining mortgage loan modifications. In nearly all cases, it is illegal for businesses to charge consumers upfront fees for loan modifications.

***

• The State alleged that, along with co-defendant, Scottsdale, Arizona- based Underwater Property Solutions, The Mortgage Law Group (“TMLG”) marketed mortgage modification services to consumers as legal services that they represented would be performed by TMLG’s attorneys, including local "partners" in the states where TMLG's clients resided.
  
  The State alleged that Underwater Property Solutions’ non-lawyer employees did nearly all of the substantive work for consumers who paid "retainer fees" to TMLG.

***

• The settlement permanently prohibits TMLG from engaging in any consumer debt or loan modification activities in Arizona or on behalf of Arizona consumers and requires TMLG to pay $39,280 in restitution and $60,000 in attorney's fees.
  
  In entering into the settlement with the State, TMLG did not admit that it violated the law nor did the court make findings that it did so. A consent judgment with co-defendant Underwater Property Solutions was approved in May, 2012.

For the Arizona AG press release, see AG Horne Announces Settlement With Law Firm That Advertised Mortgage Modification Services.