Feds Charge 2 Lawyers With Stripping Clients' Home Equity

In separate cases, two Chicago bankruptcy attorneys were accused of running sale-and-leaseback programs for financially strapped homeowners that federal authorities claim were schemes allowing the lawyers to strip and keep the equity from their clients’ homes.

As reported by Crain's Chicago Business, these defendants were 2 of 11 defendants charged in Chicago as part of Operation Truth or Consequences, a nationwide sweep run by the U.S. Department of Justice designed to crack down on bankruptcy fraud and protect the integrity of the bankruptcy system. A total of 78 defendants were charged across the nation.

According to the Justice Department's Operation Truth or Consequences Case Summaries, one of the attorney's activities was described as offering a "mortgage bailout"
program to homeowners facing foreclosure. The program allegedly consisted of transferring the properties to investors, who would then hold the properties, with the homeowners being given the chance to repurchase their homes after a predetermined period of time. The attorney allegedly also offered this "service" himself directly to clients through a separate company that he owned.

In the other case, it is alleged that the lawyer, working with a confederate who was also indicted, convinced homeowners to sell their homes to "investors" while in bankruptcy or shortly before filing. Allegedly, with the use of phony paperwork, the closings took place, the sale proceeds disbursed to the confederate and not the homeowners, and the sale and existence of the sale proceeds were concealed from the court, trustees, and creditors. The approximate amount of this fraud was $500,000.

Click here for U.S. Justice Department News Release