Closing Agent Gets 35 Months In $777K Ponzi-Style Escrow Ripoff; Feds Credit 'Katrina' For Foiling Scam; Restitution To Title Underwriter Ordered

In New Orleans, Louisiana, The Times Picayune reports:

• Hubert Ellzey Jr. secretly bilked clients out of $777,000 before Hurricane Katrina put an end to his scheme. When the storm hit Aug. 29, 2005, all real estate closings in the New Orleans area halted for a time, upsetting the Metairie title agent's practice of converting clients' mortgage money to his personal use then covering the misappropriation with money from future mortgage payments.(1) As a result, he pleaded guilty Sept. 23 to wire fraud, and U.S. District Judge Eldon Fallon sentenced him Thursday to almost three years in prison. Ellzey, 68, worked nine years as an independent agent for Commonwealth Land Title Insurance Co.

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• "The scheme was discovered when, after Hurricane Katrina hit New Orleans ... all closings came to a halt and Ellzey was unable to cover some of the funds converted to his own use and to close the pending mortgages," said a statement from the U.S. attorney's office. [... Judge Eldon] Fallon [...] sentenced Ellzey to 35 months in prison, followed by three years' probation. He also ordered restitution to Commonwealth.

For the story, see Metairie title agent imprisoned for $777,000 wire fraud.

(1) Go here for a description of the mechanics of the swindle on the six specific deals involved in this prosecution.