Foot-Dragging Mortgage Lender Yields To HOA Demand; Abandons Foreclosure On Unwanted Collateral, Releases Security Interest In Condo Unit

In Miami Beach, Florida, WFOR-TV Channel 4 reports:

• A new tactic in dealing with foreclosed condo units is being used by one attorney in South Florida. [...] Attorney Ben Solomon of the Association Law Group explained, "The bottom line is the banks don't want to assume the liability associated with the unit, including the obligation to pay maintenance assessments to the association."

• Solomon is now challenging the banks to foreclose or get out of the way. "The bank has to make a decision as to if they are going to take title to the financially upside down unit, or release their mortgage," said Solomon. He calls it a mortgage terminator.

• He demanded Citibank to foreclose on unit 14 in [one] building. Surprisingly, instead of an 18 month legal fight, Citibank wrote off the debt, and handed the title over. [...] Solomon believes this case will set a precedent for more cases. "They can't sit on the sidelines anymore. And that's this legal strategy. It's to force them into making a decision," said Solomon.

• Either way the association wins collecting dues or now title from the bank. Solomon says he plans to use this tactic on 12 more properties. It's an interesting concept. Forget foreclosure or refinance. Just ask the bank for the title. Who knows, maybe they'll give it to you.(1)

For the story, see Condos Demanding Foreclosure On Abandoned Units (Condo Associations Plagued With Abandoned Units Demanding Banks To Foreclose Or Give Up Title), (or go here for the video).

See also, Forget Short Sales, Just Hand Over Title:

• In the case of this Miami Beach condo the unit owner actually moved out in 2007 when the association foreclosed on the unit. [...] The association has waited patiently for the bank to foreclose but three years later nothing has happened. Citibank knew they were going to take a bath on the unit mortgaged at $166,000 ... Appraised today under $60k.

(1) Based on the WFOR-TV Channel 4 video report, it appears that, after waiting around for a couple of years after it took title to the unit as a result of conducting its own lien foreclosure action, the condo association filed an action to quiet title against Citibank demanding, essentially, the lender to either "fish or cut bait" with respect to its foreclosure rights (assuming, of course, Citibank had any foreclosure rights in the first place by establishing that it had legal standing to foreclose).

NY Alleged Multi-Billion $ Bogus Lien Racket Used In Intimidation, Extortion, Racket Against Local Officials, Say Plaintiffs In RICO Lawsuit

In Albany, New York, Courthouse News Service reports:

• Ulster County and three towns in New York say they're the targets of a multibillion-dollar revenge and extortion plot aimed at "disrupting the administration of local government," because a town issued two traffic tickets to the plot's alleged ringleader.

***

• The towns say the plot is revenge for two tickets that lead defendant Richard Enrique Ulloa received at a traffic stop in Rosendale, a rural town in Ulster County, in the Hudson Valley. Ulloa was sent to Ulster County Jail after failing to provide identification to Rosendale Town Justice Robert Vosper, a plaintiff in the case.(1)

• "Shortly thereafter, defendant Richard Ulloa began a pattern of harassment and attempted extortion towards plaintiffs, including, but not limited to, filing purported maritime liens and UCC statements containing fraudulent statements asserting that plaintiffs owed defendants amounts totaling several billion dollars," the complaint states. "The liens and UCC statements were not only fraud, but part of a course of intimidation by defendant Richard Ulloa" and others.(2)

***

• They demanded more than $2.8 billion from the plaintiffs through a myriad of phony criminal complaints and invoices, according to the complaint. Adding to Richard Ulloa's fury was the fact that "property owned by defendant Richard was the subject of a foreclosure proceeding venued in Ulster County," according to the complaint. "Ulloa attempted to file a purported 'deed' removing the foreclosing party's interest in his property. The Ulster County Clerk rejected the 'deed' offering."

For more, see Towns, Judges Say They're Being Extorted.

For the lawsuit, see County of Ulster, New York, et al. v. Ulloa, et al.

(1) The plaintiffs in this federal RICO lawsuit include: Ulster County, the Towns of Lloyd, Rosendale and Ulster, and 15 people, including judges, municipal attorneys, and a chief of police.

(2) Sara Ulloa, Jeffrey-Charles Burfeindt, Ed-Charles Parenteau, Raymond Tompkins, Katherine A. Cairo Davis and Kathy Steinhilber are the other defendants.

Consumer Resistance Continues To Mount Against Bill Collectors, Zombie Debt Buyers

The New York Times reports:

• Even as collectors try to recoup debts from millions of Americans struggling to pay their bills, a small but growing number of lawyers and consumers are fighting back against what they describe as harassment, unscrupulous practices — and, most important to their litigiousness, violations of the Fair Debt Collection Practices Act.

• In fact, 8,287 federal lawsuits were filed citing violations of the act in 2009, a 60 percent rise over the previous year, according to WebRecon, a site that tracks collection-related litigation and the most litigious consumers and lawyers on behalf of debt collectors.(1)

***

• Debt collectors and debt buyers are the targets of litigious consumers, since the debt collection law primarily applies to third-party collectors. Peter Barry, a Minneapolis trial lawyer, is so bullish on the future of debt collection litigation that he holds several “boot camps” each year to share his secrets with other lawyers who want in on the action. If the debtor wins a court case under the act, the debt collector must pay the lawyer’s fees.

***

• [58-year-old accountant and ex-bill collector Steven] Katz can also claim some credit for the increase in lawsuits. For six years, he has run a free Web site called Debtorboards.com, where people share tips on topics like keeping a paper trail and recording calls from collectors. He said the site received two million hits in 2009, a 60 percent increase over the previous year.

• “Debtorboards is geared to help people use the laws as they are on the books as both a shield and a sword,” said Mr. Katz, who says he has won $36,000 from his own litigation against collection agencies. (Since many of the settlements are confidential, it is difficult to prove the claims of Mr. Katz and others). Of course, debt collectors are hardly pleased with the litigation trend.

For more, see Learning How to Fight the Collector.

(1) The story points out that the U.S. Supreme Court made it even easier for consumers to use the courts to fight debt collectors, ruling that collectors cannot be shielded from suits by claiming they made a mistake in interpreting the law. See Supremes Reverse Lower Courts; Say Attorney Screw-Up When Pursuing Foreclosure Action Is Indefensible As "Bona Fide Error" Under FDCPA.

Testimony Of MERS CEO, Senior VP Available Online

Available at GetDShirtz.com are depositions of Mortgage Electronic Registration System (MERS) CEO R.K. Arnold and Senior VP and Corporate Secretary William Hultman which were taken in recent litigation, as well as a hearing transcript from Dalton et al v. Citimortgage et al. These documents may be helpful to every borrower with loans involving MERS and should pass along to their legal counsel.

Go here for the links to the above-referenced documents.

Documents available online courtesy of Mike Dillon at GetDShirtz.com.

Lender Accused Of Improper Trash-Out After Selling Former REO To Michigan Homebuyer In All-Cash Deal

In Grand Rapids, Michigan, WOOD-TV Channel 8 reports:

• A Gowen couple is filing a federal suit against Deutsche Bank National Trust Company, saying the bank not only stole their belongings, but also, their sense of security. Rick and Sherry Rought say the same bank that sold them a home for their adult daughter is breaking into the house and treating it as a foreclosure.

• The family's plan was simple. The Roughts bought the foreclosed home in cash and fixed it up, then commuted from their primary home, moving in little by little. But six months after the purchase from Deutsche Bank, things started to get complicated.

• "We just went up there one day and there was a note on the door from this company -- a trash-out company," Rick Rought said. "The doors were broken into." The defendants not only changed the locks on the home, but stole some possessions, the Roughts said. All kinds of things were taken -- from a dining room set to the American flag mounted outside the home. "We looked and the curtains were gone, then we started to panic and when we went in, there was virtually nothing left," Sherry Rought said. "Everything was swept out and gone."

• The couple got the Michigan State Police involved, but the investigation led to dead ends: unreturned messages at Deutsche Bank and a third-party company, Field Asset Services, hired by the bank to maintain the property during foreclosure. Field Asset Services broke into the home two other times, the Rought family said, treating the property as though it was still foreclosed.

For the story, see 'Bank acts like home is a foreclosure' (Gowen couple files lawsuit against Deutsche Bank).

See also, WZZM-TV Channel 13: Family's recently purchased home, gutted by property removal service:

• The Roughts are telling their story with help from Massachusetts attorney's Joseph DeMello and Carlin Phillips. "They have suffered what many people throughout the United States have been suffering and that is unconscionable conduct at the hands of these multi-billion dollar banks," says DeMello.(1)

(1) DeMello currently represents a Massachusetts couple who got similarly screwed when they bought a foreclosing lender's REO on an all-cash basis, only to have the premises trashed out shortly thereafter. See ABC News: No Mortgage, Still Foreclosed? Bank of America Sued for Seizing Wrong Homes (In the Last Four Months, Three Homeowners Have Sued Bank of America for Mistakenly Foreclosing on Their Homes).

Judge Gives Go-Ahead To F'closing Lender Despite Lack Of Conclusive Evidence Of Standing As Ch. 11 Debtors Refuse To Make Adequate Protection Payments

A recent ruling by a U.S. Bankruptcy Court in Northern California allowed for a foreclosure action to continue, despite the lenders' failure to conclusively establish that it had standing to foreclose, where a Chapter 11 debtor/couple adamantly refused to make "adequate protection payments" as apparently required by the bankruptcy law, pending full adjudication of the standing issues. In allowing the lenders to go ahead with foreclosure actions, the court made the following comments (bold text is my emphasis, not in the original text):

• In this chapter 11 case the pro se debtors have steadfastly and repeatedly resisted motions for relief from stay, while at the same time steadfastly and repeatedly refusing to make payments pending resolution of their disputes about the standing of those secured creditors to seek such relief.

• The court is sympathetic with any debtor who finds it difficult, if not sometimes seemingly impossible, to wade through the maze of transferred notes, assigned deeds of trust, ethereal beneficiaries, and information and belief allegations about what some predecessor loan servicing agent did with the original note and deed of trust.

• But it is equally unsympathetic with debtors shedding crocodile tears about making adequate protection payments while at the same time claiming all the benefits the bankruptcy law provides them. If you want to gamble in the casino and hope to hit the jackpot, you can't expect to win by using house money. You've got to put a "little skin in the game". Because these debtors have refused to do so, relief from stay could hardly be more appropriate.

For the ruling, see In Re Aniel, Bankruptcy Case No. 09-30452DM (Bankr. N.D. Cal. April 21, 2010).

(1) The court when on to give this rationale for its ruling (bold text is my emphasis, not in the original text):

• Here, Creditor has made a colorable claim that it has standing by showing that it holds the note, endorsed in blank. Debtors do not dispute that they executed the note and deed of trust which are the subject of the MRS [motion for relief from stay]. If Debtors wish to maintain the status quo pending resolution of matters that require more plenary proceedings than relief from stay motions (e.g., adversary proceedings for declaratory relief to determine the proper holder of a note; objections to the claim of the creditor; confirmation of a Chapter 11 reorganization plan that restructures the claim of the creditor, etc.), the conventional way to do so is to make adequate protection payments in the meantime.

• Because of Debtors' adamant refusal to make such payments the court is less tolerant than the Wilhelm, Jacobson, and Hwang courts in one material respect: whether debtors should provide adequate protection payments to the Creditor until the standing issues are fully adjudicated. They have not made any payment on this note (or the notes secured by the six other properties in which Debtors assert an ownership interest) in over a year while they have been in bankruptcy. They failed to make at least five prepetition payments on the note secured by the Property. They have no equity in the Property. They have used cash collateral without permission.

• Under such circumstances, justice dictates that Debtors make adequate protection payments pending resolution of the standing issues. The court will not continue the stay with all of the risk being borne by the creditor. In circumstances where there is no doubt that the Debtors signed the note that is the subject of the motion, (and, frankly, not much doubt that ultimately Creditor will be able to "connect the dots" by showing the chain of title of the note and deed of trust), denial of relief from stay when adequate protection payments could be made would be patently unfair to Creditor and impose on it all of the risk of further deterioration of its security without protection.

• Since Debtors have no inclination to make payments, it is abundantly clear that once the Creditor (and other similarly situated secured creditors on other properties of Debtors) proves its standing, Debtors will allow the Property to be foreclosed. There is simply no point in delaying the inevitable.

• Debtors were not unprotected or left without remedy if they had made the adequate protection payments as ordered by the court. As the December 31 order provides, the adequate protection payments consist of the monthly payments due under the note undisputedly executed by them, and Creditor's counsel was to hold such payments in trust pending resolution of the standing challenge. If Debtors had ultimately prevailed, the payments (plus interest) would have been returned to Debtors. Moreover, the order granting relief from the automatic stay does not preclude Debtors from challenging in state court the legitimacy of Creditor's right to foreclose.

• Debtors chose not to comply with this court's December 31 order. They chose not to make the adequate protection payments. They must accept the consequences of their decision. Under the circumstances described in this memorandum decision, the court questions whether the Debtors' challenges to standing are made in good faith. The court therefore did not and will not vacate the order granting relief from stay.

MERS "The Veiled Man Wielding The Home Foreclosure Ax" & "A Tax Evasion Broker"?

In Salt Lake County, Utah, The Salt Lake Tribune recently spotlighted Mortgage Electronic Registration Systems (MERS), a loan registry designed to save the home loan industry millions of dollars on paperwork and recording fees, and the role it plays in foreclosure actions:

• Here and nationally, the company's legal status as a party in these actions is increasingly being challenged. "This is one of the buried, yet-to-emerge bombs in the whole mortgage crisis," said Christopher Peterson, a University of Utah law professor and author of the first scholarly analysis of MERS and its legal underpinnings, to be published this spring in the University of Cincinnati Law Review. "This has the potential to fundamentally affect the trajectory of our recovery."

• MERS officials vigorously disagree, but Peterson contends the MERS system has violated a deep-seated principle of American law -- transparency in land-ownership transactions -- by effectively removing much of that information from the public record. In so doing, Peterson says, MERS also has served as "a tax evasion broker," denying counties millions of dollars in recording fees -- revenue that might otherwise have funded essential public services.

• And now, by allowing actual lenders to pursue foreclosures under MERS' name instead of their own, Peterson says the company is acting as a "foreclosure doppelganger." "Throughout history, executioners have always worn masks," the U. professor writes in his article, Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration System. "In the American mortgage lending industry, MERS has become the veiled man wielding the home foreclosure ax."

***

• Amid the current explosion in foreclosure actions across the country, courts in Nevada, Florida, Minnesota and elsewhere have upheld MERS standing as a foreclosing party. MERS also points to a 2009 federal case in Utah that affirmed its authority to exercise certain legal powers accorded to the lender, including the right to foreclose.

• But several MERS foreclosures have bogged down when parties could not produce the original loan or "blue-ink'' documents on judicial demand. In September, the Kansas Supreme Court ruling took a dim view of the idea of a "nominee'' of the lender filing foreclosures(1) -- a position that some observers see as hostile to the MERS approach.

For more, see Loan registry raises legal questions (Foreclosures: Courts, legal scholars question company's role).

(1) Landmark Nat'l Bank v. Kesler, 289 Kan. 528; 216 P.3d 158, 2009 Kan. LEXIS 834 (2009), affirming Kansas Court of Appeals in Landmark Nat'l Bank v. Kesler, 40 Kan. App. 2d 325, 192 P.3d 177, 2008 Kan. App. LEXIS 138 (2008).

Assembly Line Attorney Does "Ralph Kramden" Imitation When Judge Seeks Explanation For Bogus Affidavit Filed In Foreclosure Action

The New York Post reports:

• GMAC Mortgage got slammed by a Florida judge this month -- and that may be good news for some of the 1,234 New York homeowners hit with a foreclosure action by GMAC since the beginning of 2008.

• In that case, Judge Anthony Rondolino voided a GMAC foreclosure win after he found out legal papers filed by the company with the court to steamroll its way over homeowner Debbie Visicaro were faulty. They were filed by an employee of GMAC's law firm who had no personal knowledge of the faulty mortgage's position. In short, they were based entirely on hearsay.

• Lawyers familiar with foreclosure actions filed by law firm mills, as was done in this case, say such instances aren't rare. Visicaro, like most of the New York homeowners, at first decided to fight the foreclosure action without a lawyer. She didn't know that the law firm employee was guessing in his court papers. But Visicaro finally hired a lawyer, Michael Alex Wasylik, who pointed out the flimsy evidence to the judge who then admitted he made a mistake when he first awarded GMAC a quickie legal win.

• When the GMAC lawyer couldn't explain away the bad evidence -- and could only manage a Ralph Kramden-like(1) hamina-hamina-hamina -- the judge barked: "You're going to have to speak up. I know that when you're getting pummeled, it's hard to talk loudly."

• "You know what I'd really like to see?" Rondolino said. "I'd like to see in one of these cases where a defense lawyer cross-examines, takes a deposition of these people, and we can see whether they ought be charged with perjury for all these affidavits."

Source: Fla. judge reverses GMAC loan.

(1) For those of you out there under the age 0f 80, Ralph Kramden is a character in the 1950's TV situation comedy The Honeymooners, played by the late actor Jackie Gleason.

Oklahoma Couple Beats Off Foreclosure As Lender Fails To Produce The Note, Prove Right To Collect

In Forest Park, Oklahoma, The Oklahoman reports:

• The Rev. Horace Scott for six years struggled to keep his house from being foreclosed on. Last week he learned he won’t lose his home. When it came down to it, no one could prove who actually owned what he thought was his.

• "In the old days, you got a loan to buy your house from a nearby bank,” explained Scott’s attorney, Roland Combs. The mortgage note, or the instrument of the debt containing the payment terms and details of it, stayed with the bank along with the mortgage that is signed by the borrower and is filed with the county clerk. The mortgage secures the debt obligation with the property.

• "Then, someone on Wall Street got the idea to use those notes as securities so they could be invested,” Combs said. "Notes were sold and combined and put into a pool to invest in by investors.” And sometimes, along the way, exactly what investor or bank has the original note becomes a mystery.

***

• [L]ike so many mortgage notes pooled and used as investment vehicles, it wasn’t clear who held the original note or had a right to collect on the debt. Combs objected in court to Bank of New York’s claim that they had a connection to the Scotts’ debt because their name wasn’t on the mortgage or the note. On two occasions the bank didn’t respond to the objection. For this reason, a judge ruled the bank couldn’t collect. State law requires banks prove they have a mortgage and note together in order to foreclose on a home.

For the story, see Home loan confusion puts end to foreclosure of Oklahoma reverend (After housing bubble, toil and trouble, preacher wins).

Wells Fargo Sold Home Out From Under Me Despite Payments On Loan Modification Agreement, Says Homeowner In Lawsuit

In Las Vegas, Nevada, the Las Vegas Review Journal reports:

• When W.T. Joseph "Tyree" Brown, a 39-year-old sales manager, lost his job and tried to negotiate a home-loan modification, he became entangled in a situation as strange as science fiction, court documents suggest. Things were not as they seemed to be, according to a lawsuit filed in Clark County District Court. Brown said he now fears he will lose his home.

• In his lawsuit, Brown said he tried to negotiate a permanent loan modification with Wells Fargo Bank. But after several months of payments under a trial loan-modification program, the bank surprised him by foreclosing and selling the house to an investment company.

***

• District Judge Valerie Adair has scheduled a hearing for May 5 to consider a motion for a preliminary injunction to replace the temporary restraining order. Alternatively, she may dismiss the lawsuit.

For more, see Modification and misery: Lawsuit claims house sold from under homeowner after push to alter loan.

California Woman Cops Plea To Duping Mentally Impaired Homeowner Into Deeding Over Title To Property, Then Pocketing $336K On Subsequent Refinance

In Santa Clara County, California, the San Jose Mercury News reports:

• A San Leandro woman who defrauded a vulnerable San Jose woman by illegally refinancing her house and taking an estimated $336,000 pleaded guilty Friday to real estate fraud and grand theft charges, according to the Santa Clara County District Attorney's Office.

• Diana Marks, 45, is facing a four-year prison sentence, according to the district attorney's office. Marks was arrested in May 2009 after a concerned neighbor of the victim's tipped off the district attorney's real estate and elder-dependent adult fraud unit, which investigated the case.

• Prosecutors say Marks persuaded the woman into gift-deeding to her the title of the victim's house. The victim had suffered brain injuries from an accident years earlier and did not understand the transaction, according to prosecutors.

• Marks told the victim she was going to help her get rid of about $26,000 worth of liens levied against her home, which is valued at about $300,000. Except for the liens, the victim owned her house. After removing the liens, Marks refinanced the house and cashed out its remaining equity. Marks gained nearly $336,000, most of which was spent on her family, according to prosecutors.

• When it was time to pay the mortgage, Marks defaulted on the loan and the house went into foreclosure. The victim lost her house and all of its equity and was at risk of eviction. Marks is scheduled to be sentenced Sept. 23, when she will be ordered to pay restitution as a condition to the plea, according to the district attorney's office.(1)

Source: San Leandro woman pleads guilty to defrauding San Jose homeowner.

(1) Unwinding or undoing a scam like this requires the filing of a civil suit in which, among other things, a determination is sought as to whether the deed signed by the unwitting victim is void, or is merely voidable. See Schiavon v. Arnaudo Bros., 84 Cal. App. 4th 374; Cal.Rptr.2d 801 (Cal. App 6th Dist. 2000), for California case law that references the propositions that:

• A deed is void if the grantor's signature is forged or if the grantor is unaware of the nature of what he or she is signing. (Erickson v. Bohne, supra, "130 Cal.App.2d at pp. 555-556.)
  
  A voidable deed, on the other hand, is one where the grantor is aware of what he or she is executing, but has been induced to do so through fraudulent misrepresentations. (Fallon v. Triangle Management Services, Inc. (1985) 169 Cal.App.3d 1103, 1106 [215 Cal.Rptr. 748].) The same rules apply to the reconveyance of the property interest under a deed of trust as to the conveyance of property by grant deed. (Wutzke v. Bill Reid Painting Service, Inc. (1984) 151 Cal.App.3d 36, 43 [198 Cal.Rptr. 418] (Wutzke).)

If the deed is found to be void, a subsequent bona fide purchaser for value is not protected by the state recording statutes, in which case his/her interest is a nullity. If the deed is found to be voidable, a subsequent conveyance to a bona fide purchaser will be recognized as valid. Fallon v. Triangle Management Services, Inc. (1985) 169 Cal.App.3d 1103 [215 Cal.Rptr. 748]:

• A deed obtained as a result of fraud committed against the grantor or by use of undue influence by the grantee may be rescinded by the grantor. (Rogers v. Warden (1942) 20 Cal.2d 286 [125 P.2d 7].) If a grantor is aware that the instrument he is executing is a deed and that it will convey his title, but is induced to sign and deliver by fraudulent misrepresentations or undue influence, the deed is voidable and can be relied upon and enforced by a bona fide purchaser. (Peterson v. Peterson (1946) 74 Cal.App.2d 312 [168 P.2d 474]; Conklin v. Benson (1911) 159 Cal. 785 [116 P. 34].)

• In Conn. Life Ins. Co. v. McCormick (1873) 45 Cal. 580, the Supreme Court held a deed voidable, not void, if obtained as a result of undue influence or compulsion. Such a deed "stands on the same footing as a deed procured by fraud." The court concluded that a deed or mortgage procured by duress cannot be set aside as against a party purchasing in ignorance of the facts constituting the duress, that is to say as against a purchaser for a valuable consideration and without notice of the duress. Until a voidable deed is declared void it is fully operative. (Frink v. Roe (1886) 70 Cal. 296 [11 P. 820].) Civil Code section 1107 provides: "Every grant of an estate in real property is conclusive against the grantor, also against everyone subsequently claiming under him, except a purchaser or incumbrancer who in good faith and for a valuable consideration acquires a title or lien by an instrument that is first duly recorded."

For more, see Unwinding An Abusive Or Fraudulent Real Estate Transaction? Determining If The Deed Is Void, Or Merely Voidable.

Rent Skimming Scam Stings Would-Be Buyer Of Elder Care Home Under Lease-Purchase Deal With Owner; Leaves Unwitting Seniors Facing The Boot

In Northern California, The New York Times reports:

• Sometimes even the licensed administrators managing an elder care home have been blindsided by an eviction notice resulting from a mortgage default. Inocencia Arindaeng, the administrator of a facility in Walnut Creek, Calif., has said in court documents that this happened to her.

• She had signed a “lease to purchase” agreement with the owner of the property in 2007, according to court records, and diligently paid her monthly rent to the owner while caring for her elderly charges, who range in age from 86 to 97. The complaint said the owner did not use Ms. Arindaeng’s money to pay the mortgage. Ms. Arindaeng did not know the extent of the financial mess she was in until she and the elderly tenants she cared for received an eviction notice on March 18, 2009.

Source: Elder-Care Home Foreclosures, Without Warning.

Underwater Homeowner Uses Short Sale, Leaseback Deal To Shed Onerous Bank Debt While Retaining Possession Of Property & Future Right To Repurchase

In Akron, Ohio, WKYC-TV Channel 3 reports:

• Dave Droge had few options when he lost his job in 2008. So he took a chance, a risk that not only kept his family from losing its home to foreclosure but also helped reduce a mammoth debt he likely never would pay off. "I had to either refinance or sell the home or I'd lose it," he said.

• Droge applied for help with American Homeowner Preservation (AHP), a private group that came to Akron 18 months ago offering to help whose mortgages were under water -- owing more than their homes were worth -- a chance to reduce their debt. AHP's plan, which was called too risky by Summit County leaders and others,(1) allowed the group to negotiate a buyout of underwater mortgages with a written commitment to sell the home back to home owner at a reduced rate within five years.

• Droge owed nearly $200,000 on his home, valued at just $160,000. After taking a risk with the AHP program, Droge's home recently closed on a short sale at $51,000. While it's now owned by a private investor, the home is under contract that allows Droge to buy it back within five years at a cost of $59-65,000, less than a third of what he once owed.

For more, see Akron man takes chance, saves home from foreclosure.

(1) Presumably, the plan was considered risky because lenders who OK short sales combined with a leaseback and buyback option are probably doing so unwittingly, being kept in the dark about the short sellers' continuing possession of the premises, and their retention of an option to buy back the home in the future at an amount significantly lower than what the lender is owed. Failure to fully disclose any contemporaneous side deals to the lender/loan servicer approving the short sale, or any lender financing the short sale, could land the participants in these deals in hot water. See:

• U.S. Attorney (Bridgeport, Connecticut) press release: Two Connecticut Real Estate Agents Charged with Engaging In Short Sale Mortgage Fraud Schemes (Feds indict two in alleged short sale flipping scam using straw buyers to dupe lenders into accepting less than full payment on underwater loans),
• U.S. Attorney (Manhattan/NYC) press release: Four Indicted In $3 Million Mortgage Fraud And Foreclosure Rescue Scheme (Feds describe short sale flipping deals and sale leaseback foreclosure rescue arrangements in one recent indictment of ten suspects; for the indictment, see U.S. v. Bills, et al.),
• U.S. Attorney (Phoenix, Arizona) press release: Foreclosure-Rescue Schemers Indicted (Feds indict pair in alleged scheme abusing HUD "short sale" program to pocket illegal profits by flipping homes facing foreclosure).

See also, The Stockton Record: Home program savior or sketchy? (Buyback investor deals risky, some experts say).

Jury Convicts POA Abuser Of Ripping Off 89-Year Old Woman; Care Home Staff's Suspicions Raised After Scammer Put Victim's £300,000 Home Up For Sale

In Exeter, Devon (UK), the Herald Express reports:

• A "greedy" 67-year-old man has been found guilty of defrauding his elderly neighbour out of £40,000. Robert Cole, of Ilsham Marine Drive, Torquay, abused his position as power of attorney over the affairs of Hilda Falk, a jury at Exeter Crown Court found. Cole denied one charge of fraud but the jury returned a unanimous verdict. [...] The verdict brought to an end a five-day trial during which the court was told that Cole had gained control over his neighbour's financial affairs and then exploited that to pay for his failing business.

***

• Suspicions were only raised after Mrs Falk had moved into residential care at Sundial Care Home in Torquay. Staff were puzzled by her diminishing financial assets. Cole put her house on the market and changed the locks.(1) Speaking during a police interview in 2008, Mrs Falk, who has since died, said: "I thought I could trust him but I found I couldn't."

For the story, see Greed 'overcame' man who took £40,000 from elderly neighbour.

(1) See: Man 'put home of neighbour up for sale':

• [Robert Cole] stole £42,000 from his elderly neighbour to pay for his mortgage and failing business[, ... ] then put the 89-year-old's £300,000 house on the market and attempted to auction her belongings when she went into a care home 'with eyes on the main prize', the jury has heard on the first day of his trial for fraud.

Renters Say "You Lend It, You Mend It!" As Lawyers Cite NY Legal Precedent In Attempt To Hold Banks Responsible For Repairing Property In Legal Limbo

In New York City, the Daily News reports:

• Thousands of city tenants living in foreclosed apartment buildings - many with deteriorating conditions - saw a glimmer of hope Wednesday. Lawyers for Legal Service NYC filed a motion in Bronx Supreme Court that would force banks foreclosing on a property to maintain the building's upkeep while the case is pending.

• A foreclosure, especially a contested one, could drag on for years, leaving the building without a tangible owner to make repairs for some things as simple as a runny faucet or as serious as toxic mold. "As complicated as this problem is, we're not going to take it lying down," said City Council Speaker Christine Quinn (D-Manhattan), who was involved in forming a city task force on financially distressed rental housing last year. "We will go building by building. This is a message to lenders that they will be held accountable," Quinn said.

• The judge hearing the case, Justice Stanley Green, will not likely rule on the motion for several weeks. There is legal precedent for the motion, said Legal Services lawyers citing a 1997 New York State appellate court ruling that a bank is responsible for maintaining a property during a foreclosure proceeding.

• About a year ago, banking behemoth Wells Fargo foreclosed on 10 properties in the Bronx owned by Los Angeles-based Milbank Real Estate. Since then, the buildings have been languishing in legal limbo, no longer owned by Milbank, but not yet definitively awarded by a judge to Wells Fargo.

For more, see Judge to rule on maintenance resposibility for foreclosing properties.

See also, The New York Times: Bid to Make Banks Fix Crumbling Bronx Properties (Housing advocates estimate that 4,700 apartments in dozens of buildings across New York City are in foreclosure, and that about 110,000 apartments are at risk).

California State Pension Plan To Cease Predatory Equity Real Estate Investments After Writing Off Million$ In Soured Deals

In Sacramento, California, Bloomberg News reports:

• The California Public Employees’ Retirement System, the largest U.S. public pension, said it will stop investing in real-estate projects that would eliminate rent-regulated apartments, such as New York City’s Stuyvesant Town-Peter Cooper Village. [...] The new policy states that Calpers cannot invest in projects that would eliminate rent-controlled apartments or convert them to market rates.

• Calpers wrote off a $500 million investment with Tishman Speyer Properties LP and BlackRock Inc. after the partnership’s plan to raise rents at Manhattan’s largest apartment complex failed to generate enough income to pay the $3 billion mortgage. The group paid $5.4 billion for Stuyvesant Town-Peter Cooper Village in 2006. The policy change is intended to head off a more restrictive proposal making its way through the California Legislature. That bill might prevent the fund from investing in affordable housing projects, said Brad Pacheco, a Calpers spokesman. Tenant-rights advocates sought the change after Calpers invested $100 million in a project in East Palo Alto, a low-income city in Silicon Valley. Tenants there complained to the Calpers board that if vacancy rates increase enough, the owners would be allowed to end rent-control rules.

Source: Calpers’ Board Approves Policy Shift to Protect Rent Control.

Cops Search For KC Woman Accused Of Forging Elderly Alzheimer's Victim's Signature To Pocket Reverse Mortgage Proceeds

In Kansas Ciy, Missouri, The Associated Press reports:

• A Kansas City woman is accused of using an 89-year-old neighbor with Alzheimer's disease to obtain a reverse-mortgage loan of more than $64,000. Jackson County prosecutors on Thursday announced charges against 55-year-old Marilyn James, including financial exploitation of an elder/disabled person and two counts of forgery.

• James is accused of forging David Cecil's signature to get a $9,000 loan from his life insurance policy. Officials say she also deeded a house that she had inherited over to Cecil, then forged his signature to take out a $64,445 reverse-mortgage loan on the property. Prosecutor Jim Kanatzar says James kept the money from the loan and now Cecil is liable for repayment. The house is in foreclosure and James is still at large.

Source: KC woman accused of using elderly neighbor to land fraudulent reverse-mortgage loan.

Houston Woman Says Lender Foreclosed On Her Twice By Mistake

In Houston, Texas, KVUE-TV reports:

• A Houston woman says Wells Fargo sold her home through foreclosure by mistake last summer, quickly corrected the error, then did the same thing again. Debra Cannon's story began with a divorce in 2007 when she fell behind on her payments and threats of foreclosure followed.

• "In August of 2009 they foreclosed on my home," she said. Cannon says she was in the process of working out a deal with her mortgage holder, Wells Fargo. But she says it was foreclosed on anyway. "They never really said, but it was an error due to Wells Fargo, and they did rescind -- they gave the money back to the man who bought the home," Cannon said.

• Cannon's relief was short lived. The foreclosure process began again -- but this time, she thought she had reached an agreement for loan modification and that ended with a knock at the door. "A gentleman came by and told me my home was foreclosed on and gave me a letter demanding I get out," she said.

• On April 6, Wells Fargo sold her home again through foreclosure. She said she was never notified and has a letter from the bank dated the same day of the foreclosure that states "a system error caused her to be deemed ineligible for the loan modification." "I didn't understand, after Wells Fargo told me everything was fine … I didn't understand it," she said.

For more, see Bank forecloses on woman's home twice.

Homeowner/Couple Say They Owe $20K+ Over $50 Ticket For Texas HOA's Rules Infraction

In Austin, Texas, The Dallas Morning News reports:

• Lawmakers say they have tried to write laws in recent years to prevent homeowners associations from gouging and abusing property owners, but more might need to be done. On Monday, outraged homeowners told a House panel they've been threatened with huge fines and possible foreclosure for what they described as minor infractions of association rules.

• A Houston couple may wind up having to pay more than $20,000 after a feud over a $50 ticket for having gray – instead of black – tape on exterior water lines, leaders of a property owners' rights group told the House Business and Industry Committee. "That was clearly, if it's true, the most egregious thing we heard today," said Rep. Gary Elkins, R-Houston, the panel's vice chairman.

For more, see Outraged homeowners detail HOA fines, foreclosure threats to Austin lawmakers.

Virginia Woman Loses Chance To "Buy Down" Felony Conviction By Failing To Return Entire Ripoff Proceeds To Elderly Victim

In Spotsylvania County, Virginia, The Free Lance Star reports:

• A woman who stole more than $188,000 from an elderly Spotsylvania County woman officially became a felon yesterday. Jerriett A. Bennett, 56, has repaid $143,000, Commonwealth's Attorney Bill Neely said, but so far has been unable to come up with the rest of the money.

• Bennett entered a conditional guilty plea last year in which her embezzlement conviction was deferred in order to give her a chance to repay the money. According to the agreement, if she repaid the whole amount, she would have been convicted of a misdemeanor and gotten a suspended 12-month jail sentence. If not, she'd get the felony conviction and a suspended five-year prison term. Neely said Bennett still has to repay the rest of the money or face the possibility of serving prison time.

• According to the evidence, Bennett stole the money from Maude Scott, a longtime county resident, between October 2007 and April 2008. [...] On Oct. 19, 2007, Scott signed a [] power of attorney giving Bennett control of her affairs. [...] Court records show that Bennett proceeded to cash large annuities belonging to Scott. The money was supposed to provide for Scott's care, and Scott told police she never gave permission for Bennett to spend it.(1)

For the story, see Spotsylvania woman declared a felon in embezzlement case (Woman formally convicted in $188,000 heist; gets suspended sentence).

(1) Reportedly, Bennett's attorney, Claire Caldwell, tried to have Scott declared unfit to testify because of her mental slippage. Neely acknowledged he would have had no case against Bennett had the effort succeeded. But Judge David Beck ruled that Scott could testify and said it would be up to the jury to determine her credibility.

Pressure From State AG Leads Oregon Man To Cough Up Cash To Settle Complaints From Homeowners In Lopsided Sale Leaseback Arrangements

In Portland, Oregon, KATU-TV Channel 2 reports:

• Thousands of dollars have been returned to families that Oregon’s attorney general said were hurt in a scam that promised to save their houses from foreclosure, but the man who had to refund the money said he has done nothing wrong. Scott Barnes, a former lease/buyback plan agent, said the homeowners knew exactly what they were getting into – selling their homes and leasing them back with an option to buy them back someday, but Attorney General John Kroger said the case shows how difficult foreclosure rescue schemes are to understand for people in desperate situations.

• One woman, who declined to be identified, said it was “a total shock, because I wasn’t expecting (the money to be returned).” She got a $4,000 check from Barnes as restitution. Kroger said he promised to help people save their homes through the lease buy-back plan, which he said was too lopsided against the families.

For the story, see Man pays back homeowners in loan modification case.

(1) “(They) were in danger of losing their homes to foreclosure and entered into an agreement that they believed would give them a little bit of time to get their financial house in order; instead, it resulted in them having a real risk of losing their home and not be able to get it back,” AG Kroger reportedly said. Barnes said he wrote another $4,000 check to a second family but said he only settled the case because it was cheaper than fighting the attorney general, according to the story.

S. Calif. Man Suspected Of Openly Hijacking Title To Vacant Homes & Renting Them Out, Leaving Owners Frustrated, Neighbors Rattled, Cops Flat-Footed

In Southern California, The Orange County Register reports:

• California's foreclosure crisis has spawned an unusual operation by a bankrupt Orange County businessman who takes control of vacant homes and rents them out, according to police, property records and neighbors.

• From an office at an Anaheim massage clinic, Blair Hanloh has recorded deeds on at least 12 vacant houses in Southern California that he does not own. Property records show no evidence that the owners deeded interest to him—and five owners interviewed by The Orange County Register said that they had not.

• Hanloh uses his deeds, to homes in Orange, Los Angeles, San Bernardino and San Diego counties, to line up tenants and to placate police, who are inevitably called by neighbors to oust new residents they believe to be squatters. (Click to learn more about the properties.)

• Hanloh's scheme has rattled neighbors, befuddled police and frustrated the properties' real owners – who say they must spend thousands of dollars in legal fees to evict the tenants.(1)

For more, see Owners say they lost vacant homes to 'renters'.

See also, D.A. to examine vacant home scheme:

• Orange County prosecutors have begun examining the law behind an unusual Southern California scheme in which an Anaheim businessman deeds vacant homes to himself and then installs renters. The District Attorney's fraud unit is working with Orange County Recorder Tom Daly to gather information about the operation by Anaheim businessman Blair Hanloh, officials said.

(1) According to the story, Hanloh twice declined comment, saying only that he is doing everything legally. "I will tell you that what I do is fight the banks," Hanloh reportedly said. Reportedly, the Orange County Sheriff's Department and Anaheim police say they are investigating. "We're getting an education, just like you are," said sheriff's Lt. Mark Levy, who oversees police services in Dana Point. "These quitclaim deeds, if misused, certainly muddy the water." Hanloh's official-looking paperwork has reportedly kept police officers from immediately taking action.

The story states that Hanloh's scheme appears similar to one in Pasco County, Fla., where a man took over 72 homes under a law called "adverse possession," renting out half of them, according to published reports. He was arrested in February on fraud charges. See C. Fla. Man Claims "Adverse Possession" Defense After Arrest On Home Hijacking Charges; Swiped 72 Houses, Rented Out 31 To Unwitting Tenants, Say Cops.

Upstate New York Man Charged With Using Forged Documents To Steal Dead Mom's Home & Rip Off His Six Siblings

In Washington County, New York, The Post Star reports:

• A former Whitehall police dispatcher has been indicted on five criminal charges that accuse him of cheating his siblings out of a Whitehall home after their mother died. John Dalton, 50, [...] is accused of filing a will and property deed with forged signatures of his mother that allowed him to take ownership of her West Street home, worth an estimated $70,000.

• State Police said Dalton’s six grown siblings were denied their rightful inheritance by the forgeries. Dalton faces felony counts of grand larceny and criminal possession of a forged instrument and misdemeanor counts of offering a false instrument for filing in the indictment handed up recently in Washington County Court.

For more, see Police: Man tried to steal home.

LA Real Estate Broker Cops Plea To Use Of Forged Documents In Deed Theft Scam

In Los Angeles, California, the Los Angeles Times reports:

• A former Los Angeles firefighter who also worked as a real estate broker pleaded no contest [] to more than a dozen felony counts in connection with a real-estate fraud scheme, authorities said. Brent Lamont Mathews, 43, pleaded no context to six counts of forgery, three counts of recording a false or fraudulent instrument and four counts of grand theft, the Los Angeles County district attorney's office said. He also admitted two special allegations of taking more than $500,000.(1)

***

• Mathews allegedly put his name on the title of a Hacienda Heights property without the owner's knowledge or consent through a series of forgeries and false filings, prosecutors said. He also allegedly went on to defraud two investors after recruiting them as partners to "flip" the house, the district attorney's office said. The two victims lost $146,000 in the deal, prosecutors said Mathews resigned from the Los Angeles Fire Department in December 2009 in lieu of discharge, according to the district attorney.

Source: Former L.A. firefighter pleads no contest in real-estate scheme.

(1) Acording to the story, Mathew’s girlfriend at the time, Joi Rochelle Smith, 34, was a notary public and part-time real estate broker who was also charged by authorities. In February, she pleaded no contest to one count of recording a false or fraudulent instrument, the district attorney said. Smith was sentenced to three years of formal probation and 52 days of community service, the story states.

Another Florida Judicial Rubber-Stamper Reversed On Appeal As Foreclosing Lender Fails To Conclusively Establish Standing To Sue

In West Palm Beach, Florida, a unanimous, 3-judge panel of Florida's 4th District Court of Appeal recently reversed a Broward County trial judge that rubber-stamped a summary judgment of foreclosure in favor of a lender that failed to conclusively establish that it had standing to sue (bold text is my emphasis, not in the original text):

• Aurora Loan Services, LLC, filed a mortgage foreclosure action against Jerry Riggs, Sr., alleging that it was the "owner and holder" of the underlying promissory note. Aurora filed a copy of the mortgage and a copy of the promissory note, which named Riggs as the mortgagor and First Mangus Financial Corporation as the mortgagee. The promissory note reflected an "endorsement in blank," which is a stamp with a blank line where the name of the assignee could be filled in above a pre-printed line naming First Mangus. Aurora moved for summary judgment, and, at the hearing, produced the original mortgage and promissory note reflecting the original endorsement in blank. The trial court granted summary judgment in favor of Aurora over Riggs' objections that Aurora's status as lawful "owner and holder" of the note was not conclusively established by the record evidence. We agree with Riggs and reverse the summary judgment.

• The Second District confronted a similar situation in BAC Funding Consortium, Inc. ISAOA/ATIMA v. Jean-Jacques, 28 So. 3d 936 (Fla. 2d DCA 2010), when the trial court granted alleged assignee U.S. Bank's motion for summary judgment. In order to establish its standing to foreclose, U.S. Bank filed an assignment of mortgage, which, as described, is comparable to the endorsement in blank in the instant case. Id. at 937.

• That court reversed because, inter alia, "[t]he incomplete, unsigned, and unauthenticated assignment attached as an exhibit to U.S. Bank's response to BAC's motion to dismiss did not constitute admissible evidence establishing U.S. Bank's standing to foreclose the note and mortgage." Id. at 939. The court in BAC Funding Consortium, properly noted that U.S. Bank was "required to prove that it validly held the note and mortgage it sought to foreclose." Id.

• In the instant case, the endorsement in blank is unsigned and unauthenticated, creating a genuine issue of material fact as to whether Aurora is the lawful owner and holder of the note and/or mortgage. As in BAC Funding Consortium, there are no supporting affidavits or deposition testimony in the record to establish that Aurora validly owns and holds the note and mortgage, no evidence of an assignment to Aurora, no proof of purchase of the debt nor any other evidence of an effective transfer. Thus, we reverse the summary judgment and remand for further proceedings. We find no merit in any of the other arguments raised on appeal.
  
  Reversed and remanded.
  GROSS, C.J., and POLEN, J., concur.

For the ruling, see Riggs v. Aurora Loan Services, LLC, 4D08-4635, (Fla. 4th DCA, April 21, 2010).

Supremes Reverse Lower Courts; Say Attorney Screw-Up When Pursuing Foreclosure Action Is Indefensible As "Bona Fide Error" Under FDCPA

In Washington, D.C., Courthouse News Service reports:

• Attorneys cannot hide behind an honest mistake should they violate federal debt-collection laws when chasing down debt, the Supreme Court ruled Tuesday. The ruling comes after the law firm of Carlisle, McNellie, Rini, Kramer & Ulrich filed suit in Ohio state court in 2006 on behalf of Countrywide Home Loans to foreclose on the mortgage for property owned by Karen Jerman. The lawsuit included a notice that the mortgage debt would be assumed valid unless Jerman disputed it in writing. Jerman's attorney sent a letter disputing the debt, and Countrywide confirmed that the debt had been paid in full.

• The law firm withdrew its foreclosure lawsuit. Jerman fired back with a lawsuit, seeking class certification and damages for violating the Fair Debt Collection Practices Act. She contended that the firm broke the law by stating that her debt would be assumed valid unless she disputed it in writing.(1) The district court found that the woman's rights had been violated, but concluded that the law firm was shielded from liability because the violation was not intentional and "resulted from a bona fide error. The 6th Circuit found that the fair-debt law extends to "mistakes of the law."

• In writing the decision, Justice Sonia Sotomayor said the court declines "to adopt the expansive reading" of the law. "We have long recognized the 'common maximum, familiar to all minds, that ignorance of the law will not excuse any persons, either civilly or criminally.'"

For the story, see Ignorance Still No Defense, Court Says.

See also, The Wall Street Journal: Debt Collectors Can Face Lawsuits for Mistakes, Court Says.

For the ruling, see Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, 08-1200 (April 21, 2010).

For earlier post, and links to all the briefs, see Supremes To Decide Whether Attorney Screw-Up When Pursuing Foreclosure Action Is Defensible As "Bona Fide Error" Under FDCPA.

(1) The consumer alleged the defendant violated the FDCPA because it compelled consumers to dispute the debt in writing when the FDCPA imposes no such requirement. See 15 USC 1692g(a)(3). The FDCPA states simply that if the consumer dipsutes the debt in writing, such written dispute operates to impose certain legal obligations on the creditor. See 15 USC 1692g(a)(4),(5); 15 USC 1692(g)(b). The consumer is always free to dispute the debt orally. Such oral dispute, however, will not impose those legal obligations on the creditor that a written dispute imposes.

Pair To Get Probation In Foreclosure Rescue Scam That Duped 22 Victims Into Signing Over Title To 34 Properties Into Fraudulent Trusts

In San Diego, California, San Diego News Network reports:

• A husband and wife who assisted others in a Ponzi scheme aimed at San Diego Filipinos struggling to make their mortgage payments pleaded guilty [] to felony charges. Ben Hebron, 51, and Gloria Hebron, 53, will be placed on probation and be required to give up their real estate licenses when they are sentenced May 20, said Deputy District Attorney William La Fond. [...] The couple pleaded guilty to three counts each of deceitful practices by a foreclosure consultant and two counts each of rent skimming, La Fond said.(1)

***

• During the scam, 22 people “quitclaimed” 34 properties into various fraudulent trusts owned by [Edmundo] Rubi and administered by the Hebrons, the prosecutor said.

For the story, see Couple pleads guilty in Filipino Ponzi scheme.

(1) According to the story, they were indicted in January along with co-defendants Edmundo Rubi and Joseph Encarnacion. Encarnacion, 60, pleaded guilty to helping the scheme’s alleged ringleader, Rubi, by recruiting victims and assisting in a presentation in which the victims were encouraged to transfer titles to their real estate to the defendants, La Fond said. Encarnacion was sentenced to four years in prison and Rubi is scheduled for a mental competency hearing next month. Filipinos in San Diego were urged to invest in companies called “Apocalypse Trust” and “Amerisian Trust,” the prosecutor said. At the time he was indicted, Rubi had just gotten out of prison after serving a 70 month federal sentence for swindling $24 million out of 425 mostly Filipino victims in 2005, La Fond said.

Foreclosure Volume May "Encourage" Sloppiness, Boilerplate Paperwork Or A Lack Of Thoroughness;" Makes Process "Fraught With Potential For Fraud"

A recent story in The Wall Street Journal serves as another reminder of the problems inherent with mortgage lenders' use of assembly line law firms to prosecute foreclosure actions:

• [A] Florida ruling against U.S. Bank was also a critique of law firms that handle foreclosure cases on behalf of banks, dubbed "foreclosure mills." Lawyers operating foreclosure mills often are paid based on the volume of cases they complete. Some receive $1,000 per case, court records show. Firms compete for business in part based on how quickly they can foreclose. The David Stern firm had about 900 employees as of last year, court records show.

• "The pure volume of foreclosures has a tendency perhaps to encourage sloppiness, boilerplate paperwork or a lack of thoroughness" by attorneys for banks, said Judge [Lynn] Tepper of Florida, in an interview. The deluge of foreclosures makes the process "fraught with potential for fraud," she said.

Source: Judge Bashes Bank in Foreclosure Case.

Paralegal Admits Guilt In $2.6M Client Ripoff; Trust Account Looted, Chronic Care Patient Left Broke, On Public Dole; Pair Lost Entire Inheritance

In Hamilton, Ontario, The Hamilton Spectator reports:

• A crooked paralegal with an admitted gambling problem admits to siphoning more $2.6 million from unsuspecting clients, while masquerading as a bona fide lawyer. Shellee Spinks, 47, pleaded guilty to 16 criminal charges yesterday, including one of theft by power of attorney, 12 counts of theft by conversion, and one each of perjury, obstruction of justice and uttering a forged document.

***

• Superior Court Justice Barry Matheson heard that between September 2002 and February 2008, Spinks was employed as a paralegal by Hamilton lawyer Michael Puskas. Much of her work involved completing real estate transactions for her employer, along with various accounting responsibilities.

• Puskas maintained a bank account at TD Canada Trust in which mortgage funds were held in trust for real estate clients in the process of buying and selling properties. At the same time, Spinks controlled another account with the bank that was for her personal use and into which she regularly transferred large sums of money from the law firm's legitimate trust account. Total losses to real estate clients from these type of thefts amounted to $926,000.

• Between October 2002 and February 2008, Spinks held power of attorney for an 81-year-old woman in a nursing home. Spinks stole an estimated $200,000 and left the chronic-care patient destitute and on public assistance.

• In March 2006, Spinks forged the last will and testament of an Ancaster man, which named herself as the executor and trustee of his estate. The bogus will directed that his estate should pass to Spinks, and absent that, to the man's two sisters. The man died on Sept. 26, 2006. At the time of his death, he owned a property on Glancaster Road and had about $400,000 in investment securities.

• In December that year, Spinks and one of the sisters sold the Glancaster Road property. After adjustments and fees, the balance of nearly $950,000 was to have been deposited into an account in trust for the man's estate. Instead, Spinks deposited the cheque into her private account. When his family questioned why the estate was taking so long to disburse, Spinks told another lie. She said a former employee had come forward with a new will, naming himself executor and this was causing complications and delay. In the end, Spinks also cashed out the deceased man's securities and ended up cheating his sisters out of their entire $1.4 million inheritance.

• Crown counsel Tracey Stapleton said documents obtained from the Ontario Lottery and Gaming Corporation and internet gambling records revealed that most of the $2.6 million was gambled away by Spinks, except for $700,000, which was transferred to a company called The Broker's Room.

Source: Legal assistant bilked millions (Woman pleads guilty to 16 charges).