NYC Judiciary Kiboshes 'Honor System' Method Of Oversight In Connection With Attorneys Acting As Court-Appointed Foreclosure Referees & Their Handling Of Proceeds From Public Sales; Recently-Discovered Surplus Snatching Scandal Where Lawyer/Politician Allegedly Used Unclaimed Funds As Campaign Piggy Bank Triggers Reform

In Brooklyn, New York, the New York Post reports:

• State Sen. John Sampson’s alleged embezzlement scheme has sparked specific reform in how city courts handle foreclosure suits, The Post has learned.
  
  The Brooklyn Democrat was indicted last month for allegedly looting $440,000 from four foreclosure accounts he had been appointed to safeguard.
  
  Officials say the alleged scam was aided by a total lack of supervision over the cash raised by the auction of foreclosed properties. “Because of the Sampson situation, we realized we had no way to check up if the referee was complying with the law,” said Lawrence Knipel, the Brooklyn Supreme Court administrative judge for civil matters. “We weren’t double-checking.”
  
  Under the new rule, judges must confirm that money from foreclosure auctions is properly deposited with the clerk and not pocketed by crooked lawyers.
  
  The oversight began about two weeks ago. Similar monitors will be instated in the other boroughs. “Very shortly, this will be administered citywide,” Knipel said.
  
  The reform could also have been accomplished with a change to the statewide law, but it was unclear how long that would take or whether it would ever happen, a court source said.
  
  Civil judges assign attorneys, or “referees,” who are paid $500 to oversee the auction of a foreclosed property, pay off the mortgage and return any leftover money to the homeowner.
  
  Until the recent reform, there wasn’t any mechanism that checked for excess money that should be returned to the homeowner, which allowed crooks to make off with the dough. But now when the winning bid exceeds the amount owed on the house, the clerk will alert the judge and it will be the judge’s responsibility to check 60 days after the auction whether the money was properly deposited, Knipel said.
  
  In a bizarre coincidence, in 2001 Knipel assigned Sampson a Windsor Terrace property that the politician allegedly used as a piggy  bank. Prosecutors say Sampson, 47, used the money to finance his failed 2005 bid for Brooklyn district attorney. Sampson has pleaded not guilty to the embezzlement charges.

Source: Sen. Sampson’s embezzlement indictment spurs reform in foreclosure suits .