Wednesday, November 11, 2015

Use Of LLC Secrecy Plays Key Part In Proliferation Of Snatch & Flip Home Hijacking Rackets Throughout NYC

In New York City, The New York Times reports:
  • [I]n Bedford-Stuyvesant and other pockets of the city, white-collar criminals are employing a variety of schemes to snatch properties from their owners. Often, they use the secrecy afforded to shell companies to rent out vacated properties until they are caught or sell them to third parties. Victims are left groping for redress, unable to identify their predators or even, in some cases, to prove a crime has been committed.

    Attention lately has focused on the growing use of shell companies to buy prized real estate in Manhattan and other glittering destinations for global wealth. But the stealthy practice of deed theft illustrates another way that limited liability company law used to create such entities has been twisted and stretched to conceal the ownership of real estate. This is particularly true in Brooklyn neighborhoods where profits in the hundreds of thousands of dollars from quick turnaround sales have become common.

    “Sham LLCs are a huge problem in terms of their lack of transparency, in terms of who is behind the property and who is behind these schemes,” said Jennifer Sinton, a lawyer with South Brooklyn Legal Services, which is representing [one victimized homeowner] in an effort to reclaim her home.

    A review by The New York Times of several dozen cases, and interviews with lawyers, prosecutors and others knowledgeable about fraudulent deed transfers, suggests they are accelerating even as officials struggle to address them. The city’s Department of Finance said it was investigating 120 cases, many of them hard to crack because of the role played by LLCs, officials said. Underscoring the rising alarm over the problem, the state attorney general, Eric T. Schneiderman, and the Brooklyn borough president, Eric L. Adams, held a forum last month to warn property owners about it.

    Deed thieves often scan legal notices for mortgages in arrears, typically targeting properties like Ms. Campbell’s that are in poor repair or abandoned. Vulnerable homeowners — including older and disabled adults — are sometimes tricked into signing over their properties, while believing they are getting financial relief.

    In other cases, signatures are simply forged on deeds. The thieves, meanwhile, hide behind inscrutable mazes of limited liability companies, rented post office boxes and fake addresses.

    Coming amid waves of gentrification, the reports of deed theft have helped feed the unease felt in neighborhoods where longtime residents — blacks and Hispanics, the poor and middle class — are increasingly being priced out. A report last year by the Lawyers’ Committee for Civil Rights Under Law and the Center for NYC Neighborhoods found that the schemes disproportionately affected black and Hispanic homeowners.

    When LLCs are taken to court, those behind them often remain a step ahead — and impossible to find. “They’re shell companies,” said Jomo Gamal Thomas, a lawyer who has represented several deed fraud victims. “There’s no guarantee you’ll get your money back.”

    Some schemes are particularly brazen, with thieves forging homeowners’ signatures and filing fraudulent deeds with the city to register transfers. Among the telltale signs of forgery, according to Toby M. Cohen, a Brooklyn lawyer who has represented clients attempting to reclaim stolen properties: “a deed transferred for no consideration to an LLC or a corporation and scribbled signatures you can’t read.”
For more, see Real Estate Shell Companies Scheme to Defraud Owners Out of Their Homes (Relying on the secrecy of limited liability companies, white-collar thieves are targeting pockets of New York City for fraudulent deed transfers, leaving the victims groping for redress).

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