After Spending 30 Days In Jail Under Civil Order For Failing To Provide Accounting For Money Held In Estate Account, Attorney Gets Thrown Back In Jail, This Time Indicted For Alleged Theft Of Over $500K He Earlier Failed To Account For

In Brooklyn, New York, the New York Daily News reports:

• A Queens lawyer who spent 30 days in jail under a civil order for digging into the estate of the late Judge John Phillips was thrown back behind bars [] after Brooklyn prosecutors indicted him for the same crime.
  
  When the legendary Bedford-Stuyvesant Slave Theater and an adjacent lot sold at auction for $2.2 million in 2012, the executor of the estate Samuel Boykin and Frank Racano were to report to a surrogates court judge where the money would go.
  
  After several unanswered requests, the judge removed Boykin as the executor and held them both in contempt of court.
  
  In March, the Daily News reported, Racano was brought into Brooklyn Civil Supreme Court by city sheriffs where he admitted to selfishly writing over 300 checks to himself from the estate’s escrow account to pay bills.
  
  “The money disappeared, the account whittled down to $100 last year May,” said Assistant District Attorney Frank Dutis in court.
  
  Racano stole $587,160.56, prosecutors said. The judge sentenced Racano to 30 days in jail and gave him a $1,000 fine.
  
  With Racano’s admission in civil court, prosecutors indicted him for one-count of second-degree grand larceny. “We will now hold him accountable for these shameful criminal acts,” said Brooklyn District Attorney Ken Thompson.
  
  Racano’s attorney Sam Karliner entered a plea of not guilty on his behalf. If convicted, Racano faces up to 15 years in prison.
  
  Brooklyn Supreme Court Justice Danny Chun set bail at $250,000 cash or bond and ordered a bail sufficiency hearing.
  
  Phillips, who was known as the “Kung Fu Judge” for his martial arts skills, suffered from Alzheimer's and died in the troubled Prospect Park Residence in 2008 when they failed to give him a diabetic diet and a room with heat. He was 83.

Source: Queens lawyer who spent 30 days in jail for raiding late judge's estate thrown back behind bars.

For the Brooklyn District Attorney press release, see Attorney Indicted for Stealing Almost $600,000 From the Estate of Deceased New York City Civil Court Judge (Stolen Funds Include Proceeds from Sale of Historic Slave Theater in Bedford-Stuyvesant).

Tennessee State Cops Bag Two Attorneys In Separate Cases, Alleging They Each Fleeced Clients Out Of Over $250K Held In Trust

In Jacksboro, Tennessee, WATE-TV Channel 6 reports:

• Two Campbell County attorneys are charged with stealing money from his clients’ accounts in two separate cases.(1)
  
  Wesley Lynn Hatmaker, 50, is charged with one count of theft over $250,000; four counts of theft over $60,000; and two counts of theft over $10,000.
  
  Conrad Mark Troutman, 57, is charged with one count of theft over $250,000; two counts of theft over $60,000; and one count of theft over $10,000.
  
  The Tennessee Bureau of Investigation began looking into complaints of theft against Hatmaker in December and developed information that from April 2009 to November 2015, Hatmaker stole more than $250,000 from the trust account for his clients. TBI says he never returned the money to the estates or victims and instead used it for his own personal use.
  
  Hatmaker was arrested Wednesday and booked into the Campbell County Jail. He was released after posting $150,000 bond.
  
  Meanwhile, TBI began investigating Troutman in January and learned that on several occasions between 2014 and 2016, he allegedly unlawfully spent money in a trust account for his clients without their knowledge. He says he then concealed the funds use by using additional client funds to replace previously used funds.
  
  Troutman turned himself into the Campbell County Jail after being indicted by a grand jury. he was released after posting $50,000 bond.
  
  Both attorneys’ law licenses have been suspended.

Source: 2 Campbell County lawyers accused of stealing from clients’ accounts.

See, generally, Frederick Miller, "If You Can't Trust Your Lawyer .... ?", 138 Univ. of Pennsylvania Law Rev. 785 (1990) for more on the apparent, long-standing tolerance for deceit by many in the legal profession:

• This tolerance to deception is encouraged by the profession's institutional civility. Seldom is a fig called a fig, or a shyster a shyster. No, our euphemisms are wonderfully polite: "frivolous conduct," or a "lack of candor;" or "law-office failure;" or, heaven forbid, a "peculation," a "defalcation," or a "negative balance" in a law firms's trust account.
  
  There is also widespread reluctance on the part of lawyers --- again, some lawyers --- to discuss publicly, much less acknowledge, that they have colleagues who engage in deceit and unprofessional conduct.
  
  This reluctance is magnified when the brand of deceit involves the theft of client money and property, notwithstanding that most lawyers would agree that stealing from clients is the ultimate ethical transgression.[...] The fact is, however, that theft of client property is not an insignificant or isolated problem within the legal profession. Indeed, it is a hounding phenomenon nationwide, and probably the principal reason why most lawyers nationwide are disbarred from the practice of law.

---------------------------

(1) The Tennessee Lawyers’ Fund For Client Protection was established to reimburse claimants for losses caused by dishonest conduct committed by lawyers duly licensed to practice in Tennessee.

For similar "attorney ripoff reimbursement funds" that attempt to clean up the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (now includes a listing for Canadian client protection funds, courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

Maps available courtesy of The National Client Protection Organization, Inc.

See generally:

• N.Y. fund for cheated clients wants thieving lawyers disbarred, a July, 2015 Associated Press story on this Fund reporting that the Fund's executive director, among other things, is calling for prompt referral to the local district attorney when the disciplinary committee has uncontested evidence of theft by a lawyer injuring a client or an admission of culpability;
  
  When Lawyers Steal the Escrow, a June, 2005 New York Times story describing some cases of client reimbursements ("With real estate business surging and down-payment amounts rising with home prices, the temptation for a lawyer to filch money from a bulging escrow account and later repay it with other clients' money has never been greater, said lawyers who monitor the thefts."),
  
  Thieving Lawyers Draining Client Security Funds, a December, 1991 New York Times story that gives some-real life examples of how client security funds deal with claims and the pressures the administrators of those funds may feel when left insufficiently financed as a result of the misconduct of a handful of lawyer/scoundrels.

Mishandling/Misappropriation Of Clients' Funds &/Or Property Dominate Recent Lawyer Sanctions By Illinois Supreme Court

A recent news release from the Illinois State Bar Association reports that the the Supreme Court of Illinois announced the filing of lawyer disciplinary orders on May 18, 2016, imposing sanctions on 25 lawyers, disbarring nine, suspending 16, because the lawyers engaged in professional misconduct by violating state ethics law.

Of those sanctioned, the following fourteen attorneys were belted for conduct relating, at least in part, to the mishandling or misappropriation of their clients' money and/or property, and, in one case, the purchase of a home in a short sale belonging to his then-wife, and failing to disclose that fact to the bank for which he copped a gulity plea in a federal court.

• DISBARRED
  
  Maurice W. Birt, III, Northbrook
  Mr. Birt, who was licensed in 1999, was disbarred. He intentionally misappropriated $80,000 belonging to an elderly woman who entrusted her funds to him. He also misled his law partner about his handling of the woman’s funds by telling his partner that he had invested the funds for the woman.
  
  Thomas Mitchel Henry, Peoria
  Mr. Henry, who was licensed in 1978, was disbarred on consent. He misappropriated approximately $144,000 from an estate while serving as both attorney and executor of the estate.
  
  John William Pleta, Mokena
  Mr. Pleta, who was licensed in 1987, was disbarred on consent. He misappropriated more than $1.2 million of client funds. He then lied to his client by telling the client that the funds remained in his trust account when, in fact, he had already spent all but about $10,000 of the funds for his own business or personal purposes. He was suspended on an interim basis on January 19, 2016.
  
  SUSPENDED
  
  Edward Dorsey, Carbondale
  Mr. Dorsey, who was licensed in 1993, was suspended for 18 months. He converted funds owed to client medical providers and also endorsed a settlement check with the signature of a medical provider without that provider’s permission. The suspension is effective on June 8, 2016.
  
  George Ernest Faber, West Dundee
  Mr. Faber, who was licensed in 1964, was suspended for one year and until further order of the Court. He violated a court order to place $10,000 in a trust account for the benefit of clients by placing the money into a personal investment account opened in his own name. He then used the investment account to trade stocks and earn money to satisfy his personal financial obligations. He also failed to reduce a contingent fee agreement to writing.
  
  Darren Anthony Fish, Chicago
  Mr. Fish, who was licensed in 2006, was suspended for six months and until he successfully completes the ARDC Professionalism Seminar. While operating a firm concentrating in mortgage foreclosure and mortgage loan modification matters, he commingled client funds with his own, divided legal fees with non-lawyers, and failed to keep clients informed about the status of their matters. The suspension is effective on June 8, 2016.
  
  Gary N. Foley, Round Lake Beach
  Mr. Foley, who was licensed in 1996, was suspended for one year and until he completes the terms of his supervised release in his federal criminal case. In order to help his then-spouse, he devised and participated in a plan to purchase his wife’s property through a purported short sale wherein he prepared the closing documents as attorney for both his wife, the seller, and then falsely concealed the source of the funds for the purchase of the home and the fact that he was the buyer. In response to a subsequent inquiry about the property from the Federal Home Loan Mortgage Corporation, he prepared an e-mail for use by one of the real estate brokers involved in the sale falsely reflecting the source of the earnest money funds for the purchase. As a result of his conduct, Mr. Foley was charged with, and pled guilty to, wire fraud affecting a financial institution. The suspension is effective on June 8, 2016.
  
  Joseph Preston Harris, Forest Park
  Mr. Harris, who was licensed in 1965, was suspended for six months and until he makes certain restitution. He neglected four different client matters, failed to communicate with those clients, and did not refund an unearned fee of $2,000 to one of those clients.
  
  G. Ronald Kesinger, Jacksonville
  Mr. Kesinger, who was licensed in 1973, was suspended on an interim basis and until further order of the Court. The suspension is effective on June 1, 2016. While representing an elderly widow in the probate of her late husband’s estate, Mr. Kesinger obtained a $26,000 loan from her without advising her that their interests in the transaction conflicted, that she could seek independent advice, and without obtaining her informed written consent to the transaction. In another matter, while he represented a couple against a bank in a mortgage foreclosure proceeding, he entered into an agreement with the bank to purchase his clients’ house, without the clients’ knowledge or consent. Finally, he made false statements to a bank concerning his liabilities in an application for a personal mortgage loan.
  
  Nancy J. Murphy, River Forest
  Ms. Murphy, who was licensed in 1990, was suspended for six months. She represented a husband in a divorce and sought custody of the parties’ minor child for her client. When the husband and wife reconciled, Ms. Murphy engaged in a conflict of interest by representing the husband’s parents in their attempt to gain custody of the child. She also charged $8,000 in fees to another client’s credit card without authorization to do so. The suspension is effective on June 8, 2016.
  
  Rostyslav Saciuk, Palatine
  Mr. Saciuk, who was licensed in 2007, was suspended for one year and until he successfully completes the ARDC Professionalism Seminar. He converted approximately $23,000 in client and third-party funds while handling two personal injury cases. The suspension is effective on June 8, 2016.
  
  Frank Anthony Santilli, Chicago
  Mr. Santilli, who was licensed in 1989, was suspended on an interim basis and until further order of the court. According to charges pending against him before the Hearing Board, he knowingly misappropriated over $500,000 in client settlement funds and signed a medical lienholder’s signature to three settlement checks without authority.
  
  Karen Walin, Berwyn
  Ms. Walin, who was licensed in 1986, was suspended for sixty days. She engaged in a conflict of interest by drafting a trust agreement for her client in which she was named a beneficiary. She also represented that same client in the sale of a townhouse to an employee of her firm, and prepared a purchase agreement and installment note under terms favorable to the employee. The suspension is effective on June 8, 2016.
  
  David Paul Wiener, Chicago
  Mr. Wiener, who was licensed in 1969, was suspended for one year and until further order of the Court. On September 21, 2015, the Supreme Court suspended him for one year and until further order of the Court, with the suspension stayed in its entirety by a two-year period of conditional probation. He did not take the necessary steps to pursue his clients’ interests in three criminal cases, did not adequately communicate with those clients, did not return $9,000 in unearned fees, and made a misrepresentation about the status of one of those matters. In addition, in another criminal case, he failed to communicate with his client and did not return $4,000 in unearned fees. Because he failed to avoid alcohol usage, and missed taking random alcohol screening tests, the Court revoked his probation.

Source: Illinois Supreme Court disbars 9, suspends 16 in latest disciplinary filing.

Another Dead Client's Estate - Another Case Of Lawyer Pilfering; $144K Swindle Costs Attorney His Bar Ticket

In Peoria, Illinois, Peoria Public Radio reports:

• A Peoria attorney has been disbarred by the Attorney Registration and Disciplinary Commission. The Commission is an agency of the Illinois Supreme Court.
  
  Thomas Henry was licensed in 1978 and was disbarred for misappropriating approximately $144,000 from an estate while serving as both attorney and executor.

Source: Peoria attorney disbarred.

See, generally, Frederick Miller, "If You Can't Trust Your Lawyer .... ?", 138 Univ. of Pennsylvania Law Rev. 785 (1990) for more on the apparent, long-standing tolerance for deceit by many in the legal profession:

• This tolerance to deception is encouraged by the profession's institutional civility. Seldom is a fig called a fig, or a shyster a shyster. No, our euphemisms are wonderfully polite: "frivolous conduct," or a "lack of candor;" or "law-office failure;" or, heaven forbid, a "peculation," a "defalcation," or a "negative balance" in a law firms's trust account.
  
  There is also widespread reluctance on the part of lawyers --- again, some lawyers --- to discuss publicly, much less acknowledge, that they have colleagues who engage in deceit and unprofessional conduct.
  
  This reluctance is magnified when the brand of deceit involves the theft of client money and property, notwithstanding that most lawyers would agree that stealing from clients is the ultimate ethical transgression. [...] The fact is, however, that theft of client property is not an insignificant or isolated problem within the legal profession. Indeed, it is a hounding phenomenon nationwide, and probably the principal reason why most lawyers nationwide are disbarred from the practice of law.

----------------------------

(1) The Client Protection Program of the Attorney Registration and Disciplinary Commission (ARDC) was established by the Supreme Court of Illinois to provide reimbursement to clients who have lost money or property because of dishonest conduct by lawyers admitted to practice law in the State of Illinois. The Program reimburses clients who cannot get reimbursement from the lawyers who caused their losses, or from other sources such as insurance. (But see Stolen Inheritances: I-Team lawyer warning, in which one Illinois victim said of the program, "Their rules are vague, ambiguous and they are applied at their own discretion, and you can't get a straight answer[.]")

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (now includes Canadian recovery funds, courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

Maps available courtesy of The National Client Protection Organization, Inc.

See generally:

• N.Y. fund for cheated clients wants thieving lawyers disbarred, a July, 2015 Associated Press story on this Fund reporting that the Fund's executive director, among other things, is calling for prompt referral to the local district attorney when the disciplinary committee has uncontested evidence of theft by a lawyer injuring a client or an admission of culpability;
  
  When Lawyers Steal the Escrow, a June, 2005 New York Times story describing some cases of client reimbursements ("With real estate business surging and down-payment amounts rising with home prices, the temptation for a lawyer to filch money from a bulging escrow account and later repay it with other clients' money has never been greater, said lawyers who monitor the thefts."),
  
  Thieving Lawyers Draining Client Security Funds, a December, 1991 New York Times story that gives some-real life examples of how client security funds deal with claims and the pressures the administrators of those funds may feel when left insufficiently financed as a result of the misconduct of a handful of lawyer/scoundrels.

Indiana Supremes Give Sleazy Lawyer w/ History Of "Unjustly Enrich[ing] Himself At His Clients’ Expense" The Heave-Ho; Bad Acts Include Stealing Funds Entrusted To Him, Failing To Maintain Contemporaneous Accounting For Trust Account Cash & Other Pocketed Money For Which No Work Was Done

In South Bend, Indiana, The Indiana Lawyer reports:

• The Indiana Supreme Court issued a disbarment decision [] finding Elton Johnson committed attorney misconduct in a number of ways. The per curiam decision lists incompetent representation, converting client funds and failing to cooperate with the disciplinary process as reasons for Johnson’s disbarment.
  
  ***
  Indiana Disciplinary Commission hearing officer Judith Hawley Conley listed six counts against Johnson. In the first Johnson supplied a memorandum recommending a three-part plan to stop a client from registering as a sex offender, but if the plan worked the client could have been retried and forced to serve additional prison time, which the client said he did not want to do.
  
  Johnson charged the client more than $32,800, did no additional work and would not provide an accounting of time spent on the matter when the client hired another lawyer. The Supreme Court found he lied about the time spent on the matter, and insisted the plan was drafted by a lawyer when the person who did the work was either a law student or recent graduate. None of the money was refunded.
  
  ***
  In [another instance], clients hired Johnson to investigate suspected misconduct by the trustee of a trust created by a pour-over will. Johnson made withdrawals from his attorney trust account without approval and did not provide monthly billing statements. He was fired and refunded just $4,445 of more than $28,000 in fees advanced but did no work. “When Clients 3 protested, Johnson said, ‘What are you going to do, sue me?” … then laughed and ended the meeting,” the disbarment order says.
  
  ***
  Johnson also did not maintain a contemporaneous individual accounting of whose money he was holding in his trust account, according to the fifth count, which says he made at least nine checks from the trust account payable to “cash” and transferred more than $9,000 in client funds to cover business expenses. He also fired a paralegal who refused to deposit client money directly into his business account, the order says.
  
  The court also found Johnson failed to take delivery of mailings from the commission or timely respond to demands for information.
  
  The Supreme Court found Johnson violated 13 Indiana Professional Conduct Rules and three Indiana Admission and Discipline rules including failure to provide competent representation, making an agreement for, charging, or collecting an unreasonable fee, and failure to deposit legal fees paid in advance into a client trust account.
  
  “During his short-lived legal career Respondent has demonstrated a continuing pattern of serious misconduct, much of it predicated upon efforts to unjustly enrich himself at his clients’ expense,” the justices wrote. “Respondent’s neglect, incompetence, dishonesty, conversion of client funds, noncooperation with the Commission and failure to meaningfully participate in these proceedings all persuade us that disbarment is the appropriate sanction here as well.”
  
  Johnson had been suspended since March 2014, and since being admitted to practice, he had been the subject of five formal disciplinary complaints.

Source: Supreme Court disbars South Bend lawyer.

For the disbarment order, see In re: Johnson, 71S00-1408-DI-544 (May 18, 2016).

Foreclosure Rescue Operator Gets Nearly Eight Years For Peddling About 50 Bogus Sale Leaseback Deals To Financially Strapped Homeowners; Purported Mortgage Help Was Nothing More Than Disguised Equity Stripping Racket, Followed By Rent Skimming Scam That Left Victims' Homes In Foreclosure

From the Office of the U.S. Attorney (Los Angeles, California):

• The chief executive officer and owner of a Westwood-based mortgage brokerage company that falsely promised to help distressed homeowners avoid foreclosure – but instead stole the equity in the homes and served as the homeowners’ impostor landlord – was sentenced [last week] to 94 months in federal prison.
  
  David Singui, 52, of Inglewood, the former CEO of Direct Money Source (DMS), was sentenced after pleading guilty to conspiracy, loan fraud, aggravated identity theft and tax evasion charges.
  
  United States District Judge Christina A. Snyder sentenced Singui and ordered him to pay just over $4 million in restitution.
  
  The scheme related to DMS caused distressed homeowners to lose more than $4 million and lending institutions to suffer losses of more than $11 million. Homeowners suffered losses when they were induced to sell their homes to straw borrowers sponsored by DMS, which was supposedly going to hold these properties for one year while the distressed homeowners repaired their credit and would then be in a position to repurchase these properties from the straw borrowers.(1)
  
  In fact, DMS and Singui took permanent title to these properties and misappropriated the distressed homeowners’ equity, while DMS and Singui ended up serving as the landlord of these distressed properties and collected rent from the homeowners for over five years.
  
  Previously in this case, Aziz Meghji, 37, of Los Angeles, who was the second-in-charge at DMS, was sentenced to four years in federal prison.
  
  ***
  DMS offered a “Fresh Start Program” that purportedly could assist distressed homeowners avoid foreclosure by arranging to have their homes purchased by so called “credit investors,” who would hold the properties for a year and then sell them back to the original homeowners after they restored their credit ratings. In reality, DMS was an equity-skimming operation that took possession of distressed homeowner’s equity under fraudulent pretenses.
  
  As part of the scheme, DMS told distressed homeowners that it would provide “credit investors” who would provisionally purchase the properties for one year, thereby allowing the homeowners to avoid foreclosure. During the one-year period, the distressed homeowners could remain in their homes and repair their credit. At the end of the 12-month period, the homeowners were promised that they could repurchase their homes at a lower interest rate.
  
  The distressed homeowners were told that DMS would draw down on the equity in their homes and use the revenues to make monthly mortgage payments during the one-year period.
  
  DMS took title to about 50 distressed properties and misappropriated the existing equity in the homes. The “credit investors” were nothing more than “straw borrowers” whose names were used to access the equity in the homes. DMS and its principals falsified the employment, bank account and income information of the straw borrowers on the loan applications.
  
  At the conclusion of these transactions, DMS usually ended up with approximately $100,000 equity per transaction, plus around $35,000 in fees and commissions associated with each loan.
  
  In the meantime, each of the straw borrowers ended up owing approximately $300,000 or more on loans that went into default because DMS did not make the mortgage payments as promised. This led to banks suffering more than $11 million in losses and the homeowners suffering losses of over $4 million as a result of the theft of the equity in their homes.

Source: CEO of Mortgage Brokerage Engaged in Equity-Skimming Scheme Sentenced to Nearly Eight Years in Federal Prison.

------------------------------

(1) For more on this type of foreclosure rescue ripoff, see:

• Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals;
  .
• Dreams Foreclosed: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (June 2005).

Central Florida Landlord Running Rent-Skimming Racket With Homes In Foreclosure Dupes Family Into Signing One-Year Lease, Leaves Them Now Facing Bank Boot

In Seminole, Florida, WFLA-TV Channel 8 reports:

• A Pinellas County businessman is once again causing trouble with his dealings. This time, a family rented a home from him in Seminole and then found out – after paying for months – it was in foreclosure the whole time.
  
  Now, a bank owns the home, and the family has to get out by the end of next week.
  
  Jennifer Greiner, the renter, is in tears. “We have two children and now no place to go,” she said crying.
  
  Greiner, her boyfriend and her two children rented the home from Ronnie Pownall, owner of Freedom Cycles in Pinellas Park. They rented the home in February. Pownall had them sign a year-long lease, never mentioning the foreclosure that was nearing its final stages. Instead, he took the $1,700 they paid every month, plus their last month’s rent, and pocketed the money.
  
  “My son is so worried. He asked me every day if we’re going to have a house to live in and my daughter is an emotion wreck,” Greiner said.
  
  This isn’t the first time Pownall has made headlines with his business dealings. Earlier this month 8 On Your Side tracked him down after he failed to pay $8,000 to a customer after selling the man’s motorcycle. He ended up forking over cash – but numerous other customers called 8 On Your Side to report similar situations.
  
  Meanwhile, public records list more than a dozen home foreclosures in Pownall’s name.(1) Some of those houses have already been taken back by banks. Others are still in the process. Greiner wants to warn other renters.
  
  “I don’t want this to happen to any other family,” she said.

Source: Pinellas businessman causes trouble again by renting home in foreclosure to family.

--------------------------

(1) Depending on how a semi-creative (and motivated) criminal prosecutor interprets and applies state law, engaging in rent skimming (referred to in the Florida Statutes as "equity skimming") two or more times within a 3-year period might constitute a third-degree felony in Florida. See Section 697.08, Florida Statutes:

• 697.08 Equity skimming.—
  
  (1) It is unlawful for any person, with intent to defraud the owner of real property, to engage in equity skimming, which is, to:

• (a) Purchase, within a 3-year period, two or more single-family dwellings, two-family dwellings, three-family dwellings, or four-family dwellings, or a combination thereof, that are subject to a loan that is in default at the time of purchase or within 1 year after the time of purchase, which loan is secured by a mortgage or deed of trust;

• (b) Fail to make payments under the mortgage or deed of trust as the payments become due, regardless of whether the purchaser is obligated on the loan; and

• (c) Apply, or authorize the application of, rents from such dwellings for the person’s own use.

• (2) A violation of subsection (1) constitutes a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.

Rent skimming/equity skimming may also be illegal in other jurisdictions. See People v. Phelps, 837 P.2d 755 (Colo. 1992), quoting with approval from United States v. Capano, 786 F.2d 122 (3d Cir.1986):

• "Equity skimming is the practice of diverting revenues generated by mortgaged property in default to purposes other than property maintenance or mortgage payments."

Despite Recent Changes In Law, Contracts For Deed Pose Continuing Problem For Poor, Unsophisticated South Texas Homebuyers; Some Landowners Use It To Sell Parcels In Illegal Subdivisions; Housing Advocate Calls It "The Underbelly Of Real Estate"

In Harwood, Texas, PBS NewsHour reports:

• To Fredie McKinney, buying the mobile home seemed like a great idea. It was big enough for McKinney, his wife and his elderly mother. The fenced 8-acre property in Harwood, Texas, was perfect for their dogs and horses. McKinney only had to pay $500 to move in, two years ago, with the understanding that after paying the developer $1,000 a month for 25 years, he’d own the property.
  
  At least, he says, that was the plan. Now the developer is demanding McKinney pay back taxes owed under the contract — money 68-year-old McKinney says he shouldn’t have to pay— and county officials say the entire subdivision may be illegal.
  
  McKinney has a “contract for deed,” a financing arrangement common in some low-income communities that can leave homebuyers in a legal mess. Unlike a mortgage, buyers don’t get title to the property until they’ve completed their last payment. They have to maintain the property and pay property taxes, but they don’t build any equity. They usually don’t get a homeownership tax break, and if they miss a monthly payment they can lose the home and all the money they sank into it.
  
  Texas passed a law last year that will help McKinney and homebuyers like him claim titles to the properties they’re paying for, the latest in a series of reforms. Other states also are adding protections for buyers involved in this archaic form of financing.
  
  Nobody knows how many U.S. homebuyers have entered into contracts for deed. The U.S. Census Bureau’s American Housing Survey pegged the number at 3.5 million in 2009, but hasn’t asked the question since.
  
  In some communities, the contracts may be on the rise. The recession eroded people’s finances and drove banks and credit unions away from risky borrowers. This expanded the market for contracts for deed, rent-to-own plans, and leases with option to purchase — seller-financed deals that don’t require a credit check and sometimes don’t even require a down payment.
  
  “The underbelly of real estate, is what I call it,” said Robert Doggett, an attorney with Texas RioGrande Legal Aid who specializes in housing law.(1)
  
  Major investment firms have bought up distressed properties across the Midwest and South and are using contracts for deed to sell them. After The New York Times reported on the practice in February, New York state regulators subpoenaed two of the firms and the federal Consumer Financial Protection Bureau assigned enforcement lawyers to investigate.
  
  The Poor Man’s Mortgage
  
  Texas Rep. Terry Canales, a Democrat who practices law in a town about an hour’s drive from the Mexican border, said contracts for deed are “a continuing problem” in South Texas.
  
  Along the border, thousands of very poor people live in colonias — unincorporated communities that often lack running water, paved roads and other basic infrastructure. In these mostly Hispanic neighborhoods, contracts for deed have long been a popular way for developers to sell property and for friends and relatives to sell homes to one another.
  
  These contracts are typically signed without help from real estate agents and attorneys and involve buyers who know very little about the law. In colonias and other informal subdivisions, some contracts are handwritten on scraps of paper or not written down at all, according to a 2012 University of Texas at Austin study.

For more, see Here’s why low-income households may gamble with homeownership.

See generally, The Contract for Deed Prevalence Project (A Final Report to the Texas Department of Housing and Community Affairs).

----------------------------

(1) Texas RioGrande Legal Aid (TRLA) is a non-profit organization that provides free legal services to low-income residents in sixty-eight counties of Southwest Texas, and represents migrant and seasonal farm workers throughout the state of Texas and six southern states: Kentucky, Tennessee, Alabama, Mississippi, Louisiana and Arkansas. In addition, TRLA operates public defender programs in several Southwest Texas counties, representing the poor who are accused of felonies, misdemeanors and juvenile crimes. land contract

More Contract For Deed Horror Stories As Texas Landowner Uses Controversial Device To Peddle Lots In "Off-The Books" Rural Subdivision That Has Never Been Platted Or Surveyed & In Apparent Violation Of Applicable Land Use Laws To Unsophisticated Buyers; Victims Now Discover They Can't Build Or Sell

In Caldwell County, Texas, the Austin American-Statesman reports:

• Seeking a place to retire from his corrections officer job in California, Juan Alvarado fell in love with the rural Caldwell County land as soon as he saw it. The parcel lies just beyond a gated subdivision entrance marked by a replica Statue of Liberty flanked by wildflowers. A dirt road winds under spreading oaks to fields covered fence to fence with a lush carpet of grass.
  
  Responding to an ad promising only a $500 down payment for the 9 acres, Alvarado signed an owner-financed contract for the remaining $98,000. In June 2014 he packed up and moved from the Fresno area with his wife to Century Oak Estates, a subdivision in the far east corner of the county.
  
  But after hiring a contractor to construct his dream home, Alvarado received devastating news. County officials refused to issue his building permit. Their reason: Century Oak Estates, in its entirety, was in violation of the law. “Everything that is out there is illegal — everything,” said Kasi Miles, who manages subdivision permitting for Caldwell County, referring to the property’s missing legal foundation.
  
  “I was stunned,” Alvarado said. He and his wife passed the sweltering summer in a small trailer — “a living hell” — before finding another place to live in nearby Luling.
  
  His isn’t the only complaint. Some Century Oak Estates landowners say they have tried to sell their property in recent years only to find out it was impossible because it had never been surveyed.
  
  Many of the properties — mobile homes, primarily — have been tied into a single untreated and unlicensed well. Century Oak’s owner, Richard Burns, has threatened to turn off residents’ water for violations of his subdivision rules, or even late checks. Anyone with delinquent payments “will be disconnected from the water system,” a December 2013 letter warned.
  
  Local inspectors routinely encounter land-use violations, particularly in rural areas, where isolated properties and a live-and-let-live attitude can combine to produce an occasional skirting of the rules. But those familiar with Century Oak said it appears to be of a higher magnitude: an entire development created and sustained for a decade with apparent disregard for state and county land-use laws. The absence of records means the county is even uncertain of how many people live there; Miles says it could be as many as 300.
  
  ***
  Miles said she contacted Caldwell prosecutors more than six years ago seeking criminal charges. When they failed to act, she said she stopped looking into the isolated community. “I knew it was illegal,” she said. “So there was no point in me going back.”
  
  ***
  [One lot owner], a disabled veteran, said he fears losing his property because recent letters from Burns informed residents they need to install their own wells — a cost he can’t afford. Burns also has said failure to install the systems would be considered a violation of residents’ contracts and grounds for him to evict them from the premises.
  
  Burns said he hasn’t acted on the threat. Still, housing advocates say eviction is a legitimate concern to residents because of the antiquated purchase contracts. Also known as poor man’s mortgages, the seller-financed contract for deed means a buyer receives title to the property only after paying the seller in full, typically over many years with high interest rates — 10 percent at Century Oak.
  
  Unlike standard bank mortgages, in which a buyer’s payments build equity, payments in contracts for deed add up to nothing until the final one is made. Sellers also can evict residents rather than use the foreclosure process. A 2012 University of Texas study of the contracts in some Texas counties found a 45 percent failure rate for buyers.

For more, see Long aware of problem community, Caldwell County now faces irate residents (Residents say they now can’t sell or build on their property; Developer Richard Burns has been criminally charged; County officials concede they knew about Century Oak Estates for years).

For a follow-up story, see Regulators open investigation into off-the-books Caldwell subdivision (Property transfers in the subdivision apparently were done through so-called contract for deed transactions). land contract

Five 90+ Year Old Senior-Holdouts Who Refused To Be Booted From Gentrifying-NYC Assisted Living Home After Its Announced Shutdown & Sale Finally Agree To Leave After Squeezing New Owner/Condo Developer For $3.35 Million In 'Cash For Keys' Deal

In Park Slope, Brooklyn, The Associated Press reports:

• Five elderly women who refused to leave their assisted-living home after its closure was announced will finally vacate as part of a $3.35 million settlement, attorneys said [last week].
  
  The holdout residents, ages 91 to 101, will be required to leave Prospect Park Residence by Aug. 31, and will each receive $533,333 under the deal reached Tuesday in Brooklyn state Supreme Court. Eleven former residents or their estates will also receive payouts.
  
  "It's definitely a win for our clients. We got them a significant amount of money and time to make plans to find appropriate placements nearby that they can move to," said Fred Millett, one of the attorneys for the holdouts. "This allows them more options to look at places that they can maintain their standard of living."
  
  The agreement comes more than two years after the facility announced it would be closing and sold for conversion to condominiums in the upscale Park Slope neighborhood of Brooklyn. Most of the roughly 125 residents vacated in short order, but a handful fought the move, sparking a web of litigation. Separate lawsuits alleging wrongful deaths remain unresolved, as well as litigation over the status of the $76.5 million building sale.
  
  Frank Carone, an attorney representing building owner Haysha Deitsch, said he was pleased with the settlement and that it allowed a focus on the remaining lawsuits. Deitsch, in an email, suggested the holdouts' families were simply motivated by greed.
  
  "I believe it was always about money for the families of the residents," he said. "They are getting plenty of it, and now we can all move on."
  
  Ten former residents or their estates will receive payments of $25,000 under the agreement. One other former resident will receive a payment of $433,333 under a deal that Millett said had been separately negotiated.
  
  "In the perfect scenario, PPR would have never closed," Millett said. "We did all we could the last two years keeping it open."
  
  Joyce Singer, whose mother Alice has remained at the facility, expressed fear Deitsch would follow through with the agreement and said while the money would help in the transition, it still would be difficult.
  
  "It's going to be unbelievably distressing for her," she said. "She loves that room. There isn't a day that goes by that she doesn't say to me how much she loves looking out those windows."

Source: Fight Over Assisted-Living Home Closure Ends in $3.35M Deal.

See also, The New York Times: With $3.35 Million Deal, 5 Holdouts Will Leave a Brooklyn Seniors’ Home.

Note: One of the lawsuits, filed in Kings County (Brooklyn) Supreme Court is captioned Berger et al. v. Prospect Park Residence LLC et al., Index No. 6639/2014 (New York State Supreme Court, Kings County), which plaintiffs brought under the New York State Social Services Law, the Public Health Law, the Rehabilitation Act, and the federal Americans with Disabilities Act. Source: MFY Legal Services.

60 Elderly Nursing Home Residents In Gentrifying Boston's North End Told To Get Ready To Pack Their Bags & Leave; Owner To Avoid Making Expensive Renovations, Announces Plans To Close Facility Instead; Surging Local Real Estate Values Provide Incentive To Unload Premises & Cash In While Leaving Trail Of Outraged Families

In Boston, Massachusetts, North End Waterfront.com reports:

• The 140-bed North End Nursing Home and Rehabilitation Center owned by Partners Healthcare is planning to close in about a year, according to those familiar with the situation. Residents and families are currently being notified of plans to sell the property. Operated by Spaulding Rehabilitation Hospital, the nursing and therapy center is located at 70 Fulton Street, on the corner of Richmond, in Boston’s North End neighborhood.
  
  News of the closure has many North End and Downtown Boston families outraged as they scramble to consider options for their loved ones, mostly seniors and elderly, who live and receive nursing care at the facility. Taking to Facebook, several North End residents and family members are vowing to publicly oppose the move saying they “will not go down without a fight.”
  
  “Maybe the city should stop worrying about the stupid bike paths and worry about basic living,” said an infuriated grandson of a resident at the North End nursing home. Partners did not immediately respond with a comment, but staff members have told families the company is very likely to move forward with the sale. Another relative wrote on social media, “So where should our elderly go when living with family or on their own isn’t an option?”
  
  Surging real estate prices in the North End and Downtown Boston could encourage a developer to build luxury apartments or condominiums on the property. At this time, there is no word of a buyer nor even that the sales process has begun.
  
  ***
  Families have been told that the facility is [] not meeting the owners economic needs and needs expensive renovations. [...] Many relatives of the sixty long-term residents receiving care at the nursing facility live or work in the area, making frequent visits convenient to their loved ones. The move of residents outside of downtown will make it that much more difficult for family and friends to stay connected. They believe the original promises that the facility would always serve North End seniors is being broken.

For more, see North End Nursing Home & Rehab Center to Close Leaving Elderly and Families in Lurch.

See also, Boston Herald: North End nursing home move blindsides relatives, patients (Fight on to keep seniors’ space).

Aging Building, Failing Inspections, Apparent Loss Of Medicare & Medicaid Reimbursements Lead To Nursing Home Shutdown, Triggering The Boot For 60 Frail Senior Citizens

In Tybee Island, Georgia, WSAV-TV Channel 3 reports:

• Residents at Tybee Nursing Home were told they needed to leave [last week]. The company that manages the facility, New Beginnings filed for bankruptcy in January. Ironically, attorneys for New Beginnings officials were in bankruptcy court in Tennessee the same time residents were having their belongings packed.
  
  ***
  We checked the facility’s rating and found its overall and health inspection ratings to be well below average. In both categories the facility received one star out of five. Poor inspections lead to a loss of Medicare and Medicaid money, which appears to be exactly what happened in the case of the Tybee facility.
  
  An email from Terry Walker at New Beginnings (which was received at 6:15 p.m. Thursday) said “the Centers for Medicare and Medicaid Services (CMS) sent a notice of their intent to terminate the agreement at Oceanside back near the first part of May due to regulatory issues we have not been able to work out with the Dept of Community Health. We have tried unsuccessfully through appeal and legal measures to prevent the termination from happening.”
  
  Walker’s email went on to say “Oceanside is a facility that is more than 40 years old and requires a great deal of maintenance and repair. The physical plant and environmental issues are due largely to the age of the building. We do not own the facility. We are a management company that leases the building from the owner. We have spent more than $250,000 in the last 3 months and a great deal more than that over the last year. We have operated the building for less than 3 years. We had the intentions of continuing to make improvements and renovate but are not able to keep the facility open. We have attempted without success over the last several months to work with the owner to transition the operation to another operator.”
  
  ***
  Walker also said that “the 60 residents we had here and their responsible parties (were notified) of the process of relocating the residents. Most have been able to stay in the county. We will be able to retain many of the employees at another location but not all of them.”
  
  Walker did not indicate how many employees worked at Tybee or when all the residents will be moved.

For the story, see Elderly Residents told they have to Leave Tybee Nursing Home.

Seniors In Troubled Metro-Detroit Assisted Living Facility Receive A Mere Few Hours Notice Before Getting State-Ordered Boot; Fire Safety, Other Licensing Violations On Top Of Incident Involving Fallen Patient Who Didn't Get Help For Six Hours Spark Senior Home Shutdown

In Livonia, Michigan, WJBK-TV Channel 2 reports:

• Residents of a Livonia senior home are searching for a new place to live with little notice after they were told to get up and move out - all with just a few hours' notice.
  
  "This is all we got. Okay. This is all we got. Nobody said anything," Constance Lovely said. "My sister has Alzheimer's. Nobody said anything."
  
  Desperate families pulled up to the nursing home to pick up their loved ones from the Livonia assisted living facility []. They were told to pick up their mothers, brothers, fathers, and sister and their belongings by 6 pm.
  
  "This is awful what they're doing. To give you a notice and tell you they're going to take it tonight," Bridgett Schultz said. "We've been married 54 years and I'm devastated. I can't believe this."
  
  The Ashley Court facility on 7 Mile has been known to have issues. The latest state order shut down buildings two and three for license violations. Buildings one and four were already closed down.
  
  The state order stemmed from an investigation last March. That investigation says back in February a patient fell in her bedroom and didn't get help for six hours. This, along with nine fire safety violations and other licensing violations, brought on the closure. As the residents moved out, the owner was nowhere in sight.
  
  "He said they're gonna lock the doors whether there's people in there or not," Wade McCann said. That brings on new challenges. "Every time you move these patients who are older who have Alzheimer's, like my mother, there's a set back."
  
  "Is this legal for the state to kick us out with a couple of minutes notice? With couple hours notice?" Schultz said.
  
  According to FOX 2 legal expert Charlie Langton, yes. If the state finds the conditions are dangerous or detrimental, it's legal.

Source: State shuts down Livonia senior home, residents get hours notice.

See also, State of Michigan is blasted for kicking out seniors on short notice (State officials are slammed for not properly notifying guardians of elderly patients with Alzheimer's who were suddenly told to leave their Livonia senior home in hours).

Another Bankster Faces Class Action Allegations That It Screwed Over Homeowners With Inflating Costs Of Force-Placed Insurance Through Illegal Kickbacks

In Chicago, Illinois, the Cook County Record reports:

• Seterus, one of the country’s largest servicers of home mortgages, has been hit with a class action lawsuit alleging the company has overcharged its customers for mandatory insurance coverage by partnering with one insurance provider, who then kicks back a portion of the purportedly overpriced insurance policies to Seterus.
  
  On May 24, plaintiff Jolanta Rozwadowska filed the putative class action in Cook County Circuit Court against Seterus Inc. and QBE First Insurance Agency over the alleged kickback scheme.
  
  ***
  [T]he complaint said in Rozwadowska’s case, and in the case of potentially thousands of others homeowners in Illinois and elsewhere, Seterus “abused the discretion” granted it under the mortgage loan agreement, force-placing insurance policies that are overpriced because, according to the complaint, “a considerable portion” of the premium charged to borrowers is “kicked back to Seterus and/or QBE First.”

For more, see Class action lawsuit: Seterus reaped kickbacks from force-placed home insurance policies.

The Art Of The Swindle: Ex-Insiders Allege How Trump University Was Nothing More Than A Racket Peddling Worthless Real Estate Seminars

A recent story in The Atlantic describes the testimony provided in sworn statements from a couple of former Trump University insiders about the operation of its real estate seminar business. The statements were included as part of the recently-released court documents involving the class action litigation accusing Trump University of being nothing more than a fraudulent racket:

• “Based upon my personal experience and employment, I believe that Trump University was a fraudulent scheme, and that it preyed upon the elderly and uneducated to separate them from their money,” said Ronald Schnackenberg, a sales manager at Trump University in 2006 and 2007.
  
  ***
  The playbook frequently tells Trump University employees to lean on the instructors’ and mentors’ wisdom as a selling point. But Jason Nichols, a Trump University sales executive who worked for the company in 2007, challenged this depiction in his declaration to the court.
  
  “The Trump University instructors and mentors were a joke. Most of them were not experts in real estate and did not [have] experience in the real estate techniques they were teaching,” Nichols said. “They were unqualified people posing as Donald Trump’s ‘right-hand men.’ They were teaching methods that were unethical, and they had little to no experience flipping properties or doing real estate deals. It was a façade, a total lie.”
  
  ***
  Corinne Sommer, the former manager of Trump University’s events departments, recalled how instructors in the second-level seminars, which cost roughly $1,500 to attend, would ask customers to call their credit-card companies to triple or quadruple their credit limit and max out their credit cards for real-estate investments.
  
  “While Trump University’s advertisements claimed it wanted to help consumers make money in real estate, in fact, based upon my experience, I believe that Trump University was only interested in selling every person the most expensive seminars they could possibly buy on credit,” Sommer testified. “I recall that some consumers had showed up who were homeless and could not afford the seminars, yet I overheard Trump University representatives telling them, ‘it’s ok; just max out your credit card.’”
  
  ***
  “I do not believe that Trump University taught Donald Trump’s investing ‘secrets,’” one former Trump employee testified. “Donald Trump came from a wealthy family and had resources at his disposal to purchase real estate—that is the secret—one the average consumer could not replicate.”

For the story, see The Art of the Swindle (In court filings, former employees of Trump University allege that it preyed on the insecurities of its students, selling them courses they did not need or could not afford).

Georgia Man Returns Home After 15-Month Work-Related Trip, Finds Squatting Couple Who Moved In & Set Up Pot-Growing Operation; Pair Allegedly Used Forged Documents To Hijack Title To $350K+ Residence, Now Face Multiple Felony Charges

In Jonesboro, Georgia, the Clayton News-Daily reports:

• A Clayton County man was surprised to discover when he returned to his Jonesboro home after traveling that a couple of strangers had taken up residence in his home, going so far as to change the locks to his house, replace his personal items with their own, and allegedly use the home to grow marijuana.
  
  The victim contacted the Clayton County Police Department about two weeks ago to report that squatters had taken over his Shoreline Drive home. After a two-week investigation, detectives discovered that a former Atlanta Public School teacher, Jacqueline Dennis, and her husband, Dexter Dennis, used forged documents to illegally obtain the residence valued at more than $350,000, a press release from the police department states.
  
  When authorities confirmed that the victim was the rightful owner of the property, he was escorted to the home by detectives and had to make entry into his home through a window.
  
  Once he got inside, the homeowner discovered that many of his personal possessions had been removed from the home and replaced with the personal possessions of Jacqueline and Dexter Dennis. He also found marijuana plants growing inside the home, Sgt. Ashanti Marbury reported.
  
  Narcotics agents were called and after obtaining a search warrant they found several ounces of marijuana, Schedule IV prescription pills, materials that are commonly associated with the function of a marijuana grow operation, drug paraphernalia and firearms, police said.
  
  Detectives also seized the documents allegedly used by the Dennises to illegally obtain the residence along with documents that led agents and detectives to believe that Jacqueline and Dexter Dennis may be sovereign citizens, Marbury stated.
  
  Those claiming to be sovereign citizens generally assert they are not subject to any federal, state or local laws. They have been known to be uncooperative with law enforcement and other government officials.
  
  Jacqueline and Dexter Dennis were arrested [] and booked into the Clayton County Jail.

Source: Squatters face multiple charges after moving into Jonesboro home.

See also, Couple arrested squatting, growing pot in Clayton County house:

• A Clayton County homeowner returned from a 15-month trip to find a woman and her husband living there illegally, according to Channel 2 Action News. [...] Det. Nicholas Deaton told Channel 2 the homeowner left in December 2014 to do contract work in Haiti.
  
  ***
  Jacqueline Dennis is charged with forgery, ID fraud, burglary, possession of a firearm by a convicted felon and violation of local drug laws. Her husband is charged with marijuana manufacturing with the intent to distribute.

On Eve Of Foreclosure, Buffalo Landlord Of 8-Unit Building Coughs Up $58K To Pay Off Back Taxes, Then Loses Premises At Public Auction Next Day Anyway Over Unpaid $2,000 'Back User Fees'; Ultimately Forks Over $92K To Buy Back His Own Property From Winning Bidder

In Buffalo, New York, WIVB-TV Channel 4 reports:

• A streak of bad luck put Kevin Judge way behind paying his bills, including Buffalo property taxes, but last October Kevin came up with the money to $58,000 in back taxes on his Park Street property in Allentown, but the very next day, his property was sold at the city’s annual foreclosure auction.
  
  Judge’s apartment building was auctioned off to pay $2,000 in back user fees, which he claims he had no knowledge of–even though Judge had just paid all that money to get his 8-unit property off the auction block.
  
  Two weeks ago, Kevin went to court to try to get his property back, but a county judge instructed him to work out a deal with the buyer, and he did work a deal to pay the buyer $92,000.
  
  It is a lot of money which Judge said he could have used to continue making improvements to the building. Kevin said he has already made substantial investments in the property, “New sidewalks, new walkways, new boilers, new hot water tanks.”
  
  “With the setback of $92,000, I’ve got to see how my finances are, and see when I can get the building looking like I want it to look for this neighborhood.”
  
  Attorneys and others familiar with Judge’s dilemma have said there are simple ways of avoiding this kind of disaster, such as simple notation on your property tax receipt that user fees have to be paid. They say those notations are necessary because property taxes and user fees are paid at different windows at Buffalo City Hall.

Source: Property owner pays dearly to get building back from foreclosure.

Already Facing Charges Of Stealing Nearly $200K From Four Clients, Long Island Lawyer Gets Pinched Again After 13 More Clients Come Forward, Accusing Him Of Swindling $550K From Them

In Garden City, Long Island, Newsday reports:

• A Garden City attorney already accused of stealing nearly $200,000 in settlement checks meant for four of his clients has been charged with stealing an additional $550,000 from another 13 clients, Nassau County police said [].
  
  Steven Morelli, 59, of Manhattan, was rearrested [...] and charged with three counts of second-degree grand larceny and 10 counts of third-degree grand larceny, police said.
  
  Morelli, already scheduled to appear in court on June 27, had previously been conditionally released on his own recognizance after being arrested on March 8, when he was charged with second-degree grand larceny and three counts of third-degree grand larceny.
  
  Morelli now faces arraignment on the new charges [] in First District Court in Hempstead.
  
  All told, Morelli is accused of stealing about three-quarters of a million dollars from at least 17 clients.(1)
  
  The crimes took place between June 2014 and earlier this month, police investigators said [].
  
  “Mr. Morelli’s scheme was that he would receive settlement in regards to these lawsuits, the money would be placed into his account at the law firm,” Nassau Det. Sgt. Richard Harasym, commanding officer of the Crimes Against Property Squad, said in March. “Evidence we gathered showed that once that money was deposited into the accounts, Mr. Morelli almost automatically withdrew that money and spent it on personal items.”
  
  ***
  Once Morelli found out police were investigating him [on the initial charges], “he made good on the monies owed” to three of the [initial] victims, Harasym said, adding that Morelli still owed a fourth victim about $40,000.
  
  However, police said in March that investigators believed there were additional victims — and, police said Tuesday, there were. It was not immediately clear what happened to the additional $550,000 allegedly stolen or misappropriated by Morelli or if, following his arrest, he made any attempts to reimburse those victims.

Source: Lawyer Steven Morelli arrested in more thefts, cops say.

See, generally, Frederick Miller, "If You Can't Trust Your Lawyer .... ?", 138 Univ. of Pennsylvania Law Rev. 785 (1990) for more on the apparent, long-standing tolerance for deceit by many in the legal profession:

• This tolerance to deception is encouraged by the profession's institutional civility. Seldom is a fig called a fig, or a shyster a shyster. No, our euphemisms are wonderfully polite: "frivolous conduct," or a "lack of candor;" or "law-office failure;" or, heaven forbid, a "peculation," a "defalcation," or a "negative balance" in a law firms's trust account.
  
  There is also widespread reluctance on the part of lawyers --- again, some lawyers --- to discuss publicly, much less acknowledge, that they have colleagues who engage in deceit and unprofessional conduct.
  
  This reluctance is magnified when the brand of deceit involves the theft of client money and property, notwithstanding that most lawyers would agree that stealing from clients is the ultimate ethical transgression.[...] The fact is, however, that theft of client property is not an insignificant or isolated problem within the legal profession. Indeed, it is a hounding phenomenon nationwide, and probably the principal reason why most lawyers nationwide are disbarred from the practice of law.

---------------------------

(1) The Lawyers’ Fund For Client Protection Of the State of New York manages and distributes money collected from annual dues paid by members of the state bar to members of the public who have sustained a financial loss caused by the dishonest conduct of a member of the New York bar acting as an attorney or a fiduciary.

For similar "attorney ripoff reimbursement funds" that attempt to clean up the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (now includes a listing for Canadian client protection funds, courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

Maps available courtesy of The National Client Protection Organization, Inc.

See generally:

• N.Y. fund for cheated clients wants thieving lawyers disbarred, a July, 2015 Associated Press story on this Fund reporting that the Fund's executive director, among other things, is calling for prompt referral to the local district attorney when the disciplinary committee has uncontested evidence of theft by a lawyer injuring a client or an admission of culpability;
  
  When Lawyers Steal the Escrow, a June, 2005 New York Times story describing some cases of client reimbursements ("With real estate business surging and down-payment amounts rising with home prices, the temptation for a lawyer to filch money from a bulging escrow account and later repay it with other clients' money has never been greater, said lawyers who monitor the thefts."),
  
  Thieving Lawyers Draining Client Security Funds, a December, 1991 New York Times story that gives some-real life examples of how client security funds deal with claims and the pressures the administrators of those funds may feel when left insufficiently financed as a result of the misconduct of a handful of lawyer/scoundrels.

Chicago DA Bags Now-Disbarred Attorney (& Part-Time Comedian) On 36 Felony Charges That He Swindled Over $1.1 Million From Nearly A Dozen Clients; $600K In Payouts From Client Protection Program Provides Partial Loss Recovery For Unwitting Victims

In Chicago, Illinois, the Chicago Tribune reports:

• When clients came to his Loop offices, personal injury lawyer Jordan Margolis sometimes liked to point out the self-published book he kept on his coffee table featuring "Excuseman," a comic character he developed.
  
  Margolis had big hopes for Excuseman. He even took the character on the road, telling corny jokes in his superhero costume — a shiny blue body suit with the letters XQ over his chest, an orange skullcap and cape and a purple bandit mask, his paunch hanging slightly over his Excuseman belt. He skewered those who "mess up and don't fess up."
  
  ***
  But now it is Excuseman who is in a bad jam.
  
  Last week, Cook County prosecutors indicted Margolis, 61, on charges he stole more than $1.1 million from nearly a dozen clients — in part to pay expenses connected to Excuseman. The indictment charged him with 36 felony counts of theft, theft by deception, misappropriation of financial institution property, continuing a financial crimes enterprise and forgery, according to Assistant State's Attorney Joel Bruckman.
  
  ***
  At a disciplinary hearing over his law license, Margolis' lawyer didn't dispute that Margolis took the money, saying he did so to keep his law practice going after a massive potential class-action lawsuit he was handling on behalf of firefighters from across the country stalled, records show.
  
  ***
  Clients who had been impressed by his connections and upscale Loop offices with a large saltwater aquarium out front and art on the walls suddenly found they couldn't reach Margolis. Some complained to the Illinois Attorney Registration & Disciplinary Commission, the state agency that investigates allegations of wrongdoing against lawyers.
  
  The agency filed disciplinary charges against Margolis, but he chose not to fight them, moving to California instead. His law license was suspended in 2013, then formally revoked last year.
  
  For a time, employees continued to run his law firm — unaware of his disbarment or that the law firm had closed, according to prosecutors.
  
  James Grogan, the ARDC's deputy administrator and chief counsel, said he uses the Margolis case as a warning to lawyers attending mandatory ethics classes. "You're converting all this money from clients and you're Excuseman?" Grogan said.
  
  An ARDC insurance fund has paid out about $600,000 to the alleged victims, [...]. But the fund has a cap of $100,000 for each victim.(1) A few have sued Margolis but collected pennies on the dollar after attorneys' fees, according to court records.

For the story, see Lawyer with comic ambitions as 'Excuseman' charged with thefts from clients.

See, generally, Frederick Miller, "If You Can't Trust Your Lawyer .... ?", 138 Univ. of Pennsylvania Law Rev. 785 (1990) for more on the apparent, long-standing tolerance for deceit by many in the legal profession:

• This tolerance to deception is encouraged by the profession's institutional civility. Seldom is a fig called a fig, or a shyster a shyster. No, our euphemisms are wonderfully polite: "frivolous conduct," or a "lack of candor;" or "law-office failure;" or, heaven forbid, a "peculation," a "defalcation," or a "negative balance" in a law firms's trust account.
  
  There is also widespread reluctance on the part of lawyers --- again, some lawyers --- to discuss publicly, much less acknowledge, that they have colleagues who engage in deceit and unprofessional conduct.
  
  This reluctance is magnified when the brand of deceit involves the theft of client money and property, notwithstanding that most lawyers would agree that stealing from clients is the ultimate ethical transgression. [...] The fact is, however, that theft of client property is not an insignificant or isolated problem within the legal profession. Indeed, it is a hounding phenomenon nationwide, and probably the principal reason why most lawyers nationwide are disbarred from the practice of law.

----------------------------

(1) The Client Protection Program of the Attorney Registration and Disciplinary Commission (ARDC) was established by the Supreme Court of Illinois to provide reimbursement to clients who have lost money or property because of dishonest conduct by lawyers admitted to practice law in the State of Illinois. The Program reimburses clients who cannot get reimbursement from the lawyers who caused their losses, or from other sources such as insurance. (But see Stolen Inheritances: I-Team lawyer warning, in which one Illinois victim said of the program, "Their rules are vague, ambiguous and they are applied at their own discretion, and you can't get a straight answer[.]")

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (now includes Canadian recovery funds, courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

Maps available courtesy of The National Client Protection Organization, Inc.

See generally:

• N.Y. fund for cheated clients wants thieving lawyers disbarred, a July, 2015 Associated Press story on this Fund reporting that the Fund's executive director, among other things, is calling for prompt referral to the local district attorney when the disciplinary committee has uncontested evidence of theft by a lawyer injuring a client or an admission of culpability;
  
  When Lawyers Steal the Escrow, a June, 2005 New York Times story describing some cases of client reimbursements ("With real estate business surging and down-payment amounts rising with home prices, the temptation for a lawyer to filch money from a bulging escrow account and later repay it with other clients' money has never been greater, said lawyers who monitor the thefts."),
  
  Thieving Lawyers Draining Client Security Funds, a December, 1991 New York Times story that gives some-real life examples of how client security funds deal with claims and the pressures the administrators of those funds may feel when left insufficiently financed as a result of the misconduct of a handful of lawyer/scoundrels.

Nine Months After Getting Bar Boot, NJ Lawyer Finally Gets Pinched For Allegedly Fleecing Clients Out Of Over $1.5 Million; Among Victims: Dead People's Estates, Young Boy Entitled To $400K From Wrongful Death Suit Involving His Late Father's Demise

From the Office of the New Jersey Attorney General:

• Acting Attorney General Robert Lougy announced that a lawyer who practiced in Jersey City has been indicted by a state grand jury on charges that he stole more than $1.5 million from five clients over a period of more than 10 years. The indictment supersedes a November 2015 indictment that charged him with stealing from one of the clients.
  
  The Division of Criminal Justice Financial & Computer Crimes Bureau filed an indictment [] charging Joseph J. Talafous Jr., 53, of Toms River, with money laundering (1st degree), three counts of theft by unlawful taking (2nd degree), four counts of theft by failure to make required disposition of property (2nd degree), five counts of misapplication of entrusted property (2nd degree), two counts of theft by deception (2nd degree), and four counts of filing fraudulent state income tax returns (3rd degree).
  
  From October 2004 through May 2015, Talafous allegedly stole approximately $1,528,022 from the following clients. He allegedly laundered most of the funds through his attorney trust account and/or attorney business account.

• Talafous allegedly used a power of attorney to make unauthorized withdrawals totaling approximately $78,202 from the investment account of an elderly client who lived in Jersey City and from the client’s estate after the client died in 2010.

• Talafous allegedly stole approximately $402,418 from a trust set up for the benefit of a young boy in 2005 with funds from a wrongful death suit stemming from the death of his father. The father died in 2001 in a workplace accident when the child, a West New York resident, was still an infant.

• Talafous allegedly stole approximately $316,275 from the estate of an elderly Jersey City woman who died in 2009 without any immediate family. She had hired him to prepare her will and had named him executor of her estate.

• Talafous allegedly stole approximately $406,076 from the estate of a Jersey City man who died in 2012 and whose family hired Talafous as attorney for the estate, which included several life insurance policies worth a total of more than $870,000.

• From 2012 to 2015, Talafous allegedly stole $325,051 that was entrusted to him as counsel for the estate of a Jersey City woman who owned property in New Jersey and New York.

• The case was referred to the Division of Criminal Justice by the New Jersey Office of Attorney Ethics. The Supreme Court of New Jersey revoked Talafous’ license to practice law in August 2015.
  
  “We charge that Talafous crookedly stole from his clients again and again, even stooping so low as to steal funds placed in trust to care for a young boy who lost his father,” said Acting Attorney General Lougy. “Attorneys have a duty to uphold the law and faithfully serve their clients, but we allege that Talafous instead broke the law to serve himself.”
  
  “Lawyers are positioned to do tremendous harm if they betray the trust placed in them, and we allege that the harm suffered by Talafous’ clients and their beneficiaries exceeded $1.5 million,” said Director Elie Honig of the Division of Criminal Justice. “Through prosecutions such as this one, we’re sending a strong message that we will not tolerate lawyers who abuse their licenses.”
  
  Talafous is charged with failing to report the monies he allegedly misappropriated from his clients in state income tax returns that he filed for the tax years 2011, 2012, 2013 and 2014.
  

Source: Jersey City Lawyer Indicted For Allegedly Stealing More Than $1.5 Million From Clients.

For the indictment, see State of New Jersey v. Talafous.

See, generally, Frederick Miller, "If You Can't Trust Your Lawyer .... ?", 138 Univ. of Pennsylvania Law Rev. 785 (1990) for more on the apparent, long-standing tolerance for deceit by many in the legal profession:

• This tolerance to deception is encouraged by the profession's institutional civility. Seldom is a fig called a fig, or a shyster a shyster. No, our euphemisms are wonderfully polite: "frivolous conduct," or a "lack of candor;" or "law-office failure;" or, heaven forbid, a "peculation," a "defalcation," or a "negative balance" in a law firms's trust account.
  
  There is also widespread reluctance on the part of lawyers --- again, some lawyers --- to discuss publicly, much less acknowledge, that they have colleagues who engage in deceit and unprofessional conduct.
  
  This reluctance is magnified when the brand of deceit involves the theft of client money and property, notwithstanding that most lawyers would agree that stealing from clients is the ultimate ethical transgression.[...] The fact is, however, that theft of client property is not an insignificant or isolated problem within the legal profession. Indeed, it is a hounding phenomenon nationwide, and probably the principal reason why most lawyers nationwide are disbarred from the practice of law.

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(1) The New Jersey Lawyers' Fund for Client Protection was established to reimburse clients who have suffered a loss due to dishonest conduct of a member of the New Jersey Bar.

For similar "attorney ripoff reimbursement funds" that attempt to clean up the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (now includes a listing for Canadian client protection funds, courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

Maps available courtesy of The National Client Protection Organization, Inc.

See generally:

• N.Y. fund for cheated clients wants thieving lawyers disbarred, a July, 2015 Associated Press story on this Fund reporting that the Fund's executive director, among other things, is calling for prompt referral to the local district attorney when the disciplinary committee has uncontested evidence of theft by a lawyer injuring a client or an admission of culpability;
  
  When Lawyers Steal the Escrow, a June, 2005 New York Times story describing some cases of client reimbursements ("With real estate business surging and down-payment amounts rising with home prices, the temptation for a lawyer to filch money from a bulging escrow account and later repay it with other clients' money has never been greater, said lawyers who monitor the thefts."),
  
  Thieving Lawyers Draining Client Security Funds, a December, 1991 New York Times story that gives some-real life examples of how client security funds deal with claims and the pressures the administrators of those funds may feel when left insufficiently financed as a result of the misconduct of a handful of lawyer/scoundrels.

Bank Tips Off Maryland's Attorney Grievance Commission On Suspicious Account Activity, Leads To Bar Boot For Long-Time Attorney; 40+ Year Career Ends Despite Repaying $280K+ In Misappropriated Client Trust Fund Cash, But Returning Loot May Save Him From Criminal Charges

In Arbutus, Maryland, The Baltimore Sun reports:

• Seven judges in the Court of Appeals of Maryland voted last month to disbar an Arbutus lawyer who spent more than 40 years practicing law, after he misappropriated $281,651 from a trust fund he was responsible for.(1)
  
  Bruce A. Kent issued loans using funds of the trust and transferred money to his son-in-law, according to the Attorney Grievance Commission of Maryland, a state agency. He also withdrew cash and wrote checks to himself from the account.
  
  The trust was established for John and Sally McClelland's adult children, according to Deputy Bar Counsel Raymond Hein.
  
  First Mariner Bank reported the suspicious activity in August 2013.
  
  "They really knew very little about what was in the trust and did not really question any of this," Hein said. "It came to our attention because the bank, First Mariner Bank, reported it to us."
  
  The misappropriation was carried out between October 2010 and September 2013. The Attorney Grievance Commission of Maryland first filed an action against Kent on April 22, 2015.
  
  Kent ultimately repaid the missing funds, Hein said.
  
  In April he was found to have violated 10 parts of the Maryland Lawyers' Rules of Professional Conduct, including committing a "criminal act that reflects adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer in other respects," according to the Attorney Grievance Commission's opinion.
  
  No criminal charges have been filed against Kent, according to Maryland's Judiciary Case Search. Kent did not return voicemails left at his office.

For the story, see Longtime Arbutus lawyer Kent disbarred for misusing trust fund (Arbutus lawyer disbarred for misusing $280K from trust fund).

See, generally, Frederick Miller, "If You Can't Trust Your Lawyer .... ?", 138 Univ. of Pennsylvania Law Rev. 785 (1990) for more on the apparent, long-standing tolerance for deceit by many in the legal profession:

• This tolerance to deception is encouraged by the profession's institutional civility. Seldom is a fig called a fig, or a shyster a shyster. No, our euphemisms are wonderfully polite: "frivolous conduct," or a "lack of candor;" or "law-office failure;" or, heaven forbid, a "peculation," a "defalcation," or a "negative balance" in a law firms's trust account.
  
  There is also widespread reluctance on the part of lawyers --- again, some lawyers --- to discuss publicly, much less acknowledge, that they have colleagues who engage in deceit and unprofessional conduct.
  
  This reluctance is magnified when the brand of deceit involves the theft of client money and property, notwithstanding that most lawyers would agree that stealing from clients is the ultimate ethical transgression.[...] The fact is, however, that theft of client property is not an insignificant or isolated problem within the legal profession. Indeed, it is a hounding phenomenon nationwide, and probably the principal reason why most lawyers nationwide are disbarred from the practice of law.

----------------------------

(1) The Client Protection Fund of the Bar of Maryland (formerly "The Clients' Security Trust Fund"), was created in 1965 for the purpose of maintaining the integrity and protecting the good name of the legal profession. The Fund, supported financially by practicing attorneys, reimburses claimants for losses caused by theft of funds by members of the Maryland Bar, acting either as attorneys or as fiduciaries.

For similar "attorney ripoff reimbursement funds" that attempt to clean up the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (now includes a listing for Canadian client protection funds, courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

Maps available courtesy of The National Client Protection Organization, Inc.

See generally:

• N.Y. fund for cheated clients wants thieving lawyers disbarred, a July, 2015 Associated Press story on this Fund reporting that the Fund's executive director, among other things, is calling for prompt referral to the local district attorney when the disciplinary committee has uncontested evidence of theft by a lawyer injuring a client or an admission of culpability;
  
  When Lawyers Steal the Escrow, a June, 2005 New York Times story describing some cases of client reimbursements ("With real estate business surging and down-payment amounts rising with home prices, the temptation for a lawyer to filch money from a bulging escrow account and later repay it with other clients' money has never been greater, said lawyers who monitor the thefts."),
  
  Thieving Lawyers Draining Client Security Funds, a December, 1991 New York Times story that gives some-real life examples of how client security funds deal with claims and the pressures the administrators of those funds may feel when left insufficiently financed as a result of the misconduct of a handful of lawyer/scoundrels.