Alleged 1031 Exchange Scam Leaves Real Estate Investors With Big Tax Bill & No Money To Pay It With

The New York Post reports:

• Federal authorities are investigating a Virginia-based finance company that went belly-up last year, sticking hundreds of real-estate investors with millions of dollars in losses, The Post has learned. The 440 investors had parked the proceeds from their real-estate sales with LandAmerica 1031 Exchange Services Inc. in hopes of delaying capital gains taxes - only to find their entire investment nest egg missing.

***

• And worse, the Internal Revenue Service wants those burned in the failure of LandAmerica and other so-called "qualified intermediaries" to pay taxes on the profits they no longer have. [...] The LandAmerica failure and FBI probe highlight a growing issue for 1031 accounts. When Congress created these so-called "Starker exchanges," they forgot to regulate the companies that run the 1031 accounts.

For more, see Helter Shelter (Feds Probing Tax Haven 'Ponzi Scheme').

Go here for other posts on problems with 1031 exchange intermediaries. EscrowRipOffAlpha

Pennsylvania AG Warns State Homeowners Of Defunct Escrow Company, Possible Unpaid Property Tax & Insurance Bills

From the Office of the Pennsylvania Attorney General:

• Attorney General Tom Corbett [...] announced that the Attorney General's Bureau of Consumer Protection has launched an investigation into the business practices of American Escrow LLC, an Illinois-based escrow company that suddenly halted operations in March 2009.

• Corbett said that homeowners across Pennsylvania, along with consumers from several other states, used American Escrow to handle the payment of their property taxes and/or homeowners insurance. "Based on our preliminary investigation, it is possible that property tax and insurance bills for more than 100 Pennsylvania consumers were not paid by American Escrow," Corbett said. "It is essential that consumers who used American Escrow contact their local taxing authorities and homeowner's insurance companies as soon as possible to notify them of the problem, verify what payments have been made and make arrangements to directly pay any balances that are due." [...] American Escrow customers in Pennsylvania who do not receive a letter [from the pennsylvania Attorney General], or those who misplace the complaint form, can download a copy of the form.

For the entire press release, see Attorney General Corbett cautions homeowners about closed escrow company; encourages check of tax & insurance records. EscrowRipOffAlpha

1031 Exchange Intermediary Suspected Of Feloniously Pocketing $550K+ In Clients' Sale Proceeds Found Dead By Suicide

In Boulder Colorado, the Boulder Daily Camera reports:

• [K.C.] Schneider, who owns a commercial real estate firm in Boulder, said Wednesday he is [...] out $425,000 in real estate proceeds he gave National 1031 Exchange Service to hold while he closed on a new property.

***

• Schneider filed a complaint in October against the now-defunct holding company's owner, Debra Edwards, and earlier this month Boulder police issued a warrant for her arrest on suspicion of three felony counts of theft of more than $20,000.

• But the day before Edwards was to surrender to authorities, the 53-year-old certified public accountant and former board member of the Longmont Area Chamber of Commerce was found dead in her Longmont office. The Boulder County Coroner's Office said Wednesday that her Dec. 15 death was a suicide -- asphyxiation due to inhalation of helium.

• Edwards' death led Boulder police to close its criminal case against her. Schneider said that leaves him and two other National 1031 Exchange Service clients -- who also claim to have been bilked of tens of thousands of dollars -- out in the cold.

For more, see Suicide complicates money-recovery effort (Client says Debra Edwards' Boulder financial firm stole $425,000 from him).

Go here for other posts on problems with 1031 exchange intermediaries.

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Closing Agent Get 21 Months In Prison For Pocketing Escrow Cash Intended To Pay Off Existing Mortgages; Title Underwriter Takes $877K Hit

The U.S. Attorney for the District of Maryland announced Monday that Marny Arlen Bailey, age 35, of Highland, Maryland, was sentenced to 21 months in prison followed by five years of supervised release for wire fraud in connection with a scheme to steal real estate settlement funds which were intended to pay off the homeowners’ previous loans. She was also ordered to pay restitution of $877,000, to the title company who paid off the homeowners’ loans after the fraud was discovered. According to the U.S. Attorney's press release:

• Beginning in late 2007 or early 2008, Bailey used funds which were intended to pay off mortgage lenders for her own purposes. In early 2008, she diverted whole settlement amounts to her personal accounts, and started gambling in an attempt to recoup the amounts she had stolen. [... S]he stole settlement monies from as many as four homeowners, for a total of over $877,000.

For the press release, see Settlement Officer Sentenced For Diverting Funds Intended To Pay Off Mortgage Lenders (Stole Over $877,000 in Just Three Months).

Go here, Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds. EscrowRipOffAlpha

Closing Agent Gets 33 Months For Swiping $1.2M+ In Escrow Cash, Leaving Existing Mortgages Unpaid

The U. S. Attorney's Office in Miami, Florida recently announced the sentencing of closing agent John Mohan, 38, of Delray Beach, FL, to 33 months’ imprisonment in connection with his September guilty plea to a one-count Information charging him with wire fraud. An excerpt from their press release:

• According to the Information, court documents, and statements made in court, Mohan worked as a mortgage broker and closing agent who assisted buyers in real estate transactions. As the closing agent, Mohan would collect funds from buyers and lenders, and would represent to the parties engaged in the transaction that these funds were being held in escrow to be disbursed for various specified purposes, including the satisfaction of pre-existing mortgages.

• In fact, Mohan misappropriated the escrowed funds for his personal use and to make additional personal investments. Over the course of the scheme, Mohan misappropriated more than $1.2 million in client funds. In an effort [to] conceal the fraud and prevent immediate foreclosure of the property, Mohan would sometimes make some payments on the homeowner’s original mortgage.

For the press release, see Delray Beach Mortgage Broker Sentenced For Fraud.

Go here, Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds. EscrowRipOffAlpha

Rhode Island Closing Agent Cops Plea To Pocketing Escrow Cash Intended For Payoff Of Existing Mortgage Loans; Title Underwriter Takes $1.3M Hit

In Providence, Rhode Island, the Office of the U.S Attorney announced:

• Angela Raposa, who owned Title America Closing Services, pleaded guilty today to a federal fraud charge, admitting that she used about $1.3 million from her company’s escrow account to pay for personal expenses.

***

• Proceeds of real estate transactions were deposited into the escrow account and were supposed to be used to be disbursed at real estate closings, primarily to pay off existing mortgages. Stewart Title served as an underwriter for Title America and discovered Raposa’s fraudulent scheme in February 2007. As the underwriter, Stewart Title had to pay off mortgages totaling $1,301,826 from five real estate transactions.

For the press release, see Title company president admits $1.3 million fraud.

Go here, Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds. EscrowRipOffAlpha

Attorney Accused Of Pocketing Closing Funds Due To Lien Holders Seeks "Free Pass" From Prosecution As Psych Pros Contest Competence To Stand Trial

In Pittsburgh, Pennsylvania, the Tribune Review reports:

• Two mental health experts had differing opinions Wednesday on whether a once-prominent Fayette County trial attorney is competent to stand trial on theft charges.

• Adam Sedlock, a Uniontown psychologist, testified [...] that crippling physical ailments have reduced Mark F. Morrison of Hopwood to functioning at the level of a seventh-grader. He said Morrison's condition is permanent and he will never be able to assist in his own defense.

***

• Morrison, 51, is accused of stealing about $99,000 in mortgage-settlement payments from two elderly Hopwood couples.(1) Instead of settling outstanding mortgages on the two properties, Morrison allegedly paid off smaller mortgages and diverted most of the money.

For more, see Ex-attorney Morrison's ability to face theft trial disputed.

For story update (1-15-09), see Morrison ruled competent to stand trial.

Go here, Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds.

(1) Reportedly, Morrison is charged with two counts each of:

• theft by failure to make required disposition of funds received,
• forgery,
• tampering with records or identification, and
• misapplication of entrusted property. EscrowRipOffAlpha

Attorney Declared Competent To Stand Trial On Charges Of Stealing Refinancing Proceeds From Two Clients

In Fayette County, Pennsylvania, The Herald Tribune reports:

• Although a Fayette County judge found that a former deputy prosecutor has experienced declined intellectual function because of his ailing health, he ruled the former attorney is competent to stand trial. Mark F. Morrison, 51, of Hopwood is accused of stealing nearly $100,000 from two clients. State prosecutors alleged he stole money from mortgage refinancing for two clients in 2005.

For more, see Morrison ruled competent to stand trial.

For earlier report on this story, see Ex-attorney Morrison's ability to face theft trial disputed.

For story update (3-3-09), see: Lawyer's theft trial delayed.

Go here, Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds. EscrowRipOffAlpha

Minnesota Title Agent Faces State Regulator's Embezzlement Charge; Accused Of Pocketing $230K+ In Real Estate Closing Proceeds

From the Minnesota Department of Commerce:

• The Minnesota Department of Commerce has summarily suspended the real estate closing license, resident insurance producer license and notary public commission of Kuntee Singramdoo and charged her with embezzling over $230,000 in real estate closing proceeds and using the money to pay off her own creditors or her family members' creditors.

***

• Singramdoo admitted under questioning from Commerce Department investigators that she embezzled the funds but at this time has only paid back $10,000 [...].

For the entire press release, see Lakeville woman charged with $230,000 embezzlement (Licensed real estate closer used proceeds from closing to pay her own debts).

Go here for the Department's administrative charges.

Go here, Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds. EscrowRipOffAlpha

NJ Closing Lawyer Cops Plea To Pocketing $4M In Escrow Cash; Blows Money Intended For Existing Lien Holders On AC Slots; Title Insurers Foot The Bill

From the Office of the New Jersey Attorney General:

• Attorney General Anne Milgram and Criminal Justice Director Deborah L. Gramiccioni announced that a Lyndhurst lawyer pleaded guilty [last week] to stealing approximately $4 million entrusted to him for real estate closings, which he used to gamble in Atlantic City.(1)

***

• [Michael P.] Rumore was hired as an attorney and settlement agent for real estate purchasers. Between April 16, 2007 and August 13, 2008, he received approximately $4 million into his attorney trust account from various mortgage companies. He had a duty to disburse the funds for closings and use them to pay balances on existing mortgages and other associated costs and fees.

• In pleading guilty, Rumore admitted that he instead transferred the funds into his personal and business accounts and used them to gamble at casinos in Atlantic City, primarily on slot machines.

For the NJ AG press release, see Lyndhurst Lawyer Pleads Guilty to Stealing $4 Million in Funds for Real Estate Closings Which He Gambled in Atlantic City.

Go here, Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds.

(1) According to the NJ AG press release, the plea agreement provides that the state will recommend that attorney Michael P. Rumore be sentenced to 15 years in state prison, and must sign a consent judgment to pay full restitution to the victims, which are various title insurance companies. Rumore, 50, pleaded guilty to first-degree money laundering and second-degree theft by failure to make required disposition of property received. EscrowRipOffAlpha

Disbarred Florida Attorney Gets 14 Years For Pocketing $1.7M+ From Escrow Accounts Involving Clients' Real Estate Transactions

In Pinellas County, Florida, the St. Petersburg Times reports:

• Richard Da Fonte, the disbarred Clearwater lawyer accused of stealing more than $1.7 million from clients, was sentenced to 14 years in prison and 15 years' probation.(1)

***

• [His lawyer, Larry] Sandefer said his client had hoped to pay back his victims from the sale of his business, real estate and life insurance. The business, though, which Da Fonte sold to a former associate, is tied up in a legal dispute. Foreclosure is pending on his office condominium, and his home is in foreclosure, Sandefer said. His $3 million life insurance has lapsed.

For more, see Disbarred lawyer Richard Da Fonte gets 14 years for stealing from clients.

Go here, Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds.

(1) The story describes some of Da Fonte's victimized clients as follows:

• Shakawat Hossain of St. Petersburg hired Da Fonte in 2003. He said the lawyer stole about $235,000, money he planned to use to buy a gas station and convenience store;
• Pinellas Park resident Sharon Dore and her family lost $110,000 when they hired Da Fonte to handle the sale of her late mother's St. Petersburg home. The money was supposed to go to Dore, her daughter and a brother;
• Joan Kelly, a widow, paid for her Seminole home in full in April 2007. That summer, while she was in Cape Cod, she began getting calls from lawyers offering help with a problem. It was foreclosure. Da Fonte had taken almost $200,000 meant to pay her home's previous owners;
• Winnie Yang of Clearwater couldn't wait to have her say during the lengthy hearing. The lawyer stole $400,000 from her brother-in-law Kenneth Yang, who lives in Texas. The money was from a real estate transaction involving Yang, her husband and her brother-in-law. EscrowRipOffAlpha

Florida Closing Attorney Gets 63 Months For Pocketing $3M+ In Escrow Money Intended Mostly For Payoff Of Existing Mortgages

The U.S Attorney's Office (Southern District of Florida) recently announced the sentencing of attorney Joseph J. Weisenfeld to 63 months in prison based, following his guilty plea to wire fraud charges. An excerpt from the press release:

• According to the Information and statements made during the plea hearing, Weisenfeld, a licensed attorney, represented individuals and/or entities (mostly buyers) in real estate transactions. As the closing agent in many of these transactions, Weisenfeld would collect funds from buyers and lenders, and would represent to the parties engaged in the transaction that these funds were being held in escrow to be disbursed for various specified purposes, including the satisfaction of pre-existing mortgages. In fact, however, Weisenfeld misappropriated the escrowed funds for his use and benefit. Over the course of the scheme, Weisenfeld misappropriated over $3 million in client funds from his attorney trust account.

For the press release, see Local Real Estate Attorney Sent To Jail On Fraud Charges.

Go here, Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds. EscrowRipOffAlpha

Feds Charge Title Agent With $900K+ Heist From House Closings; Homeowners Left In Foreclosure; Underwriter Says Suspect Unauthorized To Issue Policies

In Louisville, Kentucky, The Courier Journal reports:

• [A] former lawyer, Wavy Curtis Shain, 26, was charged [last week] with carrying out various schemes to defraud banks and mortgage companies. He is accused of using businesses he owned and operated, Derby City Title and Capital Distribution LLC, to carry out the schemes.

• He also is charged with misappropriating substantial amounts of money received on behalf of borrowers using Derby City Title to obtain loans to purchase homes. In doing so, he allegedly failed to pay off existing loans and mortgage held by the sellers of those houses. Shain also is charged in the indictment with perpetrating a check-kiting scheme using business and personal accounts maintained with US Bank and BB&T bank.

For the story, see Suspended, former lawyers charged.

In a related story, WAVE-TV Channel 3 reports:

• Seven families could lose their homes any day now, even though they did nothing wrong. They made their house payments on time, but their homes are still going into foreclosure. They say it happened after a Louisville man scammed them out of almost a million dollars during a re-finance of their mortgage.

***

• Federal investigators believe [Wavy Curtis] Shain pocketed more than $900,000 from seven families. The FBI has charged him with theft.

According to the WAVE-TV Channel 3 story, Shain, through his company, Derby City Title, purportedly wrote insurance policies for underwriter Investors Title Insurance Company. Officials from Investors Title reportedly told Channel 3 that Derby City Title was never authorized to issue policies for them.

For more, see Title company's failure to make loan payments means families could lose homes.

Go here, Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds. EscrowRipOffAlpha

Owner Of Now-Defunct Title Company Admits Swiping Closing Proceeds Intended To Pay Off Existing Mortgages, Leaving Homeowners Facing Foreclosure

In Louisville, Kentucky, WHAS-TV Channel 11 reports:

• In an exclusive interview with WHAS11 News, the former owner of a Louisville title company admits to misappropriating mortgage money. His actions could cost a number of people their homes.

• Wavy Curtis Shain appeared in federal court Tuesday, but the court did not accept his guilty plea, pending a better explanation of the charges by the U.S. Attorney’s Office. Shain, 26, operated Derby City Title first as a title search company from 2001 to 2003, then as a closing agent from 2003 to 2007. Shain tells WHAS11’s Joe Arnold that the “money was misappropriated to keep the business open.”

***

• When Nancy Mitchem refinanced her home through Shain, she says he kept that payout for his own use -- failing to pay off her first mortgage -- setting her up for foreclosure. [...] Homeowner Joe West adds, “We can’t even go rent an apartment because our credit scores are demolished and it’s all because of what he did.”

For the story, see Former owner of Louisville title company admits misappropriating money.

Go here for interview with Wavy Curtis Shain.

Go here, Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds. EscrowRipOffAlpha

Title Agency Owner Cops Plea To Pocketing $3.4M In Escrow Funds From Real Estate Closings Intended To Pay Off Existing Lien Holders

From the Office of the U.S. Attorney (Maryland):

• Deborah Williams, age 56, of Pasadena, Maryland, the owner of a Severna Park title company, pleaded guilty [last Friday] to mail fraud related to a scheme to divert settlement funds to her own benefit, announced United States Attorney for the District of Maryland Rod J. Rosenstein.

***

• According to her plea agreement, [...] Deborah Williams used for her own benefit settlement funds from real estate closings that were deposited in Day Title’s escrow account and were intended to pay off the lien holders on those properties. [...] Williams attempted to conceal her illegal transactions by falsely representing on the settlement documents that her company had paid off lien holders, then sent the falsified settlement documents to the lender by commercial carrier. In fact, Williams either initiated stop payments of payoff checks that had been disbursed or intentionally failed to mail the payoff checks to the lien holder.

• Day Title’s failure to make the pay offs to the lien holders was not detected until sellers began receiving delinquency notices from their mortgage companies. The time delay between the settlement and the date when Day Title made the pay offs to the lien holders allowed Williams to replenish the escrow account with proceeds from new unrelated real estate settlements.

• A title insurance company that had issued policies through Day Title, began to receive claims from lien holders who had not been paid off and conducted an audit of Day Title. The title insurance company found over 16 properties where Williams had not paid off the lien holder. The company paid out a total of $3.443 million to these entities, as required under the title insurance policies that guaranteed that the buyer was receiving a title free of prior liens. As part of her plea agreement, Williams must forfeit $3.4 million, the amount she admits that she failed to pay to the lenders.

For the entire press release, see Pasadena Title Company Owner Pleads Guilty to Defrauding Lenders of over $3.4 Million (Diverted Real Estate Proceeds to Personal Use and Created False Settlement Documents). EscrowRipOffAlpha

3 Accused With Stealing $4M In Escrow Funds; Title Insurer Takes $3M+ Hit; Used Photoshop Software To Create Altered Bank Statements, Say C. Fla. Cops

In Orange County, Florida, WDBO Radio reports:

• Orange County Sheriff's Economic Crime Unit arrested Michelle Worley [...] on grand theft charges. Deputies allege that between December 2004 and July 2006, Worley and the partners of Preferred Alliance Title, Patrick Torre and John Callaghan, misappropriated approximately $4 million in escrow funds. Investigators say the escrow funds were used to operate other businesses such as a real estate company, a restaurant and a magazine publishing company.

• The suspects, investigators say, were able to hide their fraud from Stewart Title Guaranty, by conducing fraudulent monthly bank reconciliation with altered bank statements. Stewart Title insured a number of real estate transactions which were closed at Preferred Alliance Title. After satisfying all of the lien holders and various other entities, Stewart suffered an approximately $3.1 million dollar loss.

Source: Three accused of multi million dollar fraud.

See also, Orlando Sentinel: Third suspect arrested in $4 million escrow-fraud case:

• [T]hey hid their activities from Stewart Title Guaranty, referred to as the "victim," by creating altered bank statements with Photoshop software, the Sheriff's Office's economic-crime unit said. EscrowRipOffAlpha

Now-Defunct Title Company Accused Of Failing To Pay Off Existing Mortgage On Refinance; Owner Now Left Facing Foreclosure With Two Home Loans

In Cincinnati, Ohio, WKRC-TV Channel 12 reports:

• A local homeowner who refinanced his mortgage two years ago appears to be the victim of fraud and is now facing foreclosure. The man afraid he'll lose his home even though he's been faithfully paying his new mortgage company. Rodney Everson is afraid he'll lose his Forest Park house because someone stole the money that was supposed to pay off his first mortgage company when he refinanced. This happened in October 2007, after he contacted a local mortgage broker to get a new loan.

***

• The title company, Preferred Choice Title, was to have paid off that loan. But a month later the lender called to say it never got the money. [...] Local 12 has learned the title company that was supposed to pay off the mortgage, Preferred Choice Title, was closed down late last year after it took the money but failed to pay off another $100,000 mortgage.

***

• Unfortunately, although the new lender required Everson to buy title insurance to protect it, he failed to buy his own policy to protect him. And now, as a result, he may end up losing the house.

For the story, see Forest Park Man Believes He Is Victim of Mortgage Fraud.

Go here, Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds. EscrowRipOffAlpha title insurance legal issues

Probe Continues Into Pennsylavania Title Company's Failure To Apply Escrow Funds Towards Unpaid Mortgages In Real Estate Closings

In Luzerne County, Pennsylvania, The Times Leader reports:

• Kerry and John Foose are among the latest victims of Priority Search Inc., a Kingston title search company under investigation by the U.S. Secret Service for keeping money owed to property sellers. The Fooses say their credit is now shot because Priority Search failed to use $78,000 from the buyer of their Wilkes-Barre property to pay off the outstanding mortgage on the property. Priority Search also kept another $9,000 that the couple turned over at the June 2008 closing to pay off the remainder of their old mortgage, Kerry Foose said.(1)

***

• Since the Secret Service investigation became public in November, dozens of victims have contacted the agency to report claims against Priority Search, said William Slavoski, the agent in charge of the Secret Service Scranton office. [...] Priority Search, which has since closed, is owned by Robert E. Marsh Jr. and Elizabeth Sichler, who was past vice chairwoman of the county Republican Party organization.

For more, see More victims step forward in Kingston title search case (Priority Search investigated for keeping money owed to property sellers).

Go here, Go here, Go here, and Go here for other stories of trust account / escrow account theft of funds.

(1) According to the story, the couple learned in February that their mortgage servicer had reported the unpaid debt, because their credit score plunged. The low credit score has prevented the couple from refinancing the mortgage on their Susquehanna County farm, where they now live. “Now it’s impossible to refinance. We’ve been denied by three lending institutions,” she said. EscrowRipOffAlpha

Ohio Attorney Gets 4 Years For Lifting $624K+ From Escrow Account, Stiffing 23 Clients In The Process

In Toledo, Ohio, the Toledo Blade reports:

• A former Toledo attorney who pleaded guilty to stealing hundreds of thousands of dollars from her clients was sentenced in Lucas County Common Pleas Court Thursday to 4 years in prison. Karyn McConnell Hancock, 38, was convicted of aggravated theft in November for stealing more than $624,000 from 23 clients over a period of nearly six years.(1)

***

• Authorities said that McConnell Hancock would put money into an attorney escrow account for clients of personal injury cases, probate matters, and real estate issues, and would divert some of the funds for personal use.

***

• Those clients who investigators have identified as victims of theft have been advised to file a claim with the Client Security Fund of the Supreme Court of Ohio. The fund is made up of money from registration fees paid by Ohio's attorneys and is used to reimburse those who are victims of attorney misconduct.

For more, see McConnell Hancock gets 4 years.

For those outside of Ohio who get screwed out of money or property by an attorney in the course of representing you, and seek some amount of reimbursement, see:

• U.S.: Directory Of Lawyers' Funds For Client Protection (American Bar Association);
• U.S.: Check the USA Client Protection Funds Map;
• Canada: Check the Canada Client Protection Funds Map.

(1) Reportedly, because McConnell Hancock would ultimately pay back some of that money with other accounts, authorities believe the total stolen was about $389,000. EscrowRipOffAlpha