C. Florida Closing Agents Cop Pleas To Looting Real Estate Escrow Accounts; Ordered To Pay $7.9M In Restitution To Title Insurer Left Holding The Bag

From the Office of the Florida Attorney General:

• Attorney General Bill McCollum [last week] announced that a Pinellas County woman pleaded guilty to stealing nearly $8 million in a real estate fraud scheme. Cheryl Wehlau, owner of Gulf Coast Title Offices, entered her plea [last week] in a case prosecuted by the Office of Statewide Prosecution.

• Cheryl Wehlau masterminded a scheme to funnel funds held in escrow for real estate closings into a business operating account, then spent the cash on a lavish lifestyle. Gulf Coast Title was placed into receivership by their underwriter Commonwealth in January 2006. Cheryl Wehlau pled guilty to 21 counts of misappropriation of $100,000 or more in funds. She will be sentenced at a future date to eight years in prison, to be followed by 15 years supervised probation. Should she violate any criminal laws or fail to show up to her sentencing at a later date, she will receive 30 years in state prison.

• John Wehlau, Cheryl Wehlau’s husband, also pleaded guilty to one count of misappropriation of escrow funds, $100,000 or more and 20 counts of petty theft of $100 or more. Restitution will be ordered against both defendants in the amount of $7.9 million, payable to Fidelity National Title Group, the victim of the scheme.

• As a condition of her plea agreement, Cheryl Wehlau may not be employed in real estate, title or mortgage services, or be directly or indirectly involved as fiduciary handling another person’s money. The Wehlaus will also have to pay $4,000 for the cost of prosecution and court costs.

Source: Pinellas County Woman Sentenced to 8 Years in Prison in Real Estate Fraud Scheme (Defendant and husband ordered to pay nearly $8 million in restitution).

Defunct Florida Title Insurance Agency Required Employees To Put In "Chinese Overtime"

The Saint Petersburg Times ran another story on the escrow scandal involving the now-defunct Gulf Coast Escrow and its owners, Cheryl L. Wehlau and her husband, John T. Wehlau. According to the story:

• Loan closers worked 12-hour days, weeks on end without time off. Processors prepared loan packages, napped on cots, splashed water on their faces, then went back to work to meet the volume of loans. [The Wehlaus] even insisted employees do what they called "Chinese overtime" -- paid not at time-and-a-half, but at half-wage.

[...]

• The Wehlaus had a secret reason for maintaining high productivity at Gulf Coast, according to state investigators: They were stealing millions from escrow accounts under their trust, laundering the cash through shell corporations and spending it on an extravagant lifestyle. The stolen funds were replaced by money coming in for new mortgage loans, investigators said, but if the flow of new money was interrupted, the scheme faced collapse.

[...]

• An audit revealed an escrow account that should have held $9.4-million contained just $1.5-million. More than $7.9-million had vanished. [...] Each was charged with 25 felonies: theft from escrow accounts, grand theft and money laundering.

For more, see Title business boomed, but the cash vanished (Life was hard but lucrative at Gulf Coast, until the owners were charged with stealing millions).

For story update, see Search for title company's millions leads to employee (Much of $7.9-million looted from Gulf Coast Title remains missing) (St. Petersburg Times - 10-11-07).

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Another Multi Million $ Florida Escrow Scandal; $8 Million Missing

It's been a busy last week and a half or so in Florida for escrow agents accused of swiping other people's money that has been entrusted to them in connection with pending real estate transactions.

In the most recent scandal, reported in the St. Petersburg Times, a whistleblower's phone call coming from within Gulf Coast Title Closings and Escrow Services is reported to have triggered an investigation that resulted in yesterday's arrest of Gulf Coast's owners, Cheryl L. Wehlau and John T. Wehlau, who are currently being held by authorities on $5-million bail. They were each charged with 25 felonies - grand theft, money laundering and theft of escrowed funds.

According to an attorney for Commonwealth Land Title Insurance Co., the underwriter that wrote title insurance policies for Gulf Coast and discovered the misappropriations, $7.99-million was stolen from escrow accounts at Gulf Coast, leaving Commonwealth holding the bag, having to cover hundreds of bad checks that started bouncing all over Florida.

Hundreds of people and companies filed claims on bad checks disbursed at Gulf Coast closings, including one couple who sold their home and walked out of a Gulf Coast closing with a rubber check for almost $140,000. After three weeks of experiencing panic and increased high blood pressure when discovering that Gulf Coast had shut down, the couple received full reimbursement from Commonwealth, which reportedly was legally required to cover the Gulf Coast losses.

The funds were allegedly spent entirely on a lavish lifestyle, as a search of the couple's assets hasn't turned up much. For more, see Lavish life over, pair face prison (Title business misspent millions, authorities say).

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