Saturday, September 29, 2012

Virginia Homeowner Cops Guilty Plea To Using Phony Social Security Number, Bogus Address When Filing Bankruptcy To Stall Foreclosure

From the Office of the U.S. Attorney (Lynchburg, Virginia):
  • A Burkeville, Virginia woman pleaded guilty [...] in the United States District Court for the Western District of Virginia in Lynchburg to charges related to bankruptcy fraud following an investigation by the Bankruptcy Fraud Task Force for the Western District of Virginia.

    Sally Marie Jones, 55, of Burkeville, Virginia, waived her right to be indicted and pleaded guilty [...] to one count of bankruptcy fraud. At sentencing, the maximum possible penalty faced by Jones is up to five years in prison and/or a fine of up to $250,000.
  • According to evidence presented by Assistant United States Attorney Daniel Bubar, Jones filed for bankruptcy in the Eastern District of Virginia twice between June 18, 2008 and June 8, 2009. Both times she filed, the defendant listed a different social security number and address.

    On July 23, 2009, the Bankruptcy Court for the Eastern District of Virginia banned Jones from filing bankruptcy for two years in any United States Bankruptcy Court.

    Despite the two-year ban, Jones filed Chapter 13 bankruptcy in the Lynchburg Division of the Western District of Virginia using a false social security number and the address of 3470 Candlers Mountain Road, Lynchburg. No such address exists.

    According to evidence, when a creditor made a motion to dismiss her bankruptcy claim, Jones admitted that the only reason she filed bankruptcy was to enjoy the protection of the automatic stay to avoid foreclosures.
For the U.S. Attorney press release, see Virginia Woman Pleads Guilty To Bankruptcy Fraud.

Civil Rights Feds File Fair Housing Suit Charging Landlord With Discriminatory Practices, Use Of Slurs, Harassment, Retaliation Targeting Black Tenants

From the U.S. Department of Justice (Washington, D.C.):
  • The Justice Department announced [] that it has filed a Fair Housing Act lawsuit against the owners and manager of approximately two dozen rental homes in Washington, N,C., alleging that the manager, William I. Cochran III, discriminated against African-American tenants.

    The complaint, filed in the U.S. District Court for the Eastern District of North Carolina, names Cochran and three related corporate entities – EKP LLC, WRC LLC and Emlan Properties LLC – that own or owned the various properties managed by Cochran.

    The complaint alleges that Cochran delayed or refused to perform maintenance or repairs at properties rented by African-Americans and refused to credit them for repairs they paid for or made themselves; verbally harassed African-American tenants with racial slurs and epithets, having made statements indicating that he disfavored African-American tenants; and threatened, harassed and retaliated against African-American tenants who resisted his discriminatory housing practices.

Tenants To Split $1M In Insurance Company Cash In Suit Settlement Against Former Landlord Who Operated Unsafe, Pest/Mold-Infested 40-Unit Building

In Rancho Cordova, California, The Modesto Bee reports:
  • The conditions were barely tolerable. Tenants living in the 40-unit Cordova Estates apartments in Rancho Cordova had to contend with cockroaches, bedbug infestations and balconies with failing floors. There were roof leaks, mold, damaged carpets, inadequate heat, dangerous gates on unpermitted laundry rooms and more.

    But in recent weeks, 99 people have become the latest tenants to win a legal settlement after being subjected to deplorable rental conditions. Jessica Rubio Munoz, the lead plaintiff in the lawsuit filed on behalf of Cordova Estates' tenants, said she's pleased to receive her share of the money – close to $8,000.

    But she said the money can't fully compensate for the losses she and her family suffered while battling illnesses, infestations and mold. "My son was constantly in the hospital," she said. "He always had rashes." Her daughter developed a staph infection, she said.

    Munoz said she was about to move out last year when she heard about an attorney who would go to bat for besieged residents. Last fall, she contacted the lawyer, Robb Strom of Los Angeles.

    Strom filed suit in December in Sacramento Superior Court on behalf of the tenants. A settlement came last month: $1 million paid for by three insurance companies with policies on behalf of previous owners. Lawyers for the insurance companies did not return calls from The Bee.
  • On Friday, Strom went to the Jalisco Market on Folsom Boulevard, within walking distance of Cordova Estates, and began to distribute settlement checks.

    Adults will each net just under $8,000, Strom said. Children will net about $3,500 each. The rest, about $388,000, will cover court costs and legal fees, Strom said.

    Meanwhile, Strom said he has been contacted by about 20 more former Cordova Estates tenants who have requested that he file a follow-up lawsuit on their behalf. And he's close to filing a suit involving another substandard Rancho Cordova apartment complex.

    In 2010, Strom and another attorney sued owners of another Rancho Cordova complex, Carriage House, and reached a $1 million settlement in that case. The Carriage House has since changed ownership.

Industry-Favoring Florida Law Allows For 'At Will' Evictions For Residents In Assisted Living Facilities

In Broward County, Florida the South Florida Sun Sentinel reports:
  • Assisted living facilities often market themselves as "just like home," cozy places where people will live just like they did in their houses or condos. But many don't realize their new lifestyle has the equivalent of a month-to-month lease.

    Under Florida regulations, assisted living operators need give residents little more than a 45-day written notice in order to evict them. The discharge rules are among the least restrictive in the nation, according to the National Senior Citizens Law Center.

    "Florida is an outlier on the wrong side of the curve. It allows people to be forced out at will," said Eric M. Carlson, the law center's directing attorney and long-term care policy expert.

    Florida advocates' ongoing efforts to change eviction rules failed again this year, with legislators not acting on reforms proposed by an assisted living task force. The group — composed of assisted living administrators, legislators, policy experts and advocates — was convened last year by Gov. Rick Scott to examine care centers' oversight and regulation.

    Florida's Long-term Care Ombudsman Program, which protects the rights of nursing home and assisted living residents, said it will continue to push for discharge policy changes when the group begins meeting again next month.

    An assisted living facility doesn't need to document specific reasons for a discharge and its residents have no right to appeal the decision, unlike in nursing homes. The staff isn't required to help residents find another place to live — even if the evictee is alone, sick or very elderly.

    State Ombudsman Jim Crochet said assisted living discharges should be handled similarly to those in nursing homes. Proposed changes include requiring the ombudsman program be notified when an eviction notice is issued, and that residents be entitled to a state-supervised appeals hearing.

    The ombudsman's office investigated 75 complaints about inappropriate evictions last year, and 72 complaints from residents who said they feared retaliation — including being discharged — for being too demanding or questioning staff decisions.

    One reason that discharge regulations aren't uniform is that nursing homes are governed by federal laws, and assisted living facilities by state regulations. And assisted centers, unlike nursing homes, are not allowed to house people with complicated medical conditions or advanced dementia.

    So discharges often happen when a resident's health deteriorates and the facility can no longer legally or safely care for the person, said Pat Lange, executive director of the Florida Assisted Living Association, an industry group.

    Passing more extensive rules could tie the facilities' hands "if they feel they need to relocate someone in order to meet the resident's needs," Lange said.

    Jean Merget, a family consultant with the Memory Disorder Center at North Broward Medical Center, said most of the discharges she's encountered are sensible and handled properly. "I tell my caregivers not to fight discharge decisions," she said.

    Some geriatric care managers, who coordinate services for elders, say families sometimes hear nothing about discharge policies when they sign their contracts — then suddenly, the resident is asked to leave, said Rona Bartelstone, the senior vice president of care management for SeniorBridge. "The family feels they have been bait-and-switched," said Bartelstone, of Fort Lauderdale.

    Bartelstone said assisted living centers should do a better job telling residents up front about eviction policies and consumers should educate themselves before moving in.

Foreclosed Homeowners Opt Against Pressing Criminal Charges Against Neighbors Who Looted Their Home Under Mistaken Belief It Was Abandoned

In Aurora, Illinois, WBBM-TV Channel 2 reports:
  • There will be no charges filed against the neighbors who picked clean an Aurora home they believed had been abandoned. As WBBM Newsradio’s Pat Cassidy reports, Mike Stapleton and his wife, Susan Kendall, had moved most of their possessions out of their home on Downer Place in Aurora before turning the home over to the bank and moving off to Kansas.

    But when they returned for the rest [o]f their personal belogings, the Aurora Beacon-News reports they discovered that neighbors had cleaned up – and cleaned out – the house.

    The neighbors entered the house without permission, and took about $3,000 worth of property from the house, including Stapleton’s lawnmower, hedge trimmer, and other gardening implements, the Chicago Sun-Times reported last month.

    The neighbors even took personal items of sentimental value such as family photos and heirlooms, the Sun-Times reported.

    Aurora Ald. Rick Lawrence (4th) said he was called by a neighbor about the trash left behind, the Sun-Times reported. The neighbor wanted the house cleaned up.

    Lawrence said he was inside the house shortly after the neighbors had picked over and taken many of the items, the Sun-Times reported.

    But Stapleton tells the newspaper the air conditioning was still on and the utilities were still in the family’s name, and they would never have abandoned the house with everything inside. He told the paper that no one had a right to barge into the house and take anything he or she wanted.

    Still, while police could have filed charges against the neighbors, they did not, because the owners did not want to press charges, the Beacon-News reported.

Homeowner Facing Foreclosure Faces Charges For Pointing Gun At Bank Employee Photographing Home As Part Of Monthly Inspection

In Bloomfield, Indiana, WBIW Radio 1340 AM reports:
  • A March 2013 jury trial date has been set for David Council Jr., of Solsberry,who is accused of pointing a loaded .12 gauge shotgun at a bank employee who was on his property on Washboard Road taking photographs as part of the foreclosure process. Nick Schneider, of the Greene County Daily World reports, Council is charged with pointing a firearm at another person, a Class D felony.
  • Council's wife, Barbara, told police that the U.S. Bank employee Richard Haynes had identified himself as a bank employee and gave her a red card that contained telephone numbers to call to verify his assignment. Haynes was there taking photos as part of a monthly inspection, part of the foreclosure action. [...] Hayes told police that Council had pulled a gun on him before during prior inspections and that is why he had brought a witness.

Friday, September 28, 2012

Investor Pleads Guilty To Antitrust Charges In Connection With NJ Bid Rigging Racket At Municipal Tax Lien Auctions

From the U.S. Department of Justice (Washington, D.C.):
  • A Pennsylvania corporation pleaded guilty [] to participating in a conspiracy to rig bids for the sale of tax liens auctioned by municipalities throughout New Jersey, the Department of Justice announced.

    A felony charge was filed today in the U.S. District Court for the District of New Jersey in Newark, against Crusader Servicing Corp., of Jenkintown, Pa. According to the felony charge, from at least as early as 1998 until September 2006, Crusader participated in a conspiracy to rig bids at auctions for the sale of municipal tax liens in New Jersey by agreeing to allocate among certain bidders which liens each would bid on. The department said that Crusader submitted bids in accordance with their agreements and purchased tax liens at collusive and non-competitive interest rates.
  • Since the conspiracy permitted the conspirators to purchase tax liens with limited competition, each conspirator was able to obtain liens which earned a higher interest rate. Property owners were therefore made to pay higher interest on their tax debts than they would have paid had their liens been purchased in open and honest competition.

Florida AG Files Civil Suits Tagging So-Called Land Trusts Peddling Schemes Purportedly Designed To Make Underwater Mortgages Disappear

In Fort Lauderdale, Florida, The Palm Beach Post reports:
  • The assets and operations of several South Florida land trust companies, related firms and their owners were frozen by the state attorney general’s office Tuesday in a complaint claiming they made promises to struggling homeowners they can’t fulfill.

    The companies have sold hundreds of homeowners statewide on a complicated legal “scheme” that pledges to make their underwater mortgages disappear.

    About 90 Palm Beach County homeowners have signed their deeds over to one of the land trusts as part of the plan. The homes range from million-dollar waterfront mansions in Boca Raton to $60,000 condominiums west of Florida’s Turnpike.

    A so-called “quiet title” lawsuit is then filed by the trust against the homeowner’s lender to try and cancel the mortgage while also setting the homeowner up with a new lower mortgage or other payment plan to the trust, the complaint says.
  • The civil complaint brought under Florida’s Deceptive and Unfair Trade Practices Act charges that the defendants;

    • Wrongfully guaranteed the land trusts will cancel the homeowner’s mortgage through legal proceedings that will leave the borrower with equity in their home.

    • Misrepresented that an assignment of mortgage is not valid unless it is recorded.

    • Charged an advance fee before completing foreclosure-rescue services.

    • Misrepresented that the homeowner’s mortgage is not enforceable against the land trust as a subsequent buyer even though the trusts paid nothing for the deed.
For more, see Florida attorney general files suit against land trusts, calling business unfair and deceptive (Hundreds of Florida homeowners have signed their deeds over to the trusts).

For the Florida Attorney General press release, see Attorney General Bondi’s Office Protects Distressed Homeowners from Mortgage Relief Scam.

For the lawsuit, see State of Florida v. Cherry, et al.

Self-Proclaimed President Of Sovereign Citizen Group Accused Of Running Seminars Teaching How To File Retaliatory Liens Against Gov't Officials, Creating Fictitious Bonds To Pay Federal Taxes

From the Office of the U.S. Attorney (Montgomery, Alabama):
  • A federal grand jury in Montgomery, Ala., charged James Timothy Turner, also known as Tim Turner, with conspiracy to defraud the United States, attempting to pay taxes with fictitious financial instruments, attempting to obstruct and impede the Internal Revenue Service (IRS), failing to file a 2009 federal income tax return, and falsely testifying under oath in a bankruptcy proceeding, the Justice Department, the IRS, and the Federal Bureau of Investigation (FBI) announced [].

    According to the indictment, Turner, the self-proclaimed “President” of the sovereign citizen group “Republic for the united States of America,” conducted seminars at which he taught attendees how to file retaliatory liens against government officials and to defraud the IRS by preparing and submitting fictitious bonds to the United States government in payment of federal taxes.

    Turner is alleged to have attempted to pay his own taxes with a fictitious $300 million bond and to have assisted others in attempting to pay their taxes with fictitious bonds purporting to be worth amounts ranging from $10 million to $100 billion.

Thursday, September 27, 2012

Use Of Eminent Domain To Condemn Underwater Mortgages: A Pro-Homeowner Viewpoint

Brooklyn Law School Professor David Reiss writes in The National Law Journal:
  • Local governments across the country are considering an innovative use of eminent domain. They propose to condemn underwater mortgages (those that exceed the fair-market value of the home) in their communities and restructure them so that home­owners can afford their payments and so that the new mortgage is for less than the fair market value of the property.

    If this proposal is implemented, the local government will pay the owner of mortgages of "underwater" homes the fair market value for the mortgages. The local government will then restructure each mortgage by reducing the principal amount owed to be in line with a mortgage that would be appropriate for the fair market value of the home. This will result in lower monthly payments. It will also result in a sustainable transaction, one in which homeowners can imagine ultimately paying off their mortgages, the American Dream of owning one's home free and clear.

    The financial industry is alarmed by this proposal, claiming that the sky will fall if it is implemented. But this proposal is constitutional, beneficial and administratively feasible. Local governments should give it a try as they seek to stabilize their communities.

    Eminent domain is an ancient prerogative of sovereign governments. Federal and state governments have limited that power by requiring that a government use eminent domain to achieve a public purpose and pay just compensation upon its exercise. See, e.g., Brown v. Legal Foundation of Washington, 538 U.S. 216, 231-32 (2003).

    The U.S. Supreme Court has taken an expansive view of the "public purpose" requirement, holding that use of eminent domain to achieve as broad a purpose as economic development is a legitimate exercise of government power even when it involves taking land from one private party and giving it to another. Kelo v. City of New London, 545 U.S. 469 (2005).
For more, see Eminently reasonable (Using the power of eminent domain to restructure underwater mortgages is constitutional, beneficial and administratively feasible).

Six Fair Housing Groups Tag BofA In Suit Alleging That They Maintain REO's In White Neighborhoods Better Than REOs In Minority Areas

From a recent news release from the National Fair Housing Alliance:
  • [T]he National Fair Housing Alliance (NFHA) and five of its member organizations around the country announced a federal housing discrimination complaint against Bank of America Corporation, Bank of America, N.A., and BAC Home Loan Servicing, LP.

    This complaint, which was filed earlier [this week] with the U.S. Department of Housing and Urban Development, is the result of an undercover investigation that found that Bank of America maintains and markets foreclosed homes in White neighborhoods in a much better manner than in African-American and Latino neighborhoods.
  • The investigation evaluated Bank of America REO properties in the eight metropolitan areas of Atlanta, GA; Dallas, TX; Dayton, OH; Grand Rapids, MI; Miami/Fort Lauderdale, FL; Oakland/Richmond/Concord, CA; Phoenix, AZ, and metropolitan Washington, DC.

Bed-Stuy 'Holy' War Breaks Out Between Excommunicated Christian Elder, Church Leaders Over Alleged $630K Home Equity Refinance Ripoff That Victimized Hapless Senior

In Bedford Stuyvesant, Brooklyn, New York reports:
  • A retired Brooklyn accountant is suing his former Christian church and its leaders for giving him the holy heave-ho in front of the entire congregation.

    Patson Agard claims in a lawsuit that during a Sunday service on Feb. 12, officials at Good Tidings Gospel Chapel excommunicated him and wrongfully accused him of some serious sinning.

    The lawsuit, filed Sept. 12 in Brooklyn Supreme Court, says church elders Theophilus Cato, Daril Neverson and Lloyd Allwood got up on a dais and told congregants that Agard swindled elderly church-goer Dorothy Jordan out of her home. The elders allegedly claimed he "prepared a deed without [Jordan's] knowledge" and pocketed $630,000 by refinancing her home and forging checks in her name.

    A congregant at the 275-member Bedford-Stuyvesant church since 1960, Agard says he became an elder in 1984 and "has always enjoyed a good reputation for honesty and uprightness of character." But after making their damning statements, the elders "stripped him of his position as elder and his membership in the church, in the presence of the plaintiff, his family and other worshippers in an effort to maximize his humiliation," the lawsuit says.

    Less than a week later, the elders allegedly badmouthed Agard in a letter to a dozen branches of Good Tidings Gospel Chapel with thousands of congregants, telling them he had a "serious breach of conduct," the lawsuit says.

    Agard, a retired MTA accountant from East New York, says Jordan first accused him of being a "crook" on Jan. 28 and then went to the other elders. He denies the allegations in the lawsuit and says his reputation was slandered by Jordan and the other elders who "acted with actual malice."

    There have been no criminal or civil cases filed against Agard, according to court records.

    He is suing Jordan, Cato, Neverson and Allgood for an undisclosed amount of money. Agard's lawyer did not respond to a request for comment. Jordan declined to discuss the lawsuit, but said "I didn't tell no lie on him." "I had him come in here helping me, but he helped himself," she said. "He refused to admit that he was wrong."

Wednesday, September 26, 2012

NC AG Targets Three Outfits, Principals In Civil Suits Alleging Loan Modification & Forensic Loan Audit Ripoffs

From the Office of the North Carolina Attorney General:
  • Three North Carolina companies that claim to help people win lower mortgage payments and save their homes from foreclosures are instead ripping off homeowners and must be shut down, Attorney General Roy Cooper said [].
  • As alleged in the complaints filed [last week]:

    Community Mortgage Assistance Program and its principal, Koy Chiu, charge consumers as much as $1,500 in advance and claim to have a 98 percent success rate in saving people’s homes. But consumers who pay the fee get little or no real help working out a loan modification. Chiu falsely promotes the company as a “faith-based organization” on gospel radio and in written materials to target religious homeowners and make the company seem trustworthy.

    Lender Exchange and its principals, Kenneth McCurd and Tanya Wilson, charge consumers one month’s mortgage payment and falsely claim that they’d never had a homeowner lose their home to foreclosure. The company tells prospective customers it will provide a full refund if it isn’t able to obtain a loan modification, but homeowners who’ve paid Lender Exchange and not gotten any meaningful help have had a hard time getting their money back.

    Tidewater Financial and its principal, Elaine Madej, charge homeowners $700 to $1,000 in upfront fees and promise consumers a “legal review” of their loan documents to determine whether lenders have violated state or federal law. However, Madej is not an attorney and the company has no legal expertise on lending laws--nor do its services actually help homeowners. According to one consumer who filed an affidavit in support of Cooper’s lawsuit, Madej kept claiming she was working out a loan modification even as his home was sold at auction and his family was evicted by the Sheriff.

    The Attorney General’s Consumer Protection Division has received eight complaints about Lender Exchange, including some forwarded by the Better Business Bureau and Legal Aid of NC, and four complaints each about the Community Mortgage Assistance Program and Tidewater Financial. [See also: affidavits filed by consumer victims against Community Mortgage Assistance Program, Lender Exchange, and Tidewater Financial.]

    More than 1,000 consumers have complained to Cooper’s office about various foreclosure assistance and loan modification scams over the past five years. To file a consumer complaint, call 1-877-5-NO-SCAM toll-free within North Carolina or fill out a complaint form at
For the North Carolina AG press release, see Cooper Takes Aim At Foreclosure Fraudsters In Charlotte And Wilmington (AG seeks to shut down loan modification scams, win consumer refunds).

Scam Family Gets Off With Hand Slap After Pleading Guilty To Hijacking Home Titles By Filing False Deeds, Burglary, Rent Skimming

In San Diego, California, KSWB-TV Channel 5 reports:
  • A real estate agent who filed a number of false deeds on foreclosed homes that did not belong to her, then rented them out to unwitting victims, was sentenced Monday to 332 days in custody and placed on three years probation.

    With credit for 192 days in jail, Dianne "Harmony'' Brown must serve another 70 days in custody, said Superior Court Judge Leo Valentine Jr. [...] Brown, 46, pleaded guilty to six counts, including burglary, filing a false instrument and rent-skimming.

    Her 48-year-old husband, Dexter Towance Brown, and 29-year-old son, Donavan Robbins, also pleaded guilty to rent-skimming as part of the scam. Dexter Brown, who has a lengthy criminal record, was sentenced [] to a year in jail. Robbins, described as a minor player in the scheme, had his 240-day jail sentence suspended as long as he successfully completes probation. [...] The defendants were ordered to pay more than $176,360 in restitution.

    Prosecutors said Dianne Brown targeted more than 30 South Bay homes in the scheme, claiming to be the owner of Prudent Constituents Association and Peerless Property Management.

    After recording the false deeds, the defendant would cut off Realtor lock boxes, break into the homes and have them re-keyed before renting them to victims, prosecutors said. She listed the homes on Craigslist and collected tens of thousands of dollars in rent.

Florida High Court Sanctions Seven Attorneys For Playing Fast, Loose With Clients' Cash

In a recent news release, The Florida Bar recently announced that the state Supreme Court disciplined 24 attorneys, disbarring eight and suspending 13. Some attorneys received more than one form of discipline. One attorney was placed on probation; three attorneys were publicly reprimanded; and four were ordered to pay restitution.

Among those making the hit parade are the following for playing fast and loose with their clients' money:
  1. William A. Abruzzino, 150 Trotter Ridge Drive, Mooresville, N.C., disbarred for 10 years, effective retroactive to June 1, 2011, following a June 29 court order. (Admitted to practice: 1991) Abruzzino was arrested and charged with a first degree felony for exploitation of the elderly. Abruzzino's misappropriation of his Alzheimer's/dementia- afflicted client's funds resulted in a sentence of five years in prison, followed by probation. He was also ordered to pay restitution of $202,020.50 to the client. (Case No. SC11-1308)

  2. Larry Herbert Colleton, P.O. Box 677459, Orlando, suspended for six months, effective 30 days from a June 29 court order. (Admitted to practice: 1989) Colleton engaged in a pattern of misconduct. In several separate instances, Colleton was retained to represent clients and he failed to communicate and failed to provide adequate and timely representation. He also failed to maintain proper trust account records and he failed to follow proper trust accounting procedures. (Case Nos. SC11-1459 and SC12-177)

  3. Karen Sue Keaton, P.O. Box 1139, St. Petersburg, to be publicly reprimanded by the Board of Governors following a June 18 court order. (Admitted to practice: 1984) Keaton had a long-time personal and familial relationship with a client that she agreed to assist in an estate planning matter. In the preparation of the trust, several amendments were made. Keaton violated Bar rules by being named a contingent beneficiary. (Case No. SC10-1144)

  4. Cedric Eugene Lewis, 631 Heather Glen Loop, Winter Haven, disbarred effective retroactive to June 18, 2009, following a June 21 court order. (Admitted to practice: 2000) Lewis was the subject of a Bar disciplinary proceeding stemming in part from an employee's theft of funds from Lewis’ real estate trust account. Lewis failed to produce trust and financial documents pursuant to two Grievance Committee subpoenas. After a 2009 suspension, Lewis was required to provide the Bar with an affidavit verifying that he’d notified his clients, opposing counsel and certain courts of his suspension. Again, he failed to comply. Lewis was also ineligible to practice law due to CLER and other delinquencies. (Case No. SC12-1076)

  5. Mark Vernon Morsch, 5151 Garlanger Trail, Oviedo, disbarred effective immediately, following a June 29 court order. (Admitted to practice: 1985) Morsch was the subject of several Bar disciplinary matters. In one instance he misappropriated more than $28,000 of a client's settlement funds and used the money for his own purposes. He then misrepresented to the client and the Bar that potential claims against the estate were paid. (Case No. SC11-1310 and SC11-2095)

  6. James Thomas Roslund, P.O. Box 36196, Detroit, MI, suspended until further order, following a June 18 court order. (Admitted to practice: 1973) According to a petition for emergency suspension, Roslund appeared to be causing great public harm. Roslund is also licensed to practice in Michigan. After representing a Michigan client in a Chapter 7 bankruptcy case, Roslund authorized the client to make direct monthly payment deductions to cover his fee. The client subsequently requested a receipt and offered to settle the balance in a final lump sum payment. Roslund failed to respond to the client's requests, failed to fully refund the client and failed to respond to Michigan Bar counsel. (Case No. SC12-1158)

  7. Linda Marie Smith, 11900 Biscayne Blvd., Suite 503, Miami, to be publicly reprimanded following a June 21 court order. (Admitted to practice: 1979) Smith used an account number as both a trust account and an operating account, depositing and disbursing client trust funds as well as earned fees and day-to-day operating expenses. Those actions resulted in the commingling of trust and personal funds, although a Bar review did not reveal misuse or misappropriation of client funds. (Case No. SC12-1075)
For The Florida Bar press release, see Supreme Court Disciplines 24 Attorneys.

Tuesday, September 25, 2012

Novice Foreclosure Auction Investors Bellyache After Discovering 'Great Buys' Are Tainted With 'Poison Pills'

In Central Florida, the Orlando Sentinel reports:
  • Some bidders who have purchased foreclosed houses at public auction are complaining about a "poison pill" embedded in the sale. If the auctioned house was foreclosed on by a homeowners association, some buyers end up paying for the house only to have it later foreclosed on by one or more banks.

    "We're seeing a ton of this in Orange County," said Orlando lawyer Justin Clark, who currently represents several buyers of homeowner-association foreclosures. "The banks can foreclose on these people, and they can foreclose very quickly."

    Of 187 Orange County properties hit with new foreclosure filings during the first week of September, records show that 27 of them, or about 14 percent, were being foreclosed on by homeowner associations owed dues and fees — not by banks or finance companies owed mortgage payments. Clark said HOA foreclosures are a growing part of the house-repossession mix in the courts these days.

    An Orlando woman said she and her husband recently purchased a house for $16,000 in cash, only to learn that they were responsible for the $250,000 mortgage plus overdue homeowner-association fees.

    That buyer, Theresa Edgerton, said government-run foreclosure auctions should separate bank-owned properties from those "owned" by homeowner associations as a way to better protect buyers. Otherwise, people mistakenly think they are buying the property from the principal owner, when the HOA's position is secondary to that of the company that continues to hold the property's mortgage.

    "I don't quite understand how they can sell us nothing," she said recently of the house she and husband thought they had bought at auction, not realizing a bank was still hovering in the background, waiting to foreclose on the same property because of an overdue mortgage. "What's so heartbreaking: We just felt like we won the bid. Several people are bidding on these — we're not the only ones going through this."

    But Leesa Bainbridge, a spokeswoman for the Orange County Clerk of Courts, which hires a company to handle its foreclosure auctions, said it is the bidder's responsibility to make sure the property has no other liens on it, mortgages included.

    "We put something up for sale when a judge tells us to," Bainbridge said. "There are warnings on the site: Do your research."
  • [Edgerton] said she thought she had landed her dream home for a sweet deal. Now she's out $16,000. "The system is very misleading," she said.

Non-Profit Law Firm Scores Temporary Halt On Home Foreclosure Of Elderly Widow Scammed In Alleged Reverse Mortgage Ripoff

In Louisville, Kentucky, WATE-TV Channel 6 reports:
  • A Blount County judge has stopped the foreclosure of a Louisville woman's home, although it was in the works since March. Joy Joines was caught in the middle a multi-million dollar fraud investment scheme, according to investigators.

    She was about to lose her house because no one would listen to her claims that she was a victim. Then Legal Aid of East Tennessee stepped in and got a judge's attention.
  • Her problems started when accountant Joyce Allen was arrested six months ago, along with an associate, and charged with fraud and conspiracy to commit money laundering. [...] In 2005, Allen helped set up what was believed to be a reverse mortgage on Joy's home. For seven years, it provided her a small steady income, but there was really no reverse mortgage.

    "She thought she was getting a reverse mortgage when in fact she got a new mortgage on the property," explained legal aid attorney Charity Miles Williams.

    She and an associate wrote a persuasive motion for a restraining order, enough to convince a judge that the bank trying to foreclose on Joy's home had violated the Fair Debt Collections Act and had no authority to initiate the foreclosure.

    When asked who owned the note, Williams said, "At this point, Freddie Mac owned the note, not PNC. There have been no documents filed with the Blount County register of deeds."

TV Cop Sues Co-Op; Says Management's Failure To Properly Fix Leaks Turned Her $1.2M Home Into Moldy Death Trap

In New York City, the New York Post reports:
  • Chung-chung. In the civil justice system, there are lawsuits. This is a “Law & Order” star’s lawsuit. S. Epatha Merkerson, who played Lt. Anita Van Buren on the TV series for 16 years, is suing the managers of her Washington Heights co-op, claiming they have turned her $1.2 million apartment into a moldy death trap.

    Soon after she got in The Riviera, at West 157th Street and Riverside Drive, in 2002, the co-op board and managers told the actress her roof was “in peril of collapsing” and had to be fixed, the suit says.

    She had to clear out for almost a year as a result and the repairs didn’t fix the leaks, which had caused mold growth, it alleges. And, in 2008, the building sealed off the ventilation to her stove without telling her, leaving her “in jeopardy of her life,” the suit says.

    The suit seeks an order to force the building to fix the leaks and more than $2 million in damages. Building manager Midboro Management didn’t return a call for comment.

Monday, September 24, 2012

Ohio Supremes Reject 'Internet Method' Of Providing F'closure Notice Where Party's Address Is Known, Easily Ascertainable; Reverses 2 Lower Ct. Rulings That OK'd Cheap, Easy Way To Serve Non-Defaulting Defendants

  • At issue in this case was whether a county sheriff can meet the constitutional obligation of providing notice of a sheriff's sale to a plaintiff by letter directing the plaintiff's attorney to monitor a website for a listing of the date, time, and location of sale. The court of appeals affirmed the judgment of the trial court in denying plaintiff's motion to set aside the sheriff's sale.

    The Supreme Court reversed, holding that constructive notice by publication to a party with a property interest in a foreclosure proceeding via a sheriff's office website is insufficient to constitute due process when that party's address is known or easily ascertainable. Remanded.(1)(2)
Source: PHH Mtge. Corp. v. Prater Opinion Summary.

For the ruling, see PHH Mtge. Corp. v. Prater, 2012 Ohio 3931 (September 6, 2012).

Thanks to Deontos for the heads-up on the ruling.

(1) After its analysis of the applicable U.S. Supreme Court and Ohio case law, the state high court concluded its opinion with this nutshell:
  • Constructive notice through the Internet, which is more akin to notice by publication in a newspaper, is simply not sufficient or reasonably calculated to provide actual notice to all nondefaulting parties. Moreover, as noted by Judge Powell, a change in notice requirements in this area would more appropriately be contemplated by local or state rule change.

    Accordingly, we hold that constructive notice by publication to a party with a property interest in a foreclosure proceeding via a sheriff's office website is insufficient to constitute due process when that party's address is known or easily ascertainable.

    We reverse the judgment of the court of appeals denying PHH's motion to set aside the sheriff's sale.
(2) Among the non-profit, consumer advocate 'friends of the court' who jumped into the litigation to urge the Ohio Supreme Court to reverse the lower court rulings were:
  • Southeastern Ohio Legal Services,
  • Ohio Poverty Law Center, L.L.C.,
  • Community Legal Aid Services, Inc.,
  • Legal Aid Society of Columbus,
  • Pro Seniors, Inc.

Application Of The 'Wall Street Rule' Provides Protection For Banksters From IRS Enforcement Of Laws Regulating REMICs In Connection With Mortgage Securitization Screw-Ups

From Thomson Reuters News & Insight:
  • They take aggressive positions, and they figure that if enough of them take an aggressive position, and there’s billions of dollars at stake, then the IRS is kind of estopped from arguing with them because so much would blow up. And that is called the Wall Street Rule. That is literally the nickname for it.”(1)

    Investors in mortgage-backed securities, built on the shoulders of the tax-advantaged Real Estate Mortgage Investment Conduit (“REMIC”), may be facing extraordinary tax losses because of how bankers and lawyers structured these securities.

    This calamity is compounded by the fact that those professional advisers should have known that the REMICs they created were flawed from the start. If these losses are realized, those professionals will face suits for damages so large that they could put them out of business. That is, unless the Wall Street Rule is applied.

    The issue of REMIC failure for tax purposes is important in at least three contexts:

    (1) in any potential effort by the IRS to clean up this industry;

    (2) in civil lawsuits brought by REMIC investors against promoters, underwriters, and other parties who pooled mortgages and sold mortgage-backed securities; and

    (3) state and federal prosecutors and regulators who consider bringing criminal or civil claims against promoters, underwriters, and other parties who pooled mortgages and sold MBSs.
For more, see Wall Street Rules Applied to REMIC Classification (or go here for the research paper by Brooklyn Law School Professors Bradley T. Borden and David J. Reiss.).

(1) From a Monday, September 22, 2003 oral presentation given at a financal industry conference by Emily A. Parker, the then-Acting Chief Counsel for the Internal Revenue Service in discussing the Wall Street Rule:
  • Even in Dallas, Texas – where I practiced law for 28 years prior to joining the IRS – we had heard of the Wall Street Rule. Some might say that is not surprising because Dallas is just Fort Worth trying to be New York. The truth is that the Wall Street Rule is widely known in the tax world and is not limited to issues that originate from, or arise on, Wall Street. The Wall Street Rule may often be cited with respect to publicly traded securities, but the  underlying premises of the Wall Street Rule apply to the tax treatment of a variety of issues and transactions. Therefore, my comments today are not limited to the financial industry or to Wall Street.

    There are at least two accepted versions of the Wall Street Rule.

    One version is 
    that the IRS cannot attack the tax treatment of any security or transaction if there is a long-standing and generally accepted understanding of its expected tax treatment. This is the “golden oldie” version of the rule.

    The second version of the Wall Street Rule is that the IRS is deemed to have 
    acquiesced in the tax treatment of any security or transaction if the dollar amount involved is of sufficient magnitude. This version of the Wall Street rule is primarily premised on the dollars involved and the adverse economic  or market impact of any challenge by the IRS. This is the “golden rule” version of the Wall Street Rule.

    When I first started practicing law, a senior lawyer asked me if I knew the “golden 
    rule.” I mumbled something about “do unto others as you would have them do unto you.” He immediately corrected me with the real golden rule. He said: “The person with the gold makes the rules.” That pretty well  summarizes the “golden rule” version of the Wall Street Rule. If the dollars are big enough, the IRS cannot challenge the tax treatment of a transaction or security because the economic or market impact would be too large.

    Sometimes, both versions of the Wall Street Rule are invoked simultaneously. But, any version of the Wall Street Rule ultimately is based on the principle of estoppel by laches. This is an equitable principle holding that a claim or right may not be enforced if the plaintiff delayed too long in making the claim or enforcing the right.

    One of the basic legal rules I learned in law school, however, was that there is no estoppel against the King. This basic legal rule applies under the tax law. There is no equitable principle of estoppel by laches against the Commissioner under the tax law. The failure of the IRS to issue published guidance on a transaction, and even the failure of the IRS to raise issues regarding a transaction in audits for many years does not prevent the IRS from questioning the tax treatment of the transaction. As a legal matter, there is no such thing as The Wall Street Rule.

    As a lawyer, therefore, I must dismiss the Wall Street Rule, whether I represent the IRS or taxpayers. Taxpayers cannot rely upon the Wall Street Rule, since it is not equitably or legally binding on the IRS. Likewise, the Commissioner may challenge positions taken by taxpayers, however longstanding and however many dollars are at stake.

    While it is good tax policy and good tax administration to issue published guidance to inform taxpayers of the IRS’s view of the tax consequences of their transactions, the IRS cannot be expected promptly to identify and respond to all transactions. There are institutional and practical limitations on the ability of the IRS to issue published guidance on each and every transaction or issue. That we aspire to issue more, and more timely, published guidance does not give any credibility to the Wall Street Rule.

    Even though the Wall Street Rule is not legally relevant, we cannot ignore the widespread acceptance in the tax world of the Wall Street Rule. The widespread assertion of the Wall Street Rule also tells us something about the attitudes of taxpayers and tax practitioners regarding the self-assessment system.

Media Discovery Of Old Bankruptcy Records Leads WWE Moguls To Cough Up, Pay Off 36-Year Old Debts As U.S. Senate Race Between Candidates w/ Creditor-Stiffing Pasts Heats Up

In Hartford, Connecticut, The Day reports:
  • A personal bankruptcy cleanses the past to give debtors a fresh chance. Discharged of a legal obligation to pay their overdue bills, most bankruptcy filers never do. That is how the system was designed to work.

    Yet anecdotes exist about curious individuals who, out of personal convictions, political expediency or other reasons, later decide to make good on old debts that they officially jettisoned years ago.

    There was Walt Disney, who according to a biographer, eventually paid back creditors 45 cents on the dollar following the bankruptcy of his early Laugh-O-Gram film studio. And Harry Truman, the nation's 33rd president, who settled obligations on his long-out-of-business haberdashery.

    Add wrestling moguls Linda and Vince McMahon to the club.

    Connecticut's Republican nominee for the U.S. Senate, Linda McMahon announced last week that she and her husband will repay with interest all private individual creditors in their 1976 personal bankruptcy that happened before their wrestling entertainment business, now known as WWE, made it big. They have since expanded the creditor reimbursement to include labor unions' pension and health care funds.

    In her written announcement, McMahon said one reason why they are now making good on 36-year-old debts are because the bankruptcy records, once assumed lost to time, were located last week by The Day in a national archives office.

    Another possible reason - although unsaid by McMahon - was the gesture's effect of denying her Democratic opponent, current 5th Congressional District Rep. Chris Murphy, from using the old list of stiffed creditors as campaign ammunition to deflect attention from his more recent history of late bill payments.

    Additionally, her statement's closing remarks seemed to suggest that McMahon felt a moral tug to repay old creditors, now that she and her husband have recovered from their early struggles and achieved extraordinary success and wealth.

    McMahon's personal spending in this year's Senate campaign and her unsuccessful 2010 run now exceeds $65 million. By comparison, the young couple faced $955,805 in creditor claims when they filed bankruptcy.
  • The McMahons intend to repay their eligible creditors at four times the initial amount due. Her campaign would not comment Friday on why the McMahons' biggest and most numerous creditors - financial institutions, nearly all of them since absorbed into other banks - will not be paid via their new ownership.
  • Murphy, McMahon's Democratic opponent, has a history of late payments on financial obligations. He was reportedly late on his car taxes seven times between 1998 and 2005 and on paying a real-estate bill in 2005.

    He also missed rent payments in 2003 and mortgage payments on a Cheshire home that led to a brief foreclosure scare in 2007. The congressman said he paid all his creditors in full.
For the story, see McMahons' repaying of old debt a relatively rare gesture (Recipients startled to receive checks).

Sunday, September 23, 2012

Connecticut Couple Reject 'Gag Order' As Part Of BofA's Loan Modification Offer; Say They'll Go Out Fighting In Battle To Avoid Foreclosure

In West Haven, Connecticut, the Litchfield County Times reports:
  • Ronni and George Mandell won’t go out with a whimper in the fight to keep their home. And they say because of that, Bank of America won’t modify their mortgage terms to a payment they can afford.

    Bank of America offered the couple a chance to modify the loan on the Jones Street house they’ve owned for 10 years in order to make payments more manageable, but only with conditions that include essentially agreeing to a gag-order when it comes to the deal and the financial institution.

    That means keeping quiet about opinions of the bank on Facebook, blogs, websites and in the media, and taking down any existing postings — something that may be unexpected in a document relating to a financial matter.

    The Mandells rejected the settlement.

    I cherish my rights to free speech,” George Mandell said. “We’re prepared to lose the house if we have to, but we’re going to fight it. We’re standing firm not just for ourselves, but hopefully for the rest of the people in the country. Because it’s gotta be cleaned up.”

    The Mandells say people across the country are being presented with offers like this one from Bank of America and worry some aren’t reading the fine print. They’ve called or written to just about every agency out there that oversees banks and consumer affairs, as well as politicians, and expect the bank to begin foreclosure proceedings on their home in the next few weeks.

Married Couple Gets Multi-Year Prison Sentences In Sale Leaseback Equity Stripping Racket That Screwed At Least 21 Homeowners

In Riverside, California, Southwest Riverside News Network reports:
  • A Murrieta couple who targeted distressed Inland Empire homeowners in a mortgage fraud scheme from which the pair profited handsomely were on their way [] to federal prison.

    Joe Daniel Cody, 43, and his wife, Angela Lynette Cody, 38, were sentenced [] to a combined 9 years behind bars after being convicted of money laundering and conspiracy. U.S. District Judge Virginia Phillips in Riverside imposed a 63-month sentence on Joe Cody and a 48-month term on his wife, ordering both to pay more than $1 million in restitution.

    According to the IRS, between May 2003 and June 2006, the couple ran All Fund Mortgage out of their Murrieta home, offering refinancing services that promised homeowners lower monthly mortgage payments if they agreed to “temporarily” sell their homes to predetermined buyers.

    The Codys, in fact, used straw purchasers with whom they were associated and paid between $1,000 and $25,000 to function as loan recipients to acquire properties that the defendants wanted, according to prosecutors.

    Once the couple’s buyers obtained the deeds to the properties, the Codys cashed out all available equity, leaving the homes with huge liens and the original owners with no chance of taking back title to their houses, prosecutors said.

    At least 21 people in Riverside and San Bernardino counties fell prey to the scheme, with losses totaling just over $1 million, according to the IRS.(1)

    The agency said almost all of the properties were either repossessed in foreclosure proceedings or were re-sold to new buyers.
(1) For more on this type of foreclosure rescue ripoff, see:

Foreclosed Homeowners Get Premature Boot As Auction Buyers/Investors Rush To Take Possession Of Premises Before Sales Becomes Final; Cops, DA Fiddle In Bringing Criminal Charges

In El Paso, Colorado, The Colorado Springs Business Journal reports:
  • As real estate investment heats up and the El Paso County Public Trustee’s foreclosure auctions overflow with anxious bidders, ethics have become a bigger issue.

    Those closest to the action say there are regular stories of investors breaking into houses to check them out before the sale, trashing houses after lien holders redeem them, banks sending eviction notices on properties they don’t own yet, and investors going into homes to start remodeling them before they have the title.

    That last scenario is actually getting out of hand, said Public Trustee Tom Mowle. “We’ve had a rash lately of what I would characterize as burglaries,” Mowle said. “We’ve had a couple cases lately where people have bought property at sale and immediately go to the house, lock people out and take their stuff.”

    Whoever buys a property at the foreclosure auction — an investor or the bank — has to wait eight business days before taking possession of the property. That period allows the bank to discover mistakes and lien holders an opportunity to buy the property even if it already has been sold to an investor.
  • An El Paso County sheriff’s deputy responded to a burglary call on Sept. 4. Lydia Graham, referred to as Lydia Upchurch in the deputy’s report, said she felt an investor had burglarized her home.

    Graham told the CSBJ that she saw a dumpster in front of her property [...] on Monday, Sept. 3, which was a holiday and was only seven business days after her home sold at the El Paso County Public Trustee’s foreclosure auction on Aug. 22. She said there were cabinetry and personal items in the dumpster.

    I was hot,” she said. “I was livid. They went in there without permission and were throwing my things in the trash.” Graham said she hadn’t received any notice that the property had finally sold at auction. She said she had furniture, cutlery, clothes, tile, paint and other home improvement supplies along with a motorcycle stored in the house. “They didn’t have any right to move stuff,” Graham said.

    Graham told deputies that the investor, Nikolas Fedorczuk, had called her and told her she could come get her things, but she had to get them before Sept. 4 or he would take possession of them.

    Mowle learned of the case Sept. 4 and said it was an upsetting example of recent behavior.
  • Civil or criminal?

    The county deputy who handled the case consulted with the 4th Judicial District Attorney’s office and determined that Fedorczuk had no criminal intent when he went into the house, so they would not file criminal charges. That sets a dangerous precedent, Mowle says.

    In my opinion this is a property crime,” he said. “There’s absolutely no right for anyone to do anything other than secure against theft and damage.” That means fixing broken windows and leaky roofs and locking the doors, he said. It doesn’t mean moving motorcycles into storage facilities or tearing out carpets.

    How is it a civil matter when you’re destroying someone else’s property?” Mowle said. He’s heard enough stories of this kind of thing and he’s sure it happens even more often than he realizes.

    If a property is vacant, I think a majority of investors are going to bet the owner isn’t coming back,” he said. “And unless they contact me, I wouldn’t know about it.”

    While the DA’s office might have advised the sheriff’s office that Graham’s particular case is a civil matter, Robin Cafasso, chief deputy district attorney, said not all cases like this will be civil. “We do not have a policy that all cases like this are civil,” Cafasso said. “On the contrary, we would urge law enforcement to investigate it as a burglary.”

    In most cases, she said this type of thing probably should be handled as a criminal matter. “How did they get in? If they broke a lock, there’s property damage,” she said. “If they’re taking things out of the home, there’s theft.” She said ignorance of the law is no excuse.

    Anyone buying property in a foreclosure process should know the law,” she said. “There is just no way that someone holding a certificate of purchase holds the right of possession.”

Adverse Possession-Claiming Squatter Ignores Cops' 30-Day Notice To Hit The Road, Ends Up In Jail Facing Trespassing Charges

In Brandon, Florida, ABC Action News reports:
  • Deputies found groceries on the counter, a bed on the floor and a car parked in the garage. None of which would be out of the ordinary, except the belongings did not belong to the Joyce Grimsley who actually owns the home.

    Grimsley locked up and moved out two years ago. Foreclosure looms, but county records list her as the current owner. Yet another woman moved in last November and has been living in the house ever since.

    We found a Norma Eaton had filed an adverse possession application with the Property Appraiser’s office. Eaton would not come outside to talk, but she explained over the phone that she moved in after an online search of foreclosed properties led her to this house.

    Squatters are nothing new. The glut of foreclosures spawned an increase the number of people laying claim to a home, based on a century-old adverse possession law.

    Grimsley tried contacting a lawyer and the sheriff's office, but deputies say warnings did not work on Norma Eaton. She was arrested on trespassing charges.

    The Hillsborough Sheriff’s Office says standard operating procedure for them is to issue a 30-day notice to vacate the property. Once the 30 days are up, they move in and arrest the reported squatter.