Saturday, March 09, 2013

Landlord's Alleged Failure To Fork Over Interest On Ex-Tenant's Security Deposit Leads To $24M Lawsuit Seeking Class Action Status

In New York City, the New York Post reports:
  • A former Manhattan resident has slapped his ex-landlord with a $24 million suit over the interest on the security deposit he put down for a plush, rent-stabilized pad on the Upper East Side nearly 40 years ago.

    John Sacchi, 63, claims Elyachar Properties refused to hand over the interest after he moved out of 1100 Madison Ave. and relocated to New Jersey in 2012 after suffering a stroke.

    Sacchi, who worked as a colorist at the tony Pierre Michel hair salon, last paid a little more than $1,800 a month for a spacious, one-bedroom apartment on the 10th floor of the building, which is about a block from the Metropolitan Museum of Art.

    His lawyer, Stephen Simoni, said the accrued interest on Saachi’s 1975 security deposit exceeded $10,000.

    Sacchi’s Manhattan federal-court suit seeks damages for himself and potentially thousands of other ex-tenants at 1100 Madison and two other East Side buildings that Elyachar owns, on grounds including fraud and breach of fiduciary duty.

    Elyachar lawyer Alan Friedman said the company has the canceled checks showing that Sacchi got interest payments on his security deposit, and noted that he was allowed to occupy his apartment, rent-free, for two weeks after breaking his lease.Friedman also added the company Friday mailed Saachi a check for about $1,000 for “every speck of interest” he could possibly claim he’s owed.

Confusion In Legal Community, Conflicting Professional Opinions Lead To Late-Filed Wrongful Death Claim By Parents Of Married Locksmith Gunned Down During Foreclosure Eviction

In Stanislaus County, California, The Modesto Bee reports:
  • The parents of a locksmith gunned down April 12 along with a sheriff's deputy while serving a Modesto eviction have submitted wrongful-death claims to Stanislaus County.

    The claims are similar to one filed in September by the locksmith's widow, Irina Engert, who subsequently sued in federal court in January, saying the Sheriff's Department owed her husband better protection.

    Glendon Engert, 35, and deputy Bob Paris, 53, were ambushed by a distraught man whose property was sold in foreclosure. The murders touched off a standoff with authorities that ended in an inferno and the suicide of gunman Jim Ferrario, 45. "It's a shame that Mr. Ferrario created the situation for all of us," County Counsel John Doering said Monday.
  • Engert's mother, Ann, said in January that she had consulted an attorney who advised her that a dead man's widow has legal standing to sue, but not his parents.

    The San Francisco attorney representing his widow read that story in The Bee, provided a different legal opinion and was hired by Ronnie and Ann Engert. Their claims are considered a precursor to a lawsuit.

    The parents' claims come about four months later than allowed by a six-month legal limit for such action. They acknowledge as much in the documents, blame the initial attorney for bad advice and ask for a waiver allowing a late claim.
  • A brief says Modesto attorney Gerald Brunn made an "honest mistake" in his opinion regarding the legal standing of an adult's surviving parents and acknowledges "some confusion" in the legal community, saying, "Mr. Brunn is certainly not alone in making this mistake." Brunn could not be reached Monday for comment.

    Based on his assessment, Ann Engert had told The Bee in January, "The state of California does not recognize my loss as legally actionable" and said she supported her daughter-in-law's legal pursuit. She said she had been close to her son, playing online poker with him and chatting on the phone into the wee hours of the morning.

    After her consultation with Brunn, she sent him a letter citing puzzlement that laws would not recognize "my loss as his mother" and saying she "would have been happy to have worked with you" and thanking Brunn. The letter is attached to the new complaints.

    Support in trade journal

    Others believe such parents can sue for wrongful death if the adult who died had no children. Glendon and Irina Engert were childless.

    San Francisco attorney Richard Schoenberger, representing all three survivors, cited a 2008 article in a legal trade journal written by two Santa Monica lawyers specializing in wrongful-death cases. They acknowledged disagreement among lawyers but concluded that parents of childless adults can sue, as well as a surviving spouse.

    In an email Monday, Ann Engert wrote, "I said before that I supported my daughter-in-law's actions in connection with her lawsuit, and the current development is an extension of that conviction."
For the story, see Slain locksmith's parents file claim against Stanislaus County.

Go here for the above-referenced claim, legal brief, letter sent by the victim's mother to the lawyer who advised her she had no standing to file a claim, the earlier Modesto Bee story, and the trade journal article addressing the legal standing of parents to bring a suit for the wrongful death of a married child.

Bay State AG Squeezes Landlord For $75K To Resolve Fair Housing Charges Alleging Use Of Bullying Tactics Against Renters With Young Kids To Dodge Obligations To Delead Apartments

From the Office of the Massachusetts Attorney General:
  • A Boston area property owner has agreed to pay $75,000 and delead his rental units, resolving allegations that he engaged in a pattern of unlawful and retaliatory practices against tenants with young children in order to avoid his obligation to comply with state lead paint laws, Attorney General Martha Coakley announced today.

    The consent judgment, [...] resolves a fair housing complaint filed in February 2011 against Keith L. Miller, of Newton, who at the time owned and managed at least 24 residential rental units in Chelsea, Newton, Arlington, and Brighton. This is the largest fair housing settlement with a landlord that has been reached under AG Coakley.
  • In February 2012, the AG’s Office expanded its case against Miller, after learning of additional claims by tenants of the landlord’s bullying tactics and discriminatory behavior.

    The amended complaint alleged that Miller evicted, or threatened to evict, tenants with young children, rented apartments containing lead paint to tenants with young children, failed to remove lead hazards in those apartments, failed to provide proper notice of lead hazards to his tenants, made misrepresentations regarding the presence of lead paint in his apartments, and refused to repair unsafe and unsanitary conditions.

    More recently, the AG’s Office obtained summary judgment for claims that Miller failed to abate lead hazards, failed to provide proper notice of lead hazards, and that he illegally attempted to charge tenants for water use. The court held that those violations constituted violations of the state’s Consumer Protection Act as well.
  • Massachusetts laws [] require disclosure of lead paint history, abatement of lead paint hazards in units in which children under the age of six are present, and prohibit landlords from retaliating against tenants who assert their rights under the lead paint laws.
For the Massachusetts AG press release, see Boston Area Landlord to Pay $75,000 and Delead Units to Resolve Fair Housing Lawsuit (Largest Fair Housing Settlement with Property Owner to Date Under AG Coakley).

Spineless Prosecutor Kiboshes Cop's Arrest Warrant Request For Developer Suspected Of Pocketing Customer's Cash, Then Misapplying Funds For Personal Use

In Indian River County, Florida, TC Palm reports:
  • Denise Cisneros is hopeful she will finally get the swimming pool a developer promised her a year ago.

    Recently, she walked alongside her unfinished swimming pool, her face pinched in frustration as she glanced into the concrete crater with trash strewed across dried scum at the bottom. The giant, dry hole was in contrast to her lush lawn and newly built, 3,200-square-foot home in Eagle Trace subdivision, north of Vero Beach city limits.
  • For almost a year she and her husband wrangled with developer Eli Baron, who built their house at Eagle Trace and, according to Cisneros, pressured them into paying him $43,000 to install a pool he was supposed to have completed by last June.

    The project stalled because Baron owed almost $6,000 to the pool contractor and $12,000 to the company that built the screen enclosure around the pool. Upset by the delays, Cisneros reported Baron to the Indian River County Sheriff’s Office last year.
  • In November 2011, a Press Journal investigation found Baron had a troubled financial history, a criminal record and a long list of contractors who claimed he failed to pay them.

    A year later, the Press Journal learned he has mounting unpaid taxes, owes more than $140,000 in court settlements and has had 146 liens filed against him in the past three years. He also has unhappy homeowners in the subdivision at 58th Avenue and 61st Street.
  • Arrest warrant denied

    Cisneros filed a complaint with the Sheriff’s Office in August, arguing Baron taking her money and not using it to finish the job amounted to theft.

    Through subpoenaed bank records, detectives found Baron withdrew money from a business account that was supposed to cover costs such as pool construction and instead spent it on a Caribbean cruise, hotels, $1,000 monthly BMW car payments and restaurants with tabs as high as $175, a warrant affidavit shows.

    Milo Thornton, a detective with the economic crimes unit, stated in a report that he also talked to the contractors involved. In September, he requested a warrant to arrest Baron and charge him with grand theft, but the State Attorney’s Office quashed the warrant saying Baron’s actions didn’t meet the standard for theft under Florida law.

    Nikki Robinson, assistant state attorney, said her office denied the warrant on Sept. 20 because Baron did most of the work he promised and showed he intended to finish the job.

    Plus, Cisneros kept paying him, which suggests she believed he would complete the work, Robinson said. By law, a person must display criminal intent at the outset — otherwise, the main recourse is litigation, she said.

    “Did she pick a bad contractor? Absolutely,” Robinson said. “But is it criminal? Unfortunately, no.”(1)
For more, see Some residents, contractors unhappy with Eagle Trace developer.

(1) In addition to grand theft, the described conduct by the developer could possibly also constitute a misapplication of construction funds, a second-degree felony in Florida (Section 713.345 F.S.) for ripoffs of at least $1,000 but less than $100,000. Further, under Section 713.345(1)(c) of the Florida statute:
  • A permissive inference that a person knowingly and intentionally misapplied construction funds in violation of this subsection is created when a valid lien has been recorded against the property of an owner for labor, services, or materials; the person who ordered the labor, services, or materials has received sufficient funds to pay for such labor, services, or materials; and the person has failed, for a period of at least 45 days from receipt of the funds, to remit sufficient funds to pay for such labor, services, or materials, except for funds withheld pursuant to paragraph (a).
Thumbs up to the detective who requested the arrest warrant; a Bronx cheer for the prosecutor who, in all fairness, may have such a heavy caseload that she didn't feel that the developer's actions, even if rising to the level of a crime and despite his reported track record as a creditor-stiffing businessman, wasn't a big enough deal to merit criminal prosecution. Hence the always-handy fall-back position not-uncommonly invoked by some unmotivated law enforcement personnel - 'No criminal conduct here - It's only a civil matter!'

Engaged Couple, Others Accuse Banquet Hall Operator Facing Foreclosure Of Booking Events (& Pocketing Customer Deposits) Scheduled To Take Place After Date Set For Public Sale

In West Hartford, Connecticut, the West HartfordPatch reports:
  • The doors to La Renaissance were locked [last month] amid reports that the popular East Windsor banquet facility that has played host to myriad proms, graduation ceremonies and wedding receptions throughout the years is subject to a court-ordered foreclosure sale in April.

    Upon hearing the news, several customers who had already put down a deposit to hold a function at the facility have contacted the Attorney General’s office and the state Department of Consumer Protection hoping for help with recouping their money and securing a new venue for their event.

    The owners of La Renaissance, located on Route 5, have been going through foreclosure proceedings since July of 2012, according to the state judicial website.
  • A number of consumers have said that, despite the order for the foreclosure sale, the owners of La Renaissance continued to book events - and accept deposits - that were scheduled to take place after the sale.

    One such case is that of Jose Rivera, who wrote in a complaint to the Attorney General’s office that the owners of La Renaissance took two $2,000 payments - $4,000 in total - as a deposit for a July wedding reception without telling Rivera that the facility was due to be sold.

    Rivera said that he and his fiancée are now looking for a new venue to host their wedding reception, in addition to possibly having lost $4,000.

    The state Attorney General’s office has fielded dozens of similar complaints from people who have said that they have deposited thousands of dollars to secure dates at La Renaissance, according to Susan Kinsman, director of communications of the Attorney General’s office.

    “The Office of the Attorney General is looking into the La Renaissance matter with the Department of Consumer Protection,” Kinsman wrote in an e-mail to Patch.

    Telephone calls to La Renaissance and its owners were unanswered. A message left with the attorney of one of La Renaissance’s owners was not returned.

Friday, March 08, 2013

Foreclosure Rescue Scammer Hammered With 11+ Years In Slammer For Pocketing $63K+ In Upfront Fees, House Payments From Six Financially Drowning Homeowners & Throwing Them An Anchor

In Ventura County, California, the Ventura County Star reports:
  • A woman who lost her house and thousands of dollars to real estate fraud was pleased Tuesday when a judge sentenced the manager of the bogus mortgage business. “I am very happy,” Luz Lechuga said in Spanish in an interview outside the courtroom. “I feel better. Yes, this is justice.”

    Ventura County Superior Court Judge James Cloninger sentenced Laura Cecilia Carlson, 66, of Hacienda Heights, to 11 years and eight months despite pleas from the woman’s daughters and lawyer for leniency. The judge ordered her to pay $63,900 to six victims as restitution.

    Cloninger said Carlson was in a management role of a criminal enterprise that tricked Ventura County homeowners out of tens of thousands of dollars.

    “You ruined people’s lives, you and your crime partners,” Cloninger told Carlson, noting Lechuga’s case in particular. “You took her to the brink of suicide with the harm that you inflicted,” Cloninger said. “They (the victims) were drowning, and so you all decided to throw them an anchor to make sure they would drown.”

    Lechuga, who worked in the fields, said in an interview that she had lived for 14 years in her Oxnard home, which was worth $600,000 before she lost it to foreclosure.

    Carlson, a licensed real estate agent, and others were arrested in January 2011, according to prosecutors. Prosecutor Dominic Kardum told Cloninger that state licensing officials would be told of the conviction.
  • Carlson ran the business as Global Team Consulting. She trained employees and collected thousands of dollars in upfront fees from clients after promising to reduce the principal and monthly mortgage payments on their homes. Victims were told to stop making mortgage payments and pay the fraudulent company.

    The payments instead went into Carlson’s bank account, Kardum said.
  • Carlson’s daughter and two stepdaughters said she was an honest real estate agent who took pride in helping people buy houses.

    They gave tearful comments to the judge, saying their mother was an active church member and law-abiding citizen but that her life worsened after her husband died in 2005. They said they were shocked by what had happened, describing Carlson as a woman who always helped others.
  • Cloninger told Carlson’s relatives that if they had heard the facts in the case they would understand the jury’s verdict. The judge said Carlson stole from hardworking, unsophisticated people in a “cold, calculated and heartless way.”

    In an interview, Kardum said co-defendants Victoria Santos, Juan Alvarado Cervantes and Felipe Castro have been convicted and that Jose Miguel Aguilar is a fugitive from justice. Carlson will be eligible for parole after serving 50 percent of her sentence, Kardum said.

Atlanta Feds: Broker Duped Unwitting Prospective Buyers For $1.2M+ In Upfront Fees On Bogus Loan Commitments; Victims Also Allegedly Lost Earnest Money Deposits On Expiring Home Purchase Contracts

From the Office of the U.S. Attorney (Atlanta, Georgia):
  • A New York broker has been indicted for conspiring to defraud 350 financially strapped customers of more than $1.2 million. Kenneth J. Enrico, 46, of Bohemia, New York, was arraigned [] on a federal indictment [...] on one count of conspiracy, three counts of mail fraud, and 13 counts of wire fraud.
  • According to United States Attorney Yates, the charges and other information presented in court, between June 2011 and August 2012, Enrico offered property buyers private lender loans of 105 percent of the property’s selling price at a 4.99 percent interest rate, regardless of the buyer’s credit score, as long as the buyers had jobs that generated enough income to qualify for the loan amount and monthly payments.

    Enrico required the buyers to pay him an up-front fee of $2,500 per loan, which he claimed covered loan processing fees and the appraisal. Enrico publicized his offer through several brokers, two of whom were located in the metropolitan Atlanta area. The broker tacked on additional fees.

    More than 350 individuals responded to Enrico’s pitch and sent in more than $1.2 million in up-front fees either to Enrico directly or through the brokers.

    Enrico approved all the buyers for loans. However, none of the buyers ever received a loan from Enrico. He gave the buyers numerous excuses as to why their loans never closed.

    Not only did the buyers lose the fees paid to Enrico, they lost the earnest money they paid to the sellers of the properties they were trying to buy when their sales contracts expired. The buyers often relied on Enrico’s excuses and entered into sales contracts on second properties with additional earnest money payments, which they later lost when Enrico never funded their loans.

6th Circuit Kiboshes Defendant Zombie Debt Buyer, Named Consumer Plaintiffs (& Their Lawyers) From Screwing Over 133,000 Unnamed Class Action Members With Crappy Settlement In FDCPA-Robosigning Suit

In Cincinnati, Ohio, the Toledo Blade reports:
  • A federal appeals court has reversed a lower court’s approval of a class-action lawsuit settlement that dealt with robo-signed [debt collection lawsuit] filings.

    Originally filed in 2008 in Erie County, the class-action suit challenged debt-collection agency Midland Funding’s practice of using false affidavits to initiate [debt collection lawsuits]. The affidavits claimed the person signing the paperwork had direct knowledge of the situation, when in fact they did not.

    Midland employees had been signing 200 to 400 computer-generated affidavits a day for use in debt-collection actions without any knowledge of the accounts.

    In August, 2011, a U.S. District judge approved a $5.2 million settlement in the Midland Funding vs. Brent case that would have paid $17.38 to each of the approximately 133,000 plaintiffs.(1)

    Eight plaintiffs objected to the ruling, however, arguing the settlement was improper and unfair.

    In a decision published [February 26, 2013], the 6th District Court of Appeals agreed, sending the case back to the district court.

    Among the points the appellate court raised in its reversal was that while the settlement exonerated the debts of the four named plaintiffs, [...] it did not exonerate the debts of the other plaintiffs.

    In fact, the settlement prevented unnamed class members from using Midland’s use of false affidavits against the collection agency in other lawsuits.

    The court said that virtually guaranteed Midland would be able to collect those debts.

    The court wrote that the “disparity in relief is so great that we conclude the district court abused its discretion in finding that the settlement was fair, reasonable, and adequate.”

    The settlement also provided a one-year injunction that required Midland of San Diego, to change its policies. The appellate court argued that Midland would be free to resume its “predatory practices” after that year, should it choose to do so.
Source: Appeals court agrees deal unfair to plaintiffs in Erie County robo-signing case.

For the ruling, see Vassalle v. Midland Funding LLC (6th Cir. February 26, 2013).

(1) From the court ruling:
  • Midland agreed to pay $5.2 million into a common fund for the benefit of the class. From this fund, class counsel would receive attorney fees of no more than $1.5 million, and the costs of administration.

    From the remainder of the fund, eligible class members who timely returned a claim form would receive payments of $10.00 each. In fact, however, the response rate was such that each class member would receive $17.38.

    In addition, the four named plaintiffs were to receive $8,000 collectively.

Thursday, March 07, 2013

Father & Son Scammers Who Ripped Off Struggling Homeowners With Sale Leaseback Peddling Scam Cop Guilty Pleas To NJ State AG Charges After Earlier Pleading Guilty To Feds In Separate Prosecution

From the Office of the New Jersey Attorney General:
  • Attorney General Jeffrey S. Chiesa announced that a Monmouth County man has pleaded guilty in a scheme in which he stole more than a million dollars by promising to rescue homeowners who were facing foreclosure, but instead sold their homes to unwitting investors. His son previously pleaded guilty in the scheme.

    Vito Grippo, 58, of Jackson, pleaded guilty yesterday (Feb. 27) to a criminal accusation charging second-degree theft by failure to make required disposition of property received and third-degree money laundering before Superior Court Judge John Triarsi in Union County.

    Grippo’s son, Frederick P. Grippo, 32, of Old Bridge, pleaded guilty on Jan. 23 to a criminal accusation charging second-degree theft by deception.

    According to the plea agreement, the state will recommend that Vito Grippo be sentenced to ten years in state prison and that Frederick Grippo be sentenced to four years in state prison. In addition, Vito Grippo was ordered to pay full restitution. Frederick Grippo was ordered to pay $24,681 in fines.

    “This father and son ripped off struggling homeowners at the height of the national housing crisis,” Attorney General Chiesa said. “My office will continue to seek out those who prey upon unsuspecting homeowners and will prosecute these offenders to the full extent of the law.”
  • In pleading guilty, Grippo admitted that between Feb. 14, 2008 and Jan. 7, 2010, he stole $1.3 million by soliciting 12 financially distressed homeowners, saying he could rescue them from foreclosure and fix their credit rating by transferring title to their homes temporarily to a company called Morgan Financial.
  • Vito Grippo admitted to his role in the scheme in connection with 12 homes in Elizabeth, N.J., Brooklyn, N.Y. (3 homes), Jersey City, N.J., Staten Island, N.Y. (2 homes), Rutherford, N.J., Monroe, N.J., Somerville, N.J., Mine Hill, N.J., and Cambria Heights, N.Y.

    The investigation determined that he submitted fraudulent loan applications to obtain a total of more than $4.5 million to purchase the homes. Vito Grippo in turn stole more than $1.3 million in loan proceeds that should have been disbursed to the original homeowners as equity at closing.

    He diverted those funds into his companies’ bank accounts in order to launder the money. The investigation determined that he then disbursed the funds to himself and other co-conspirators.

    Frederick Grippo was involved in seven of the fraudulent loan applications and received checks from Morgan Financial for his participation in the fraud. Although Vito Grippo made some mortgage payments on the loans in the names of the investors, all of the homes ultimately fell into foreclosure. The original homeowners lost the properties and the investors’ credit ratings were ruined.(1)
For the NJ AG press release, see Father and Son Plead Guilty in a Scheme to Steal More Than $1.3 Million from Struggling Homeowners.

For the U.S Attorney press releases announcing the earlier guilty pleas on federal charges, see:
(1) For more on this type of foreclosure rescue ripoff, see:

    Actual Knowledge Of Defectively Acknowledged Mortgage & Bona Fide Purchaser Status

    Is it possible for a "purchaser" of real estate (for this purpose, "purchaser" = a buyer of said real estate, or a lender acquiring a security interest thereupon) to have actual knowledge of a land document that is defectively acknowledged and recorded in the office of the local land record registry and still be treated as a  bona fide purchaser?

    A 2010 federal district court ruling in northern Ohio concluded, based on a state appeals court case, that yes, it appears it is possible in some cases - at least in Ohio. An excerpt from the ruling, in which the district court, sitting in its appellate capacity, reviewed the ruling of an earlier federal bankruptcy court decision:
    • Under Ohio law, it has long been established that a defective deed is not entitled to record and, even if recorded, must be treated as unrecorded, which means it does not afford constructive notice of the conveyance to all the world. See, e.g., Citizens National Bank in Zanesville v. Denison, 165 Ohio St. 89 (1956); Straman v. Rechtine, 58 Ohio St. 443 (1898); Amick v. Woodworth, 58 Ohio St. 86 (1898); Erwin v. Shuey, 8 Ohio St. 509 (1858); White v. Denman, 1 Ohio St. 110 (1853).

      This longstanding rule has been applied more recently as well. See, e.g., MERS v. Odita, 159 Ohio App.3d 1, 5 (Tenth Dist. 2004) ("a defective mortgage is treated as though it has not been recorded").

      Indeed, the Odita court held that a defectively executed, albeit recorded, mortgage was not entitled to priority over a subsequent mortgagee's properly executed and recorded mortgage, even though the subsequent mortgagee had actual knowledge of the prior mortgage. Id. at 9.

      In so holding, the Odita court acknowledged that its ruling may seem unfair given the actual knowledge of the subsequent mortgagee. However, after a careful historical analysis of Ohio law upon the subject (See Odita, Id. at 9-10), the court explained:

      [A]lthough this court recognizes that the current ruling may seem intuitively unfair or inequitable to some observers, because there exists a significant line of authority supporting the ruling, we follow these precedents based upon stare decisis and to lend stability to future property transactions.

      Id. at 10
    Source: Bank of Am., N.A. v. Corzin, Case No. 5:09 CV 2520, No. 08-54674, Case No. 09-503, 2010 U.S. Dist. LEXIS 8755 (N.D. Ohio Feb. 2, 2010).

    (1) The Odita court's discussion of the apparent inequity in the case law, as it relates to sloppy banksters and other careless secured lenders, follows:
    • {¶ 21} It would seem that, as a matter of principle, a defectively executed mortgage should be superior to a subsequent legal interest if the subsequent legal interest was acquired with notice of the prior defectively executed mortgage. See 69 Ohio Jurisprudence 3d, Mortgages and Deeds of Trust, Section 103, supra. However, "[w]hile this is the rule in many jurisdictions, the rule is otherwise in Ohio because of the recording statutes." Id.

      Notwithstanding, with property rights it is not necessary that the outcome be the best outcome possible in each case; only that the outcome be consistent across every case so as to provide reliability and predictability.

      In addressing an issue similar to that in the present case, the Ohio Supreme Court noted that it was constrained by cases that had been affirmed and adhered to by subsequent legal authority for many years. See White v. Denman (1853), 1 Ohio St. 110, 115, 1853 WL 2. The court was also mindful that its decision was based on the construction given to a statute, had relation to rights of property, and had become a rule of property in determining priorities among creditors. Id. The court then explained:

      Stability and certainty in the law, are of the very first importance. Hardships may sometimes result from a stern adherence to general rules. This is unavoidable under any system of jurisprudence. Some barrier is essential to guard against uncertainty. If judicial decisions are subject to frequent change, it would disturb and unsettle the great landmarks of property. The certainty of a rule is often more important than the reason of it; and in the case now before us, we think that the maxim, stare decisis et non quieta movere, is the safe and judicial policy, and should be adhered to. If the law, as heretofore pronounced by the court, in giving a construction to the statute, ought not to stand, it is in the power of the Legislature to amend it without impairing rights acquired under it.

      Id. at 115.

      {¶ 22} Therefore, although this court recognizes that the current ruling may seem intuitively unfair or inequitable to some observers, because there exists a significant line of authority supporting the ruling, we follow these precedents based upon stare decisis and to lend stability to future property transactions. For these reasons, appellants' first and second assignments of error are sustained.

    More On Defectively Acknowledged Instruments

    More on defectively acknowledged instruments, courtesy of, and presented here for general information only (Reliance on these cases by any reader of this blog is not recommended without first doing further research to determine the currently applicable state law):
    • Some statutes require that an instrument must be acknowledged before recording. In such a situation, if the certificate of acknowledgment is materially defective and does not establish a valid acknowledgment either active or presumptive, then the actual recording of the instrument will not impart constructive notice to third parties. A defectively executed mortgage is valid between the parties in absence of fraud.[i]

      In Bank of Am., N.A. v. Corzin, 2010 U.S. Dist. LEXIS 8755 (N.D. Ohio Feb. 2, 2010), it was observed that a defectively executed mortgage, although recorded, is not entitled to priority over a mortgage that is executed and recorded subsequently in a proper manner, even though the subsequent mortgagee had actual knowledge of the prior mortgage.

      In Mortg. Elec. Registration Sys. v. Odita, 159 Ohio App. 3d 1 (Ohio Ct. App., Franklin County 2004), the court observed that a defectively executed mortgage although recorded, is treated as though it is not recorded. Therefore, a defectively executed mortgage without proper acknowledgement of the mortgagor by a notary will not be entitled to priority over a subsequent, properly recorded mortgage.

      In Gregg v. Georgacopoulos, 990 S.W.2d 120 (Mo. Ct. App. 1999), the court observed that if the formal acknowledgment is defective, the instrument is not invalidated between the parties or persons having actual notice of the deed. The recordation of the unacknowledged instrument is a nullity and will not provide constructive notice to any subsequent purchaser. Therefore, only purchasers for value without notice can take advantage of a defective acknowledgment.

      However, a deed to secure debt is considered as valid between the parties even if it is unattested or improperly attested.[ii] Recordation of an improperly attested deed to secure debt will not provide constructive notice of the contents or existence of the deed.

      [i] Seabrooke v. Garcia, 7 Ohio App. 3d 167 (Ohio Ct. App., Lorain County 1982),

      [ii] In re Updike, 93 B.R. 795, 797 (Bankr. M.D. Ga. 1988).

    Wednesday, March 06, 2013

    Broker Sues Freddie For Blacklisting Him On Suspicion Of Improperly Counseling Customers On Short Sale 'Shuffles'; Feds Respond By Raiding His Real Estate Office

    In Livonia, Michigan, the Observer & Eccentric reports:
    • Former state Attorney General Mike Cox, who represents the owner of the Livonia-based realty raided Wednesday by the FBI, said he expects no charges will be filed against his client because he hasn't broken any laws.

      “I think it will turn into a whole bunch of nothing,” he said. “I haven't seen one thing that would lead to a charge.”

      Cox said the FBI raided William Elias's Livonia and Brighton offices because the Federal Home Loan Mortgage Corp. (Freddie Mac) told law enforcement officials he was committing fraud by hiding the fact some of his short-sale customers had bought second homes. Cox said Freddie Mac is going after Elias and his businesses, including Elias Realty, because he does more short sales than anyone else in Michigan.

      Cox said Thursday he had not seen a copy of the search warrant.

      Elias sued Freddie Mac in U.S. District Court Jan. 31, saying his businesses were unjustifiably blacklisted and have lost 500 clients and more than $2 million in revenue. Freddie Mac placed Elias on its exclusionary list in November, meaning it could not participate, either directly or indirectly, in any Freddie Mac transaction.

      In a letter Oct. 1 to Elias, Freddie Mac alleged Elias “instructed borrowers to purchase a new home prior to applying for short sale assistance on the Freddie Mac loan,” the lawsuit says, and the short sale packages submitted to the Freddie Mac servicers on behalf of the borrowers “failed to disclose the acquisition of the new home.” Freddie Mac also alleges the inability of the borrowers to repay the Freddie Mac loans was “not genuine” or “was created as a result of the purchase of the new homes made possible through Elias and his companies.”(1)

      Elias denies all the allegations.
    • Cox said Elias never broke any Freddie Mac rules; he simply explained them to people.

      According to Freddie Mac, people generally qualify for a short sale by demonstrating one of four hardships: divorce, debt, disability or distant relocation. They also qualify if they haven't paid their mortgage for three months, Cox said. “He doesn't tell them what to do,” he said, adding that Freddie Mac guidelines encourage some homeowners to forego payment of their mortgage if they do not qualify by virtue of a death, divorce, disability or distant relocation.

      These same regulations do not prohibit potential short sale homeowners from purchasing a second home with lower payments before they stop paying on the first mortgage, Cox said.
    For the story, see Cox doesn't expect charges against Elias Realty (Short-sale customers caught in quagmire).

    See also Livingston Daily: FBI raid raises questions about short-sale deals.

    (1) According to a Detroit Free Press story (see FBI raids William Elias' realty offices, Agents sought files on 23 properties):
    • Elias, 38, was until this fall a familiar presence on local radio and television, where he advertised his real estate services with a showman's flair. He encouraged frustrated homeowners who were underwater on their mortgages to erase their debt by dialing 877-CALL-WILL.

      The ads went off the air soon after Elias received notice in October that the Federal Home Loan Mortgage Corp., known as Freddie Mac, would add his businesses to its "Exclusionary List" of agents and lenders with which it will not do business because of alleged unsavory practices.
    An April, 2012 story attributed to reporter Greta Guest in the Detroit Free Press says this about Elias:
    • And he’s advised homeowners who feel trapped in underwater mortgages to buy a new home before starting the short-sale process. It could be hard to get approved for a mortgage if the lender knows you are doing a short sale even if you haven’t missed payments.

      Am I tricking the bank? Absolutely not. There are no laws against this, and the banks can’t turn down an applicant who qualifies for two mortgages just because they want to,” Elias said. “I hope I’m looked at as helping people.”

    Some Unscrupulous Real Estate Operators Employ 'Reverse Staging' Tactic To Beef Up Profits When Running Short Sale Flopping Conspiracies

    A recent story from Northern California NPR/PBS-affiliated TV & radio station KQED on mortgage fraud had this excerpt describing a growing real estate fraud - short sale "flopping":
    • Flopping: In one widely publicized case, a homeowner spread possum urine around the house, turned up the heat and closed all the windows for a few days. Why?

      The seller wanted to convince a bank’s appraiser the house wasn’t worth as much as it actually was ahead of a short sale. The bank is already accepting a write-down of the property's value, but the fake evidence drops the price tag even lower.

      The impression of reduced value can be gained with less aromatic strategies than urine, like ripping out ceiling fans or air conditioning. Think of it asreverse staging.” The seller unloads the home for the discounted price to an accomplice, who can then clean it up and flip it for a quick gain. The real estate agent is typically in on this conspiracy, too. Average take: $55,000.

    KC Feds Indict Two For Allegedly Duping Financially Distressed Homeowners With False Debt Rescue Promises, Getting Victims To Send Mortgage Payments To Them, Sign Over POAs To Control Homes

    From the Office of the U.S. Attorney (Kansas City, Missouri):
    • [J]ohn Lee Norris, 42, and Julie Tina Hatcher, 37, both of Kansas City, were charged in a 21-count indictment [accusing them of running a racket that promised to help financially-strapped clients get out of debt and defrauding them, causing some of them to lose their homes and vehicles].
    • According to the indictment, Norris and Hatcher operated Reaper Investment Partners, LLC; in August 2011 they formed Death Productions LP. Between August 2010 and April 2012, the indictment alleges, Norris and Hatcher participated in a conspiracy to defraud homeowners and other debtors who were in financial distress (as well as their victims’ lenders and the Federal Housing Administration).

      Norris and Hatcher allegedly recruited and targeted homeowners and others who were in financial difficulties with promises that they would be rescued from their financial problems, including foreclosure. Norris and Hatcher allegedly told victims that Reaper Investment Partners (RIP) would refinance the homeowners’ existing mortgages for a lower amount and at an interest rate of three percent.

      As part of their scheme, the indictment says, RIP would control title to the homeowners’ properties. The homeowners would stop making payments to their lenders and instead make their monthly payments to RIP. The homeowners gave Norris and Hatcher power of attorney.

      Homeowners did not communicate with their lenders, the indictment says, even when they received telephone calls, late notices and foreclosure notices from their lenders. Instead, homeowners forwarded the notices and other documents to Norris and Hatcher. When homeowners contacted Norris and Hatcher to report that they had received notice that their homes were being foreclosed, the defendants reassured them by telling them not to worry, that was part of the process.

      Norris and Hatcher allegedly told some of their client-victims that one or both of them were lawyers, had legal experience, or were able to practice law. They allegedly said that RIP would draft, serve, file, and record legal forms, pleadings, and other documents and would conduct necessary legal processes, contact the relevant parties, and implement administrative procedures. Norris and Hatcher allegedly mailed documents to the homeowners’ lenders, demanding the lenders “cease and desist” collection activities.

      Norris and Hatcher also allegedly told individuals who were in financial difficulties due to credit card debt, vehicle loans, and other debt, that they would refinance the debt for a lower amount and interest rate and lower their monthly payments. These clients, likewise, would stop making payments to their lenders and instead make their monthly payments to RIP.
    • In addition to the conspiracy, Norris and Hatcher are charged together with nine counts of mail fraud and 10 counts of wire fraud.
    For the U.S. Attorney press release, see KC Business Owners Indicted For Defrauding Debt-Stressed Clients.

    Tuesday, March 05, 2013

    Big Banksters Turn Over Information To Regulators Indicating That 700+ Military Members Were Slammed With Wrongful Foreclosures

    The New York Times reports:
    • The nation’s biggest banks wrongfully foreclosed on more than 700 military members during the housing crisis and seized homes from roughly two dozen other borrowers who were current on their mortgage payments, findings that eclipse earlier estimates of the improper evictions.

      Bank of America, Citigroup, JPMorgan Chase and Wells Fargo uncovered the foreclosures while analyzing mortgages as part of a multibillion-dollar settlement deal with federal authorities, according to people with direct knowledge of the findings. In January, regulators ordered the banks to identify military members and other borrowers who were evicted in violation of federal law.

      The analysis, which was turned over to regulators in recent days, provides the first detailed glimpse into the extent of wrongful foreclosures amid the collapse of the housing market. While lenders previously acknowledged that they relied on faulty documents to push through foreclosures, the banks claimed borrowers were rarely evicted by mistake, including military personnel protected by federal law.

      That thesis, which underpinned the government’s response to the financial crisis, helps explain why homeowners languished for years without relief. The revelations of more pervasive harm could provide fresh ammunition for Wall Street critics and prompt regulators to adopt a tougher stance.

      Housing advocates say the findings also underscore the broader flaws with the settlement. In the latest negotiations, according to people briefed on the talks, the banks secured favorable terms for doling out some aid, a deal that could diminish the relief to homeowners.

    92-Year Old Widow Duped By Loan Peddler Into Removing Name From Home Title To Get Reverse Mortgage With Now-Deceased Hubby Dodges Foreclosure After CFPB Intervenes

    Syndicated Real estate columnist Kenneth Harney reports:
    • Jeanette Ogle, a 92-year-old widow with a reverse mortgage on her house, got a huge birthday surprise recently: She did not lose her home at a scheduled foreclosure auction that had drawn scrutiny from federal and state agencies and consumer advocates.

      Because of obscure federal rules that critics say have snared unwitting elderly homeowners across the country, Ogle's home in Lake Havasu City, Ariz., had been set for foreclosure on Feb. 27, her birthday. But after interventions on her behalf by the federal Consumer Financial Protection Bureau, AARP and the Arizona attorney general's office, the auction was canceled.
    • According to government estimates, more than 9 percent of all federally insured reverse mortgages — the ones hawked on TV by Henry "the Fonz" Winkler, among others — were in default in 2012. This is especially significant because so many reverse mortgage borrowers, like Ogle, are in their 80s and 90s, living on Social Security, and may be unaware of certain fine-print details about their loans.
    • One technicality tucked away in FHA's regulations can snag owners whose spouse dies after taking out the reverse mortgage. If the surviving spouse's name does not appear on the mortgage documents, the outstanding debt balance becomes due and payable. If the surviving spouse can't afford to buy the house to make the payoff, the property may be put up for foreclosure sale.

      Ogle's situation illustrates the problem: She did nothing wrong. Ogle and her late husband, John, who died in 2010, refinanced a reverse mortgage in 2007. Though Ogle believed her name remained on the mortgage documents and she was a co-borrower, a loan officer listed only John's name. Ogle says she never agreed to her name being removed and suspects fraud.

      When her husband passed away, the loan balance became due and payable. Bank of America — the servicer of the mortgage on behalf of Fannie Mae, the big national loan investor — informed Ogle of the FHA rule. She complained to the Arizona attorney general's office, which negotiated an agreement with Bank of America that it would not foreclose. Subsequently, however, when the servicing contract was transferred to Reverse Mortgage Solutions, that firm renewed the threat of foreclosure and set the date for the sale.

      Reverse Mortgage Solutions refused to comment on the matter. Meanwhile, Ogle's son, Bob, filed complaints with the Consumer Financial Protection Bureau and with the state attorney general, seeking their help in saving his mother's home. He told me in an interview that "I don't think my mother could survive a move, she just couldn't handle [a foreclosure]." Fannie Mae, owner of the loan, expressed sympathy for her situation and promised not to evict her, but would not postpone the scheduled foreclosure.

      Enter the Consumer Financial Protection Bureau. Though precisely how it brokered the final resolution of Ogle's problem has not been made public, its intervention into the case appears to have been a catalyst. Bank of America, which had made a promise in 2010 to Ogle not to foreclose simply because her name was missing from the documents, purchased her loan from Fannie Mae and now owns it. The bank then canceled the Feb. 27 auction.

      "We wanted to stay true to our commitment," said Dan Frahm, a spokesman for Bank of America. "So we bought back the loan."

      Ogle's reaction? "Oh, I'm on cloud nine," she said. "I'm staying put in my house. I don't have to move. And even though I'm 92, I've got all my marbles — so everybody should know I plan to be around for a while."

    Alaska Feds Pinch Disbarred Lawyer, Another On Wire, Mail Fraud Charges In Connection With Alleged Hijacking Of Elderly Widow's $2M+ In Trust Funds, Leaving Her To Lose Home To Foreclosure & Die Destitute In Nursing Home

    In Anchorage, Alaska, the Anchorage Daily News reports:
    • Two men are charged in federal court with crimes related to duping an elderly Anchorage woman out of millions of dollars by taking control of her trust fund, which her husband set aside for her care before his death.

      In December, a grand jury indicted friends and business partners Brian Ben-Israel, 53, and Philip Myers, 60, for mail fraud. On Feb. 22, jurors handed up a superseding indictment adding charges of wire fraud and, for Ben-Israel, charges of filing false tax returns.

      Both men pleaded not guilty to all the charges Wednesday, court records show.

      Ben-Israel, once a registered nurse in Anchorage and now a Georgia resident, and Myers, a disbarred California lawyer still residing there, worked together to pilfer the accounts of Juanita Gielarowski, a longtime Anchorage resident and the widow of Thomas Gielarowski, according to the indictment.

      The two men -- who were either very close friends or romantically linked -- emptied the Gielarowski trust, leaving Juanita destitute, according to court filings in a separate civil case.

      Without funds to pay for her in-home care, and with her house in foreclosure, Juanita was forced to live in a state-funded nursing home, where she died during the legal wrangling over the stolen money, according to the indictment and civil court filings.

      In some instances, Ben-Israel asked Juanita to sign documents without her reading glasses, and the trusting woman abided, according to the civil court papers. He also wooed Juanita's daughter, who fell in love with him, even though he was in a relationship with another man, the court papers say.

      A judge in a civil case awarded the Gielarowskis' estate $7 million in punitive damages. The results of a separate medical-malpractice lawsuit brought against Ben-Israel and his employer at the time, Meridian Psychiatric Group, remain sealed.

      According to the federal indictments, the scheme worked like this:

      Ben-Israel met Juanita and her daughter, Linda Stowers, while working in Juanita's home as a nurse, providing care to both women. In 2007, Ben-Israel gained control over Juanita's trust fund and, with her mental health deteriorating, made himself a beneficiary of the trust. He and Myers ultimately used funds from the trust to travel and transferred $2.8 million to a California-based company Myers owned: Typhoon Security Technology, which aimed to be a global leader in "explosives and weapons detection technology," the indictment says.

      But past fraud cases involving Typhoon had caused the State of California to revoke the company's business license. When Ben-Israel and Myers were bilking Juanita Gielarowski, the company served only as a vessel through which the men could get at her money.

      With the trust emptied, bills went unpaid, and a bank foreclosed on Juanita's house in 2009. Her family filed the lawsuit that year, but, as it was still playing out in court in 2010, Juanita died at a nursing home.

      The wire transfers Myers and Ben-Israel made and a fraudulent check they mailed led to the wire and mail fraud charges. Ben-Israel faces tax fraud charges for allegedly filing false tax returns because he failed to report the hundreds of thousands of dollars he received.

    Monday, March 04, 2013

    Washington State Supremes: Trustee's Agreement With Bank Not To Delay Foreclosure Without Its Express Consent, Having Notary Falsely Pre-Date Notices Of Sale Violate State Consumer Protection Act

    In Seattle, Washington, The Seattle Times reports:
    • The state Supreme Court on Thursday ruled that one of the West Coast’s major players in the foreclosure industry violated the state consumer-protection law by falsely notarizing legal documents and not considering requests to delay the auction of a Whidbey Island home.(1)

      The court, overturning an appeals court’s decision, instructed a King County Superior Court judge to issue an injunction against foreclosure trustee Quality Loan Service. Quality “has demonstrated little understanding or regard for Washington law,” wrote Justice Tom Chambers.

      Foreclosure trustees are not simply agents for the lender, the court wrote. “The power to sell another person’s property, often the family home itself, is a tremendous power to vest in anyone’s hands,” Chambers wrote. The law “requires that trustee to be evenhanded to both sides and to strictly follow the law.”

      In 2008, the nonprofit group Puget Sound Guardians sued Washington Mutual and Quality Loan for allegedly violating the consumer-protection law after the trustee sold Dorothy Halstien’s home at a foreclosure auction for a dollar more than the $83,087 the disabled senior owed, stripping her of more than $150,000 in equity.(2) The property’s new owners quickly flipped it, selling the property for $235,000.

      Halstien owed WaMu about $75,000 at the time she developed dementia and had a guardian appointed. The cost of her medical care ate up funds to pay the mortgage. She died in late 2008 at 76.

      Quality falsely notarized the date on the notice of trustee sale, the court said, and apparently trained its notaries to do this regularly from 2004 to 2007. Had the notice of sale been correctly dated, the foreclosure auction would have been delayed at least a week, the court said.

      “A signed notarization is the ultimate assurance upon which the whole world is entitled to rely that the proper person signed a document on the stated day and place,” Justice Chambers wrote.

      Dianne Klem, executive director of Puget Sound Guardians, said her agency made repeated requests to WaMu and Quality to delay the sale. But Quality had a written agreement with WaMu that forbade it from postponing a sale without the bank’s approval.

      An appeals court in 2011, rejecting a jury’s verdict against Quality, had ruled there wasn’t sufficient evidence to show Quality had violated the consumer-protection law — and as a result, was not liable for attorneys fees.

      In a statement Thursday, Quality said it “has dedicated significant resources to ensure non-judicial foreclosures are processed to the highest standards of legal compliance while respecting and focusing on compassionate treatment of all borrowers during their difficult time.”

      Fred Corbit, the senior attorney at the Northwest Justice Project(3) who represented Puget Sound Guardians, said the court’s ruling sent a strong message to all foreclosure trustees:

      “They have to treat both banks and borrowers in good faith, and if they don’t treat them in good faith then they’re going to be held liable for damages,” he said.
    Source: State high court rules big foreclosure trustee broke consumer law (The state Supreme Court on Thursday ruled against a major player in the foreclosure industry, Quality Loan Service, saying it could not act merely as an agent for lenders).

    For the court ruling, see Klem v. Quality Loan Service Corporation of Washington, No. 87105-1 (Wn. February 28, 2013).

    (1) The state Consumer Protection Act is Washington's version of the state laws that prohibit unfair and deceptive acts and practices in trade and commerce (generically referred to as state UDAP statutes).

    For more on UDAP statutes across the U.S., see Consumer Protection In The States: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes.

    (2) See Trustee Ordered To Cough Up The Cash In Wrongful Foreclosure; Conducted Auction Despite Notification By Owner's Court-Appointed Rep Of Pending Sale.

    (3) Northwest Justice Project is a not-for-profit statewide law firm that provides free civil legal assistance and representation to low-income people and communities throughout Washington.

    NJ Appeals Court: No Need For Property-Snatching Town To Include Foreclosure Judgment-Holding Lienholder In Pre-Condemnation Lawsuit Negotiations

    From an Alert/Update from the law firm Duane Morris LLP:
    • In a recent decision, the Appellate Division of the Superior Court of New Jersey has held that New Jersey law does not require a condemning authority to negotiate with a mortgagee, which has obtained a final judgment of foreclosure on the subject property, prior to the initiation of an eminent domain action. Borough of Merchantville v. LB-RPR REO Holdings, LLC, No. A-3745-11T4 (App. Div., 2013).

      New Jersey law requires a condemning authority to conduct bona fide negotiations with a prospective condemnee prior to filing a complaint in condemnation. These negotiations entail, at minimum, "an offer in writing [based upon an approved appraisal] by the condemnor to the prospective condemnee holding the title of record to the property being condemned," prior to initiating a condemnation action. N.J.S.A. 20:3-6. Such negotiations are a jurisdictional prerequisite to a condemnor’s ability to proceed with a condemnation action.

      In Borough of Merchantville, in response to the Borough's filing of a complaint in condemnation, the lender objected to the condemnor's authority to condemn the subject property based on an alleged failure of the Borough to conduct bona fide negotiations.

      The lender asserted that it was the real party in interest because it had a final judgment of foreclosure and had taken possession of the property. Moreover, it had advised the Borough of the foreclosure action at the time the condemnor's offer was made. Thus, based on its being the judgment holder and the party in possession of the property, the lender claimed the condemning authority was obligated to negotiate with it as the true "stakeholder and only party with a genuine interest in negotiating the sale of the property."

      The trial court disagreed, finding that New Jersey law imposed no duty to negotiate with a lender who was not the record owner of the property at the commencement of negotiations.

      In affirming the trial court's decision, the Appellate Division explained that the rationale for requiring negotiations with the "owner of record" is that it allows a condemning authority to avoid the challenging proposition of negotiating with each party who may hold an interest in a property targeted for a taking.

      Although the mortgagee in Borough of Merchantville had obtained a final foreclosure judgment, the Appellate Division held that the condemning authority was not required to include the mortgagee, whose name "was not recorded on the Borough's rolls as the 'owner of record,'" in its pre-condemnation negotiations.

      Rather, in such instance, the mortgagor still was the "record owner" of the property. The Appellate Division added that if negotiations with the record owner fail and a condemning authority files a complaint initiating the eminent domain action, the law nevertheless protects parties with an interest in the property—including a mortgagee—by requiring the complaint to name such parties as defendants, and further allowing them to participate in the valuation portion of the proceedings.

    S. Illinois Feds To Judge: Figuring Out Restitution For 1000s Of Screwed-Over Homeowners In Tax Sale Bid-Rigging Racket Too Expensive & Tough To Do; Let Them Bring Their Own Lawsuits, Go After Their Own Recoveries

    In East St. Louis, Illinois, The Madison-St.Clair Record reports:
    • Calculating the losses of individuals who may have been victimized by the conspiracy that former Madison County Treasurer Fred Bathon pled guilty to [last] month is not practicable, the government asserts.

      The U.S. Attorney’s Office for the Southern District of Illinois filed a motion Monday regarding restitution, seeking an order from the federal court that it is impracticable to determine the losses of individual victims of the property tax sales schemegiven the complex issues of fact related to the large number of victims.”

      The government also asked the court to find that it “has exercised its ‘best efforts’ to accord crime victims their right of restitution in the instant caseand should not expend additional resources indetermining the exact amount of restitution owed to each of several thousands of victims in the case.”

      The motion stems from the conspiracy charge lodged against Bathon, who earlier this month pled guilty to violating the Sherman Antitrust Act. He admitted to structuring tax sales in a way that eliminated competitive bidding and allowed tax buyers to engage in price fixing.

      Bathon, according to the U.S. Attorney’s Office, did this for delinquent property tax sales conducted between 2005 and 2008, during which time he awarded properties at non-competitive interest rates and made sure his largest campaign contributors were the winning bidders.

      As a result, the federal prosecutor’s office asserts that by 2007 and 2008, distressed homeowners were charged the statutory maximum interest rate – 18 percent – on nearly every property tax lien sold.

      Bathon, who served as treasurer from 1998 until his 2009 resignation, is set to be sentenced May 17. Under the terms of his plea, he faces between 33 and 41 months in prison. He will also lose his entire public pension as a result of his conviction.
    • “A restitution determination would require the Government to begin investigating the particular details of roughly 10,000 property tax transactions after the guilty plea, when the criminal inquiry into Bathon’s activities has ended,” the motion states, noting that “the sheer volume of property tax sales involved in this case makes a restitution determination logistically impracticable.”

      Pointing to a previously filed motion regarding victim notification, the government contends that determining restitution would “be expensive and largely unsuccessful for the Government to attempt to identify and locate each of the owners of the properties subject to the tax sale.”
    • The prosecutor’s office further asserts that since Illinois law requires public employees convicted of a felony to forfeit their pensions, Bathon wouldn’t be able to pay a restitution judgment even if an amount could be calculated.

      According to the motion, the Antitrust Division of the U.S. Department of Justice advised the federal prosecutor’s office “that it is common in municipal tax lien bid rigging cases for the parties to agree, and the Court to order, that the complex and voluminous issues of restitution are better resolved by way of civil litigation.”

      Late last week, St. Jacob attorney John Barberis and Collinsville lawyer Steve Giacoletto filed a lawsuit in Madison County Circuit Court on behalf of five property owners who suffered financial losses as a result of Bathon’s tax sale auctions.

      The suit that seeks class action status names Bathon, Madison County and individuals tied to the tax sales — John Vassen, Dennis Ballinger, Robert Luken, John Scott, Scott McClean and Edward Beasley—as defendants.

      The plaintiffs seek an award of money for the losses and injuries they suffered as a result of the tax scheme. The suit states that as a result of the defendants’ conduct, Madison County property owners have lost or could lose millions of dollars in interest.

    Sunday, March 03, 2013

    Possible Indefinite Bar Ticket Suspension Looms Over Lawyer For Taking Client's $63K Real Property As Security For Yet-To-Be-Earned $9.6K Fee, Then Foreclosing When Ultimately Stiffed After Providing Satisfactory Services

    In Jefferson City, Missouri, reports:
    • The Office of Chief Disciplinary Counsel is recommending to the Missouri Supreme Court that the law license of Sunrise Beach Attorney Gregory D. Williams be suspended for six months, according to court documents.

      The Disciplinary Panel’s recommendation stems from an investigation and two hearings concerning a fee agreement and surrounding circumstances between Williams and a former client, Robert Boothe.
    • The Office of Chief Disciplinary Counsel is an agency of the Missouri Supreme Court responsible for investigating allegations of misconduct by lawyers, prosecuting the cases where a lawyer’s misconduct poses a threat to the public or to the integrity of the legal profession, and maintaining current records of disciplinary information for lawyers licensed to practice law in Missouri.

      The Office of Chief Disciplinary Counsel provided the following information concerning the Williams investigation:

      Robert Boothe is the Complainant in this case. Boothe is considered disabled by the Social Security Administration due to being bipolar with schizophrenic tendencies. Boothe also has a significant criminal history. He has a felony conviction for statutory rape in 1985 and a felony conviction for robbery in 1990, both in the State of Virginia. Boothe is also a registered sex offender in Missouri. Boothe has several other criminal convictions, including driving under the influence and possession of marijuana.

      Boothe was arrested on September 5, 2009, by the Missouri State Water Patrol, for having expired registration on his boat, being in the possession of a Schedule IV controlled substance without a prescription, possession of less than 35 grams of marijuana, and drug paraphernalia. He went into the Camden County Jail with a bond set at $40,000.

      Boothe owned property, but reportedly had no liquid assets. He allegedly had insufficient funds to bond out of jail. Boothe was also unable to obtain the services of a public defender because he owned real estate.

      According to panel documents, Boothe owned a lakefront lot at Lake of the Ozarks known as Lot 9 of Kip's Cove that he purchased for $63,500. At the time Boothe purchased the property, it was appraised in the office of the Camden County Assessor for $46,200.

      Boothe had been in jail since September 5, 2009 when he called Williams’ office on September 8, 2009 and spoke to an attorney. According to court documents, Boothe told the attorney he had "no cash whatsoever but owned property worth about $200,000.” The attorney told Boothe he would have to speak with Williams.

      Williams visited Boothe in the Camden County Jail on or about September 8, 2009. According to court documents, Williams stated that Boothe entered into a typed Client Minimum Fee Agreement dated September 8, 2009 and a typed Installment Fee Agreement, also dated September 8, 2009. The Installment Fee Agreement referred to a fee of $3,000. The Installment Fee Agreement set out in handwriting the following: "Property at Lot 9 Kip's Cove given as collateral for this note."

      The Disciplinary Panel alleges neither the document, nor any separate writing, contained language that Boothe should be advised of the desirability of seeking, and he be given the reasonable opportunity, to seek the advice of independent counsel before giving Williams a security interest in his property.

      The panel also alleges Williams did not provide Boothe the opportunity to give informed consent, in a writing signed by Boothe, to the essential terms of the security agreement including Williams’ role in the transaction.

      According to court documents, the Disciplinary Panel alleges that it is unclear as to when and where the agreement was signed and if it was legally notarized. The Disciplinary Panel alleges in its written recommendation the following: “Boothe executed a Future Advance Deed of Trust in (Williams’) presence that was not witnessed by a Notary. (Williams’) secretary, later notarized that document and backdated it to September 8, 2009, a date both (Williams) and Boothe agree was not correct. Whether Boothe's signature was witnessed by or acknowledged to the Notary is unclear.”

      At some point after September 10, 2009, Boothe, with Williams’ assistance, was able to obtain a reduction of his bail bond to $20,000. Boothe posted bond, reportedly by paying the bail bondsman $2,000 from the sale of a motorcycle.

      The Missouri Supreme Court Disciplinary Panel alleges that Boothe is inarticulate, sometimes contradictory and confusing, and allegedly had little knowledge of the true significance of the legal consequences of his execution of the agreement with Williams.

      Boothe remained free on bond until May of 2010. At that time his bond was revoked because of a new arrest for possession of marijuana. Boothe was returned to the Camden County Jail and remained there until his plea of guilty on June 23, 2010.

      Williams was able to negotiate a suspended imposition of sentence on Boothe's Class C felony of possession of a controlled substance, despite Boothe's status as a persistent offender. Further, Williams was able to negotiate a misdemeanor conviction on Boothe's marijuana possession with punishment assessed at 60 days confinement, most of which Boothe already had served at
      the time of his plea.

      According to court documents, Boothe acknowledges he received good representation and a favorable disposition of his criminal case. Williams’ attorney fees and expenses for representation of Boothe totaled $9,682.20. Boothe acknowledged those fees and expenses were reasonable.

      Boothe never paid Williams for representation, according to court documents. Boothe sent letters to Williams in July and September 2010 saying he would pay some money as soon as he got an income tax refund and also would make other monthly payments.

      Williams sent a letter to Boothe in September 2010 advising Boothe that he would "commence collection action effective September 30, 2010, including the foreclosure on the property.” Williams foreclosed on the property and purchased the property at foreclosure sale on January 11, 2011 for $5,000, according to the Disciplinary Panel.

      Boothe lost his property in which he had invested $63,500. That was an injury, according to the Disciplinary Panel, regardless of Boothe's failure to pay Williams, failure to take action to avoid foreclosure and failure to successfully pursue any legal action against Williams.

      The question is whether taking a security interest in real estate owned by the client for a fee that is yet to be earned violates Rule 4-1.8? We find that it does and that a lawyer practicing in observance of our Rules should have known that in 2009,”(1) the Disciplinary Panel writes in its recommendation to the Missouri Supreme Court.
    • In its concluding paragraph the Disciplinary Panel writes, “This Panel recommends that the Supreme Court issue an order giving Respondent (Williams) an indefinite suspension with leave to apply for reinstatement after six months.” Williams’ law license is currently in good status in the State Missouri. The timeline for a final decision from the Missouri Supreme Court is unclear at this juncture.(2)
    For the story, see Sunrise Beach attorney to appeal possible suspension of law license to Missouri Supreme Court.

    (1) According to the story, Missouri Supreme Court Rule 4-1.8(a) of the Rules of Professional Conduct states as follows:
    a. A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security, or other pecuniary interest adverse to a client unless:
    • the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client;
    • the client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the transaction; and
    • the client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer's role in the transaction, including whether the lawyer is representing the client in the transaction.
    (2) Real estate conveyances from clients to their attorneys can be problematic for the latter. See, for example, Flanagan v. De Lapp, 533 S.W.2d 592 (Mo. 1976), where the Missouri Supreme Court made the following, among other, observations when slamming an attorney for taking a client's property:
    • It is an almost universal rule that any client's transfer of his property to his attorney is subject to being set aside as resulting from undue influence unless the attorney is able to meet the burden of proving that the transaction was fair and equitable.
    See also Real Estate Conveyances From Clients To Their Attorneys Are "Presumptively Fraudulent" Unless Lawyer Can Prove Otherwise.

    Nevada AG Defends Conduct That Led To Criminal Robosigning Indictment Getting The Boot; Considers Returning To Grand Jury With Revised Charges

    In Las Vegas, Nevada, The National Law Journal reports:
    • A Las Vegas judge has dismissed a high-profile criminal "robo-signing" case against two Southern California title officers after their attorneys accused the Nevada attorney general's office of prosecutorial misconduct.

      Defense attorneys John Hueston and Kenneth Julian had argued that prosecutors—in their zealous pursuit to bring criminal charges tied to the mortgage meltdown—gave the grand jury an improper definition of what constituted a forgery and threatened a witness into pleading guilty. The witness later committed suicide.
    • [Clark County, Nevada District Judge Carolyn] Ellsworth gave the attorney general's office leave to bring revised charges against both defendants. Jennifer Lopez, a spokeswoman for Attorney General Catherine Cortez Masto, said the office was evaluating whether to do so.

      "There was no intent to mislead the grand jury," she wrote in an email to The National Law Journal. "We think the judge recognized this. The judge's ruling allows this office to return to the grand jury. We are in the process of now evaluating the judge's ruling and the evidence."
    • In court documents, senior deputy attorney general Robert Giunta defended the office's definition of forgery to the grand jury. "The defendants' signatures were not provided on the [notices of default]; the notary falsified the defendants' signatures. This is the falsity or forgery as alleged in the indictment," he wrote.

    C. Florida Title Company Head Gets 20 Months For Illegally Dipping Into Escrow Account, Creating Phony Docs To Dupe Insurance Underwriters In $1.1M Embezzlement

    From the Office of the U.S. Attorney (Orlando, Florida):
    • Senior U.S. District Judge G. Kendall Sharp sentenced Douglas Wayne Bartle, III, also known as Ridgely Douglas Bartle and Douglas Wayne Bartle, Jr., (49, Winter Park) to 20 months in federal prison for wire fraud. The court also ordered Bartle to pay $862,770.12 in restitution to his victim. Bartle pleaded guilty on November 27, 2012.

      According to court documents, in 2004 Bartle and others opened a title insurance company named Vision Title. Vision Title had offices in various counties throughout Florida. The offices were formed as Florida limited liability companies (Vision LLCs).

      In 2009, to cover living and other personal expenses, Bartle embezzled money from Vision Title’s escrow account. To ensure that Vision Title’s insurance underwriters were unaware of the theft, Bartle used a computer in Orange County, Florida, to access the Internet and obtain bank statements on computer servers in North Carolina.

      Bartle then altered those bank statements and provided copies to Vision Title’s insurance underwriters. These fraudulent bank statements prevented the insurance underwriters from detecting the fraud and caused the insurance underwriters to allow Vision Title to stay in business.

      As Vision Title continued to operate, Bartle was able to steal more money. Because of Bartle’s actions, Vision Title had insufficient funds to cover claims that could have been made on title insurance issued by Vision Title.

      When law enforcement detected the fraud, Vison Title offices throughout Florida were immediately shut down. Vision Title employees lost their jobs with no advance notice. In total, Bartle embezzled approximately $1.1 million.(1)
    For the U.S. Attorney press release, see Title Insurance Company President Sentenced To Federal Prison.

    (1) According to an October, 2012 Orlando Sentinel article:
    • Stewart Title Insurance Co. underwrote Vision Title until 2008 and then Ticor Title Insurance Co. became Vision's underwriter. Ticor found discrepancies in Vision Title's bank statements on Wachovia Bank accounts.

      "The original bank statements clearly showed that Bartlett had provided Ticor with fraudulent bank statements to cover his embezzlement from Vision Title escrow accounts," the plea deal reads.

      On finding the discrepancies, Ticor closed Vision Title and notified law enforcement. Ticor lost $850,000, records show. Bartle agreed to repay Stewart Title and Ticor Title. Sentencing can carry a maximum of 20 years imprisonment and a fine of as much as $250,000.