Saturday, June 18, 2016

Elderly Lawyer Convicted Of $700K Client Theft Violates Terms Of Prison 'Buy Out' Deal; Originally Sentenced To 6 Years Probation In Exchange For Promise To Make Good On Pilfered Loot, Judge Now Belts Him With 25 Months In Slammer After Stiffing Victim Out Of Promised Restitution Payments

In Miami, Florida, the Miami Herald reports:
  • Guy Bailey, the once-prominent Coconut Grove lawyer convicted of stealing $700,000 from his clients, is headed to prison for 25 months after failing to pay any restitution.

    A Miami-Dade judge [] sentenced Bailey, 77, who shuffled gingerly into court and pleaded for mercy because of a condition that makes walking difficult.

    Circuit Judge Milton Hirsch said little as he meted out the sentence for Bailey. He had already given Bailey a break two years earlier, sentencing him to probation so he could work to try to pay back the money.

    But in an order issued in April, Hirsch was clearly perturbed that Bailey paid nothing but was able to go on family trips upstate.

    “I recognize that these family field-trips, all told, could not have cost Mr. Bailey more than hundreds of dollars, at the very most a couple of thousand dollars,” Hirsch wrote.

    “But during the same period … Mr. Bailey paid not a penny toward his restitution. Perhaps he could not have paid much but he could have paid something.”

    Bailey was once one of the top commercial lawyers in South Florida. He represented CenTrust Chairman David Paul, the former multimillionaire Miami power broker who did nine years in prison for bank and securities fraud in the 1980s.

    But Bailey was arrested in 2010 after taking the money from a trust account set up for a father and son in a life-insurance claim case.

    The Miami-Dade state attorney’s office recused itself from the case because of Bailey’s longstanding ties to the local legal community.

    At trial in March 2014, Bailey took the stand to claim the money was actually a loan to be paid back later. Jurors nonetheless convicted him in March of first-degree grand theft.

    “I didn’t see this coming,” Judge Hirsch said in court after the verdict.

    Monroe prosecutor Colleen Dunne asked for prison time. Hirsch declined, opting instead for six years of probation.

    “Guy Bailey committed his crime, not with a gun and a mask, but with a law license,” Hirsch wrote in his original sentencing order, adding later: “What pride can a just and a decent society take in a criminal justice system that tosses an ailing septuagenarian in jail to rot while making no provision for his victims?”

    But when Bailey paid no money, Hirsch ruled he violated the conditions of his release.

    “I beg you not to do this,” Bailey told the judge [] as he continued to insist he did not steal the money.

    Bailey told the judge he suffers from neuropathy in his right foot, which makes walking difficult without a brace and bars him from doing even menial labor.

    “I don’t think I’ll die in prison, but I don’t think I’ll make it out without serious injury,” Bailey said.

    Hirsch ordered that he be taken into custody immediately. Miami-Dade police officers gently cuffed Bailey and walked him into a secured area of the courthouse, into a holding cell.

    “Mr. Bailey had every opportunity to right his wrong when he was originally sentenced to probation with his only condition being that he pay restitution,” prosecutor Dunne said afterward. “Despite the court's leniency, he made no attempts to repay the victims and in the end it was his arrogance that resulted in him being sentenced to prison.”
Source: Miami lawyer sent to prison after not paying back stolen money (Guy Bailey was once one of the top commercial litigation attorneys in South Florida; Judge Milton Hirsch originally sentenced him to six years of probation; He made no payments despite his second chance, the judge found).

Appeal Court Upholds Bar Boot For Lawyer Who Misappropriated $9,100 From 86 Clients; Relatively Minuscule Thefts No Bar To Disbarment

In Winnipeg, Manitoba, the Winnipeg  Free Press reports:
  • A disbarred Winnipeg lawyer has lost his legal battle to overturn the career-ending judgment.

    Robert Doolan, a real estate lawyer who was called to the bar in 1977, was previously found guilty of misappropriating $9,096.44 worth of funds from 86 clients, then trying to mislead the Law Society investigation by falsifying bank records.(1)

    The allegations first surfaced in 2010 following an audit and triggered a lengthy process, including a trial where Doolan admitted wrongdoing but denied any malicious intent. He said the small amounts he took out of refund cheques for registrations at the Winnipeg Land Titles Office was not used "for his own benefit" but rather to pay himself on behalf of other clients who owed him money.

    "He said he treated the refund cheques as float money," Appeal Court Justice Barbara Hamilton wrote in a decision released this week. Doolan told the governing legal body he didn't need the money but tried to conceal what he did "out of fear and panic."

    The Law Society panel ultimately took the most extreme sanction available against Doolan in 2014, saying his actions showed a "well thought out and premeditated and deliberate attempt" to mislead them. They also cited concerning statements from Doolan in which he couldn't guarantee he wouldn't do the same thing again if he found himself in similar circumstances.

    "The panel was of the view that (Doolan) continued to display a lack of understanding and/or appreciation of the seriousness of his actions," Hamilton wrote.

    The Law Society added that anything short of disbarment "would not be sufficient to reflect the seriousness of the offences in this case, and to deter other members from similar actions, and to preserve public confidence in the legal profession and its ability and willingness to govern itself."
For more, see Appeal court upholds lawyer's disbarment.

(1) The Law Society of Manitoba Reimbursement Claims Fund is a fund maintained to repay people whose trust monies have been misappropriated by their lawyer. All members of the legal profession in Manitoba contribute to this fund. Contact the Law Society for further information on how to make a claim under this fund.

For similar "attorney ripoff reimbursement funds" that attempt to clean up the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:
Maps available courtesy of The National Client Protection Organization, Inc.

Florida Supremes Discipline More Attorneys

The Florida Bar recently published the latest issue of its periodic gossip sheet, in which it announced that the Florida Supreme Court disciplined 21 attorneys – disbarring three, revoking the license of one, suspending 12 and publicly reprimanding five. Six attorneys received more than one form of discipline. One attorney was ordered to pay restitution; five attorneys were also placed on probation.

Of those disciplined, the following seven attorneys were sanctioned for matters involving, at least in part, either alleged violations of rules governing trust accounts, or the alleged mishandling or misappropriation of client funds:
  • Joseph Bernstein, Fort Lauderdale, suspended until further order, following a March 14 court order. (Admitted to practice: 1977) According to a petition for emergency suspension order, Bernstein appears to be causing great public harm by misappropriating client funds. (Case No. SC16-403) [see Petition For Disciplinary Revocation - allegations include the pilfering of at least $164,000 from real estate closings, commingling of client funds with lawyer funds, failing to maintain minimum trust accounting records]

    Arthur Clifton Black, Orlando, suspended for 30 days, effective 30 days from a March 31 court order. Further, upon reinstatement, Black shall be placed on probation for one year and complete a trust accounting workshop. (Admitted to practice: 1972) A Florida Bar auditor found that Black was not in substantial compliance with Bar rules governing trust accounts during the audit period Dec. 1, 2014, through June 30, 2015. (Case No. SC16-455)

    Stuart Carl Hoffman, Boca Raton, disbarred effective immediately, following a March 31 court order. (Admitted to practice: 1990) In two matters, Hoffman was paid for his services, but after being retained, he took little or no significant action. In a third matter, he abandoned the client’s matter. In all three matters the clients made attempts to contact Hoffman but he did not respond. Upon investigation, the Bar learned that Hoffman vacated the office space at his record Bar address. (Case No. SC15-1591)

    Natalie Aleta Jackson, Orlando, suspended for 90 days, effective 30 days from a March 31 court order. Further, upon reinstatement, Jackson shall be placed on probation for two years and complete a trust accounting workshop. She shall also contact Florida Lawyers Assistance for an evaluation. (Admitted to practice: 2003) A Bar audit found that Jackson was not in substantial minimum compliance with the Bar rules governing trust accounts during the audit period Jan. 1, 2015, through Sept. 30, 2015. (Case No. SC16-458)

    Leroy H. Merkle Jr., Tampa, to be publicly reprimanded and further, placed on probation for two years, following a March 17 court order. (Admitted to practice: 1975) Beginning Oct. 1, 2013, Merkle failed to maintain all required trust records on his trust account and failed to perform the required monthly reconciliations to ensure that funds in his trust account were properly maintained. As a result, Merkle failed to keep the correct funds in his account at all times. (Case No. SC15-1686)

    C. Byron Stout III, St. Petersburg, to be publicly reprimanded by publication in the Southern Reporter, following a March 3 court order. Further, Stout shall complete ethics school. (Admitted to practice: 2003) Stout engaged in providing loan modification services predominantly to out-of-state clients. Stout entered into a business relationship with a staffing company to assist with handling mortgage modifications under his supervision. Stout’s representation and collection of fees from out-of-state clients did not fully comply with state and federal regulations regulating mortgage assistance relief services. (Case No. SC16-199)

    Horecia Ingram Walker, Miramar, permanently disbarred effective immediately, following a March 24 court order. Further, Walker shall pay restitution of $11,321.60 to one client. (Admitted to practice: 2004) Walker misappropriated client funds that should have been held in trust. A Bar audit revealed that Walker did not maintain minimum trust accounting records and procedures. She failed to respond to Bar inquiries regarding these matters and failed to provide requested records to a subpoena. (Case No. SC15-1573)
Source: Supreme Court Disciplines 21 Attorneys (Summaries of orders issued March 3, 2016 – April 11, 2016).

Note: Key discipline case files that are public record are posted to attorneys’ individual online Florida Bar profiles. To view discipline documents, follow these steps. Additional information on the discipline system and how to file a complaint are available at

Criminal Charges Catch Up With Disbarred Attorney Who Lost Bar Ticket For Pilfering $130K Settlement Proceeds From Now-Deceased Client

In Albuquerque, New Mexico, the Albuquerque Journal reports:
  • A lawyer disbarred for taking a $130,000 settlement he received on behalf of a Gallup restaurant owner has entered a not guilty plea to an indictment charging him criminally for the same conduct.

    The settlement was for property damages related to a drainage retention pond next to the business by the city of Gallup.

    Cody Kelley, 45, of Albuquerque waived his appearance at a May 6 arraignment but showed up in person for a scheduling conference last week before 2nd District Judge Alisa Hadfield on the charge of embezzlement over $20,000, a second-degree felony that carries a potential sentence of nine years in prison.
    Kelley failed to show up for the hearing before the New Mexico Supreme Court seeking his disbarment in June 2015, but a prosecutor from the New Mexico Disciplinary Board presented the case.

    Besides telling him he couldn’t practice law, the court ordered Kelley to pay restitution of $130,000 in the Gallup case and $3,500 in another case, as well as $1,066 in costs to the disciplinary board.(1)

    Kelley also failed to respond to charges filed against him by a disciplinary hearing committee.

    According to documents filed by the disciplinary board, defendants in the restaurant case filed on behalf of Susan Yurcic led to a settlement and four checks sent to Kelley’s law office in December 2013. Yurcic still hadn’t received any of the money when she died in February 2014, and her nephew was appointed personal representative of the estate.

    Kelley told the nephew, William Mataya, that the funds were in his trust account, but records subpoenaed by disciplinary counsel showed that none of it went there and that Kelley instead spent it. Mataya had to pay for repairs to the property himself.
Source: Disbarred lawyer pleads not guilty.

See, generally, Frederick Miller, "If You Can't Trust Your Lawyer .... ?", 138 Univ. of Pennsylvania Law Rev. 785 (1990) for more on the apparent, long-standing tolerance for deceit by many in the legal profession:
  • This tolerance to deception is encouraged by the profession's institutional civility. Seldom is a fig called a fig, or a shyster a shyster. No, our euphemisms are wonderfully polite: "frivolous conduct," or a "lack of candor;" or "law-office failure;" or, heaven forbid, a "peculation," a "defalcation," or a "negative balance" in a law firms's trust account.

    There is also widespread reluctance on the part of lawyers --- again, some lawyers --- to discuss publicly, much less acknowledge, that they have colleagues who engage in deceit and unprofessional conduct.

    This reluctance is magnified when the brand of deceit involves the theft of client money and property, notwithstanding that most lawyers would agree that stealing from clients is the ultimate ethical transgression.[...] The fact is, however, that theft of client property is not an insignificant or isolated problem within the legal profession. Indeed, it is a hounding phenomenon nationwide, and probably the principal reason why most lawyers nationwide are disbarred from the practice of law.
(1) The Client Protection Fund of the State of New Mexico is intended to promote public confidence in the administration of justice and the integrity of the legal profession by reimbursing losses caused by the dishonest conduct of lawyers admitted and licensed to practice law in the courts of New Mexico.

For similar "attorney ripoff reimbursement funds" that attempt to clean up the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:
Maps available courtesy of The National Client Protection Organization, Inc.

See generally:
  • N.Y. fund for cheated clients wants thieving lawyers disbarred, a July, 2015 Associated Press story on this Fund reporting that the Fund's executive director, among other things, is calling for prompt referral to the local district attorney when the disciplinary committee has uncontested evidence of theft by a lawyer injuring a client or an admission of culpability;

    When Lawyers Steal the Escrow, a June, 2005 New York Times story describing some cases of client reimbursements ("With real estate business surging and down-payment amounts rising with home prices, the temptation for a lawyer to filch money from a bulging escrow account and later repay it with other clients' money has never been greater, said lawyers who monitor the thefts."),

    Thieving Lawyers Draining Client Security Funds, a December, 1991 New York Times story that gives some-real life examples of how client security funds deal with claims and the pressures the administrators of those funds may feel when left insufficiently financed as a result of the misconduct of a handful of lawyer/scoundrels.

Attorney Voluntarily Hands In Bar Ticket After Admitting To Allegations Of, Among Other Things, Pocketing Advanced Unearned Retainer Fees, Failing To Perform Services; Decision Pending As To How Much To Tap Into Reimbursement Fund To Cover Victimized Clients' Claims

On Prince Edward Island, Canada, CBC News reports:
  • Well-known Charlottetown lawyer Mitchell MacLeod has resigned after admitting to a finding of unprofessional conduct by The Law Society of P.E.I. The resignation was part of a settlement agreement MacLeod signed under the Society's discipline process.

    The law society regulates and disciplines Island lawyers, of whom there are currently 240 practicing.
    According to the settlement agreement MacLeod advised the society his alcoholism was affecting his ability to practice law.

    The society [] appointed a receiver to manage MacLeod's files and accounts.

    That person found further problems, noting in a report to the society in May 2015 what he called "unearned retainers" — where MacLeod had accepted retainers from clients without doing much on their files.

    The society investigated and charged MacLeod with unprofessional conduct.

    In April, as part of the settlement agreement, the society accepted MacLeod's resignation after he admitted to the allegations against him.

    Proceedings cost $75K

    MacLeod also agreed to pay $75,000 to cover the costs of the proceedings. He's not allowed to re-apply for membership with the Law Society for seven years.

    Susan Robinson, executive director of the society, told CBC [] she is in the process of reviewing about 10 claims from former clients over their retainers. She estimates the claims total between $10,000 and $20,000 and date back to 2013.

    "The lack of paperwork on both sides is a challenge," said Robinson. She has to review what paperwork exists in MacLeod's files and communicate with the former clients to determine how much work MacLeod did compared to the retainers clients paid him, she said.

    There is no money left in MacLeod's business account to pay out any claims, Robinson added.

    Law Society may pick up tab

    Any payments will come from the Law Society's Reimbursement Fund,(1) to which each member contributes $50 a year to provide for situations like this.

    Robinson's recommendations regarding payment will go to the general membership for a vote June 25.
For the story, see P.E.I. lawyer Mitchell MacLeod resigns, admits unprofessional conduct.
(1) When a lawyer licensed on Prince Edward Island, Canada has been found guilty of dishonesty or fraud and caused his or her client(s) to suffer a financial loss, the Council of the Law Society of Prince Edward Island may approve a payment from its Compensation Fund, which is a discretionary fund provided through a fee paid by lawyers as part of their Law Society dues each year. An application for compensation can only be considered after the Discipline Committee hearing has taken place.

For similar "attorney ripoff reimbursement funds" that attempt to clean up the financial mess created by the dishonest conduct of lawyers licensed in the U.S. and Canada, see:
Maps available courtesy of The National Client Protection Organization, Inc.

Friday, June 17, 2016

NYC Landlord/Condo Developer Nabbed For Illegally Buying Out Tenancy Rights From Two Elderly Rent-Controlled Tenants, Then Using Fake Eviction Proceedings To Cover Up Illicit Handiwork; Agrees To Cough Up $500K+ To Settle Charges w/ State AG

In New York City, DNAInfo New York reports:
  • A Manhattan landlord and developer who illegally bought out two elderly, rent-controlled tenants then tried to cover it up will pay nearly half a million dollars in a settlement with the state, the Attorney General Eric Schneiderman announced [].(1)

    "With many struggling to find affordable housing, my office will not tolerate real estate developers who circumvent laws designed to protect rent-stabilized units," the AG said [].

    Both tenants, who both paid about $1700 — one for a 2-bedroom and the other for a 3-bedroom — approached the developer, 165 West 91st Street Holdings LLC, who is also the landlord, hoping to be bought out of their apartments, but under state law they had to wait until building renovation plans were approved by the AG.

    The developer who began converting apartments in the building into condominiums in May 2012, bought the units from them for $200,000 and $155,000 respectively in Dec. 2012 even though the conversion plans were still being reviewed.

    Afterwards, the developer attempted to cover up the illegal early buy-out by bringing fake non-payment proceedings against its tenants.

    By claiming the tenants were not paying rent, the developer was able to falsely settle with the tenants and pay them for their units.(2)
For more, see UWS Landlord Pays $500K After Illegally Buying Out Rent Stabilized Tenants.
(1) For the New York AG press release, see A.G. Schneiderman Announces $540K Settlement With Manhattan Developer For Concealing Prohibited Rent-Controlled Tenant Buyouts.

(2) According to the New York AG's office:
  • These purported “settlements” were not settlements to bona fide non-payment proceedings. Rather, the non-payment proceedings were brought solely with the purpose of concealing the improper red-herring tenant buy-outs.

Lawsuit: Eviction-Seeking NYC Landlord Fired Building Super For Refusing To Snoop Inside Rent-Regulated Tenants' Apartments In Search Of Evidence Of Illegal Subletting In Order To Give Them The Boot

In New York City, DNAInfo New York reports:
  • A super at a rent-regulated apartment building was fired for refusing the landlords' orders to “snoop” around tenants’ homes to find evidence to evict them, a new lawsuit charges.

    Jorge Perez, 52, accuses his bosses at Pine Management — a company that owns at least 31 buildings in the city — of ordering him and other supers to search apartments for mail, prescription medicine and other materials that might prove tenants were illegally subletting rent-stabilized units.

    When Perez said he wouldn’t snoop, his bosses axed him March 1 and are now trying to evict him from his apartment in one of their Upper West Side buildings.

    Perez said he worked for Pine Management since 2001, first as a maintenance supervisor and later taking on superintendent duties at 510 Amsterdam Ave. in exchange for a rent-free basement apartment.

    He said the requests for supers to snoop began in 2014, when brothers Daniel and Jason Rohlman took over Pine Management from their father, Thomas Rohlman.

    “They just started having me do stuff that I found that was not right,” Perez recalled. “They were trying to find out if the tenant is actually living in that apartment.”

    Daniel and Jason instructed the supers to delay repairs and perform shoddy fixes on rent-regulated tenants’ apartments, according to the lawsuit filed in Manhattan Civil Supreme Court on May 25.

    The Rohlman brothers would also issue work orders that instructed supers to perform “snoop” tests on many rent-regulated apartments throughout their buildings, the lawsuit says.

    “These ‘snoop’ tests would require that the superintendents unlawfully trespass into rent-regulated tenants’ apartments and mailboxes and take pictures of mail, prescriptions or any other evidence that would provide a basis for Pine Management to evict the tenants,” the lawsuit says.

    The mail and other evidence could help prove that a tenant wasn’t really on the apartment lease, giving grounds for eviction, according to Perez's lawyer, Sumani Lanka of the Legal Aid Society.

    “Pine Management’s owners are using illegal means to try to evict tenants from rent-regulated apartments in order to increase their rents," Lanka said in a statement. "Their actions target a vulnerable population who depend on rent-regulated rents in order to maintain their housing. The Legal Aid Society, in bringing this lawsuit, is aiming to protect both our client, Jorge Perez, and low-income tenants in these rent-regulated apartments.”

    The Rohlman brothers are also accused of instructing supers to cut the circuit breakers in buildings to kill the electricity to rent-regulated apartments, according to the lawsuit. Perez said the supers were to use the power outage as a ruse to enter the apartments to snoop for evidence.

    Perez said he went along with the Rohlmans’ orders a couple times but, in February 2016, he refused to follow their instructions.

    “I felt like this is something that we shouldn’t be doing. And when I told them I felt uncomfortable doing it, they fired me,” Perez said.

    The lawsuit said that his termination letter said he was being fired for "not always sending pictures when work orders are completed." Perez said he never received a negative review while working for Pine Management and was rarely written up for complaints about his work performance.

    Pine Management did not respond to requests for comment. Ironton Realty, a company also controlled by the Rohlmans, is also named as a defendant in the lawsuit.

    Perez's lawyer said Pine Management is currently trying to evict him in housing court. Lanka said she is trying to get a stay in that proceeding until the lawsuit can be litigated.

    She also said that Perez has reported his accusations about Pine Management to the state Attorney General's office.

Thursday, June 16, 2016

Sacramento-Area Foreclosure Rescue Operator Gets 18 Years For Running Racket That Used Recorded Forged Documents, Abused Bankruptcy Process To Stall Foreclosures While Pocketing Monthly Payments From Unwitting Homeowners & Stiffing Mortgage Holders

From the Office of the Sacramento County, California District Attorney:
  • The Honorable Marjorie Koller sentenced 52-year-old Richard Henri Fecteau to 18 years in state prison. On April 22, 2016, a jury convicted Fecteau of 23 felony real estate fraud charges involving grand theft, recording false documents, and illegally acting as a foreclosure consultant.

    Between 2011 and 2014, Fecteau ran a foreclosure rescue company called Team Fecteau. He directed homeowners to deed properties to a trust. The names of people who had recently filed bankruptcy were then named co-trustees of the trust, along with Fecteau himself, which placed an automatic stay against foreclosure of the property.

    Fecteau would often tell the homeowners not to have further contact with the banks or lenders as he would handle all further negotiations regarding their mortgages. Homeowners were also directed not to pay their mortgages and make monthly payments to Fecteau for his service.

    After the homeowners signed the first deed to Fecteau, he or his employees would then file additional grant deeds using the same scheme of adding names of people in bankruptcy to the deeds. There was no intent to transfer any interest in the property to these individuals as their names were removed as trustee each time a new deed was recorded. Fecteau did not negotiate with lenders to take any action towards saving the homes of his unsuspecting clients. He continued this scam with some of the homeowners for several years.

    Once the scheme was no longer effective and most of Fecteau’s clients lost their homes to foreclosure, Fecteau would then employ another scam to illegally obtain money from the properties. Fecteau and an employee filed false mechanic liens against those same properties hoping the foreclosing lenders would settle the liens when they resold the properties.

    Fecteau was ordered to pay more than $35,000 in restitution to multiple victims he defrauded.

Tampa Feds Indict Convicted White Collar Scammer Of Add'l Crimes Involving Alleged Attempt To Satisfy Defaulted Mortgage On His Residence With Fraudulent Paperwork

In Tampa, Florida, the Tampa Bay Business Journal reports:
  • A federal grand jury in Tampa has indicted a former Tampa man, alleging he tried to defraud two banks in a mortgage repayment scheme.

    The June 2 indictment, charging Leigh Fiske with two counts of bank fraud, is the latest in a series of charges against Fiske. He faces 10 counts of bank and wire fraud from a separate indictment in late March. In 2014, a federal judge in California sentenced Fiske to 37 months in federal prison after he pled guilty to defrauding small businesses.

    The latest indictment focuses on events in 2008 and 2009, involving a property on Spruce Street in Tampa, where Fiske maintained a residence and had a mortgage.

    When the mortgage went into default, Fiske sent documents, including a fraudulent note, to Wells Fargo Bank and U.S. Bank, purporting to pay off the mortgage, the indictment said, “when in fact such documents represented and conveyed nothing of monetary value, were fraudulent, and could not and did not satisfy the defendant’s loan obligation.”

    The intended loss of the scheme was more than $650,000, according to a press release from the U.S. Attorney for the Middle District of Florida, A. Lee Bentley III.

Jersey City Prosecutor's Office Indicts Four For Allegedly Recording Forged Satisfaction Of Mortgage, Then Using 'Unencumbered' Property To Obtain New Mortgage Loan

In Jersey City, New Jersey, The Jersey Journal reports:
  • Former state Senate and Assembly candidate Bruce Alston and two other family members were arraigned [...] on a 27-count indictment for their alleged role in a sophisticated mortgage fraud scheme.

    Alston, 44, of Jersey City, was indicted along with his sister, Gail Alston, 50; his mother, Helen Alston, and ex-girlfriend Maisha Taylor, 42, of Newark, authorities said.

    They are charged with conspiring to file a false document with the county stating the mortgage held on a Bramhall Avenue property had been paid off, even though an amount in excess of $75,000 was still owed on the mortgage, the indictment says.

    In the second half of the indictment, Bruce Alston, Gail Alston and Helen Alston are charged with using the false representation that the mortgage had been paid off in order to obtain another mortgage to purchase a property.

    Those charged are alleged to have been acting on behalf of Blu Angle LLC, officials said.

    The charges are based on the alleged actions of the accused between the period of Oct. 1, 2011 and Oct. 31, 2015, the indictment says.

    In January 2012, Bruce Alston and Taylor were charged with conspiring to sell a parcel of Jersey City real estate they did not own and then using the sale proceeds to buy the property themselves, authorities said at the time. Charges were later dropped after the alleged victim died.

    Among the charges file against various defendants in this case are theft by deception, conspiracy, theft by failure to make required disposition of property received, making a simulated document, tampering with public records or information, falsifying records, forger and wrongful impersonation, the complaint says.

Wednesday, June 15, 2016

David v. Goliath: 81-Year Old Widow's Refusal To Be Bulldozed From Her Modest Orlando-Area Vacation Townhome Threatens To Shut Down Billionaire-CEO's 180-Acre, $24 Million Timeshare Project; Developer's Failure To Obtain Title From Unwilling Seller Prior To Starting Project May Lead To Revocation Of Site's Building Permit

In Orlando, Florida, the Orlando Sentinel reports:
  • Julieta Corredor's vacation home is the last obstacle in the way of Westgate Resorts' plan to build multimillion-dollar timeshare towers.

    Bulldozers have plowed over everything else around home — every townhouse, the community spa, tennis courts and all the trees.

    "It's just a house in the middle of nowhere now," said William Corredor, a software executive speaking for his 81-year-old mother, who bought the home 30 years ago with her late husband and used it as a hub to visit theme parks with their children, 19 grandkids and seven great-grandchildren.

    But a Westgate executive said the company has tried for more than a decade to acquire Corredor's townhouse, offering double its value.

    "This isn't about their mother's vacation home; this is about how much money they can get us to pay," Chief Operating Officer Mark Waltrip said. "We're building around them."

    Corredor's son appealed to Orange County commissioners this week for help, complaining that Westgate erected a construction fence blocking access to his mom's place and questioning how the timeshare company got permission to start its $24 million project when it doesn't own the whole property.

    County officials are re-examining Westgate's permit applications.

    "That [approval] could be undone," said Jon Weiss, director of Orange County community, environmental and development services.

    Developers seeking permission from the county for projects are required to certify they own all properties included in their plan or have agreements with authorized agents, Weiss said. If Westgate misrepresented its ownership, the company could be forced to stop work on the 180-acre project.

    Waltrip said the company accurately portrayed the ownership of the properties.

    Orange County property records are clear: Westgate or its parent company, Central Florida Investments, owns every lot in the former Sonesta Villa Resort but one: a two-bedroom, two-bath townhouse titled to Corredor's mother, who lives in South Florida and had used the property as a vacation home.

    Weiss said the county wants a Westgate representative to appear next month before an advisory committee to explain the ownership discrepancy.

    Waltrip said the townhouses adjacent to Julieta Corredor's unit were moldy and rotting. He said he asked the county to condemn hers, too.

    William Corredor, 54, said money isn't the issue for his mother, who paid $154,000 for the home. He said his mother has been offered $150,000 by Westgate Resorts, whose president and CEO is billionaire David Siegel.

    Property appraiser records show nearby condos have sold for an average of $69,000 over the past six months.

    "She doesn't want to sell," Corredor said. "It's not like you can tell her what to do." Her taxes on the property are up to date, although no one in the family has stayed overnight at the home for several years.
For a follow-up story, see Widow, Westgate still at stalemate over condo.

Editor's Note: For those of you with a long memory, a similar scenario played out in an episode (Season 1, Episode 5: I Won't Go) of the 1960's New York City-based police situation comedy, Car 54, Where Are You?

That episode hilariously depicted city officials and the fits they were having when discovering that there was one remaining resident in an entire 15-square block neighborhood condemned and undergoing demolition (in connection with the construction of the approach to the George Washington Bridge off of the Cross Bronx Expressway, a part of master builder Robert Moses' infamous urban renewal project that displaced thousands of residents in the Bronx throughout the 1950s & 1960s).

That resident, a sweet (but shrewd), elderly widow named Mrs. Bronson (played by famed star of Yiddish theater and film, Molly Picon) not only avoided eviction but, because of her knowledge of "the system," was proving to be a bit more difficult than they expected to boot from her (presumably rent-controlled) apartment, thereby threatening to indefinitely hold up the entire construction project.

Surprisingly, it was Toody & Muldoon who stumbled into a solution to gently persuade Mrs. Bronson to leave her home of 40 years and allow the Bronx urban renewal project to continue.

Elderly Texas Homeowner Says Computer Glitch Keeps Her From Getting Real Estate Tax Deferral Under State's Homestead Laws, Leaving Her At Risk Of Foreclosure Over Unpaid Tax Assessments

In San Antonio, Texas, KSAT-TV Channel 12 reports:
  • A San Antonio woman says she is caught in a massive knot of government red tape, and it could cost her home.

    Margarita Balcazar, 67, is suing the Bexar County Appraisal District and had her first court appearance [last week].

    Balcazar’s lawyer argued a battle of technicalities keeps the widow from a tax deferral, which is needed to prevent foreclosure on her property.

    Balcazar lives in a home in the 1000 block of Clark Avenue and does not have a birth certificate because she says she was born to a midwife in Laredo. Because of this, she says she can't get a state identification card.

    To receive a tax deferral, the appraisal district said Balcazar must show the house is her main home and that she is over the age of 65. She has federal identification to prove it.

    However, the electronic county forms require a state-issued form of identification.

    "The computer system does not allow them to check the box for the tax deferral, unless the boxes for the homestead and the over 65 are checked, and those can not be checked," said Balcazar’s attorney Carla Sanchez-Adams. “So part of it, it seemed like it was more of a glitch in the computer system.”

    The attorney representing the appraisal district said Balcazar has a pending appeal that may get her what she wants anyway and the suit is unnecessary at this point.

    A KSAT news crew visited Balcazar’s home, but she was not there at the time.

    A group of men who claim to be her sons told KSAT Balcazar lives in a second house on the same lot. The men said she owns both homes, which were left to her after her husband passed away.

    Sanchez-Adams said the results of the appeal should come down in the next couple of months.

    "At the end of the day, I think we all agree she should stay in her home," said Sanchez-Adams.
Source: Woman suing Bexar County in effort to keep home (Woman suing Bexar County Appraisal District to get tax deferral).

Tuesday, June 14, 2016

More Light On Unscrupulous NYC Landlords Who Intentionally Create Hazardous Conditions, Then Get City Inspectors To Issue Vacate Orders In Sleazy Gentrification Campaign To Empty Rental Buildings Of Nearly-Impossible To Boot, Rent-Regulated Tenants

From a recent op-ed piece in The New York Times:
  • THE arraignment of the notorious New York landlord Steven Croman last month was a rare bit of good news for the tenants in his buildings, many of whom have said they have endured hazardous conditions designed to force them out of their homes. Mr. Croman was charged with 20 felonies related to his rental income (he has pleaded not guilty), and faces a civil suit accusing him of using illegal means to force tenants out of their rent-stabilized apartments, in order to renovate them and find new tenants to pay market rates.

    Unfortunately, Mr. Croman’s alleged approach to emptying buildings is not at all uncommon. Altering or destroying a building in order to make it unsafe is the method of choice for many property owners operating in some of the city’s most rapidly changing neighborhoods.

    When tenants can no longer cope with the danger, they often reach out to city agencies for help, which plays right into the property owner’s hand: A city inspector pays a visit, observes the hazards and issues an order to vacate. Tenants then have mere hours to leave their homes, and once they vacate an apartment it is nearly impossible for them to get back in.

    Even when housing court disputes are settled and a judge finds a property owner responsible for illegal construction, such decisions rarely involve criminal charges. Occasionally, city and state governments are able to work in concert to arrest a bad actor. But the number of bad actors far exceed the arrests. Brooklyn, which is undergoing an aggressive wave of gentrification, is rife with property owners who engage in these practices with impunity. Specific examples are easy to come by.

Sleazy NYC Landlord Makes News Again, Ordered To Comply w/ Pre-Existing Buyout Agreement & Pay $124K In Tenant's Legal Fees After Failed Attempt To Dodge Contractual Obligation To Provide Senior Citizen w/ Renovated Rent-Regulated 1st Floor Apartment

In New York City, the Wall Street Journal reports:
  • Julie Collins agreed in 2006 to leave her modest, rent controlled-apartment in a building on West 57th Street in Midtown Manhattan to make way for the luxury apartment tower known as One57.

    In exchange, she took a cash buyout and a walk-up unit on a high floor of an Upper West Side brownstone. The deal included a promise that she could move to a lower floor when an apartment became available.(1)

    Ten years later, Ms. Collins, 69 years old, is still waiting for that lower-floor apartment.

    Her experience shows the lengths that developers sometimes go to clear sites for gigantic towers—and how those plans can go off track.

    By all accounts, the developer of One57, Extell Development Co., honored the terms of the agreement it made with her. But a few years after Ms. Collins moved, Extell sold the brownstone to Steven Croman, who has battled Ms. Collins and her lawyers for three years in court.

    A prominent Manhattan landlord, Mr. Croman was arrested and charged in an unrelated criminal case last month with filing false statements to obtain loans on some of his buildings. He also was accused in a civil case of harassing rent-regulated tenants to try to get them to leave their apartments. Mr. Croman had denied any wrongdoing.

    In March, Manhattan state Supreme Court Justice Cynthia S. Kern ordered Mr. Croman to pay $124,350 to cover Ms. Collins’s legal fees, while the final details of a renovation promised long ago by Extell were being worked out.

    Mr. Croman used the judicial system to force this elderly lady to climb four flights of stairs for years, while the first-floor apartment was empty without any rhyme or reason,” said Adam Leitman Bailey, who represented Ms. Collins. “This is a gross injustice, even though we prevailed.”
For more, see One57 Tower Deal Brings a Fight (One tenant sued to get what she was promised in exchange for moving: a first-floor apartment) (may require paid subscription, if no subscription, GO HERE, then click the appropriate link for the story).
(1) Reportedly, a 17-page agreement was signed by Ms. Collins and the developer in which she received $600,000 in cash and which said she would be charged $388.73 a month for a rent-stabilized apartment, according to the agreement filed in court. The agreement also included two pages laying out Ms. Collins’s right-of-first refusal when a lower-floor apartment became available, and showed the lengths that the developer went to meet Ms. Collins’s needs, according to the story. One page spelled out renovation specifications, including the installation of a loft bed, the story states.

Monday, June 13, 2016

Florida Trial Judge Directed To Set Aside Foreclosure Sale After Improperly Allowing It To Take Place While A Defendant's Timely Motion For Rehearing Was Pending

In a recent court ruling, a Florida appeals court reminded all trial judges presiding over foreclosures in Florida that a foreclosure sale cannot take place when a defendant files a timely motion for rehearing, and said motion remains pending on the scheduled date of sale. Under Florida law, the enforcement of a final judgment is suspended by the filing of a rehearing motion.

As a result of the screw-up, the appeals court directed the trial judge to set aside the improperly held foreclosure sale, and essentially, directing a 'do-over' of that part of the proceedings beginning at the point that the rehearing motion was filed by the defendant.

It should be noted that the foreclosing bank's attorney, possibly knowing that the foreclosure sale was, in fact, improperly allowed to go forward, decided not to file a response to the defendant's petition with the appeals court. The appeals court treated this failure to file a response to the petition as the equivalent of a confession of error.

From the court's ruling:
  • On May 5, 2015, a bench trial was held in the Bank's foreclosure action, and a final judgment of foreclosure was entered in the Bank's favor. The judgment set a foreclosure sale for June 29, 2015.

    On May 20, 2015, Petitioners (defendants in the Bank's action) timely filed a rule 1.530 motion for rehearing directed toward the Bank's judgment. On June 26, 2015, the trial court cancelled the June 29, 2015 foreclosure sale date pursuant to Petitioners' motion to cancel the sale on the basis that the final judgment had not yet rendered. The trial court rescheduled the foreclosure sale for August 10, 2015.

    Because Petitioners' motion for rehearing remained pending on the rescheduled August 10, 2015 sale date, Petitioners filed a second motion to cancel the foreclosure sale. This motion to cancel the sale was heard by the trial court on the morning of the scheduled sale. The trial court summarily denied the motion and the foreclosure sale proceeded. Respondent Tania Cienfuegos was named the winning bidder of the unit at the foreclosure sale. The Petitioners' rule 1.530 motion has not been adjudicated and remains pending.

    Petitioners' seek certiorari review of the trial court's summary order denying their motion to cancel the foreclosure sale.[1]

    It is well settled that a foreclosure sale cannot be held while a timely motion for rehearing is pending because enforcement of a final judgment is suspended by the filing of the rehearing motion. United Invs. Ltd. P'ship v. Resolution Tr. Corp., 566 So. 2d 370, 370 (Fla. 3d DCA 1990) (Mem). Accordingly, the trial court erred by not cancelling the August 10, 2015 foreclosure sale, and the foreclosure sale must be set aside. See Hoffman v. BankUnited, N.A., 137 So. 3d 1039 (Fla. 2d DCA 2014) (Mem).

    Based on the foregoing, we grant the petition, quash the order denying Petitioners' motion to cancel the sale of foreclosure, direct the trial court to set aside the foreclosure sale to Cienfuegos, and remand for proceedings consistent herewith.

    Petition granted.
For the court ruling, see 944 CWELT-2007 LLC v. Bank of Am., N.A., Case No. 3D15-2091 (Fla. 3d DCA May 25, 2016).

Miami-Area HOAs & Property Management Firms Running "Application Fee" Racket? Media Probe Finds Apparent Illegal Gouging Of Prospective Condominium Buyers & Renters With Exorbitant Upfront Fees In Excess Of $100 Legal Limit Under Florida Law

In South Florida, the Miami Herald reports:
  • Condo associations across South Florida are ripping off consumers with high application fees in violation of state law, a Miami Herald investigation has found.

    Associations are allowed to charge people applying to buy or rent a unit a maximum of $100 per person. The nonrefundable fees cover the costs of interviews, background and credit checks. But many buildings gouge tenants and buyers with fees anywhere between $125 and $625, according to lease and purchase applications reviewed by the Herald.

    Some associations also tack on moving-in and other charges that run into the hundreds of dollars. At a few condos that allow pets, even residents’ furry friends have to cough up fees of $100 or more.

    In Miami-Dade County, nearly half of condo listings show application fees exceeding $100, from fancy high-rises in Miami Beach to run-of-the-mill units in Kendall, according to a Herald analysis of a database used by Realtors. The problem exists in Broward County too but is less widespread.

    All in all, the high fees could lead to class-action lawsuits against associations, attorneys say.

    “State law seems to pretty clearly prohibit fees in excess of $100,” said Jason Kellogg, a Miami attorney who specializes in condo association law. “This sounds like a major racket. ... The cost of owning or renting a condo in South Florida is expensive enough without associations fleecing residents with illegal fees.”

    The revelation follows a series of reports in El Nuevo Herald documenting corruption at South Florida condo associations, including rigged elections and contracts awarded without fair bidding.
    Jacking up the price

    The Florida Condominium Act prohibits condo associations from charging so-called transfer fees of more than $100 per applicant “in connection with the sale, mortgage, lease, sublease, or other transfer of a unit.” Those fees — including charges associated with applications, background checks, screening and move-in fees — must be clearly stated in a condo’s governing documents.

    The law also states that married couples should be treated as one person and pay a total of $100, and prevents associations from charging dependent children or people renewing their leases.

    But the rules are widely flouted.

    To apply for a lease at 2 Midtown in the popular neighborhood near Wynwood, a renter must pay a $200 application fee, plus a $350 “processing” fee. Only money orders are accepted.

    At the Pavillion in mid-Beach, the association charges $260 for new applicants.

    An extra $160 might seem like small change, but it adds up. The Pavillion has 408 units. About 200 of them are rented out at any given time, according to a tenant information package.

    At larger buildings, the benefits for management and associations are even greater. Quantum on the Bay in Edgewater has nearly 700 units. The association charges tenants a $100 application fee plus $125 for “registration and orientation,” $175 for “administrative review” and $225 to move in and out.

    Property management companies usually handle the applications and profit from high fees. The associations also make extra cash.
For more, see South Florida condo boards rip off consumers with high application fees (State law says condo associations shouldn’t charge fees greater than $100 per applicant, But nearly 50 percent of Miami-Dade condo listings ask more).

Sunday, June 12, 2016

Recent NYC Landlords' Seminar Promotes "Demolition Evictions" Approach As Legitimate Way To Boot Nearly-Impossible To Evict, Rent Regulated Tenants In Gentrifying Neighborhoods

In New York City, The Real Deal (NYC) reports:
  • [At a recent presentation to a local landlords' group, well-known New York City landlord attorney Michelle Maratto Itkowitz] quickly got down to the business of eviction, telling landlords the best way to get tenants out of their buildings is to show the state they plan to knock ’em down in the first place.

    “Things have changed in three years,” Itkowitz said. “Tenants understand implicitly, even if they live under a rock, that there is value for owners, developers and managers in recovering rent-stabilized apartments. It’s not a secret anymore.”

    Shooing out existing tenants from stabilized and market-rate properties alike has become more difficult with a more organized tenant movement, increased media attention — think the Stuyvesant Town debacle — and stricter regulation on both the city and state levels. Tenants are now too savvy to succumb to the old tricks of the trade and housing codes have been revised, Itkowitz said. As such, she had three main points for landlords who have still not figured out how to go about “de-tenanting” in the “next generation.”

    “No harassment. No frivolous litigation. No supers,” she said, giving examples of how not to operate in a market with heightened tenant protections.
    “Now let’s talk about about something that actually moves tenants out of the way if you have to get to that point,” said Itkowitz, transitioning from don’ts to dos. “Demolition eviction, page 23,” she prompted, referencing a pamphlet that accompanied her speech.(1)

    A line in the rent-stabilization law allows landlords to deny tenants’ renewals on leases at stabilized apartments if the landlord can show the state they have approved new building plans, the money to complete them, and agree to pay tenants relocation expenses and a stipend.

    Currently, many landlords try to evict tenants and clear a building before really getting the ball rolling with demolition and development plans, she said. But if landlords would just bite the bullet and get all of that filed up-front, they’d have an easier time getting tenants out.

    That got the audience talking.

    So can you do demolition eviction and then evict the tenants and then not demolish the building?” asked one man in attendance.

    There’s nothing in there I can see that penalizes you for not demolishing the building,” Itkowitz replied. This bait-and-switch technique is probably fair game, excepting that a “nasty person with a grudge” tried to take you to court over it after the fact, she said.

    More questions followed: Does the phantom demolition technique work for gut renovation? (No.) Does it work for rent-controlled buildings? (Sometimes, but it’s hard to do.) Does the unit count have to be the same in the new project after demolition? (Only if rent control is involved.) Does it work with SROs? (You bet.) Can you start the demolition eviction while you’re not legally allowed to be contacting tenants about buyouts? (Yeah, I don’t see why not.) Does starting this process preclude you from also suing your tenants or buying them out? (No, that’s fine.)

    I like demolition eviction and I’d just like to see people do more of it” instead of frivolous and sneaky tactics that lead nowhere, Itkowitz concluded.

    “I don’t understand why more landlords aren’t doing it,” she said.

    Other bits of advice for owners looking to part with tenants included coming up with a de-tenanting strategy before closing on a building, and making sure new buyers have all the outstanding lease contracts in hand ahead of time. “Someone needs to be looking at them and methodically planning,” she said.

    Itkowitz also noted that many landlords get themselves into trouble by trying to be sneaky. “Own your agenda, people,” she told the audience — “none of this hidden stuff.” Owners should also try in advance to identify the likely holdovers looking to lawyer-up and deal with them directly and honestly.

    “I can’t help you with lies,” she said, “but there’s enough tools in the truth.
For the story, see An insider’s guide to evicting rent-stabilized tenants ("Demolition eviction, page 23," RE attorney Michelle Maratto Itkowitz advises landlords).

See also, Gothamist: Real Estate Vampires Plot How To "De-Tenant" Rent-Stabilized Brooklyn.
(1) For a handbook describing this process, see Demolition Evictions: A Real Possibility. See also, Tenant Buyouts for the Next Generation and Demolition Eviction.

Racist Lowlife Cops Plea To Interfering With Neighbors' Enjoyment Of Their Housing Rights; Admits To Using Threats Of Force To Injure & Intimidate Family Because They Were Of Vietnamese Descent; Conduct Frightened Them Into Vacating Their Home Of 20 Years

The U.S. Department of Justice recently announced:
  • John Blayne Vangastel, 37, of Klamath Falls, Oregon, pleaded guilty [] in the District of Oregon to one count of using threats of force to injure, intimidate and interfere with his neighbors in the enjoyment of their housing rights because they are a family of Vietnamese descent.

    According to court documents, on the evening of Dec. 30, 2015, Vangastel, who had been living next door to a family of Vietnamese descent for approximately three months, entered the family’s property without permission. Vangastel admitted that he then forcibly blocked their front commercial gate so that family members could not park their vehicles on their property after returning from work. When one of the family members told Vangastel to let go of the gate and get off of the family’s property, Vangastel told the family member to “push [him] off the property.” He then raised his hand and balled up his fist as though he was going to assault one of the female family members.

    Vangastel further admitted that he then repeatedly tried to instigate a fight with the rest of the family, threatening to hit them and making comments like, “You are trash;” “You are not even white;” and “You smell like salmon-fish.” He also told the family something to the effect of, “I’ll beat you because you are Asian,” and “You [expletive] Vietnamese – you don’t deserve to live here.”

    The incident was the culmination of Vangastel’s repeated intimidation of his neighbors, who had lived at their residence for 20 years without incident. As a result of Vangastel’s conduct, the family became so fearful that they moved out of their home.

NYC DOI Bags A Dozen In Sweep Of Allegedly Dirty Tenants Accused Of Pilfering Over $500K In Fraudulently Obtained Public Housing Subsidies (Section 8, Etc.)

The City of New York Department of Investigation recently announced:
  • Mark G. Peters, Commissioner of the New York City Department of Investigation (“DOI”), announced a dozen arrests as part of a sweep by DOI to attack tenant housing fraud.

    The arrests originate from separate investigations and include charges associated with the theft of public housing funds through schemes that include underpaying rent, continuing to receive housing benefits while no longer living in a Section 8 apartment, failing to disclose familial relationships and failing to disclose additional income of tenants living in apartments. Several of the investigations resulted in the arrest of current City and other government employees on charges of defrauding the City’s public housing agencies.

    In all 12 individuals have been arrested involving a total of more than $500,000 in housing fraud, according to the charges.

    On these cases, DOI referred its findings to, and worked with, the Bronx County District Attorney’s Office, the Queens County District Attorney’s Office, and the Office of the United States Attorney for the Southern District of New York. In addition, DOI worked with the Office of the City Comptroller, which referred matters to DOI as a result of data matches the office conducted with various City records that revealed potential fraud.

    DOI Commissioner Mark G. Peters said, “Housing fraud is corruption – plain and simple. Housing fraud by the government employees we just arrested is doubly corrosive. These crimes diminish valuable public housing dollars and, in these cases, tally to more than half a million dollars, undermining efforts to provide affordable housing to needy New Yorkers, according to the charges.”
For more, including the highlights on each of the recently bagged alleged dirty dozen, see DOI Arrests a Dozen Individuals on Nearly Half a Million Dollars in Housing Fraud and Theft Charges (Arrests are part of a sweep by DOI’s NYCHA and HPD Inspectors General and includes the arrests of three current City and State employees).

Section 8 Tenant Gets Five Years In State Prison For Swindling Local Housing Authority By Pocketing Benefits From Rent Subsidy Vouchers For Two Different Apartments While Living With Landlord/Boyfriend In A Third

In Missoula, Montana, the Missoulian reports:
  • Christy Ann Cummings sank to the floor crying [] when District Court Judge James Manley sentenced her to five years in the Department of Corrections with no time suspended.

    “I can’t go to jail,” she yelled, resisting as bailiffs grabbed her by the arms and took her out of the courtroom.

    In March, Cummings was convicted by a jury of felony theft for defrauding Missoula Housing Authority by receiving vouchers she used to pay rent at two different apartments while she lived at a third location with her boyfriend.

    According to a court affidavit, Cummings, 36, received Housing Choice Voucher payments through the Section 8 program for a pair of residences, [...].

    In 2014, Cummings told a judge she had been living at another address with her boyfriend Joshua Patterson since July 2012. In early May, Patterson – who was the landlord at one of the properties Cummings was receiving vouchers for that was allegedly actually being rented to her brother – was charged with felony theft by deception for defrauding Missoula Housing Authority.

    During Cummings’ sentencing [], senior deputy county attorney Karla Painter requested Manley designate her a persistent felony offender, which carried a mandatory minimum of at least a five year sentence, due to a prior felony DUI from 2010. Cummings also was convicted of theft and forgery in 2002. Painter recommended the sentence for her latest theft conviction be for 15 years with 10 years suspended.

Lawyer Falls Victim To Fake New Client, Counterfeit Check Scam That Commonly Targets Attorneys; Leaves Clients' Trust Account Short Nearly $300K; Court Kiboshes Attempt To Hold Banks Responsible For Negligence, Etc., Leaving Duped Victim Holding The Bag

In New York City, the New York Law Journal reports:
  • A small firm that fell victim to a counterfeit check scheme targeting attorneys lost its bid to sue two banks for negligence.

    In dismissing the firm's claim, Southern District Judge Edgardo Ramos found that the Law Offices of Oliver Zhou, which sued Citibank and PNC Bank over a counterfeit check by a purported client, failed to provide any authority for the proposition "that ordinary care" requires a collecting bank to identify false routing numbers, use fraudulent-check detection devices or investigate the source of counterfeit checks.

    The Zhou firm "appears to have been the victim of an unfortunately commonplace scheme targeting attorneys," Ramos said.(1)

    The scheme involves a fake new client who provides a counterfeit check for deposit and then requests an emergency wire of funds from the attorney's bank account before the check bounces.

    "The victim attorney is then both subject to his bank's right to charge back the funds from the check when it is eventually dishonored, and unable to reverse the wire of funds to the fake client," Ramos explained.

    Oliver Zhou, the firm's principal, told Ramos in a court conference last year that a woman from Japan called his office and asked for representation in a post-divorce action to get a payment from her ex-husband. He said the woman explained that her ex-husband agreed to transfer money for an emergency surgery for her child.

    Zhou, who said he represents a number of clients from Japan, told the court he believed the woman because she provided divorce documents, and he entered into a retainer agreement with her.

    On June 17, 2013, Zhou received a $297,500 cashier's check, purportedly from the ex-husband, that displayed PNC Bank's logo and a routing number, according to court papers.

    On June 18, Zhou deposited the check in his firm's IOLA attorney trust account at Citibank by giving it to a Citibank teller. According to Zhou's complaint, the teller reviewed the check, accepted it without using any counterfeit device to determine its validity or checking the routing number, and providing Zhou with a bank receipt stamped with notice of the money's availability. The notice stated that $297,750 was "available today."

    A day later, Zhou said he deducted a $10,000 retainer and, at the direction of his purported client, requested a wire transfer of $287,450 to an account in Japan.

    But on June 20, PNC Bank returned the check to Citibank as "altered/fictitious" and Citibank reversed the provisional credit in the account by $297,512, including a $12 service fee, according to court papers.

    On June 24, another firm client told Zhou that a check Zhou had issued to him had been dishonored due to insufficient funds in the trust account.

    The firm said it immediately contacted Citibank and was informed that PNC Bank had determined that the check deposited on June 17 was a "forged or counterfeit instrument" and would not be honored. Zhou asked Citibank to cancel the wire but it appears the transfer was never successfully recalled, Ramos said.

    Zhou sued Citibank and PNC Bank in June 2015, alleging negligence, breach of contract, misrepresentation, fraudulent concealment and aiding and abetting.
Source: Firm Victim of Check Scheme Loses Bid to Sue Banks (may require paid subscription; if no subscription, GO HERE, then click the appropriate link for the story).

For the court ruling, see Law Offices of Oliver Zhou v. Citibank N.A., 15 Civ. 5266 (S.D.N.Y. May 17, 2016).
(1) In footnote 10 of the ruling, Judge Ramos describes the facts of a 2011 New York case with nearly identical facts that victimized another law firm:
  • The facts of Greenberg, Trager are practically identical to the facts in this case. The Greenberg, Trager plaintiff was also a law firm, which received an unsolicited email from a purported client seeking legal representation.

    The fake client agreed to pay the plaintiff a $10,000 retainer, and informed plaintiff that a customer of the client's would be sending the plaintiff a check for $197,750, which the customer supposedly owed to the client. The client instructed plaintiff to receive and deposit the check into the plaintiff's attorney trust account, and then wire $187,750 from that account to the client's account in Hong Kong, holding on to the $10,000 retainer.

    Plaintiff contacted the collecting bank three days after deposit to ask whether the check had "cleared," was told that "the funds were available," and wired the $187,750 to the fake client that same day. Days later, the payor bank informed the collecting bank that the check had been dishonored and was being returned as counterfeit. The collecting bank then charged back the $197,750 credit it had made provisionally available to the plaintiff, and the plaintiff was unable to cancel the wire to the Hong Kong account. The plaintiff then sued both the collecting bank and the payor bank on grounds of negligence and negligent misrepresentation. See Greenberg, Trager, 958 N.E.2d at 78-81. The New York Court of Appeals affirmed dismissal of the plaintiff's claims on summary judgment. Id. at 87.