Saturday, November 05, 2016

Section 8's 4-Month Rule A Major Fear For Voucher-Holding Renters Seeking Apartments; Housing Official: "[N]umber One Reason Why Vouchers Are Returned Is Because Landlord Is Not Willing To Accept Section 8"

In Southern California, The Orange County Register reports:
  • [T]he basic bargain of Section 8 is simple and, often, cruel. Once a person gets a voucher, they have it for life, as long as they follow the rules and meet income guidelines, meaning they stay poor enough to qualify.

    But there’s a catch – the four-month rule. After you first get a voucher, you have four months to find an apartment. And if you’ve had your voucher for years but you lose your dwelling, you still have only those same four months to find a new one.

    But take a day longer than four months, and your Section 8 voucher – the thing that often makes the difference between a bed under a roof and the back bench of an Isuzu – goes to the next person in line.

    [One] woman [living in her] vehicle held her voucher for 13 years before a dispute with her landlord put her on the streets. Her clock started ticking Aug. 7. If she doesn’t land a new lease by Dec. 10, she’ll lose her voucher for good.

    “I’m stressing out,” she said. “That’s why, every day, I call and look for a place. “But God will come through for me and help me. That’s what I believe.”


    Orange County – like much of Southern California – is a tough rental market for anybody, with or without a Section 8 voucher.

    The apartment vacancy rate in the county is about 4 percent, and the typical monthly rent is more than $1,700, up about $165 from three years ago.

    Both factors help explain why so many locals who have Section 8 vouchers eventually lose them.

    The federal program, generated by the Department of Housing and Urban Development, is administered through a patchwork of agencies that serve communities around the country. In Orange County, there are four such agencies – the Orange County Housing Authority, which serves much of the county, as well as smaller housing authorities in Garden Grove, Santa Ana and Anaheim.

    Within the OC Housing Authority, the Section 8 failure rate – the percentage of people who lose their vouchers because they can’t land a place to live within the four-month window – is running at about 22 percent. It’s the same in Garden Grove. In Anaheim, the failure rate is about 33 percent. And in Santa Ana it’s 64 percent.

    Judson Brown, manager of Santa Ana’s Housing Division, wrote via email that the failure rate is going up, adding, “The number one reason why vouchers are returned is because the landlord is not willing to accept Section 8.”

    Other reasons, Brown said, include a lack of available units, high rent, pet ownership and shaky credit.

    The statistics of failure represent a human toll. For a family that loses a voucher after waiting years to get one, the result can be devastating.
    Whatever the reason, and whatever the results, Section 8 failure is common.

    The national failure rate is about 30 percent, and it takes a typical voucher holder about nine weeks to find a place, according to federal data.

    Many parts of Southern California fare worse than the national average.

    In Los Angeles County, Section 8 failure rates range from 90 percent in Culver City to 27 percent in the city of Los Angeles, according to federal data. About two-thirds of new voucher recipients fail to find rentals in Pasadena and Santa Monica, while clients with the L.A. County housing authority have a 39 failure percent rate.

    “It’s a national problem,” said Dave Levy of the Fair Housing Council of Orange County. “Every big metro area with high-priced housing is facing the same problem.”

HUD Housing Subsidies Nearly Worthless In Dallas; Over 1000 Vouchers For Homeless Have Gone Unused As Landlords Reject Subsidy-Receiving Renters; Benefits Expire If Voucher Goes Unused Within Short Time Frame

In Dallas, Texas, KDFW-TV Channel 4 reports:
  • The Dallas Housing Authority estimates 1,100 housing vouchers specifically for the homeless have gone unused.

    Daniel Roby, executive director of the Austin Street Center, is working with the city to come up with solutions to Dallas' growing homeless problem. He's frustrated that the money - set aside in the form of housing vouchers - is going to waste.

    "We have over 1,000 people who have access to these vouchers who are homeless but aren't able to use them,” Roby said. “They're roaming the streets, calling apartment complex owners to be able to lease their units and are finding themselves left empty handed at the door."

    In May, Dallas cleared out 300 people who made their homes under the I-45 overpass. Some went to shelters, some moved in with family and some set up camp elsewhere. Only 33 received housing.

    According to a draft report obtained by FOX4, there is federal money available to house everyone who was there.

    Frankie Grant is one of the people who could put a voucher to use. "I ended up here at Austin Street Center because I lost my own home,” Grant said.

    Grant is a driver at Dallas Love Field making $8.50 an hour. She has a voucher for an apartment from the Dallas Housing Authority, but she can't find an apartment that will take it.

    "Oh there's no vacancies, oh, maybe at the beginning of the year,” Grant said. “At the beginning of the year, I will have lost my voucher then. It only lasts 90 days.”

    If the housing vouchers aren't used in Dallas the federal government will give the money to another city and that costs Dallas even more money.

    "The average cost of a chronically homeless person is $40,000 or more a year,” Roby said. “The cost of a homeless person in a house could be $6-10,000."

    As the economy improves more landlords are taking higher rents over the housing vouchers - meaning the problem might only get worse. "It's like we're being set up to fail,” Grant said.

    Grant only has until the end of November to use her voucher -- or lose it for good.
Source: 1,000-plus housing vouchers for homeless have gone unused in Dallas.

See also, Dallas city officials hope to solve unused housing vouchers problem:
  • The city of Dallas is working to solve the problem of $8 million in federal vouchers for housing going unused. Alicia Lewis is one of 1,100 people who received section 8 vouchers but couldn’t find landlords to take them in the 90-day expiration date. Section 8

City's Lack Of Protection Against Source Of Income Housing Discrimination Results In The Boot For All Section 8 Tenants In One Seattle-Area Apartment Complex

In Renton, Washington, KING-TV Channel 5 reports:
  • It's happening at the Renton Woods Apartments on Petrovitsky Road in Renton.

    "We have children that are going to be out on the streets," said Elimika James, a single mother of five. "Just to know that we're going to be homeless, it's not a good feeling."

    James and every other tenant with a Section 8 housing voucher got an eviction notice on their door, giving them sixty days to vacate their apartments. For James, that quickly approaching deadline is October 31.
    The Tenants Union of Washington(1) is now working with Renton Woods neighbors, trying to help find a solution. They held a meeting [] to discuss tenants' options and next steps.

    "Giving them 60 days notice is technically legal. However in this rental climate, especially for people who are voucher holders, it's extremely difficult to relocate in that time period," said Hana Alicic with the Tenants Union of Washington.
    "I think we're all aware that there are some things that are legal but are still unethical and still feel wrong," said Alicic. "In this case, Renton doesn't have any source of income discrimination protection."

    Renton Woods Apartments issued the following statement to KING 5:

    "The Renton housing program is elective and voluntary, after due consideration, Renton Woods has chosen to withdraw from this elective program."
    The Tenants Union said they would like to see Renton city leaders pass legislation that protects against income-based discrimination.

    Seattle recently passed similar legislation. In parts of unincorporated King County, according to the Tenants Union, if a tenant is on a Section Eight housing voucher, a landlord cannot legally say they won't accept you because of that voucher..
Source: 'Children are going to be out on the streets': Section 8 families get eviction notices.

For a story update, see Renton apartments withdraw eviction notices:
  • Property managers have withdrawn their eviction notices for dozens of residents at two Renton apartment complexes. Now families can stay put at the Renton Woods and Grammercy Apartments until further notice.

    Advocates of tenants rights got involved after the landlords made moves to evict low-income residents who use Section 8 housing vouchers to help pay the rent. The landlords told residents they were choosing to opt out of the housing voucher program. But again, those evictions are on hold.
See, also, New Renton ordinance prohibits discrimination against low-income renters (Renton City Council approved an ordinance banning discrimination against renters who participate in the federal Section 8 program).
(1) The Tenants Union of Washington State is a Seattle-based social services organization that promotes tenants' rights through empowerment-based education, outreach, leadership development, organizing, and advocacy.

Crackpot NYS Senate Candidate Gets Pinched For Allegedly Fleecing Combined $50K From Ten Victims In Craigslist Rent Scam; Cops: Suspect Offered To-Good-To-Be True Monthly Rent In Exchange To Those Willing To Fork Over Up To Year's Advanced Rent In Cash

In New York City, the New York Post reports:
  • A candidate for New York State Senate was charged with grand larceny [] for ripping off at least 10 people in a Craigslist rent scam, police sources told The Post.

    Cops say Jon Girodes, 38, listed his luxury apartment at 635 W. 42nd St. for a bargain-basement price of $1,100 and “rented” it to victims who could pony up to a year’s rent in cash.

    Sara Angella, 31, said she answered Girodes ad in mid-August and met him at the gorgeous Hell’s Kitchen apartment. “I knew it was too good to be true, but I looked him up and he really was running for the Senate. He was wearing a Trump hat when I met him,” she told The Post.

    Angella said she was starting a Master’s Degree in theology at the Jewish Theological Seminary and thought she had lucked into “some good karma.” From her student loans she took $9,000 cash and gave it to him in exchange for the lease.

    But the day she was supposed to move in – Aug. 28 – she said the Republican candidate texted her “a bunch of excuses” about why he couldn’t meet her at the apartment or give her the keys.

    Angella said when she complained to the building management, she was told she wasn’t the only victim. “He is a true sociopath,” she said. “He created a cloak of legitimacy before he struck.”

    When Angella complained to a cops and a reporter about Girodes, she said the political hopeful called her and threatened to kill her and her family.

    Cops say Girodes’ victims were both women and men and he took them for a total of $50,000 combined.

    The arrest of the Republican candidate comes one month after The Post reported on another woman who claimed he stole $3,200 from in the same swindle.

    “He said, ‘Don’t worry, I’m a public official, I own three businesses, I couldn’t scam you if I wanted to,’” the prospective tenant said. The woman claimed she gave Girodes a deposit, signed a lease, and planned to move in at the beginning of September.

    But as she sat in a moving truck across the street, Girodes told her the deal was off.

    In a text message she showed The Post, Girodes called her a “crazy drama queen.” He did not return calls seeking comment, but ended up dispatching an intern from his office to refund the money.

    The arrest comes just days after the politician told a reporter he was bringing KFC, Kool-Aid and watermelon to potential voters in the Harlem district he hoped to win – enraging the community.

    The telephone at his campaign headquarters was disconnected Friday.

    As Girodes was being walked out of the 7th Precinct, he grinned at reporters and said, “I love the NYPD. There’s two sides to every story.”

Cops Pinch Landlord For Allegedly Booting Tenants' Dog Across Room & Into Wall While Trying To Boot Them Out Of Rented Apartment

In Cumberland Township, Pennsylvania, the Observer-Reporter reports:
  • A Nemacolin man was arrested [] for allegedly kicking his tenants’ small dog into a wall over late rent payments, Cumberland Township police said.

    Police said John Thomas Walker, 46, [...], was trying to evict his tenants, Shanelle Smitley and Ronald Conard Jr., [] when he walked into their apartment, located downstairs below his residence, and kicked their Jack Russell terrier across the room and into the wall. Police said they found the dog crouched down and shaking beside the bed.

    According to court documents, Walker was intoxicated at the time with a blood-alcohol content of 0.091. He told investigators the tenants hadn’t paid rent and he told them to leave the property, court documents indicate.

    After Walker entered their home, police said, he screamed at the tenants, attempted to punch Conard and refused to leave their home. Once he left, Conard locked the door, the complaint said. Walker then took a hammer and began striking the door and door knob causing “major damage” to the door, police said.

    Police said Conard was treated at the scene for anxiety and chest pain.

    Walker faces charges of burglary, cruelty to animals, simple assault, harassment, disorderly conduct and public drunkenness. [...]

Friday, November 04, 2016

Legal Description Nightmare: Landlord Who Purchased & Rented Out Well-Maintained Duplex Discovers Eight Years Later That Deed Screw-Up Actually Left Him Owning Vacant, Foreclosed 2-Unit Dump Next Door

In Tumwater, Washington, The Olympian reports:
  • At the height of the real estate boom in 2006, Rory Skinner paid $305,000 for a duplex in Tumwater while his friend bought an identical duplex next door.

    Although the value has declined since the real estate market crashed, Skinner has kept his two-unit building occupied with tenants. However, his friend’s investment went into foreclosure in 2013 and was taken over by the Federal National Mortgage Association, a government-owned company better known as Fannie Mae.

    Today, the Fannie Mae-owned property at 211 and 221 Blass Ave. SE is covered with trash. Broken windows reveal piles of garbage inside the abandoned duplex where squatters have left everything from empty food containers to syringes.

    Neighbors say the conditions have attracted rats. Tenants at Skinner’s building next door told The Olympian that the Fannie Mae duplex has attracted unwanted behavior and disturbances from people who have turned it into a drug den.

    And because of confusion over who owns what, Skinner says he has been wrongly blamed.

    In short, the legal descriptions for both properties don’t match the assumed addresses. Fannie Mae is listed as the owner of Skinner’s occupied duplex while Skinner is technically considered the owner of the abandoned Fannie Mae duplex, according to property records.

    Skinner said he learned about the mix-up when an eviction notice was served to his tenants in 2014. Title documents from 2006 show that Skinner had been claiming 231 and 241 Blass Ave. SE — yet that address has been paired with the property tax parcel number for 211 and 221 Blass Ave. SE, which is the Fannie Mae duplex.

    The Skinners have hired an attorney and have filed a complaint with Stewart Title Company, but the process has been slow, he said.

NJ AG: Couple Ran Home Improvement Scam That Fleeced Over 20 'Sandy' Victims Out Of Over $1 Million In Funds Intended To Repair, Rebuild Hurricane-Devastated Jersey Shore Homes

From the Office of the New Jersey Attorney General:
  • Attorney General Christopher S. Porrino announced that an Ocean County couple has been arrested for allegedly stealing hundreds of thousands of dollars from more than 20 victims who hired the couple’s home improvement companies to repair or rebuild their homes after Superstorm Sandy. The victims paid the couple and their firms over $1 million, mostly in Sandy relief funds, but the couple allegedly diverted much of the money to gamble and buy luxury items, leaving homes in disrepair.(1)

    Jeffrey Colmyer, 41, and Tiffany Cimino, 43, who live together in Little Egg Harbor, N.J., were arrested [] by detectives of the Division of Criminal Justice on a range of charges, including theft, money laundering, and misconduct by a corporate official, all in the second degree, and failure to pay taxes and tax fraud, both third-degree offenses. They were lodged in the Ocean County Jail with bail for each set at $300,000. Charges also were filed against the couple’s home improvement contracting companies, Rayne Construction Management Services, LLC (RCMS) and Colmyer & Sons Construction, LLC.
    Colmyer and Cimino allegedly diverted hundreds of thousands of dollars their victims paid to have their homes repaired, elevated and rebuilt. [... T]hey abandoned jobs, or in many cases failed to even start jobs, leaving many victims with uninhabitable homes.

    Most of the funds that allegedly were stolen came from the Reconstruction, Rehabilitation, Elevation and Mitigation (RREM) Program, a Sandy relief program administered by the New Jersey Department of Community Affairs and funded by the U.S. Department of Housing and Urban Development (HUD). The RREM Program was the state’s largest Sandy housing recovery program and provided grants to impacted homeowners to cover rebuilding costs up to $150,000 that were not covered by insurance, other federal emergency relief funds, or other sources.

    “Colmyer and Cimino heartlessly preyed on homeowners who were devastated by Superstorm Sandy,” said Attorney General Porrino. “Just when victims were thrown a lifeline in the form of Sandy relief funds and were trying to reclaim their lives, this couple allegedly stole their money and snatched that lifeline away. We’ll ensure these defendants are held accountable for their ruthless criminal conduct.”
Source: Ocean County Couple and Their Home Improvement Companies Charged With Stealing Hundreds of Thousands of Dollars By Bilking Homeowners Whose Homes Were Badly Damaged by Superstorm Sandy (Victims paid Jeffrey Colmyer and Tiffany Cimino more than $1 million, mostly using Sandy relief funds).
(1) The New Jersey Division of Consumer Affairs previously investigated this matter and filed a civil action in August against the defendants, alleging numerous violations of the Consumer Fraud Act and seeking consumer restitution and civil penalties, among other things. The criminal charges stem from a joint investigation by the Division of Criminal Justice Financial & Computer Crimes Bureau, the U.S. Department of Housing and Urban Development Office of Inspector General and the New Jersey Division of Taxation Office of Criminal Investigation, with the assistance of the New Jersey Department of Community Affairs.

Thursday, November 03, 2016

Property Manager Gets Seven Years For Ripping Off Over $500K In Rents & Security Deposits Collected/Held On Behalf Of 100 Landlords, Tenants

In Mount Holly, New Jersey, the Burlington County Times reports:
  • A Palmyra man who worked as a property manager for a Moorestown real estate company was sentenced [] to seven years in prison for stealing money he collected on behalf of his employer from more than 100 victims.

    Randal S. Maher, 42, formerly of Cherry Hill, will have to pay $500,000 in restitution under the sentence handed down by Superior Court Judge Christopher Garrenger at the Burlington County Courthouse in Mount Holly.

    Maher pleaded guilty in May to charges of second-degree theft by deception and third-degree failure to pay taxes. As part of the plea deal, Garrenger sentenced him to seven years on the theft charge and three years for failure to pay taxes. Both will be served at the same time.
    Maher was employed as an independent contractor by Re/Max Main Street Realty and oversaw an extensive portfolio of residential property rentals, authorities have said. He was responsible for executing rental agreements, collecting payments from tenants, and overseeing repairs and maintenance to the properties.

    He admitted in court to stealing the money between 2012 and 2015, diverting funds for his own use, authorities said.
    Some of the victims have already been reimbursed by insurance, according to comments made in court. Both sides agreed on the $500,000 restitution, if Maher has the ability to pay it.

    An investigation identified 101 properties in Burlington, Camden and Gloucester counties managed by Maher in which landlords were owed money or renters were owed their security deposits or other related funds, authorities have said. Many victims live out of state or are in the military, McDonnell said in court.

    Maher’s employer reported the matter to authorities after receiving numerous complaints from property owners and landlords alleging that money was not being received in accordance with property management agreements.

    Maher had created a company known as S.J. Property Management and would instruct tenants of the properties he managed to pay rent checks and security deposits directly to his company or to himself, authorities said.

$20K Bail Set For Real Estate Agent Charged With Theft By Deception After Allegedly Taking $60K Deposit From Customer For Home Purchase, Then Refusing To Return It After Contract Was Voided

In Union City, New Jersey, The Jersey Journal reports:
  • A Union City real estate agent has been accused of stealing $60,000 that a woman put down as a deposit to purchase a home.

    Peter J. Live, 40, of the 1100 block of Bergenline Avenue, is charged with one count of theft by deception, the criminal complaint says.

    Live is accused of taking the $60,000 from the woman as a deposit for the purchase of the property and then refusing to return the money after the contract was voided, according to the complaint, which lists the day of the alleged crime as Oct. 6.

    The defendant's bail was set at $20,000 with a 10 percent cash option when he made his first court appearance on the charges this afternoon in Central Judicial Processing court in Jersey City via video link from Hudson County jail in Kearny.

    There are six warrants for Live's arrest, emanating from municipal courts in Jersey City, North Bergen, Weehawken and Secaucus, a court official said. In court today his lawyer said he believes all of the municipal bails have been resolved.

    "My client saved her entire life to buy a home and she trusted Mr. Live with all of her savings," said Mario Blanch, the woman's lawyer.

    Blanch added that he has filed a complaint against Live with the New Jersey Real Estate Commission.

Five Charged In Southern California Rent Skimming Racket That Allegedly Used Sale Leaseback Schemes, Phony Short Sale & Mortgage Relief Promises To Dupe Financially Strapped Homeowners To Sign Over Their Homes; Indictment: Defendants Routinely Forged Signatures, Filed Bogus Bankruptcy Petitions To Delay Foreclosure While Pocketing $30+ Million In Rent, Stiffing Banks Out Of Mortgage Payments

From the Office of the U.S. Attorney (Los Angeles, California):
  • The alleged architect of a $30 million mortgage relief fraud scheme and four other former employees of a purported mortgage relief company were charged in an indictment [] for their alleged participation in a conspiracy to defraud banks and homeowners.(1)
    Yun Soon Matsuba, aka Dorothy Matsuba, 65; Thomas Matsuba, 64; Jane Matsuba Garcia, 40; and Jamie Matsuba, 31, all of Chatsworth, California, and Young Park, 53, of Koreatown, California, were each charged with one count of conspiracy to commit wire fraud, make false statements and commit identity theft. In addition, the 18-count indictment charges [the defendants with a slew of other crimes].

    Dorothy Matsuba, Thomas Matsuba, Jane Matsuba Garcia and Jamie Matsuba were all arrested []; Park remains a fugitive. Thomas Matsuba is Dorothy Matsuba’s husband and Jane Matsuba Garcia and Jamie Matsuba are Dorothy Matsuba’s daughters. Young Park is Dorothy Matsuba’s brother.

    The indictment alleges that from 2005 to 2014, the defendants operated an interlocking web of companies, primarily under the names of Ownership Management Service LLC and Trust Holding Service LLC, which purported to help homeowners obtain relief from high mortgage debt through short sales, in which lenders agree to sell a mortgaged property for less than the amount owed on the mortgage.

    In a scheme to defraud both the banks and the homeowners the defendants allegedly convinced homeowners to deed their property to trusts set up and controlled by the Matsubas and also promised to pay their mortgages while negotiating with banks to short sell those properties. In the interim, the homeowners either remained in their properties or were relocated to another Matsuba-controlled property.

    Instead of performing short sales as promised, Dorothy Matsuba and the other defendants failed to make mortgage payments and submitted false and fraudulent short sale purchase offers to the banks in an effort to delay foreclosure and maximize the time period over which the Matsubas could collect rent from the homeowners and other third parties placed in the properties by the Matsubas, the indictment alleges.

    The Matsubas also routinely forged signatures, used false and stolen identities and filed fraudulent bankruptcy petitions—all in a scheme to delay foreclosure and maximize their profits at the expense of the homeowners and banks, the indictment alleges.

    The scheme allegedly netted the defendants more than $30 million in rent during the conspiracy period.
Source: Alleged Architect of $30 Million Mortgage Relief Fraud Scheme and Four Others Indicted in Conspiracy to Defraud Banks and Homeowners.
(1) Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Eileen M. Decker of the Central District of California, Assistant Director in Charge Deirdre Fike of the FBI’s Los Angeles Division, Acting Special Agent in Charge Charge Anthony J. Orlando of the Internal Revenue Service-Criminal Investigation (IRS-CI) Los Angeles Field Office, Special Agent in Charge Leslie P. DeMarco of the Federal Housing Finance Agency-Office of Inspector General’s (FHFA-OIG) Western Region and Sheriff Jim McDonnell of the Los Angeles County Sheriff’s Department made the announcement.

Wednesday, November 02, 2016

Title Defenses In Illinois Foreclosure Cases Grow In Popularity

DSNews reports:
  • While Illinois foreclosure courts continue to grapple with traditional foreclosure defenses like standing and the admissibility of affidavits and business records, 2016 has seen the rise of a new trend: title defenses.

    As the Illinois appellate and supreme courts continue to whittle down defenses available to mortgagors, industrious defense counsel have turned their attention to title, ownership, and homestead issues. Litigation of title issues has dominated recent Illinois appellate opinions, highlighting the importance of potential foreclosure pitfalls that are often overlooked until it is too late.

    For example, in CitiMortgage, Inc. v. Parille, 2016 IL App (2d) 150286, a husband and wife owned property not as joint tenants, but as tenants by the entirety, meaning both spouses must consent to any encumbrance of the property. While they both signed the mortgage, the husband signed solely for the purpose of waiving his homestead rights.

    In foreclosure proceedings initiated under the mortgage, the husband argued that because he only waived his homestead rights, the mortgage did not encumber his interest in the property. To defeat this argument, CitiMortgage pursued several avenues of recovery, including reformation, equitable lien, equitable subrogation, and unjust enrichment. The trial and appellate courts, however, sided with the husband and held that most of CitiMortgage’s legal theories were inapplicable or barred by the statute of limitations. In effect, CitiMortgage’s failure to discover the defect in the mortgage severely limited its ability to recover its damages under the mortgage.

    While Parille serves as a drastic example, Illinois appellate courts recently issued several foreclosure opinions in which title defects played a large role. See, e.g.,
  • In each instance, defects in the chain of title or in the mortgage itself caused significant litigation delays and, in some cases, limited or denied the mortgagee’s ability to recover damages.

    These trends continue to manifest at the trial court level, where objections to reformation, claims of homestead exemptions, and other title defenses become more common. Unlike the majority of foreclosure defenses, title defenses are highly dependent on the facts of the case and stem from events that typically took place years before the foreclosure.

    Because there is no simple way to predict such claims, lenders, servicers, and their counsel must carefully and promptly review the title product for the property to identify and (hopefully) address potential title defects at the earliest possible juncture, either through litigation or a title insurance claim. As the mortgagor defense bar becomes savvier concerning title defects, the industry cannot underestimate the importance of early detection and resolution of such issues.

More On Statute Of Limitations In Foreclosure Cases

DSNews reports:
  • [T]he expiration of the statute of limitations (SOL) on a servicer’s right to foreclose has long been an issue in New York and Florida. But, it is becoming an increasingly common defense and attack raised by property owners in the Pacific Northwest and Southwest as well.

    Opportunistic investors in states like Arizona are scouring title records looking for loans that have long been in default without the completion of a judicial or non-judicial sale. Borrowers too, in states like Oregon and Washington, are jumping on the bandwagon, claiming that the servicer is prohibited, by its delay, from now foreclosing on the loan. Consequently, servicers must take a close look at their loan portfolio to determine whether the SOL has run or is close to expiring. Most importantly, servicers must know what can be done to stop any further running of the SOL clock.

    For servicers to understand their options, they must first understand what a SOL is and the risk of letting it expire. In the most simplistic terms, a SOL is the outward time limit of when a servicer can enforce its Deed of Trust following a particular default. For example, if the SOL is six years, the servicer must complete its foreclosure within 6 years. If the servicer fails to foreclose within six years, it is arguably prevented from ever foreclosing on its lien, effectively giving the borrower or owner the property free and clear of the Deed of Trust. Needless to say, this is a less than desirable result!

    If the outward limit to foreclose is, say six years, the key question is – what triggers the clock to start running the SOL? Contrary to popular belief, it is not the default itself that starts the clock running; but, rather the existence of a prior notice from the servicer declaring the loan in default and that all sums are immediately due (i.e. acceleration). The problem is that, in many instances, the debt was accelerated long ago (often by a prior servicer as part of a previous foreclosure attempt). In that event, the current servicer could have a ticking time bomb on its hands.

    The SOL defense is generally raised years after a potential acceleration. At that point, servicers (and their legal teams) are left scrambling to review the entire loan file to determine when the first acceleration occurred, whether there were any tolling events preventing the SOL from having already run, and, most importantly, was the loan ever “de-accelerated."

    As we are now several years removed from the height of the financial crisis, the six year SOL on foreclosures in Arizona, Oregon and Washington are becoming an increasingly bigger problem for servicers in these states. Indeed, because servicers may not be aware that acceleration of the loan arguably starts the SOL running, proving that the loan was de-accelerated (or that the running of the statute was tolled) may prove crucial to avoiding the bar to foreclosure.[1]

    This article discusses the applicable SOL period in all three states, what events or actions servicers take that could commence its running, servicers’ ability to waive acceleration and the need to create further precedent confirming this right. ...

No Staples, No Summary Judgment: Failure To Firmly Affix Allonges To Mortgage Notes Trips Up Lenders Seeking Foreclosure In Two Connecticut Lower Court Cases

From a recent post from the law firm Shipman & Goodman LLP:
  • In attempting to fend off lenders’ mortgage foreclosure actions, borrowers will often assert defenses challenging the lenders’ right to foreclose.

    Two recent Connecticut Superior Court decisions provide cautionary tales on the basic tasks that must be performed when loans are assigned to ensure that the assignee will be able to foreclose. In these cases, the foreclosing plaintiffs were tripped up by something as simple as a staple attaching the allonge to the underlying note.
    In two recent decisions, the Connecticut Superior Court held that the lender failed to show that it was the holder of the underlying mortgage note because the allonges by which the note was allegedly ultimately endorsed to the plaintiff was not attached to the note.

    In LB-RPR REO Holdings, LLC v. Nimage Enterprises, LLC, No. CV116003546S, 2015 WL 5975594 (Conn. Super. Ct. Sept. 14, 2015) (“REO Holdings”), the plaintiff alleged that it was the ultimate assignee of a $1.7 million mortgage note under which the defendant borrower was in default. The plaintiff moved for summary judgment to foreclose the mortgage; that is, that there were no factual issues in dispute and the law requires that judgment enter allowing plaintiff to foreclose the mortgage.

    The borrower opposed summary judgment, arguing that the allonges were not attached to the note, and, therefore, the plaintiff was not the holder of the note since the note had not been properly endorsed to it. In response, the plaintiff argued that it is not necessary for the allonges to be attached to the note for it to be a holder.

    The Court denied plaintiff’s motion for summary judgment.
    Because § 3- 204(a) [of the Uniform Commercial Code] provides that the signature negotiating the note be made on the note itself or on “a paper to be affixed to the” note, the Court held that the allonges needed to be attached to the note for it to have been negotiated.

    Although the Court acknowledged no appellate authority on this issue in Connecticut, it observed that Connecticut appellate courts have defined “allonge” as “[a] piece of paper annexed to a negotiable instrument or promissory note, on which to write endorsements for which there is no room on the instrument itself. Such must be so firmly affixed thereto as to become a part thereof.”(1)

    The Court also distinguished Kohler v. United States Bank National Ass'n, No. 11–C–0893, 2013 U.S. Dist. LEXIS 87565 (E.D.Wis. June 21, 2013), which was relied on by the plaintiff, wherein the evidence showed that (i) the allonge was at some point affixed to the note because staple holes were apparent in both the note and the allonge, making it more likely that the note and allonge were once stapled together; and (ii) stickers bearing the loan number on each allonge matched loan number on the note evidencing that the allonges were intended to be affixed. By contrast, in the REO Holdings case, the only identifying information on the allonges was the parties’ names and the date the note was issued. There were no staple holes indicating that the allonges had ever been attached to the note and the allonges bore no stickers or identification numbers to evince an intent to affix the allonge to the note. Because there was an issue of material fact as to whether the allonges were “attached” to the note, the Court denied the plaintiff’s motion for summary judgment.[3]

    A few months later in RBS Citizens, N.A. v. Sabatelli, No. CV14-6016519S, 2016 WL 1099090 (Conn. Super. Ct. Feb. 19, 2016), the Superior Court similarly denied a lender’s summary judgment motion in a foreclosure action for a number of reasons, including that there was no evidence that the allonge endorsing the note to the plaintiff had ever been attached to the underlying note.

    The holdings in REO Holdings and RBS Citizens are examples of how the failure to properly document the assignment of a mortgage loan may make it more difficult, or possibly even imperil, the assignee’s ability to foreclose the mortgage securing the loan. To avoid such pitfalls, parties being assigned a note using an allonge should immediately attach the allonge to the note with a staple and include identifying information on the allonge, such as the loan number.
For more, see Attachment Issues: Staple the Allonge to the Note or Else!
(1) See SKW Real Estate Ltd. Partnership v. Gallicchio, 49 Conn. App. 563 (Conn. App. 1998)

Tuesday, November 01, 2016

NYC Landlord's Illegal Three-Pronged Strategy To Boot Long-Time, Rent-Regulated Tenants & Replace Them With Rich, High-Paying Renters

In New York City, The Real Deal (NYC) reports:
  • Manhattan landlord Steve Croman deregulated 390 apartments in the last five years and commonly used a “three-pronged strategy” to remove rent-stabilized tenants from his buildings, according to a new report from Bloomberg.

    Croman was arrested in May and charged with 20 felonies including grand larceny and scheme to defraud his lenders. According to Bloomberg, Croman’s strategy involved filing frivolous lawsuits against tenants to sap their monetary strength; then hiring a bruising ex-cop to harass and intimidate them; and finally, creating conditions so squalid and unsafe that tenants would leave.

    Although those tactics are not necessarily uncommon in the real estate industry, New York State Attorney General Eric Schneiderman sued Croman in May for allegedly resorting to those illegal methods at his properties, which tally 140 buildings in Manhattan. An analysis from Stabilizing NYC, a pro-tenant housing group, found that Croman deregulated 390 units in the last five years.
    Croman — who by 2010 owned more than 100 buildings and regularly appeared in Page Six for ostentatious displays of wealth — is currently out on a $500,000 cash bail and facing up to 25 years in prison.
For more, see Steve Croman used “three-prong strategy” to remove rent-stabilized tenants: report (Disgraced landlord allegedly filed frivolous suits and followed up with intimidation tactics to oust renters).

See also, Bloomberg: Out With the Poor, In With the Rich: The Landlord’s Guide to Gentrifying NYC (Steve Croman has spent decades exploiting rent-control laws to bring in wealthier tenants. The state attorney general wants to make an example of him).

11 NYC Tenants Illegally Driven From Their Rent Regulated Apartments By Landlords Who Vandalized Their Own Building To Render It Uninhabitable Move Back Into Their Now-Renovated Units After Nearly-3-Year Court Battle; Criminal Charges Remaining Pending Against Alleged Slumlord Brothers

In Greenpoint, Brooklyn, DNAInfo (NYC) reports:
  • Tenants forced to leave the apartments they'd lived in for decades after their notorious landlords cut off essential services, are finally back home, following nearly three years of living in shelters, temporary apartments and crashing with relatives, all the while battling their landlord in court.

    Rent stabilized residents of 300 Nassau Ave., owned by brothers Joel and Amrom Israel who still face criminal charges for the destruction there and at several other buildings,(1) moved back into their newly renovated apartments in late August, once the building was finally brought back up to code and the Department of Buildings lifted a vacate order that had condemned the property since December of 2013, according to court records.

    "I swear it's like a miracle. We've been through so many things in these three years," said Rosita Navarro, 44, in Spanish. Navarro had lived in her apartment for 23 years with her husband and two sons before they were kicked out in the dead of winter. Construction workers had cut off water, electricity and gas, according to court records and prosecutors.

    Firemen, building inspectors, and Red Cross workers showed up to evacuate them, Navarro recalled. She, her husband and two sons collected clothes they could carry and important documents by candlelight. Everything else they left behind, she said.

    The family spent seven months in a shelter and the rest of the time in an East New York public housing apartment. Navarro's asthma has gotten worse from all the stress and her 16-year-old son was robbed and attacked. They had to give their cat to a shelter and their dog to a friend's care.

    "We're just starting to readjust to the lives we had before," she said.

    Tenant lawyers with the housing advocacy group Brooklyn Legal Services Corporation A(2) represented Navarro and rent stabilized tenants from two other apartments at 300 Nassau Ave., about 11 tenants in total, all of whom recently moved back in, according to Rolando Guzman, a tenant organizer at St. Nick's Alliance.

    "It's a great victory for both families and a good example to other tenants," Guzman said. "It's inspiring to other tenants to keep the fight to get back to their homes where they rightfully belong."

    In a drawn-out housing court battle, a judge sided with the 300 Nassau Ave. tenants and in January 2015, agreed to take control of the building away from the Israel brothers and give it to an independent administrator who was tasked with repairing the building, court records show.

    In this case, the city fronted funds needed for repairs to the independent administrator, while taking out liens on the building, that the landlord is ultimately responsible for, tenants' attorney Adam Meyers explained.

    The good news for Nassau Avenue residents comes just a few weeks before a criminal trial against the Israel brothers is set to begin.

    The burglary, grand larceny, criminal mischief and a slew of other charges against them stem from issues at their Nassau Avenue property as well as three others including 324 Central Ave. and 98 Linden St. in Bushwick and 15 Humboldt St. in East Williamsburg.

    The trial is slated to begin on Nov. 7, court records show.
For the story, see Tenants Pushed Out By Notorious Landlord Return to Repaired Greenpoint Home.
(1) See:
(2) Brooklyn Legal Services Corporation A (aka "Brooklyn A") is a non-profit law firm that provides legal services (full legal representation, brief advice/services, and legal education) to low-moderate income individuals, community-based organizations and community development corporations in Brooklyn and throughout New York City.

NYS Tenant Protection Unit Recoups Over $250K In Rent Credits For Dozens Of Illegally Overcharged Tenants In Brooklyn Apartment Building

From the press office of New York Governor Andrew M. Cuomo:
  • Governor Andrew M. Cuomo [] announced that more than $250,000 in rent credits has been returned to tenants who were unknowingly overcharged at 111 Lawrence Street in downtown Brooklyn.

    The Governor’s Tenant Protection Unit flagged the owner’s registrations for the rent regulated building known as “The Brooklyner” as being unusually high, and completed an audit that found unlawful rents and overcharges for 60 tenants, some dating back four years. Under the terms of an agreement with the owner, the TPU successfully negotiated the credits for the tenants, recouping their overpayments.

    To date, the TPU’s audit and registration initiatives have returned over 52,000 units to rent regulation, and approximately $2.8 million in overcharge restitutions to tenants.

    “This administration has zero tolerance for those who prey on renters and we created the Tenant Protection Unit to root out these bad actors, tackle tenant harassment and ensure their rights under the law are not violated," Governor Cuomo said. “This recovery of rent overcharges is the latest example of the TPU’s success in cracking down on these unscrupulous practices, and we will continue working to ensure that all New Yorkers have a safe, decent and affordable place to call home.”
    Tenants who live in rent stabilized apartments and believe they are being harassed or overcharged should call the Office of Rent Administration and the Tenant Protection Unit at (718) 739-6400.

Monday, October 31, 2016

Co-Defendant Gets 4-12 Years For Role In Peddling Sale Leaseback Foreclosure Avoidance Racket Targeting Homeowners Seeking Short Sales Of Underwater Homes; Trial Pending For Three Others In Scam That Fleeced $1.2 Million From Financially Distressed Victims

From the Office of the Nevada Attorney General:
  • Nevada Attorney General Adam Paul Laxalt announced that Franklin Marquez, 52, of California, was sentenced to 4-12 years for one count of Pattern of Mortgage Lending Fraud, a category “B” felony. Three remaining co-defendants, Maria Lorena Anzu, Jose Ben Rodriguez and Gilberto Navidad are set to stand trial on April 24, 2017.

    Marquez and other defendants were alleged to have operated a criminal enterprise in Las Vegas called Majestic Group, LLC that defrauded Nevada homeowners using a foreclosure avoidance scheme.

    Defendant Marquez admitted that he promised clients that they could sell their underwater homes to Majestic Group at fair market value, and then Majestic Group would subsequently sell their homes back to the clients at affordable prices.

    After placing their trust in Marquez’s operation, several clients fell victim to the scheme and lost their homes to foreclosure as a result. Defendant Marquez further admitted that he, on behalf of Majestic Group, collected large upfront fees along with monthly payments, totaling between $10-18,000 per victim.

    In total, the business collected $1.2 million from homeowners through this scheme.

Co-Owner Of Outfit That Used Sale Leaseback Bait To Peddle Units In Since-Failed Resort Redevelopment Project To About 1,400 Investors Gets Pinched On Multiple Charges; Feds Say Racket Artificially Inflated Values In Deal That Turned Into Ponzi Scheme, Fleecing Victims Out Of $300 Million

In the Florida Keys, The Miami Herald reports:
  • The former chief financial officer of the failed Cay Clubs Resorts and Marinas was arrested [] on federal charges in Orlando, eight years after the Florida Keys-based company collapsed.

    David W. Schwarz, 60, also was vice president and a one-third owner of Cay Clubs, which federal prosecutors say turned into Ponzi scheme that cost investors $300 million.

    Schwarz was indicted on three counts of bank fraud, one count of conspiracy to commit bank fraud and three counts of making a false statement to a financial institution. He also faces an income-tax count.

    Cay Clubs founder and former president Fred Davis “Dave” Clark Jr. was convicted in December 2015 on bank-fraud and obstruction charges and sentenced to 40 years in federal prison.

    Clark owned two-thirds of the company that claimed it would redevelop 17 aging resorts in the Keys, Clearwater and Las Vegas into condo-hotels that would lure high-end visitors.

    About 1,400 people purchased the units, which came with promises of “leaseback” payments, rental income and soaring property value. “These representations were false,” the Securities and Exchange Commission says in a 2013 filing.

    Buyers were shown sales records of condo units that jumped in price, but were not told that many of the units were being sold to Cay Clubs insiders to artificially inflate the unit value, prosecution documents say.

    “Cay Clubs was in reality purchasing units from itself,” Wifredo A. Ferrer, U.S. attorney for South Florida, said in a statement. “Proceeds of these sales were diverted to Schwarz and Clark.”

    “As of March 26, 2007, Clark and Schwarz, based on their own accounting, obtained more than $28 million in proceeds from Cay Clubs, including salary payments, payments to third parties including for cash to close for condominium unit purchases, cash transfers, and credit-card payments,” says an indictment of Schwarz filed Wednesday.

    Schwarz authorized using money from new buyers to pay leaseback fees to earlier buyers, prosecutors charge, which turned the company into a Ponzi scheme that failed in 2008.

    In a Friday filing, prosecutors objected to a $200,000 bond placed on Schwarz by a federal judge in Orlando after the Thursday arrest. Schwarz’s home will serve as collateral.

    Schwarz “received millions of dollars in cash that are not accounted for,” the filing says.

    Schwarz “ has apparently been unemployed for years but continues to lead a lifestyle that appears to be funded by sources other than those that are readily apparent,” it continues. Schwarz “is experienced and sophisticated at hiding funds, creating shell companies and using shell-company bank accounts.”

    If convicted, Schwarz could face up to 30 years on each of the major counts. Kenneth P. Hazouri, an Orlando attorney representing Schwarz, could not be immediately reached.

    Former Cay Clubs sales executives Barry Graham, 59, and Ricky Lynn Stokes, 54, pleaded guilty to conspiracy to commit bank fraud and each received five years in prison.

Real Estate Agent Gets 6+ Months For Duping Family In Foreclosure Into Sale Leaseback Ripoff; Conned Homeowner Into Signing Over Deed Coupled With Promise To Give It Back, Then Stripped Equity From Home With Multiple Fraudulently-Obtained Mortgages; Subsequently-Evicted Victims Left Homeless

From the Office of the Santa Clara County, California District Attorney:
  • A San Jose real estate agent was sentenced to more than six months in jail [], after being convicted of scamming about $750,000 from a family and four banks.

    Nancy Kempis, 64, convinced a local family to sell their home to her to save them from foreclosure. Instead Kempis used the house to get multiple fraudulent mortgages and then defaulted herself.

    Kempis disappeared after being charged with 5 felony counts: 1 count of conspiracy to defraud, and 4 counts of grand theft. The fugitive from Santa Clara wrote a self-published book and hid out in New York, using the alias Morpheus Daw Pud Ko, before she was found and arrested this summer.

    “Ms. Kempis scammed hundreds of thousands of dollars and drove a family into homelessness,” prosecutor Charles Huang said. “We are pleased that despite her attempt to flee justice, she was held accountable for her crimes.”

    Between 2006 and 2009, Kempis convinced a family to sell their home to her at a dramatically reduced price, then rented it back to them with the promise that she would eventually give the house back to them.

    After Kempis stripped the home of its remaining equity by defrauding banks, she pocketed the loans. When the home was foreclosed, the family was evicted from their home and became homeless.

    Investigator Tanaya Rose found Kempis living under an alias in New York City, helping to run a women’s ministry.

Now Disbarred & Being Sought By Cops, Closing Attorney (Accused Of Peddling Phony Title Insurance Policies) Filched $100K In Refinancing Proceeds Intended To Pay Off Homeowners' Existing Mortgage, Leaving SC Family Facing Foreclosure; State Bar's Client Protection Fund Coughs Up $40K Maximum Reimbursement To Partially Compensate Victimized Couple

In Johns Island, South Carolina, WCSC-TV Channel 5 reports:
  • A Charleston County family says they have been fighting foreclosure for years and worry time is ticking down to save their home.

    William and MaryJohn Palmer say their former attorney stole more than $100,000 from them when they refinanced their house in 2012. Now, years later, the situation is still haunting them.

    “We’ve put a lot of hard work into the house. We’ve got a beautiful yard. We’ve been here now thirteen years. We’re raising our son here. We love it. It’s our home,” said William Palmer.

    South Carolina Federal Credit Union loaned them about $100,000 in October 2012 as a payoff to their original mortgage with Bank of America. They simply hoped to save money with a better interest rate. The Palmers hired then-attorney Brian Nathan Davis in Charleston to help the handle the closing.

    According to Davis’ disbarment paperwork with the South Carolina Supreme Court, “The lender wired the funds into trust account on October 19, 2012.”

    However, the court documents continue, Davis, “failed to issue the payoff of the existing mortgage of $100,824,12. In response to inquiries about the payoff from and the new lender, repeatedly made false assurances that the check had been sent. The balance in the trust account dropped below the amount necessary to cover the remaining disbursement on approximately forty-nine occasions.”

    Following Davis’ interim suspension, there were insufficient funds in his trust account to cover the payoff.

    As a result of the “misappropriation of funds,” Bank of America with its servicing company filed a foreclosure action against the Palmers in August 2013.

    At first, William Palmer says he was confused and assumed the collection calls and foreclosure warnings had to be a mistake.

    But he said after Davis stopped communicating and SCFCU expressed concerns about receiving the foreclosure paperwork, “I think that’s when I got the ah-ha moment. It was like, we’ve been duped. We’ve been screwed, we’ve been ripped off. I’m not sure how he did it or what he did but something is not right and he’s the bad guy.”

    According to the disbarment paperwork, Davis was misappropriating funds, issuing fraudulent title commitments and title insurance policies, and neglecting litigation matters. The court documents list more than thirty clients affected in various ways, including the Palmers, who are referred to as Matter VII Client F.

    “I just couldn’t believe it. I couldn’t believe it was real,” said William Palmer. “We’re good citizens. Good people. We pay our bills.” His wife MaryJohn added, “It’s still really hard to wrap your head around.”

    William said with their new attorney, they’ve tried to mediate and negotiate with the banks to reach a settlement. The SC Bar Lawyer’s Fund for Client Protection paid the Palmers $40,000 to help out.(1)

    But Bank of America, he claimed, “Put on top of the original payoff- missed payments, late fees, and attorney costs.” So they haven’t reached an agreement, and their foreclosure is still pending at this time.

    MaryJohn said, “We’re not a McMansion here. We’re a 1,500 square foot 1970’s ranch-style house. It’s not going to kill you to give us a break.”

    Brian Davis lived or lives in West Ashely. Court paperwork and various attorneys indicate he’s been nearly impossible to track down.

    Local Attorney Donna Taylor successfully sued Davis on behalf of clients who had a situation very similar to the Palmers. A judge issued a $300,000 judgement against Davis in that case. Taylor said the judge was clearly disgusted with what happened.

    However, Davis didn’t respond to the court and Taylor said he was difficult to find. She’s not sure if her clients will ever get paid. They don’t think Davis actually has many assets at this point. His own home in West Ashley is facing foreclosure.

    Taylor’s clients were able to work it out with their bank and, with some monetary help from the SC Bar Lawyer’s Fund for Client Protection, did not lose their home.

    The Palmers are hoping for such a resolution.

    The couple eventually filed a police report to seek criminal charges against Davis. The Charleston Police Department said a warrant has been issued in the case, but the department spokesperson said they haven’t been able to serve it yet. A copy of the warrant is not available until it is served.

    Davis has not responded to multiple requests for comment.

    “How could this guy be out there walking around living while he’s done this to this many people?” William questioned.
For more, see Family facing foreclosure says lawyer stole mortgage payoff.

For a story update, see Former attorney charged with Breach of Trust:
  • Charleston Police arrested Brian Nathan Davis []. Davis is charged with Breach of Trust with intent to commit fraud.
For the disbarment ruling, see In the Matter of Davis, 411 S.C. 209, 768 S.E.2d 206 (2015), which describes 17 matters involving the misappropriation of trust funds, among other bad acts. Among the title companies who cancelled Davis' authority to issue title policies prior to this ripoff were Chicago Title Company and Commonwealth Land Title Company.
(1) The Lawyers’ Fund For Client Protection of the State of South Carolina, established by the state's Supreme Court and administered by the South Carolina Bar, reimburses qualified clients for money or property mishandled by Bar members. The loss must be one that was caused by the dishonest conduct of the lawyer acting either as an attorney or as a fiduciary in the matter in which the loss arose. The loss to be paid to any one client shall not exceed $40,000; the aggregate total of claims paid per attorney shall not exceed $200,000, according to the Fund's rules.

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.

Sunday, October 30, 2016

State Lawyers' Fund Coughs Up Nearly $200K During 3rd Quarter 2016 To Reimburse Clients Fleeced By Eleven New Jersey Attorneys Out Of Escrow Money, Unearned Fees, Estate Cash, Lawsuit Settlements, Etc.

From a recent press release from the New Jersey Lawyers' Fund for Client Protection:
  • During the third quarter of 2016, the New Jersey Lawyers’ Fund for Client Protection, funded by the state’s lawyers and judges, paid $199,609.58 to clients for losses caused by eleven lawyers, the Board of Trustees announced [].

    The purpose of the fund is to pay on behalf of the honest majority of [New Jersey] lawyers for the wrongdoing of the few who are suspended or disbarred for misappropriation.(1) In its 47-year history, the fund has paid claims against a total of 779 attorneys. There are 96,938 lawyers licensed in New Jersey.

    The Fund operates under the authority of the Supreme Court pursuant to Court Rule 1:28. The court appoints the seven trustees, five attorneys and two public members, who serve staggered 5-year terms without compensation. The trustees consider clients’ claims and make awards when it is determined that the loss was caused by dishonest lawyer conduct, under fund rules.

    Cases involving legal malpractices and negligence are handled through civil court actions and fee disputes through the district fee arbitration committees established by the Supreme Court.

    For a claim to be compensable, the attorney against whom it is filed must have been a member of the bar, acting as either attorney or fiduciary, at the time of the incident; and unless deceased, must have been disbarred or suspended from the bar, or convicted of embezzlement or other misappropriation of property.

    A claimant can receive up to $400,000 if their claim is approved, and the Fund can pay up to $1.5 million in claims against any one lawyer. Special permission can be granted by the Supreme Court to exceed the aggregate limit.

    To receive a claim form, write to the New Jersey Lawyers’ Fund for Client Protection, Richard J. Hughes Justice Complex, P.O. Box 961, Trenton, NJ 08625-0961, or call 855-533-FUND (3863). The form must be completed, signed and returned with copies of any proofs of the transaction. There is no filing fee. Claimants assisted in their claims by practicing attorneys receive their representation free of charge. Fund Director Daniel R. Hendi welcomes inquiries about the Fund’s purpose and operation.

    Attached is a list of the third quarter claim awards and status of each attorney under the Supreme Court discipline system.
Source: Lawyers’ Fund for Client Protection Releases Third Quarter Report.
(1) For similar "attorney ripoff reimbursement funds" that sometimes help cover 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.

Bank Blows Whistle On $67 Overdraft, Triggering Probe Leading To Attorney Ethics Charges Against NJ Lawyer For Allegedly Using Client Trust Account To Hide Income From Creditors While In Bankruptcy; Accused Of Improperly Withdrawing Fees Thru Cash Withdrawals, Rather Than Cutting Check To Business Account

In Hunterdon County, New Jersey, reports:
  • A Hunterdon County lawyer is facing multiple ethics violations filed by the state's Office of Attorney Ethics for allegedly using a trust account to hide income from creditors during a time when he filed for bankruptcy.

    The violations came to light when TD Bank informed the office that Paul F. Clausen's attorney trust account was overdrawn by $67.10.(1)
    According to a five-count complaint filed on Sept. 27, an audit by the office revealed 77 occasions when Clausen allegedly "withdrew his fees directly from the trust account rather than issuing a check payable to his business account."

    The complaint was first reported on Random Notes on NJ Government [], a website run by New Jersey watchdog John Paff.

    State ethics law requires attorneys to deposit and withdraw their fees from an attorney account, rather than from a trust account. The latter is only to be used to hold money for others, such as clients. The office performed an audit on Clausen's accounts from March 1, 2014, to April 23, 2015, according to the complaint.
    Clausen's "deposit of his earned and unearned legal fees in his trust account and subsequent cash withdrawals therefrom was intended to insulate (his) personal assets and to attempt to place them beyond the reach of his creditors," it was stated in the complaint.
For more, see Lawyer faces ethics violations after $67 bank overdraft.
(1) See A Hunterdon County lawyer's $67.10 overdrawn trust account led to multiple ethics charges being brought against him:
  • When a New Jersey lawyer overdraws his or her trust account, Court Rule 1:21-6(b) requires the bank to notify the Office of Attorney Ethics (OAE).

Strict Rules Apply To Attorneys Handling Clients' Cash With Serious Hot Water Accruing To Those With Sloppy Trust Account Recordkeeping Habits

From a recent article in the South Florida Daily Business Review:
  • Every month, several lawyers find themselves in trouble with the Florida Bar for mismanaging client trust accounts.

    Sometimes it's intentional—but often it's not, said Miami accountant Steven Klein, who oversees law firm audits as the head of the corporate practice at Gerson Preston.

    "You can get into hot water from purely ministerial inadequacies," Klein said. "When you're handling clients' funds, in the eyes of the bar, you are acting as a professional fiduciary. That's a very high standard."

    Klein spoke with the Daily Business Review about how law firms can make sure they're abiding by Florida Bar rules regulating trust accounts.

    What are some of the most common problems when it comes to managing client funds? ...

Another Long-Time Lawyer Wraps Up Decades-Long Career By Being Frog-Marched Into The Slammer; Gets 6 1/2 Years For Fleecing Clients Out Of $5+ Million; Judge: "[U]nder The Veneer Of An Accomplished & Highly Respected Attorney, [He] Was Really A Predator ..."

In New York City, The New York Times reports:
  • A lawyer who practiced for half a century in New York and built one of the city’s leading personal injury practices was sentenced to six and a half years in prison [] for stealing more than $5 million from clients.(1)

    The lawyer, Stuart A. Schlesinger, 76, misappropriated the funds from settlements he had negotiated in cases involving medical malpractice and other injuries, and then used the money to pay expenses including mortgage bills, the government had alleged.

    He converted his law license to a license to steal,” said Judge William H. Pauley III before imposing the sentence, which included an order that Mr. Schlesinger forfeit more than $5 million and pay restitution.

    The proceeding was highly charged, with rows of victims observing from the spectator gallery. Some wept openly. Others made angry comments. More than a half-dozen victims addressed the judge personally, recounting the hardships Mr. Schlesinger had caused them, as well as his never-ending excuses, as one victim put it.

    The victim, Margaret Last, rattled off some of Mr. Schlesinger’s excuses: “He was short-staffed. He was making sure everything was in order. He had a virus. He had problems with his back and his knee. The office was moving. He didn’t know how to work a fax machine.”

    Ms. Last is still owed $660,000, her share of a settlement of a medical malpractice lawsuit that Mr. Schlesinger negotiated on her behalf, according to Christopher Cobb, a lawyer who now represents her.

    Another victim, Kenneth Lawler, who is owed $900,000 from the settlement of a lawsuit alleging medical malpractice in the death of his son, said, “Every time I have to return to this matter, it brings back sad memories.”

    Matthew J. Laroche, a prosecutor in the office of Preet Bharara, the United States attorney for the Southern District of New York, told the judge that Mr. Schlesinger did not care that his victims were plaintiffs who were alreadysuffering from life-altering injuries or the death of a loved one.

    “He stole their money and lied to them and left them revictimized and broken,” Mr. Laroche said.

    Murray Richman, Mr. Schlesinger’s lawyer, said his client’s actions had been reprehensible.

    “I’m also angry at what he’s done to the legal community,” Mr. Richman said. “He’s made every lawyer’s word less meaningful.”

    Mr. Schlesinger, who ran a firm called Julien & Schlesinger and who is now disbarred, made a rambling apology, facing the judge at times and also turning to the victims. “I know what I did,” he said. “I know the extent of what I did, and I know how terrible it is.”

    He added: “I’ve lost everything that I’ve earned in 50 years. I lost my license. I lost my respect. I have terrible issues with family.”

    Judge Pauley, of Federal District Court in Manhattan, observed that Mr. Schlesinger had become a prominent lawyer who was “at the apex” of the personal injury bar in New York. But the case revealed “that under the veneer of an accomplished and highly respected attorney, Mr. Schlesinger was really a predator — his conduct was long running and devastating to the individuals he victimized,” the judge said.

    He also noted that Mr. Schlesinger had amassed a fortune in real estate, selling an elegant brownstone on the Upper East Side of Manhattan for more than $20 million about a decade ago, and earlier buying a property on Quogue, on Long Island, that is appraised for more than $11 million.

    The Quogue property, which according to real estate listings is an eight-bedroom house on five and a half acres, with a pool and a hot tub overlooking the ocean, is for sale, currently priced at $10 million.

    The judge also suggested that Mr. Schlesinger had been hiding assets, noting he had not disclosed that he had borrowed more than $2 million against the Quogue property. He said that Mr. Schlesinger had also “apparently been busy selling personal property, including artworks,” and after selling some, he had deposited more than $65,000 in his wife’s account.

    Judge Pauley said the court’s probation department reported that bank statements reflected other significant deposits for which the sources were unknown.

    “So it really seems, Mr. Schlesinger, that the fraudulent conduct continues,” the judge said.
Source: New York Lawyer Gets Prison Time for Stealing $5 Million From Clients.
(1) The Lawyers’ Fund For Client Protection Of the State of New York manages and distributes money collected from annual dues paid by members of the state bar to members of the public who have sustained a financial loss caused by the dishonest conduct of a member of the New York bar acting as an attorney or a fiduciary.

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.

Two Years After Disbarment, Orlando Feds Finally Put Pinch On Ex-Lawyer Accused Of Fleecing Clients Out Of Over $2 Million

In Orlando, Florida, the Orlando Sentinel reports:
  • A Longwood attorney accused of draining hundreds of thousands of dollars from the trust accounts and businesses of her clients was arrested [September 30] on federal charges.

    Julie Kronhaus, 51, is accused of 11 counts of wire fraud and seven counts of bank fraud. An Orlando federal grand jury indicted her [last month].

    The indictment, [], accuses her of wrongdoing dating back to 2009. She's charged with making eight illegal wire transfers totaling $526,000 between 2012 and 2014.

    In addition, she's charged with defrauding Bank of America out of $425,000 in a separate series of transactions.

    Clients, however, have filed lawsuits and complaints with the Florida Bar accusing her of misappropriating more than $2 million.(1)

    Kronhaus provided legal advice, did accounting, set up trust funds and managed them for several clients. It's those funds that she's accused of raiding.

    One of those was Brittany Jones, who gave birth 10 years ago to a baby girl who suffered severe brain damage while in a Lake County hospital. Kronhaus was in charge of the child's trust account when $180,000 disappeared, Jones alleged in a complaint with the Florida Bar.

    "I'm glad it's finally happened," she said Friday when told of Kronhaus' arrest. "I've never seen where she's ever denied any wrongdoing."

    Kronhaus had an office on Howell Branch Road near Winter Park and also was a certified public accountant. She was disbarred in 2014 and stripped of her CPA license by state regulators last year.

    She did not return phone calls Friday evening.

    Her arrest came as no surprise. Former clients have clamored for it for more than two years, when they first discovered checks she wrote to them began to bounce.

    The first agency to take action against her was the Florida Bar. About that time, the Seminole County Sheriff's Office began an investigation, then turned it over to the FBI.

    As the investigation dragged on, clients grew angry that she had not been charged with a crime.
For more, see Disbarred Longwood attorney arrested on federal fraud charges.
(1) The Clients' Security Fund was created by The Florida Bar to help compensate persons who have suffered a loss of money or property due to misappropriation or embezzlement by a Florida-licensed attorney.

For similar "attorney ripoff reimbursement funds" that sometimes help cover 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.