FACTS
On May 28 PHOENIX RESIDENT PAIGE KINNEY, AKA JAIMELEE LAWLER, 42, pleaded guilty in two separate cases in federal district court. In one case, Kinney admitted to her leadership role in a $40 million mortgage fraud involving Countrywide Home Loans, and in the second case, she admitted to committing bankruptcy fraud, bank fraud, and mail fraud.
"THE FBI AND ITS LAW ENFORCEMENT PARTNERS WILL CONTINUE TO AGGRESSIVELY PURSUE those who are involved in these types of fraudulent schemes. Mortgage fraud has greatly impacted the citizens of Arizona over the past few years and will continue to remain a top criminal priority of the FBI."
Kinney admitted that from January 2005 through December 2007, she and others recruited straw buyers to PURCHASE HOMES THE BUYERS NEVER INTENDED TO LIVE IN by obtaining mortgage loans the buyers never should have received. Kinney arranged for the loan applications to be submitted with false information about the employment, income, and assets of the buyers so they would qualify for the loans. The loans, totaling almost $40 million, were obtained based on inflated property appraisals. The excess cash totaling $9 million was then diverted to Kinney and her co-conspirators.
Kinney further admitted that she CONTINUED HER ILLICIT ACTIVITIES WHILE SHE WAS PENDING TRIAL on the mortgage fraud charges. She declared bankruptcy and then attempted to hide assets and liabilities by changing her name. She committed additional financial fraud by arranging for friends to fraudulently obtain a loan to purchase a Mercedes. And she committed insurance fraud by staging a phony burglary of her residence and then collecting $130,000 from Allstate Insurance Co.
Kinney pleaded guilty to a total of 13 felony offenses, many of which each carry a maximum prison sentence of 30 years and a maximum fine of $1 million. Sentencing is set before Judge Neil V. Wake on Sept. 12.
MORAL
Notice how the federal prosecutors went back seven years to get to her. Loans that funded seven years ago in 2007. This lady in my opinion will probably do 7-10 years because of the aggravation in doing more criminal actions while awaiting trial. Time will tell on Sept. 12.
FEDERAL FAIR CREDIT TRANSACTIONS ACT (FACTA) DOES NOT APPLY TO emailed RECEIPTS ONLY DISPLAYED ON THE COMPUTER
FACTS
Dimitriy Simonoff purchased travel arrangements through Expedia Inc.’s website. Expedia e-mailed him a receipt, which included the expiration date of Simonoff’s credit card. Simonoff sued Expedia claiming the company violated FACTA by including the expiration date in the e-mail receipt. The district court dismissed the case finding e-mail did not constitute an “electronically printed” receipt under FACTA, and therefore Siminoff failed to state a claim. Siminoff appealed.
The 9th Circuit U.S. Court of Appeals said...affirmed. FACTA prohibits merchants from printing credit card expiration dates and nontruncated credit card numbers on electronically printed receipts. Simonoff’s receipt was via an e-mail receipt displayed on a computer screen. The court found that the term “print” means the transfer of words to a tangible medium, such as paper. “Electronically” as used in the statute means to clarify the manner of printing a receipt, differentiating receipts printed with electronic devices from receipts printed by hand or manual imprint. The court found FACTA’s text applies only to receipts impressed onto a tangible medium by electronic devices at the point of sale or transaction, not receipts that were electronically transmitted to an e-mail account or displayed on o=a computer screen.
MORAL
Read your receipt at the counter when you check out. If it has the expiration date of the full account number, you may have a lawsuit that an attorney will take on a contingency basis. Meaning the attorney does not get paid unless the lawsuit is won or settled and then gets paid from the proceeds.
WATCH YOUR HARD MONEY INVESTMENTS IN CALIFORNIA OR YOU AS AN INVESTOR MIGHT FIND YOU ARE LIABLE FOR USURY
FACTS
In 2003, Creative Ventures LLC and Arden 2002 LLC borrowed approximately $3 million from Jim Ward & Associates to finance two development projects. The loans were evidenced by four promissory notes secured by deeds of trust on the real property underlying the development projects. Each of the notes contained interest payments in excess of the maximum permitted the California Constitution. After discovering JWA was not licensed as a real estate broker as it purported to be, Creative and Arden sued JWA as well as the 54 individual investors, alleging usury, breach of contract and fraud. Creative and Arden sought to nullify the interest terms and return of all interest and broker’s fees paid under the claimed illegal interest provisions. The trial court found JWA liable for usury and fraud but found that the investors were holders in due course, exempt from usury liability having taken their fractional interests in the promissory notes in good faith. The borrowers Creative and Ardent appealed.
The 6th District Court of Appeals said...reversed. JWA committed usury but not fraud. Therefore the fraud judgment against JWA is reversed. The investors are NOT HOLDERS IN DUE COURSE AND CAN BE SUED FOR USURY. Per Commercial Code Section 3305(b), a holder in due course takes his or her interest free of any defenses, including the defense of usury. A holder in due course is the holder of an instrument who took the instrument for value, in good faith, and without notice that any party has a defense or claim in recoupment. HERE, the promissory notes HAD NO IDENTIFIABLE PAYEE other than JWA, making JWA the primary and only holder of the notes. The court found THERE WAS NO EVIDENCE that JWA negotiated the promissory notes by endorsement and delivery to make the investors qualify as holders, and JWA was the investors’ agent. Therefore, the investors, could not be holders in due course because they never became holders of the notes, and were not exempt from usury liabilities.
MORAL
There are several here. 1. No license. 2. Multi-investors should have been on the note. The broker is never supposed to be on the note or deed of trust under DRE laws and regulations. 3. Multi-investors means you have a security and need a securities permit unless you fit under an exemption.
Now here is the fun part. Within the past 30 days at least three people have asked me for a legal opinion on hard money loan compliance and I explained that I only do it hourly because of the complexity of the laws and especially with the new laws that have very recently come into effect in the past two months and the proposed laws coming into effect in July of this year. As you can see here if an attorney had been retained to review the proposed loan and documents to be used it would have been discovered that there was no license for the company and the other violations of DRE laws and regulations because the investors were not named on the note which if assigned could have made them holders in due course. So instead of spending about $3,500 to have an experience attorney review the 54 investors are spending well over $30,000 in my opinion to defend a case of usury and therefore will lose more money and probably not get back more than $1.8 million, if that, depending on how much interest the plaintiffs paid on the note plus the commission they paid. Plus attorney fees since that is undoubtedly in the note. So if you are looking for a hard money legal opinion, expect a competent attorney to review all proposed documents, all necessary licenses and review the current law. If you are not willing to pay about $3,500 or possibly more especially on a $3 million loan, I expect you will not find competent counsel willing to give you an opinion. And remember, this was a commercial loan so the consumer laws did not even come into play.
CALIFORNIA LAW PROVIDES A NEW TENANCY IS NOT CREATED WHEN LANDLORD REFUSED TO CASH RENT CHECKS AND TOLD TENANT TO VACATE THE PROPERTY PURSUANT TO A PREVIOUS SETTLEMENT
FACTS
In July 1986 Robin Goldman signed a lease for an apartment in San Francisco with rent set at $600 per month. On Aug. 7, 2000 the landlord Margaret Kaufman served Goldman with a three-day notice to pay rent or quit, and on Feb. 5, 2001 Kaufman filed an unlawful detainer action to evict Goldman. The parties entered into a settlement agreement on March 30, 2000 where Goldman agreed to vacate on March 1, 2008 waiving her rights to remain in possession after that date. Goldman also agreed to pay increased rent for the remaining time period. In return, Kaufman, the landlord, agreed to dismiss the unlawful detainer action. On Nov. 12, 2007 Goldman sent Kaufman a letter claiming the agreement was not enforceable and that she became a holdover tenant after March 1, 2008. On Feb. 10, 2009, Kaufman filed a complaint for breach of contract. Goldman contended the agreement was not enforceable and that she became a holdover tenant after March 1, 2008 creating a new tenancy. The trial court disagreed and granted Kaufman summary judgment awarding her possession of the apartment. Goldman appealed.
The 1st District Court of Appeal said...affirmed. If a lessee of real property remains in possession after the expiration of the lease, and the lessor accepts rent from him the parties are presumed to have renewed the lease on the same terms and for the same time. However, Goldman contended that Kaufman accepted her rent after March 1, 2008. But the court found that Kaufman never accepted Goldman’s post-March 1, 2008 rent checks. Kaufman sent Goldman a letter in October 2007 informing her she was required to vacate, as well as refusing to cash the checks given. Therefore, the court found, there was no evidence a new or renewed tenancy existed, and summary judgment was properly granted.
MORAL
If you want the tenant to leave, do not cash checks after the tenancy is up or you may find you gave the tenant a new lease.
FIVE INDICTED IN CHICAGO FOR MORTGAGE FRAUD
FACTS
On June 2, 2011 a federal indictment was released charging three partners in a failed North Shore development project, a title company executive, and a loan officer with engaging in a $15.7 million residential mortgage and construction loan fraud scheme to help finance the failed mixed-use commercial development known as the Center of the Northshore. The five defendants allegedly caused various lenders and a title company to lose at least $8.45 million. The loan proceeds allegedly were used to make lulling interest payments on multiple fraudulent residential mortgages, as well as to make interest payments on a $26.2 million loan to finance the purchase 14 acres in Northbrook for the proposed mixed-use development, which ultimately fell into foreclosure.
The 11-count indictment was unsealed after four of the five defendants were arrested on June 2. The defendants and charges against each are as follows:
EDWARD RENKO, 49, OF GLENVIEW, who WAS CHIEF EXECUTIVE OFFICER OF THE NOW-DEFUNCT EAG CAPITAL HOLDINGS INC.—two counts of wire fraud and one count each of bank fraud and making a false statement to influence the action of a bank; ALEXANDER FIELD, 42, OF NORTHBROOK, FORMERLY PRESIDENT OF EAG CAPITAL—three counts of wire fraud and one count of bank fraud; GARY FISHKIN, 54, of Glencoe, FORMERLY CHIEF OPERATING OFFICER OF EAG CAPITAL—two counts of wire fraud and one count each of bank fraud and making a false statement to influence the action of a bank; KALLIOPE SHAYKIN, 51, OF CHICAGO, FORMERLY PRESIDENT OF ABSOLUTE TITLE SERVICES INC., in Schaumburg—seven counts of wire fraud and one count of making a false statement to influence the action of a bank; and TATYANA FURMAN, 41, OF NORTHBROOK, FORMERLY A LOAN OFFICER AND MORTGAGE BROKER AT AMERICAN UNITED MORTGAGE CO., in Northbrook, which was 50% owned by EAG Capital—seven counts of wire fraud.
Renko, Field, Fishkin and Furman were arraigned on June 2.
According to the indictment, between June 2006 and November 2007, the defendants fraudulently obtained at least $8.45 million in residential loan proceeds by repeatedly obtaining mortgages secured by residences owned by Renko, Field and Fishkin. The mortgages were obtained purportedly to refinance existing loans secured by those residences, but instead of using the loans to pay off the existing mortgages, the defendants allegedly converted the fraudulently obtained loans to their own use, including to pay personal expenses, business expenses, and interest payments on the $26.2 million loan financing the purchase of property for the proposed Center of the Northshore.
On multiple occasions, the indictment alleges that Furman prepared, and Renko, Field and Fishkin signed, fraudulent mortgage loan applications that contained false statements that failed to disclose the respective defendant’s existing mortgage liabilities and the purpose of the loans. Shaykin allegedly created and submitted to lenders fraudulent title insurance policies under the name of Title Company A that intentionally omitted prior existing mortgages and liens on the respective defendant’s residences.
The indictment alleges that Renko, Field and Fishkin distributed at least $720,000 in fraudulently obtained loan proceeds to Shaykin through various means, and that those four defendants distributed at least $240,000 to Furman through various transactions. Overall, Renko, Field and Fishkin obtained home mortgages and a construction loan totaling at least $15.8 million and caused actual losses to lenders and Title Company A totaling at least $8.45 million.
The indictment seeks forfeiture totaling nearly $10.5 million from all five defendants.
Wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine. However, four of the wire fraud counts allegedly affecting financial institutions, together with bank fraud and making a false statement to influence the action of a bank, each carry a maximum penalty of 30 years in prison and a $1 million fine.
REMEMBER, an indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.
MORAL
This goes back five years so you know the government is looking into loans that have funded in the last five years. I trust they have good attorneys. They will need them.
TWO HOUSTON MEN GET PRISON FOR MORTGAGE FRAUD—ONE GETS NINE YEARS IN FEDERAL PRISON, THE OTHER 12.5 YEARS
FACTS
On June 1 ADRIAN LEVALE COLE AND ALBERT TERRANCE WATKINS, BOTH OF HOUSTON, were sentenced to prison for their roles in a multimillion-dollar mortgage fraud scheme. Cole, 40, owned and operated the “fictitious” companies AC HOMES AND WT HOMES and generated more than $10 million in fraudulent home loan submissions at and through PHANTOM MARKETING, CAPRI MORTGAGE AND UNITED NATIONAL MORTGAGE by recruiting borrowers with good credit in Houston and the surrounding area. He pleaded guilty to wire fraud and false representation of Social Security numbers. United States District Judge David Hittner SENTENCED COLE TO A 108-MONTH TERM OF INCARCERATION to be followed by a three-year term of supervised release.
Watkins, 47, who devised the scheme with Cole to purchase multiple residential properties in the greater Houston area through fraudulent mortgage loans, was SENTENCED TO 150 MONTHS’ INCARCERATION by United States District Judge David Hittner. Watkins’ role in the scheme was two-fold. He was both a recruiter of borrowers with good credit on behalf of Phantom Marketing and a loan processor at Capri Mortgage and subsequently at United National Mortgage. Watkins pleaded guilty to conspiracy to commit wire fraud. Judge Hittner has also imposed a three-year term of supervised release to be served by Watkins upon completion of his prison term.
The scheme involved the borrowers with good credit to agree and to apply for home mortgage loans from multiple lenders, with the understanding that they would not be responsible for the monthly mortgage payments—rather, Phantom Marketing would make all payments on all loans. Watkins explained to the borrowers that the portions of the approved loan proceeds from the purchased homes would go to them and/or Watkins and/or Cole and others. As was true of most of the other loans that were part of this scheme, only the first few monthly mortgage payments were made, and then the mortgage loans went into default for non-payment.
In December 2004 Cole purchased a Houston residential property for $110,000, an “inflated” sales price, using a false Social Security number belonging to a minor on the home mortgage loan application with a “created” line of credit that was ultimately approved for $99,000. Loan funds from the bank account of the lender, People’s Choice Home Loans Inc., were wired into the bank account of the title company. Out of the loan proceeds, a check in the amount of $69,100 issued to AC Homes, Cole’s company, as a “Contractor Loan.” No construction work of any kind was ever done by AC Homes on that property located in Houston. On June 23, 2005, Cole sold this property to a “straw purchaser,” who purchased it for a greater “inflated” sales price of $150,000. According to the title file, $105,000 went to pay off Cole mortgage loan and $39,551.33 cash went to seller, Cole. No improvements were ever done to this property. The straw buyer defaulted on $150,000 in loans and the loss to bank, after resale of the foreclosed home, has been determined to be $105,128.
In addition to the prison terms, Judge Hittner has also ordered Cole and Watkins to pay restitution, jointly and severally, to various financial institutions who are currently the servicers of the loans as a result of the bankruptcy and closure of the now defunct, initial lenders.
MORAL
Commit fraud and spend the next 10 years in a federal prison. So far we have had better success. Did you note the loans were funded SEVEN YEARS AGO. So the prosecutors are still looking at 2004 loans.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
