The Secrets to the Scheme

HANK PHILLIPPI RYAN:  Did you see the movie THE BIG SHORT? It was brilliant, and terrifying, and fascinating. But if I described what it was about, nefarious and illegal practices in the derivatives market,  you might wonder how that could be such a compelling movie. (Plus, isn’t that problem over?)  (Probably not.)

 Full disclosure: That’s a little bit like what the wonderful Lisa Black’s agent worried about when Lisa described her new book. When her agent read it—whoa. She changed her mind.

ROGUE’S GALLERY

 Players in the Housing Bust

  By Lisa Black

My new book, Perish, opens with a crime scene both lavish and gruesome. In a luxurious mansion on the outskirts of Cleveland, a woman’s body lies gutted in a pool of blood on the marble floor—Joanna Moorehouse, founder of Sterling Financial. Its offices seethe with potential suspects, every employee hellbent on making a killing. When another officer uncovers disturbing evidence in a series of unrelated murders, the investigation takes a surprising detour. But how did the beautiful Joanna accumulate such wealth in only a few short years? And why am I, someone whose eyes would glaze over if you mentioned the word ‘business’ come to write such a book?

Well, because on several lists over the years, Cleveland, Ohio and Cape Coral, Florida, led the country in foreclosures. They are also the only two places I have ever lived. I assure you this is purely coincidental…but it did prompt a sudden interest in shady mortgages.

         If you’re a relatively honest person and/or not versed in white collar crime, you may wonder how someone made money by buying a house and then abandoning it. Short answer: you can’t. Not unless you have some help.

         The scheme generally requires three people:

1.    A buyer, who can produce documents showing fictitiously inflated income and bank accounts. In fact, an entire fake identity would be helpful.

2.    An appraiser, who can inflate the value of the house out of proportion so that a large bank loan seems reasonable. Sometimes an innocent but cooperative seller can be talked into inflating the price after the buyer convinces them they need the extra loan money to improve the property. If the seller isn’t quite so naïve, the buyer can simply alter the settlement statement before they send it to the bank.

3.    It helps to have a conspiratorial or at least cooperative title company that won’t ask too many questions or wonder why this same buyer or holding company has been purchasing so many properties. 

4.    It also helps to have a mortgage broker on board who can funnel all these fraudulent documents without appearing to profit from any of them, other than normal fees. In reality, they’re a partner and taking a cut.  

The shady buyer contracts with a seller, gets a loan from the bank for far, far more than is needed to purchase the home, pays off the seller and splits the rest of the loan money among the co-conspirators. They stop making loan payments and walk away, either declaring bankruptcy or simply disappearing. And that’s how you make money by buying houses you don’t want. 

Of course, eventually the bank notices that they’re getting stuck with a bunch of foreclosed properties when at the same time they often were dealing with their own fallout from playing too fast and too loose for too long. Or an honest employee or loan officer or title company or seller figures out that one or two documents aren’t adding up. Pull one thread, and things start to unravel, which is why many of these fraudsters are only now getting out of jail.

To be clear, frauds like these didn’t cause the housing crisis ten years ago—that was caused largely by skyrocketing property values and indiscriminate lending—but they exacerbated an already difficult situation.

In Cape Coral one of our police officers, the son of our well-liked chief, went to jail for just such a conspiracy. The total funds involved totaled over four million dollars.

In Cleveland, a mortgage fraud task force led to hundreds of indictments:

Uri Gofman bought more than 450 homes, pretended that improvements had been made, refinanced based on the new inflated value and resold the homes to people who were not qualified. He was one who had a mortgage broker and a title company on the payroll. He left jail in early 2017. His broker is still inside.

 Kimberly Wilson was a broker who found the straw buyers herself and worked with her husband and an appraiser to inflate the values for loans. She made a deal to testify against the appraiser, Lavon Ruderson, to get 18 months while Ruderson got five years.

Stephen Holman, a loan officer, worked with his brother to sell properties with no down payment and other assorted shadiness. He got twelve years.

         Thomas France, once one of Ohio’s most successful, threw that away on a series of frauds as outlined above which netted him a 10 year prison sentence. For using the same technique, Fred Loewinger, Clarissa Foster, and Corritha Wells each served 6 years.

         Blaine Murphy used fake names to buy 96 homes, pretending to fix them up before selling them to other buyers for a profit. It was like flipping, but without the flipping part, and the fake names kept irate buyers and banks from coming after him—at least for a while. He got two years.

         Anthony Jerdine and Susan Alt, separately, went for scheme quality over quantity. He bought a home for $700K, faked an appraisal and resold it the same day for two million. Jerdine got eight years in the federal pen. Susan Alt served six years.

      

   When I sent this book to my agent, she worried that it might seem dated. She asked if predatory lending was really such a problem any more—reforms were supposed to have closed loopholes and opportunities for such shenanigans. But I see commercials for quick and easy mortgages, I get phone calls all the time offering business loans that I never asked for, and I worry. We learned a lesson, but did we learn it well enough?

         What do you think?

        HANK:  And don't you get those things in the mail that look like checks? Wonder how many people cash those?  Have you ever wondered about real estate schemes--or had any in your life?

***********************

Lisa Black has spent over twenty years in forensic science, first at the coroner’s office in Cleveland Ohio and now as a certified latent print examiner and CSI at a Florida police dept. Her books have been translated into six languages, one reached the NYT Bestseller’s list and one has been optioned for film and a possible TV series. 

www.lisa-black.com

@LisaBlackAuthor

The Good Son says: Trust But Verify

HANK PHILLIPPI RYAN:  

Oh, my goodness. Pull up a chair, and read this. You may not even know you need to know this. And even if you do--read it again. We are so grateful to Jim Jackson! 

And all hail! He is now officially the president of the Guppies, and he has revealed to me that he is having his granddaughter Photoshop a picture of him with bouffant hairdo and tiara, but says:  "alas, it is not yet available to share."

I'm not sure "alas" is the word I would choose. But anyway:

TRUST BUT VERIFY

   By James M. Jackson

 When my father died nearly three years ago, my mother asked me to take over the job of paying her bills and investing her assets. She had friends whose children did that for them, and she thought it would be a good idea. I said, “Sure.”

Mom completed the forms necessary to allow me to represent her with the mutual fund companies, brokerage firm, and banks that held her assets. I set up the accounts so I could handle things online, since I don’t live near my mother. I even opened a separate bank account so Mom could make ATM withdrawals, and if she lost or had that card stolen, the damage would be small, since I do not maintain a large balance in that account.

Aren’t I the good son?

According to federal officials, one in five elderly Americans reports being victims of financial exploitation. That’s 20% of our mothers and fathers – or ourselves, either now or in a few years. Another survey, this of banking officials, indicated half have dealt with suspected cases of elderly financial abuse.

Since the start of this year, more than 400 cases of elder abuse have been reported to the Tulsa Police Department, the vast majority dealing with financial exploitation. Annualizing and projecting that across the United States suggests there are well over a half million reported crimes for the year (and untold unreported crimes).

These crimes fall into two categories. First are those strangers perpetrate: internet and phone scams designed specifically for the elderly, and high pressure sales techniques especially effective for those of us who do not process information as quickly as we once did, or who sometimes become confused.

Morally worse are crimes committed by people trusted by the victim. That includes professionals with power of attorney or people with control over someone’s financial assets (as I do with my mother). Often these trusted individuals are family members.

How would anyone know if I am ripping off my mother? If I were trying to steal her money, I would go through the exact same procedures, have her sign the exact same forms. She trusts me; she’ll sign pretty much anything I tell her to (although in fairness to her, she always asks me what’s she’s signing, but I could lie.)

Last month I happened upon a news story from Panama City, Florida. Police charged a man in stealing his disabled mother’s car, pawning her jewelry, draining her bank account, and cashing her retirement and Social Security checks—oh, and leaving her and her animals to starve to death. That’s awful, isn’t it?

But no one knew until the mother was already dead.

This is an extreme case, but often family abuse (physical or financial) occurs when the elderly person either moves in with family members or a family member moves back home or after someone assumes responsibility for the person’s financial assets.

How to protect a family member (or yourself)

Ronald Reagan popularized the phrase “Trust but verify.” When it comes to financial assets, that policy should apply to anyone with the power to invest or spend (whether professionals or family members). If a professional advisor is involved, have a second set of statements sent to a family member (This should be easy to set up; if it is not, consider it a warning sign). I set up a Dropbox account I share with one of my sisters into which I periodically upload Mom’s financial statements. My sister can verify how I am spending Mom’s money and raise questions should something look suspicious.

My mother is still independent and shops using credit cards. All major cards, and many store cards, allow email alerts about certain kinds of charges. I have Mom’s set (and my own, as well) to alert me of any spending. Thieves often make a very small charge to determine if the card is good before going on a spending spree. If there is any charge I don’t recognize, I give Mom a call. This will also provide an early warning system on my mother’s mental processes should she start to slip.

Use the free annual reports from the three credit agencies to monitor credit. Set it up so every four months you get one of the free reports. If you have reason to believe that a parent has provided their social security number or date of birth or account numbers over the phone (no one should), you can set up a credit freeze so no one can set up a new credit card in the person’s name.

Do not sign anything you do not understand. I recently became aware of an elder law attorney who (1) set herself up as the executrix of the will (with compensation) and (2) attempted to slip into an estate plan the ability for the executrix (her) to change beneficiaries.

Remember, the old aphorism that if something “sounds too good to be true, it probably is” remains valid. Do not invest in any kind of security you do not fully understand. As we grow older many of us worry more about whether we’ll run out of money (regardless of our actual reality) and become more susceptible to investment schemes that enrich the seller at our expense because they are sold to “protect” our assets or money we want to leave to our heirs.

Develop an inventory of items such as jewelry, antiques, etc. that someone with home access could steal or pawn. Periodically make sure everything is still present.

If you have an elderly relative who lives alone, make sure someone makes daily contact. Often two friends can have a mutual agreement to call once a day. That’s all that would have been required to save that Florida disabled mom’s life.

Nothing can prevent 100% of elderly financial abuse, but these few simple steps will go a long way in protecting those we care about (and that includes ourselves, right?).

HANK: SO wise, Jim! And Jim will be here answering questions..so fire away. Well, first go check out his new book ANT FARM. And then ask questions.

 

James M. Jackson authors a series featuring the financial crimes consultant Seamus McCree. ANT FARM (2015), a prequel to BAD POLICY (2013) and CABIN FEVER (2014), recently won a Kindle Scout nomination. Ebook published by Kindle Press; print from Wolf’s Echo Press. BAD POLICY won the Evan Marshall Fiction Makeover Contest whose criteria were the freshness and commerciality of the story and quality of the writing.

His website is http://jamesmjackson.com where you can find more information about him (including social media links) and his books (including purchase links).

ANT FARM

In this thrilling prequel to Bad Policy and Cabin Fever, when thirty-eight retirees meet a gruesome end at a picnic meant to celebrate their achievements, financial crimes consultant Seamus McCree comes in to uncover the evil behind the botulism murders.

But the deadly picnic outside Chillicothe, Ohio, isn't the only treacherous investigation facing Seamus; he also worms his way into a Cincinnati murder investigation when the victim turns out to be a church friend's fiancé.

While police speculate this killing may have been the mistake of a dyslexic hit man, Seamus uncovers disturbing information of financial chicanery, and by doing so, puts his son in danger and places a target on his own back. Can Seamus bring the truth to light, or will those who have already killed to keep their secrets succeed in silencing a threat once more?

link for ant farm: http://jamesmjackson.com/Novels/ant-farm.html

website link: http://jamesmjackson.com