the biggest source of fraud presented to arkansas land title association by lynn w. wilburn, wilburn...

The Biggest Source of The Biggest Source of FraudFraud

Presented toArkansas Land Title Association

ByLynn W. Wilburn, Wilburn Investigations, Inc.

At Peabody Hotel, Little Rock, AR

OnFriday, June 15, 2012

copyright 2012 Wilburn Investigations Inc.

Most frauds and losses suffered Most frauds and losses suffered by title insurance agencies are by title insurance agencies are initiated by or assisted by initiated by or assisted by someone within the agencysomeone within the agency

◦Partners/co-owners◦Employees ◦Family members◦Sometimes those that “assist” from within do

so through negligence, apathy or laziness rather than intent


FloridaFlorida

◦Agency is looking for a closer/escrow officer

◦Gets recommendation from former customer about a small title agency that is closing whose owner, Abad, is looking for a job

Decides to investigate the possibilities


Interview of AbadInterview of Abad

◦Abad’s small agency is too much responsibility, too much work, wants to close it and work for someone else

◦Abad does, however, have some loyal clients and would like to continue with them

◦Also the office lease Abad has can be assumed◦It’s a deal! Abad is hired and the lease is

assumed. Abad doesn’t even have to move. We’ll just turn his office into a branch of ours.


New branch office for the agency!New branch office for the agency!

◦Name changed◦Abad’s book of business continues and more

is added◦Abad’s old assistant is also hired◦New bank account opened for branch◦Life is good


14 months later…14 months later…

◦Audit cannot find the 200K wire transfer that should have funded a transaction that Abad closed 9 months ago

◦Software system shows the wire was received but it cannot be found in the banking information

◦Contacted Abad who says it is an error as funds went to wrong file and says it will be corrected that day

◦Next day, no correction has been done, manager calls Abad and is assured it will be done


And on the third day…And on the third day…

◦Still no correction done◦Manager calls branch but Abad is not there◦In fact, the assistant says that Abad’s desk was

cleared out last night and all personal effects are gone.

◦…this is not good


Crunch timeCrunch time

◦Audit determines there is no overage in any file that would account for the missing 200K

◦Abad is not answering cell or home phone◦Neither are the buyer, seller or realtor that

were involved in the questionable transaction


Perhaps we should review the filePerhaps we should review the file

◦The purported lender that was supposed to have wired 200K never heard of the buyer, seller or Abad…there was no funding

◦The real property does exist there was a closing and it really did have a prior mortgage

◦Surprisingly, however, the prior mortgage in that transaction was paid

◦Also paid were fees to a short sale company and some funds to the seller


Who ARE these people and WHERE Who ARE these people and WHERE are they?are they?

◦Realtor, it seems, is very busy as she is listed as the principal in 30+ “investment” type companies with interesting histories

◦Buyer has a legitimate reason for not returning calls or answering written inquiries- it’s hard to get mail or return calls from the penitentiary. He was under indictment at closing and plead

guilty and was sentenced after closing Conviction involved his role as a real estate

appraiser in mortgage fraud◦Seller had the same excuse, different penitentiary


Meanwhile, back to Abad…Meanwhile, back to Abad…

◦Ever the entrepreneur, Abad formed Short Sale Company (SSC) about 10 months ago (are you doing the math, yet?)

◦Just a coincidence that SSC is getting fees from the 200K transaction

◦Just a coincidence that buyer and seller both needed money for a criminal lawyer about the time the deal closed

◦Just a coincidence that some of the addresses used by realtor, buyer, seller and SSC were the same

(I don’t believe in coincidence)


Of course, there’s more…Of course, there’s more…

◦So far another 100K in missing funds has been identified

◦No one has any of the money left◦Buyer was hit with judgments and liens after

closing that included a lis pendens on the property, wiping out any recoverable equity

◦There was a lenders policy, the underwriter will pay, but they will go after the agent who hired Abad Agent for their loss. It’s doubtful the agent’s E & O will pay because it was employee fraud and, no, there was no fidelity bond


NONE OF THIS HAD TO HAPPEN!NONE OF THIS HAD TO HAPPEN!

A collective group of errors, bad decisions and negligence resulted in a 200K loss out of the agent’s pocket.


If the agency had done a pre-hire If the agency had done a pre-hire background investigation on Abad background investigation on Abad they would have foundthey would have found

A Bankruptcy in 2010 Multiple Judgments and liens A credit history of Charged off and Collection accounts


A check with Abad’s former A check with Abad’s former underwriter would have revealed..underwriter would have revealed..

Abad was cancelled for causeThe cause was fraud and failure to remit

premiumsAbad’s old escrow account was

short…..gee, do you suppose that might be where some of the 200K went?


Even just a local search of court Even just a local search of court records would have shown..records would have shown..

The bankruptcy and the judgments and the liens of Abad

The pending litigation that laid out the fraud Abad was accused of by the prior underwriter


Remember that the agent took Remember that the agent took the recommendation of an old the recommendation of an old customer that “had some customer that “had some problems”problems”

The “problems” were a 2000K real estate fraud


Agent “assumed” that all was well Agent “assumed” that all was well with his agency escrow account with his agency escrow account reconciliations but he did not reconciliations but he did not personally review thempersonally review them

Seems there had been problems with software compatibility for almost a year that his staff didn’t mention

As a result, it took 9 months for the problem to surface (should have been one day) and nothing was left to recover.


Rescue frauds take multiple formsRescue frauds take multiple forms

◦As with Maryland case, intent is to obtain equity, if any, and fees from victims

◦Others target victims for fees promising to find a helpful lender and/or purchaser


Investor fraudsInvestor frauds

◦Ponzi schemes touting high returns on acquisitions of distressed properties

◦Many of the Ponzi schemes own no real estate yet take in millions


Montana mess- just when you Montana mess- just when you thought you’d heard them all…thought you’d heard them all…

◦Agent who owns multiple agencies hires Ms. Igot Cha, a closer from CA to run a branch

◦After a few months the branch where Igot works, while profitable, was marginal so agent decides to sell it.

◦Igot goes to him and makes an offer to purchase with the help of her sister from CA, Ibenad Teaux. He accepts the offer.

◦The sale closes with a cashier’s check payment of 250K from Igot and Ibenad with Ibenad shown as the owner and Igot as the manager


Months go by and then…Months go by and then…

◦A local bank files a SAR (Suspicious Activity Report) on Igot which is picked up and investigated by the U. S. S. S.

◦LWW gets a call from an underwriter state manager saying that a Special Agent of U.S.S.S. had called her inquiring about an agent and threatened her with Obstruction of Justice charges if she divulged the inquiry to anyone including her own company.

◦ I contact Special Agent O. Verzelous and learned that he had so much stuff he didn’t know who the bad guys were

◦After some discussion and examination of documents, the truth came out


The real story…The real story…

◦Igot was running hundreds of thousands of dollars through her personal account which triggered the SAR

◦The funds were all coming from her recently acquired title agency

◦An audit revealed multiple unpaid prior liens◦Igot had recently purchased lakefront property

for her family, expensive horses, trucks, trailers, etc.


Oh, and remember the 250K Igot Oh, and remember the 250K Igot paid for the branch agency?paid for the branch agency?

She took that 250K (and a whole lot more) from the branch agency escrow account before she bought it

She managed that by not paying prior mortgages on deals she closed before the sale

And, of course, she was still making monthly payments on the unpaid prior mortgages


The aftermath…The aftermath…

◦Losses in excess of 1000k (500K after recovery of available assets) ALL ON THE AGENT

◦In addition to her former employer, Igot Cha also took her family down Her daughters lost their horses (and the trailer

and the truck) She and her family lost their house Her parents (who had partnered with her in the

lake property) lost their property Ibenad Teaux knew nothing of her “ownership” in

the agency Igot “purchased”. Seems Igot forged her name to all documents.

Ibenad lost her job, too. She’d moved her family from CA to MT for the “job” Igot promised her.


Again, none of this had to happenAgain, none of this had to happen

◦If the agent had done a background investigation on Igot when she was first hired he would have learned that Igot was on probation for a felony conviction for

welfare fraud in CA She was fired from her former employment in a

CA title agency for fraud◦If, at the time of sale of the agency, the agent had

questioned why ownership went into Ibenad’s name he would have learned that Igot could not get a MT insurance license because of her felony record.


Theft is a crime of opportunityTheft is a crime of opportunity

It is to your advantage to minimize that opportunity.

There really is safety in numbers. The more people watching the less likely a criminal act will occur◦Separation of duties- one who reconciles the

account should not have signatory privileges.◦Two signature checks


Other preventive measures…Other preventive measures…

◦Three way reconciliations◦Clear out dated funds◦Positive pay◦Check reviews for payees◦File reviews for questionable practices◦Enforced vacations◦Periodic updates on employees (credit,

criminal, judgments, liens, litigation)


Signs of trouble in an employee or Signs of trouble in an employee or partner or co-ownerpartner or co-owner

◦Drastic changes in lifestyle (up or down)◦Family crisis (illness; death; divorce or

separation; children or other family members in trouble)

◦Financial crisis- “If they can’t handle their own money why would you let them handle yours?”

◦Substance abuse and/or other addictions such as gambling

◦Desperate people do desperate things


And the best preventive measures And the best preventive measures are…are…

◦Follow the rules you have in place◦Educate your staff◦Exercise due diligence◦Communicate- with your employees, your

customers AND your competition


Thanks for listeningThanks for listeningcopyright 2012 Wilburn Investigations Inc.

The Biggest Source of FraudPresented by

Lynn W. WilburnWilburn Investigations, Inc.

1980 Post Oak, Suite R2BHouston, TX 77056

713.629.2222 F 713.629.2223www.wilburninvestigations.com

[email protected]

the biggest source of fraud presented to arkansas land title association by lynn w. wilburn, wilburn...

Documents

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seller copyright

abad doesnt

good copyright

manager calls abad

office lease abad

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possibilities copyright