So You Want To See Your Name In Print?
A bankruptcy court found the debt of a lien in favor of Fidelity against a former employee non-dischargeable. After trial, the bankruptcy court found the escrow officer used her position within the Company to commit embezzlement and fraud. She committed these acts against the Company and her customers.
In 2002, Fidelity hired Kimberly Ann Gillaspie as a branch manager and escrow officer. During her employment, Gillaspie opened a buyer's real estate consultant company called Pueo Real Estate Services Unlimited. After management learned of her new company and its overlapping business with Fidelity, they counseled Gillaspie against working on Pueo business during Company time. Gillaspie promised she wouldn't. The management team began to look at Gillaspie's expense reports and branch expenses more closely. The management team found an expense report with falsified expenses and immediately terminated Gillaspie.
After Gillaspie's termination, the management team audited Gillaspie's closed escrow files. Irregularities were found in two of her files.
In one transaction a holdback of funds in the amount of $11,000 was disbursed to Pueo Real Estate Services – Gillaspie's company – without instruction from either principal. Later it was discovered the funds were sent from Pueo Real Estate Services to the buyer. In actuality, the dispute that caused the holdback of funds had been resolved by the seller. It was the seller that was due the funds, and upon discovering the misappropriation of funds, Fidelity sent the seller the money.
In the second transaction Gillaspie disbursed $19,837 to the County Tax Collector to pay the property taxes at close of escrow. About a year later the tax collector refunded the money back to escrow because the taxes had already been paid. Months later a $9,000 refund was disbursed to Pueo Real Estate Services. Then within weeks $9,500 of the refund was disbursed to one of the real estate agents in the transaction. A few months later the remaining $1,337 was disbursed to the same real estate agent. Fidelity stepped in and refunded the $19,837 to the charged party in the transaction, making them whole.
Wait…it gets worse! After firing Gillaspie, Fidelity received a claim from a lender she had borrowed money from. The lender claimed she promised them a first priority mortgage and that she had failed to record the mortgage. The lender further claimed that Fidelity was responsible because Gillaspie used her position with Fidelity to gain the lender's trust, and arranged the closing through the Fidelity office she managed.
The loan was in favor of Grunewald Equity Funding, Inc., (a private party lender) in the amount of $140,000. Gillaspie had signed the mortgage and then told Grunewald Equity Funding she would set up the recording of the mortgage, for which she charged $25.
Shortly after closing, the lender received a copy of the cover sheet of the mortgage with a certification that the mortgage had been recorded with the Bureau of Conveyances. As it turned out, the certification stamp was falsified. The mortgage was not recorded and the certification stamp was taken from an unrelated mortgage between different parties and secured by an entirely different property. Gillaspie concocted a false cover page by cutting and pasting a photocopied certificate from another mortgage!
After Gillaspie fell into default in her obligations to Grunewald Equity Funding, the lender ordered a title report and learned its mortgage had not been recorded. Grunewald Equity Funding made a claim against Fidelity based on Fidelity's failure to record the mortgage. Fidelity investigated the matter and paid $158,412.81 to Grunewald Equity Funding. In exchange, Grunewald Equity Funding assigned its note and mortgage over to Fidelity.
At the time, Gillaspie already had a first mortgage with American Savings Bank even though Gillaspie represented to the lender its lien would be in first position. Oddly enough, after closing on the Grunewald Equity Funding loan, a release of the American Savings Bank loan was recorded in the Land Court. Shortly thereafter, MERS, acting on behalf of American Savings Bank, filed a petition in the Land Court alleging the signature on the release was forged! The Land Court granted the petition and removed the forged release of the mortgage.
More than likely Gillaspie forged the mortgage release. She was allegedly having financial difficulties at the time. Fidelity fired her about two months before the release was recorded, depriving her of a source of income. In addition, she fell into default on the new mortgage loan and a check she wrote to the lender was returned for insufficient funds. Ultimately, Gillaspie filed for bankruptcy.
Moral of the Story:
As a result of Fidelity's findings, Fidelity's top management contacted the local authorities as well as outside counsel. They entered a petition for restitution in the Bankruptcy court. Fidelity sued Gillaspie in Federal Bankruptcy court for full restitution of its losses. The Bankruptcy judge signed a judgment for $231,330.92 together with interest, plus the legal costs of Fidelity.
In the Findings of Fact and Conclusions of Law documented by the U.S. Bankruptcy Court in Fidelity's case against Gillaspie it stated "Ms. Gillaspie used her position as branch manager, escrow officer and supervisor of the other escrow officers in Fidelity's office to give these improper transactions a false patina of regularity, in order to conceal her misconduct."
This story sends a message to all Fidelity employees contemplating embezzlement, or using his/her position within the Company to defraud the public, that those actions will not be tolerated. Not only do those types of actions call for immediate termination, but the Company will prosecute to the full extent of the law.