Embezzlement Is Never Justified
By Lisa A. Tyler
National Escrow Administrator
It is no secret the Company and the title industry as a whole have diminished due to a down market. In some markets Our Company has been able to bring back unemployed escrow and title professionals as temporary staff to provide coverage during vacations, illness and other absences of full-time staff. This type of loyalty to our former employees has proven to be a long-standing win for the Company as well as the employee. The Company has the benefit of hiring a temporary employee who has experience with the production systems, phone systems, Company policies and procedures as well as familiarity with the staff; while the employee gains the benefit of having a well-paying job. That act of loyalty wasn't enough for one temporary employee, though. Read the story entitled "Embezzlement Is Never Justified" to find out how a temporary escrow employee stole money to supplement her income.
Filing a false lien is considered the "Slander Of Title." False claims damage the reputation of the property interests to the public. It can also be considered a common law fraud as misrepresentation of a material fact intended to induce justifiable, detrimental reliance and causing damages. Read the article "Slander Of Title" to find out how an individual extorted money from REO bank-owned properties by filing fraudulent Mechanic's Liens.
In the story entitled "$1.5M Fraud Scheme" a title examiner discovered a forged deed and put a halt to a transaction in which two brothers attempted to sell a property out from under its true owner. The incident was reported to the homeowner, who in turn reported it to the district attorney's office. The brothers were later investigated and charged with 106 felony counts, including identity theft, forgery, grand theft and rent-skimming.
Did you notice on the hard copy version of Fraud Insights we've moved the placeholder for your business card from the back page to the front page? We want to keep you top-of-mind with your customers and what better way to do that than by sharing the intriguing stories from Fraud Insights with them.
Embezzlement Is Never Justified
On Thursday, February 17, 2011 Amy Levy, a supervisor from Fidelity's call center support, received a call from an escrow clerk for one of Fidelity's operations regarding its escrow production system. The escrow clerk stated she was trying to return funds to a buyer on a file that closed in June of the previous year and had a check in her hand from the tax collector. She said she cancelled the check and was attempting to issue a refund to the buyer, but the file balance showed a shortage. She wanted Fidelity's call center support to re-balance the file so she could disburse a refund.
Amy pulled up the file in question in the system and reviewed the check register. She noticed there was no check cut to a tax collector, but the fee ticket to the Company had been posted and voided four times. Amy then realized the check the escrow clerk was referring to was disbursed to the city for transfer tax, however, that check was cancelled in the system six months ago. The register showed that the city transfer tax check in the amount of $398.75 was voided on August 19, 2010 and on August 20, 2010 an outgoing wire in the same amount was issued to a name that did not appear to be a party to the escrow.
Amy also noticed a receipt posted to the closed file in the amount of $526.50 on August 19, 2010 and another outgoing wire issued to this same payee that was not a party to the transaction, on August 20, 2010 in the amount of $526.50. The register reflected a check in the amount of $526.50 payable to Fidelity National Title in November, 2010.
Amy still had the escrow clerk on the line, but her suspicions continued to grow. She told her she would have to re-balance the file and call her back. Amy's concerns were as follows:
- The escrow clerk said she had a check in hand to a tax collector that she cancelled, but there was no check issued in the file to a tax collector other than for city transfer tax and no check had recently been cancelled
- The fee ticket had been posted and voided four times in four different months
- The file contained a voided check for city transfer tax without a replacement check; so was the transfer tax paid?
- Two outgoing wires sent to a party unrelated to the transaction
- The wires were in small amounts of $398.75 and $526.50, which is highly unusual since outgoing wires are typically for thousands of dollars
- A check was cut to Fidelity National Title when fees are typically posted by fee ticket, not by check
Amy was extremely concerned so she escalated her findings to Sue Dahlstrom in the National Escrow Administration department for further review – who shared all of Amy's concerns. She reviewed the outgoing wires and noticed both wires were sent to the same account at The Golden 1 Credit Union™. She saw the voided fee ticket and a voided disbursement to the buyer in the transaction. Sue suspected the escrow clerk may have been attempting to disburse more out of the file.
Instead of re-balancing the file, Sue contacted the escrow administrator for the local operation and shared the details Amy had discovered. Sue faxed the check register and outgoing wire forms to the administrator for his/her review. The local administrator and county manager called Sue for more details. Sue relayed the story to them, starting with the call to Fidelity's call center support to help balance a file to issue a refund to a buyer.
During that conversation Amy and Sue's suspicions were confirmed. The county manager and escrow administrator stated the escrow clerk's married last name was the same as the payee receiving the wire transfers. The escrow clerk went by her maiden name at work because that is how she is known to colleagues and customers. They thanked Sue for making them aware of the situation and said they planned to confront the escrow clerk with the findings that very day.
Before meeting with the escrow clerk, the county manager and escrow administrator did some more digging because they realized the escrow clerk worked in multiple offices as an escrow assistant for years, then was laid off when the market turned. She was brought back to the Company as a temporary employee during the past 11 months. The local administrator feared the escrow clerk may have been stealing small amounts all along. They ran a report of all outgoing wires to The Golden 1 Credit Union™ under the same account number and discovered almost $42,000 in outgoing wires to that account!
Armed with the evidence, the county manager and escrow administrator met with the escrow clerk. They shared the facts and she agreed to sign a full confession of her illegal acts. During her termination meeting she showed no remorse. In fact, the escrow administrator said she seemed to feel justified in embezzling money from the Company and others, since the Company had laid her off previously. She also stated her husband lost his job and her paycheck wasn't enough to meet their monthly expenses now that they had a new baby.
After terminating the escrow clerk, the county manager and escrow administrator contacted the local police department to file a police report. They fully intend to prosecute her, both to prevent her from working in the industry again and to obtain full restitution for the money she stole.
Amy Levy has been employed by the Company for more than nine years. It is her experience that taught her to recognize defalcations and it is her integrity that forced her to do something about it. Because Amy recognized the tell-tale signs of the theft, the Company was able to stop the escrow clerk from taking any more money, reconcile every file she touched to make sure the principals did not lose any money due to the theft. Equally important, they were able to prosecute her to the full extent of the law to prevent future fraud. For Amy's expertise and high degree of integrity in catching the defalcation the Company has rewarded her $1,000.
Moral Of The Story
Embezzlement is never justified, no matter the circumstances. And, even if the reasons for embezzlement were justifiable by the thief, the monies will still have to be fully repaid. The Company will present the former escrow clerk with a demand letter for full restitution. The Company will involve local police and legal counsel to ensure all amounts are recuperated.
Slander Of Title
Unfortunately, REO properties are a prime target for fraudulent Mechanic's Liens, since it is not uncommon they might need some repairs or work done and since there are so many different people involved in rehabilitating foreclosed properties for eventual resale.
An LTIC office in the greater Los Angeles County area of Calif. had a sale transaction wherein Federal National Mortgage Association (FNMA) was the seller as the property was an REO bank owned property. The title report reflected a Mechanic's Lien payable to Anna Moskovyan for painting. Moskovyan was contacted for a payoff statement and lien release. The payoff amount was shown on the settlement statement, however, FNMA stated they were not aware of any work being performed on the property by Moskovyan. Since this transaction was so close to closing, FNMA approved the payment and did not dispute the invoice or lien. Moskovyan came to our offices and picked up her check in exchange for a release of her lien.
Shortly afterwards Paula Hirn, of our Lawyers Title Insurance Co, Riverside, Calif. office noticed Mechanic's Liens appearing on all the title reports wherein FNMA was the seller. Paula did some further investigation and discovered, upon closer examination, it appeared the lien was exactly the same – simply recorded over and over again against different REO properties owned by FNMA. This is when the following warning was sent to her co-workers:
| ||Mechanic's Liens were recorded on FNMA properties in the Los Angeles area. The exact same lien, for the exact same amount, for the exact same service, was found recorded against several properties. We've checked with FNMA and the Listing Agent and this woman who signed this Mechanic's Lien had not been contracted with to provide any services; the properties in question were not painted and were never scheduled to be painted. If you receive a title report or a supplemental report with a Mechanic's Lien, let us know immediately so that we can get this addressed before you try to record. The agent in this particular case has had six of his FNMA listed properties compromised in this manner, and he has no idea who this person is.
| ||We are not sure how wide-spread this is and whether it has gone to surrounding counties, however, it will likely disrupt recordings in the Los Angeles County area for a while, and we need to keep our eyes open for them.
Once our offices confirmed FNMA had not contracted with Moskovyan to perform work on its properties, the operations obtained an indemnity on each transaction in which a fraudulent Mechanic's Lien was filed with the county recorder and proceeding to close without paying the lien holder. The listing agent reported the fraudulent liens to the police department, and a case number was assigned.
If this lien or similar liens appear on your title report, do not take the lien at face value. Do some investigating and contact the seller and listing agent to make sure any lien affecting a property is, in fact, a true lien and not fraudulent. This could end up saving the customer and Our Company from a potential lawsuit.
The sad part of this tale is how it illustrates anyone can take a document to the County Recorder's office, pay the appropriate recording fee and have it recorded against any property. The county does not check for validity of a lien, just that the document is in the proper format. The integrity of our public records system is broken down with every fraudulent document recorded. This only emphasizes the importance of title insurance and what a vital role Our Company plays in the American dream of home ownership.
$1.5M Fraud Scheme
During a routine title exam, Lisa Hernandez uncovered a forged quit claim deed. After a more thorough investigation, Lisa discovered the deed was one of many recorded by two brothers who were recently charged with a $1.5 million fraud scheme.
Lisa Hernandez works for Chicago Title's Inland Empire operation as a title examiner. She was examining the chain of title for a residential sale of property in San Bernardino County, Calif. with a $350,000 sale price when she came across a deed she was sure was forged. These were the signs that made her question the deed:
- To avoid the payment of transfer tax, the transfer was declared a "gift" on the face of the deed
- It was an uninsured deed and not recorded by a title company
- The deed was handwritten
- The handwriting matched the signatures on the document, including the signature of the notary
- The notary stamp reflected the notary's last name as "Desahagun" however the notary clearly signed his name as "Deshagun"
- The notary's name was listed on the office postings as a suspect and all documents containing the notary's stamp should be scrutinized
- The grantor's signature did not match signed documents recorded previously in the chain of title
- The "when recorded mail to" name and address was neither the grantor's nor the grantee's
- Lisa ran a search on the grantee's name, David Zepeda, and found approximately 70 other properties in which he was suddenly the owner
Lisa brought the deed to the attention of the advisory title officer and together they called the escrow officer to provide their detailed findings and to notify the escrow officer Chicago Title would not be insuring this transaction. The escrow officer in turn called the property owner to find out if he in fact executed the handwritten deed. It turns out he did not. Lisa was right, the deed was a complete forgery and the true owner stated he had no intentions of selling his property.
The property owner then reported the incident to the District Attorney's office. As it turned out, he was not the only victim of David Zepeda. The District Attorney's office confirmed that David Zepeda and his brother, John Zepeda, were being investigated as part of a ring of suspects involved in a foreclosure scheme known as the David Zepeda Trustee Foreclosure scam, which so far has claimed hundreds of victims in San Bernardino County, Calif.
Four months later the district attorney announced in a press release the San Bernardino County Recorder's Office, among others, assisted the investigators with the district attorney's investigation by identifying quit claim deeds that had been fraudulently recorded at their office by the suspects. Their investigation disclosed that two of the San Bernardino County properties actually belong to law enforcement officers, who were unaware their names had been forged on quit claim deeds!
The two brothers were then charged with a $1.5 million foreclosure fraud scheme in which they stole the stamps of several notaries and forged hundreds of deeds across several Calif. counties.
The authorities said the Zepeda brothers identified properties in foreclosure and acquired title either by forging a quit claim deed or convincing the homeowners to transfer the property to them by promising the homeowner they would help them avoid foreclosure. Once they acquired title, the Zepedas would either try to sell the property out from under the true owner, or if the property was unoccupied, would rent it out and keep the rent payments. In order to forestall the foreclosure process and extend the period over which they collected rent or attempted to sell the property, the brothers filed bankruptcy petitions and multiple deeds.
Money was diverted away from the lenders and owners and into accounts where the cash was used to support the defendant's lavish lifestyle. During a search of the brother's residence, investigators seized un-cashed checks, gold watches, jewelry, cash, silver coins, gold troy ounces and a Bentley. Notary stamps, forged deeds and weapons were also found during the search.
By reporting the forged deed to her advisory title officer and to the escrow officer, and for refusing to insure this transaction, Lisa Hernandez received a $1,000 reward. Lisa's discovery provided key evidence in the case built against the Zepeda brothers, which was reported by the true property owner to the district attorney's office. The Company deeply appreciates Lisa's detection skills, her instincts and for protecting the Company from a $350,000 claim.