The Miami Herald reported last week (See Article HERE) that the Broward Sheriff’s Office has arrested 7 people on more than 600 charges of grand theft and identity theft. The accused allegedly fraudulently took ownership of 44 homes in Broward County, including from the estates of 18 deceased people. The article did not contain a lot of detail but did say that at times, the accused would sell the same house to multiple people and collect payments simultaneously.

We know how easy identity theft is, but how can someone “steal” a house? Unfortunately, it also is too easy. I’m not pretending to know how this ring operated, but fraud and forgery are often simple crimes to perpetrate, particularly when the victim is in financial trouble. Foreclosure rescue scams are one way to fraudulently gain possession of a home. Here, the scammer will approach a debtor in or near foreclosure with promises to bail the debtor out. The scammer will either promise to take over the mortgage payments and allow the debtor to continue to live in the house for a small fee. Or, the scammer will make a small cash payment to the debtor and “pay off” the mortgage. In return, the debtor is to make payments to the scammer. In either case, the debtor is provided with a stack of papers to sign. Instead of a note and mortgage, the debtor signs a deed, but is not told that the house is being transferred.

The mortgage is never satisfied. The debtor makes the new lower “loan” payments to the scammer. Meanwhile, the scammer sells or mortgages the house and walks away with the cash. At some point the original lender, or a new lender or both, or a new “owner” come knocking on the door seeking possession of the house. The debtor thinks he has been paying the new loan and can’t understand why he is being forced out of his house.

Sometimes, in fact often, the scammer has made multiple loans or sales and never records the mortgages or deeds. The scammer has conspired with a title company to allow this to occur. The original owner has no clue that he has signed away ownership rights and soon finds himself in a battle with multiple people claiming ownership and mortgage rights. This scam isn’t really difficult to prevent. Simply read documents that you sign and understand what you are signing. Get a lawyer. The problem is that desperate people take desperate measures and are easy targets.

Forgery is harder to prevent. If someone forges a deed, power of attorney or mortgage it is very difficult to spot after the fact. The successful forger needs a compliant notary and witnesses or access to a notary seal. E-filing and E-recording makes it easier for forgers to succeed. Original documents are no longer presented when presented for E-filing or recording. Thus, a forger need only obtain a decent copy of a previously notarized and witnessed document and then copy and paste a forged signature onto a document. The forger will then have no contact with 3rd parties and the document will look appropriately executed of record.

Forgeries are a prevalent problem in real estate transactions and title companies continue to warn agents to be on the lookout for potentially forged documents, having suffered millions in claims over the last several years. A forged deed can be recorded on any one’s house without knowledge of the owner. The subsequent sale will likely be the one that is the problem. Watch for documents that are recorded where mortgages aren’t satisfied or the notary block is “off”. By off I mean several things: the block could be crooked, the font could be different than the rest of the document or have streaks in it, the county in the jurat might not make sense or the notary’s commission might be expired.

One other common scam is the sale or lease of a home over the internet via a Craig’s List like site, even VRBO or some other lesser known site to a foreigner. Sometime the home may be actually listed and shown on MLS or Zillow or other sites and sometimes the home is randomly selected. In either case, the scammer has just enough information to make it plausible that the lease or sale is real. A friend of mine one time answered his door to find a family of 4 from South America outside with all of their belongings. That had rented his house for 6 months over a site in South America because “Sister Kelly”, my friend’s wife, was on a humanitarian mission to Africa. My friend and Kelly had just married and this was Kelly’s house. That had recently listed the house for sale. Needless to say, Kelly was not a missionary nor in Africa. This family had been scammed and had lost their money. Fortunately for my friend and his wife, they were home when these people arrived. Had they not been home, they may have attempted to break in.

While the threat or someone stealing your house seems remote, it is more common that most would think. So many of these scams are hard to predict and prevent. However, the easiest marks are the financially distressed. As in any case involving fraud, read everything before you sign, as questions and contact an attorney.

The scammers and fraudsters are alive and active. The Boards of Realtors, Title Companies, Bar Associations and local and national news media have all written warnings.  Frequently.  I have even written about it (see my blog HERE). Yet, some people miss the warning signs and get caught.

Unfortunately, I am in the middle of one such situation – the other side. I represent the seller of the assets of a small business.  We closed 2 months ago.  As per the contract, $50,000 of the seller’s proceeds were held in escrow at closing by the buyer’s attorney to give the buyer time to determine whether any undisclosed liabilities pertaining the assets popped up.  The escrow was to last for 60 days.  10 days ago, on the 61st day, on behalf of my client, the seller, I e-mailed the escrow agent and requested that the escrow agent, buyer’s attorney, release the money to the seller.  I directed the escrow agent to wire the funds to the same account as used for closing pursuant to the same wire instructions.  The escrow agent responded shortly thereafter via e-mail that she would do so but that she would need both the buyer and seller to execute a release and that she would prepare and send one to me that afternoon.  The next day, Friday, the release was signed by both the buyer and seller.  The escrow agent indicated that she would process the wire.

However, I learned 5 days later that my client never received the wire. When the broker and I inquired, the escrow agent advised that the seller had sent a confirming e-mail to the escrow agent acknowledging receipt of the wire on the Monday following.  The client denied sending the e-mail.  The escrow agent produced the e-mail and it was clear that the e-mail had not come from my client.  The e-mail account had been spoofed.  We then asked the escrow agent where she had sent the wire.  It turned out that 90 minutes after my initial e-mail to the escrow agent, the escrow agent had received a second e-mail purporting to come from me, forwarding an e-mail from my client which attached new wire instructions.  These wire instructions were to a 3rd party bank account in New Jersey.  The e-mail address from me was not my address, though it looked similar to mine (used my domain name in the sender field but had a domain name).  The client’s e-mail address was similarly spoofed.  The grammar and spelling in my e-mail and the client’s e-mail was poor and inconsistent with all prior correspondence with the escrow agent.  And, the client’s purported e-mail instructions to me were time stamped 2 hours prior to my initial e-mail to the escrow agent.

The timing of the contradictory wire instructions should have been a big enough red flag to the escrow agent for her to call me to confirm whether I had in fact sent those instructions. But, the e-mail addresses, the grammar and spelling, the time stamps on the e-mails, the 3rd party to receive the wire all should have given pause to the escrow agent.  Nevertheless, she wired the money to the wrong account.  She is a victim of the scam and is now responsible for making my client, the seller, whole.

This is a classic example of a common e-mail/wire scam. It could have been easily avoided with simple attention to detail and one phone call to verify the new wire instructions.  Best practice requires those who are responsible for wiring money to verify ALL wire instructions by telephone follow up, not just revised wire instructions.

At this point, the escrow agent, an attorney, will be responsible for making her trust account whole. While her malpractice policy may cover the shortfall, settlement might take some time.  Though this is clearly a theft of funds, it remains to be seen whether law enforcement will be able to track the perpetrator or whether law enforcement has an interest in the case.  Though $50,000 is a lot of money to the victim, wire fraud cases don’t generally get the attention of federal law enforcement until there are a lot more zeros involved.

Hopefully, a lesson has been learned. Verify all wire instructions by confirming on that antiquated device – the telephone!

Over the last year or more, we have been bombarded with news about Hillary Clinton’s use of an unsecured e-mail server, Russian hacking of the DNC and other servers, and Wikileaks and its release of confidential, perhaps classified, documents. We don’t have to get into a political debate to discuss what is a really scary issue for everybody; if computers can be breached at the highest levels of government, how secure are we ordinary folks?  The bad news keeps coming in with data breaches at financial institutions, retailers, hospitals and airlines.  The list goes on.

Those of us in the real estate industry are all too familiar with the potential for fraud and computer breaches. There have been many scams involving real estate closings over the last few years.  Many have involved attempts, countless successful, to misdirect wire transfers of loan or closing proceeds.  This scam, unfortunately, is too easy to perpetrate.  Sometime just prior to closing, usually at the last minute, the closing agent receives an e-mail changing the wire instructions for disbursement of the seller proceeds.  The e-mail appears to come from someone the closing agent has been dealing with, like the broker.  The wire is sent, the seller never gets its wire and the closing agent has been scammed.  But, so has the broker.  Somewhere along the line, the broker’s computer system has been hacked allowing the thieves to know that a closing is about to occur, who the parties are, who the closing agent is and enabling the thief to spoof the broker’s account.  The closing agent thinks he/she is doing the right thing having dealt with the broker throughout the process.  Was the closing agent wrong to trust the e-mail?  She thought the e-mail was from the broker.

The roots of scams like this go back to the e-mails we used to get (and sometimes still get) from Nigerian Princes needing help moving large sums of money to the United States or from attorneys for long lost deceased relatives who have left us large inheritances. Attorneys have been targets of “new client” scams.  A lawyer I know accepted a closing from a broker he regular worked with to handle a large residential closing.  The client was located in Great Britain and sent a cashier’s check drawn on a Canadian bank to cover both the initial deposit and the additional deposit, about $150,000 in total.  The lawyer deposited the check in his trust account.  Two days later the client called and asked that $60,000 be wired to Japan to cover another deal.  Since the remaining funds still covered the initial deposit and the additional deposit wasn’t due for a few weeks and the money was the client’s, the lawyer felt that he was obligated to do as instructed.  He checked with his bank to make sure that the check had cleared.  The bank said that it had and the lawyer wired the funds.  The next day, the bank called to say that the cashier’s check was a forgery and the funds were not in the account.  Was the lawyer wrong to trust the client and follow his instructions?

My kids use Venmo all the time to transfer money among their friends. When I send them money from time to time, I write checks.  They tease me telling me how old fashioned I am and how much easier it would be if I just got Venmo.  But I see fraud and fraud attempts all the time.  Should I trust a new technology for small transfers or will I be giving access to my bank account to countless unknown persons?

In today’s day and age, trust does not go both ways. Those who want to defraud you are extremely sophisticated and have the means to do so if you aren’t extra diligent.  When we wire proceeds at closing, wire instructions must be verified over the phone by a phone call that we place to the person providing us with the instructions.  If the instructions change, we require double verification.  We rarely accept funds for closing any more by any means other than wire.  If we don’t know you, there is no exception to the rule.

It is not a matter of trust anymore. The world is too big, technology is evolving too quickly.  In our business, we have to be diligent to protect ourselves and our clients.  And, if you think this way in your professional life, why would you think this way in your personal life as well?


        Much has been made over the last couple of weeks about the $185 million fine Wells Fargo is facing following the wide spread fraud found by the Consumer Finance and Protection Bureau (CFPB). For at least the past 5 years, Wells Fargo employees have opened 2 million customer and credit card accounts without customer authorization using fake e-mail addresses and other false information. Customers have been unaware of these new accounts until they received late notices and charges. Wells Fargo has often reported these “late payments” to credit reporting agencies, adversely affecting consumers’ credit.

             $100 million of the fine was levied by the CFPB, the largest fine in the agency’s history. In addition, the Office of the Comptroller of the Currency fined Wells Fargo $35 million and the City and County of Los Angeles, which instituted the initial investigated, will receive $50 million. The bank will also be required to pay restitution to affected customers.

             The fine, while large, is only a minor inconvenience to Wells Fargo, at least from a monetary point of view. Carrie Tolstedt, the head of the bank’s Community Banking Division, recently announced her retirement from the bank as of the end of the year. Her current salary has been reported to be $1,700,000 per year. But more importantly, she will receive a golden parachute valued near $125 million. Though Ms. Tolstedt was not singled out by the CFPB, she has been “credited” with helping the bank achieve its internal sales goals. In fact, John Stumpf, Wells Fargo CEO has called Ms. Tolstedt the “standard bearer” of the Wells Fargo culture. She was responsible for creating sales goals and incentives for employees which has been criticized as the prime reason for the bank’s systemic fraud. A $185 million fine is nothing when the person likely responsible for the bad behavior is being paid an amount equal to almost 2/3 of the fine.

             The bank has been aware of the fraud for over 5 years and has been firing employees engaged in the practice. Over 5,300 employees have been fired in that time. However, the bank took no action during these 5 years to stop the practice or change its ways. The investigation began in 2013 and again the bank took no action. Finally, with Ms. Tolstedt’s recent retirement announcement, the bank has announced that it will eliminate sales goals and incentives effective January 1, 2017. This doesn’t sound like the bank is taking the fine and enforcement action very seriously.

             Neither Ms. Tolstedt nor CEO Stumpf, nor any other individual associated with Wells Fargo is the subject of an investigation or disciplinary action by the CFPB or any other investigatory agency at this time, at least not publicly announced. Those involved in these deceptive practices appear to walk away without responsibility or liability. In fact, Mr. Stumpf has recently been re-appointed to the Federal Advisory Council, a 12 member board trusted to give guidance to the Federal Reserve Board of Governors. Makes you wonder about US monetary policy.

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    Welcome to Assouline & Berlowe’s Florida Real Estate Law and Investment Blog with news, insights, and commentary for investors, developers, and their advisors.


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