Last Friday a local Attorney was sentenced to 30 months in jail for defrauding at least a dozen of his clients. I have chosen to write a blog about this is for four reasons,
- First, because I personally know this Attorney and his family.
- Second, because it involves Real Estate transactions
- Third, to show the damage to people’s lives when “Fraud” is committed.
- Fourth to alert the members of AR to a form of “Fraud” that members might not be aware of.
I have known this Attorney and his family for the past 20 years. I met him and his family through my activity in local politics. He was a Councilman in town for over 24 years, and even served 6 months as Mayor during that time. His family, wife, daughters, In-Laws, and his mother and father were all heavily involved with the Town Committee, which is how I came to know them all. He and I never got along very well. We always seemed to be on different sides of the issues, even though we both belonged to the same political party. However, the members of his family were some of the nicest people you would want to meet. I really feel for his family, because they were innocent by standers. They had nothing to do with the “Fraud” he committed, but because of it, their world has been turned upside down, and their lives almost destroyed.
This Attorney did not specialize in Real Estate, but handled a fair number of transactions. The “Fraud” came about because this Attorney developed a “gambling problem” that he was unable to control. In order to pay his gambling debts and support his addiction to gambling, he maxed out credit cards, pulled all the equity out of his house, stole funds from his immediate family that had been entrusted to him. And when that was not enough he started to steal from his Real Estate clients.
He was able to cover up his “gambling addition” for several years. No one even had a clue that he was gambling as much as he was, and if it wasn’t for an expected incident, he might have gotten away with it for several more years.
The “Fraud” he was committing first came to light, almost a year ago, when a client that he had represented in the “Closing” of a house she had sold a couple of years before started getting phone calls from her previous bank that her mortgage payment was late. She called the bank and told them that this had to be a mistake, because she had sold the house a couple of years before. The bank told her that there wasn’t a mistake, that she still had an outstanding mortgage with them. She immediately picked up the, and called this Attorney and told him. He told her that it was a mistake and that he would take care of it. She was relieved, but it wasn’t long before she started getting more calls, and now they were threatening foreclosure. She called the bank again and was assured that her mortgage had never been paid off, and was now several months behind. She contacted another Attorney who checked into the matter, and verified what the bank was telling her. They reported this to the authorities, who
proceeded to investigate this, which then lead to this Attorneys arrest.
When his gambling debts got the point that he could not cover them any longer with his and his families money, he started to put the payoff funds on Real Estate transactions into his own account, and not payoff the mortgages. He would then make the monthly mortgage payments on these accounts by changing the mailing address to a P.O. Box that he had set up for this purpose. This was going smoothly until his gambling kept on getting worst and he started to miss mortgage payments. By the time he was caught, he had done this to at least a dozen other people.
His life and his career are now destroyed because of this. But more importantly the lives of his whole family and the people he “defrauded” have been turned upside down, both financially and emotionally. His family has lost substantial amounts of money that they will never get back, not to mention that they were very well respected in this town, and now that is gone also. The Court has ordered that he pay back all the clients that he “defrauded”, but how much can they possibly get back now that he can not practice law. The total figure that was reported that he owes is over $800,000.
My advice to the members of AR, is to advice your Buyers, and Borrowers to ask for proof of payoff of their mortgage once they have Closed. Advice them to request a copy of the check along with the “Payoff Letter” from the bank, from whom ever handles their Closing. And even then it might be wise to contact the bank directly to make sure the documentation that they have is valid.
I hope that this blog along with the others that have been written up to this point about “Fraud” , helps to make the members of AR aware of the many different types of “Fraud” that can occur in the Real Estate Industry.
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Info about the author:
George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com
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