ESCROW ACCOUNTANT ADMITS DEFRAUDING LENDERS - $1.7m LOSS to CHICAGO TITLE

According to her plea agreement, Lukenich was the escrow accountant for title companies that did business in the Baltimore, Annapolis and Washington, D.C. metropolitan areas, including Troese Title Services, Inc. (Troese Title), Camp Springs, Maryland; Troese/Hughes Title Services, Inc. (Troese/Hughes), Greenbelt, Maryland; and Troese/Prestige Title Services, Inc.  (Troese/Prestige), Ellicott City, Maryland.  As the escrow accountant, Lukenich reconciled the escrow accounts and prepared monthly reconciliation reports for each escrow account.

Prior to 2005, Troese Title and Troese/Hughes shared a joint escrow account for the receipt and disbursement of funds in connection with real estate closings carried out by both title companies.  By 2006, the joint escrow account had a $3 million shortage.  Lukenich's  reconciliation reports, which were sent monthly to the principal of the companies, clearly showed that there were significant shortages in the joint escrow account.  Principals of the title companies re-financed their homes to attempt to cover some of the escrow shortages.  Sometime in 2006, the joint escrow account was separated into separate escrow accounts and Lukenich allocated a $1.7 million escrow shortage to Troese Title and a $1.3 million escrow shortage to Troese/Hughes.

The Troese Title companies had agency agreements with Chicago Title Company which enabled them to provide title insurance in conjunction with the settlement services they performed, and made Chicago Title liable for any title defects suffered by home owners and lenders.   Chicago Title performed audits at Troese Title and Troes/Hughes. 

Prior to each of the audits, Lukenich would alter the reconciliation reports to falsely show that there were not escrow shortages and that there were not outstanding mortgage payoffs that had not been made. 

After each audit, Lukenich would reverse the fraudulent adjustments.

In March 2008, Chicago Title terminated its agency relationship with Troese Title and Troese/Hughes.  In response, Troese Title and Troese/Hughes operations were consolidated into a single title operation that would be part of Troese/Prestige. 

However, when Troese/Prestige conducted settlements, it used the new lender money to cover the mortgage pay-offs that were still outstanding at Troese Title and Troese/Prestige, instead of as instructed on the HUD-1 settlement statement, in violation of the express direction of the lender. 

Eventually, there were not enough settlements to cover all of the shortages.  Chicago Title received information that a mortgage had not been paid off and conducted a surprise audit of Troese/Prestige.  The escrow account did not contain enough money to cover all of the outstanding mortgage pay-offs from Troese/Prestige. Chicago Title, as the title insurer, was forced to make the mortgage pay-offs, and to pay off funds due to a seller from a settlement and pay to record the instruments that had not been recorded. 

In total, the loss to Chicago Title stemming from the Troese/Prestige pay-offs was approximately $1.7 million.

Lukenich faces a maximum sentence of 20 years in prison and a $250,000 fine.  U.S. District Judge William N. Nickerson scheduled sentencing for January 12, 2012 at 9:30 a.m.

The plea agreement was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Richard A. McFeely of the Federal Bureau of Investigation.

The Maryland Mortgage Fraud Task Force was established to unify the agencies that regulate and investigate mortgage fraud and promote the early detection, identification, prevention and prosecution of mortgage fraud schemes. This case, as well as other cases brought by members of the Task Force, demonstrates the commitment of law enforcement agencies to protect consumers from fraud and promote the integrity of the credit markets. Information about mortgage fraud prosecutions is available www.justice.gov/usao/md/Mortgage-Fraud/index.html.

This law enforcement action is part of President Barack Obama's Financial Fraud Enforcement Task Force.  President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

United States Attorney Rod J. Rosenstein commended the FBI for its investigative work, and thanked Assistant U.S. Attorneys Tonya Kelly Kowitz and Gregory R. Bockin, who are prosecuting the case.

Courtesy Mortgage Fraud Blog