A growing number of investors who conspire with other investors to fix bid prices at foreclosure auctions are making their way to prison. But property investors aren’t the only ones being incarcerated for foreclosure-related crimes.
Lorraine Brown, the former president of DocX LLC, has agreed to a plea agreement involving a two-year sentence, Missouri Attorney General Chris Koster announced Tuesday. DocX is a defunct subsidiary of Lenders Processing Service Inc., and Brown was employed as president until October 2009.
DocX employees allegedly signed foreclosure documents fraudulently on behalf of other employees at the direction of Brown. The scheme was exposed on 60 Minutes and reportedly led to the suspension of foreclosures by several lenders in 2010.
A separate announcement from the U.S. for the Middle District of Florida indicated that Brown also pled guilty to federal charges. She admitted that she understood multiple parties relied upon the documents as genuine. She also confessed that she tried to conceal the actions from clients, LPS corporate headquarters and law enforcement authorities. The statement indicated that DocX LLC was acquired by LPS in 2009 when LPS was divested from Fidelity National Information Services Inc.
American Mortgage Field Services LLC provided property preservation and inspection work on foreclosed homes owned by entities such as Fannie Mae, Freddie Mac and the Federal Housing Administration. Mortgage servicers such as Bank of America that were paid to protect and maintain the properties in turn contracted the work to American Mortgage Field Service.
Business was booming at first. But as the caseload of Florida real-estate-owned properties exploded, the service provider started fabricating inspection reports. BofA paid out more than $23 million in inspection fees between 2007 and 2012 — though a large number of the inspections were never actually performed.
The owner of American Field Services, Dean Counce, pled guilty on Sept. 14 to conspiracy to commit wire fraud. He faces up to two decades in prison.
An investigation by the Maryland Department of Labor, Licensing & Regulation’s Office of the Commissioner of Financial Regulation and the Baltimore County Police Department led to the March arrest of Rodney Getlan. The Owings Mills, Md., resident is accused of illegally collecting up-front fees for loan modifications and stealing their monthly mortgage payments. Around $400,000 was collected from 48 victims.
Getlan pled guilty, according to a Sept. 6 news release, and faces 30 years in prison.
Nevada borrowers were promised by Financial Link Services that their loans would be refinanced to a lower balance for an up-front fee of between $3,495 and $3,895, Nevada’s attorney general announced on Aug. 22. Problem was that the balance-reduction program being promoted didn’t actually exist.
On Aug. 15, Gary Dimattia and Lawrence Bateman Jr. were indicted for their roles in the Financial Link operation. Both defendants were scheduled for initial court appearances in September, and each faces 20 years in prison.
When investors conspire to keep down bid prices at a foreclosure auction so that they can purchase the repossessed properties at lower prices and bid among themselves, they are violating the Sherman Antitrust Act. Such violations carry a maximum penalty of 10 years in prison and a $1 million fine for individuals, though the fine can be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than $1 million.
One such case involved Darren K. Phillips, who was charged on Oct. 4 in the U.S. District Court for the Eastern District of North Carolina with conspiring with a group of real estate speculators to rig foreclosure bids and pled guilty on Nov 8, according to the Justice Department. Phillips, who agreed to cooperate with an ongoing investigation, participated in the scheme from February 2001 until May 2004. Another defendant, Christopher Deans, pleaded guilty in September 2010.
The Department of Justice announced on Nov.1 that Norman Montalvo pled guilty in U.S. District Court for the Northern District of California to his role in a bid-rigging scheme. The rigged auctions occurred in San Francisco and San Mateo counties between June 2008 and September 2010. Montalvo’s was the 26th plea agreement in the case.
In the same court, Danli Liu agreed to plead guilty on Aug. 15, according to the Justice Department. Liu, who was the 25th Northern California defendant to plead guilty to bid rigging, participated in a scheme involving public real estate foreclosure auctions in Alameda County, Calif., from April 2009 until March 2010.
