David Saks: March 2012

David Saks - Real Estate Broker - The Real Estate Mart of Tennessee, Inc. - 4040 North Watkins-Suite #4 - Memphis, Tennessee 38127 - Phone (901) 357-4663

TITLE COMPANY OWNER & PRESIDENT SENTENCED TO 18 MONTHS IN PRISON FOR FRAUD

Title Company Owner and President Sentenced to 18 Months in Prison in $3.1 Million Mortgage Fraud Scheme

U.S. Attorney’s Office March 29, 2012
  • District of Maryland (410) 209-4800
 
 

BALTIMORE—U.S. District Judge William N. Nickerson sentenced James Kevin Hughes, age 53, of Crownsville, Maryland, today to 18 months in prison followed by three years of supervised release for wire fraud arising from a scheme to defraud lenders and a title insurance company of approximately $3.1 million. Judge Nickerson also ordered Hughes to perform 300 hours of community service, pay restitution of $3,107,246, and forfeit his interest in a South Carolina condominium.

The sentence 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.

According to his plea agreement, Hughes and Stephen Troese owned Troese/Hughes, a title company in Greenbelt, Maryland. Hughes was president of Troese/Hughes, overseeing its daily activities, and a signatory on the escrow account. Troese/Hughes had an agency agreement with Chicago Title that enabled Troese/Hughes to provide title insurance, which meant that Chicago Title was liable for title defects to homeowners and lenders.

Troese/Hughes shared an escrow account with another title company, Troese Title Services. Although Hughes was unaware that the escrow account was shared, he was aware that there were shortages in the account. Sometime in 2006, Troese/Hughes opened a new escrow account, and the escrow accountant, co-defendant Brenda Lukenich, “assigned” a $1 million escrow shortage to the new Troese/Hughes escrow account.

In approximately 2006, the real estate industry started to slow. As business slowed down, it became the policy of Troese/Hughes to check with Lukenich as to when mortgage payoff checks could be sent out, so that she could confirm that there were sufficient funds in the escrow account to cover the check. At this time, the mortgage payoff checks were stored in Federal Express envelopes under the credenza in Hughes’s office.

Hughes made efforts to fill the escrow shortage at Troese/Hughes by refinancing his own home twice and not paying off the prior mortgage, causing a loss of over $1 million to Chicago Title. In addition, after an employee of Troese/Hughes re-financed his home, Hughes caused the prior mortgage on that home to not be paid off so that the money could be used to fill the escrow shortage, causing a loss to Chicago Title of approximately $217,000.

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, Troese/Prestige. Hughes was not permitted to play an active role in the operation of Troese/Prestige at the specific instruction of Chicago Title. Hughes continued to market and bring in new settlement deals and performed settlements. Lukenich still acted as the escrow accountant. It was agreed amongst Hughes, Lukenich, and others that funds from any new settlement conducted by Troese/Prestige would be used to cover the mortgage pay-offs that were still outstanding at Troese Title and Troese/Hughes, contrary to the HUD-1 settlement statement and 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, to pay off funds due to sellers from settlement, and to pay the recording fees. In total, the loss to Chicago Title stemming from the Troese/Prestige pay-offs was approximately $1.7 million.

Stephen J. Troese, Sr., age 72, of Davidsonville, Maryland, pleaded guilty and was sentenced to a year and a day in prison for his participation in the scheme. Brenda Lukenich, age 60, of Hughesville, Maryland, pleaded guilty to mail fraud and is scheduled to be sentenced on April 10, 2012 at 9:30 a.m.

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 at http://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 N. Kelly and Gregory R. Bockin, who prosecuted the case.

SOURCE: FBI

 



David Saks



Time&Temp Memphis

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