G O V E R N M E N T E N F O R C E M E N T A N D C O R P O R AT E C O M P L I A N C Ecertain schemes that may be identifiable,including but not limited to, the following:• Property flipping occurs when propertyis purchased and then its value is artificiallyinflated through false or fraudulentappraisals before being quicklyresold. <strong>The</strong> purpose is to acquire asmuch money from the property as possible.<strong>The</strong> process may be repeated withMany civil defenseattorneys find themselvessurprised by the speedof criminal investigationsand indictments.co- conspirators or straw buyers untileventually the property is foreclosed.Unfortunately, the end buyer of theproperty may be an innocent bona fidepurchaser of the property. Sophisticateddefendants may use identity theft, strawbuyers or shell companies to assist in theflipping schemes. See 2006 FBI FinancialCrimes Report.• Equity skimming occurs when the fraudster/investorrecruits a straw buyer (ornominee) to obtain a mortgage in thestraw buyer’s name. After closing thestraw buyer signs the property over tothe investor by quit claim deed. <strong>The</strong>investor rents the property and pocketsthe rental income, and makes no paymentson the mortgage. Eventually theproperty is foreclosed by the lender fornon- payment. Even worse, the unknowingtenants may continue to pay rent tothe fraudster for a period of time duringthe foreclosure process. See 2006 FBIFinancial Crimes Report.• Chunking occurs when a fraudsterrecruits homebuyers or investors to buyinvestment rental property for a commission.<strong>The</strong> investor is promised someincentive such as no down payment; thefraudster will find tenants, manage theproperty and re-sell the property aftera designated period of time. In reality,the fraudster fails to find tenants, fails76 n <strong>For</strong> <strong>The</strong> <strong>Defense</strong> n <strong>October</strong> <strong>2010</strong>to make mortgage payments, and failsto sell the property. See FFIEC MortgageLoan White Paper at 14.• <strong>For</strong>eclosure fraud, also known as “mortgagerescue” fraud, occurs when fraudstersidentify homeowners who are atrisk of default, or who are in need of helpwith a property that is close to foreclosure.<strong>The</strong> fraudster offers help by havingthe borrower surrender title of the propertyto the fraudster with promises of refinanceor securing a better interest rate.<strong>The</strong> homeowner agrees to pay rent to thefraudster and buy back the property overa long period of time. <strong>The</strong> borrower isthen unable to meet the terms of the buyback and the homeowner is stripped ofboth ownership and equity in the home.See 2006 FBI Financial Crimes Report;see also Steve Tripoli and Elizabeth Renuart,Nat’l Consumer Law Ctr. Report,Dreams <strong>For</strong>eclosed: <strong>The</strong> Rampant <strong>The</strong>ftof Americans’ Homes Through Equity-Stripping <strong>For</strong>eclosure “Rescue Scams” 8(June 2005).Strategy for Preparing a <strong>Defense</strong>Typically, by the time you learn of theinvestigation or indictment, the governmenthas already gathered all relevantinformation and evidence for prosecutionof the case. Many civil defense attorneysfind themselves surprised by the speed ofcriminal investigations and indictments,but that’s due in part to the fact that thegovernment has already been working thecase for a period of time before the civildefense attorney finds out. Additionally,civil defense counsel are comfortable withthe rules of civil procedure that allow fordiscovery and exchange of information.Such is not the case in a criminal casewhere discovery is severely limited in comparisonto the rules of civil procedure.Unfortunately, many clients will clingto denials saying that they “are innocent,”“didn’t start out intending to do anythingwrong,” “it wasn’t my idea,” or believingthat they will ultimately prevail at trial. Ifthe client has not been indicted, then youmay still have some time to evaluate andconduct your own investigation into thecase. However, defense counsel should notwait on indictment to evaluate and begindefending the case.A good defense strategy should focus onquickly evaluating and determining yourclient’s involvement. Interviewing the clientis the first step, but the client’s versionof the story will undoubtedly needto be verified by performing independentinvestigation of the allegations and the coconspirators.<strong>Defense</strong> counsel should workto obtain all relevant documents from allpossible participants including the client,the lender, the broker, the appraiser, thereal-estate agent, the closing agent and/orattorney, the borrower, and the seller. Tothe extent possible, defense counsel shouldconsider interviewing as many other playersas possible. It is the inconsistencies inthe documents and information from eachof the relevant players that will be crucialto evaluating the case.<strong>The</strong> next step is to follow the money.This may include hiring a forensic accountant,a consultant, or other appropriateinvestigator to trace the funds connectedto the baseline property transaction. <strong>The</strong>amount of money flowing to various playerswill be critical to evaluating the caseand will undoubtedly be central to thegovernment’s investigation and later prosecution.Furthermore, it is necessary fordefense counsel to understand the flow ofmoney to determine your client’s culpability,knowledge, credibility, and the potentialfor criminal charges.After you have reviewed and consideredthe facts and all relevant documents it istime to engage in an honest assessmentof your client’s potential risks and culpability.Unfortunately, defense counsel maynot be able to fully investigate the case andthere may be documents and informationthat are unavailable for evaluation. <strong>Defense</strong>counsel should remember that the governmenthas information and documentsthat the client and defense counsel willnot be able to review. However, an accurateassessment of the client and the client’sinvolvement and culpability is crucialto representation of your client.If not already engaged, at this point,defense counsel will likely need to engageexperienced white collar counsel and considerwhether the client should cooperatewith the government. Determining whethercooperation is the right strategic move foryour client can only be determined onan individual case basis. In federal cases,FERA, continued on page 85
skype ®iChat ®video teleconferenceinstant messagetextemailwebinarfaxphone andsmoke signals!Case management support?Talk about service,we’ve got you covered!Anywhere you go, TrialWorks superior customer service isthere. Whether you are in the office, in court, on a tropicalisland or climbing Kilimanjaro, TrialWorks has the latestconnectivity methods to assist you whenever and wherever.See why some of the largest firms around the globe useTrialWorks Case Management Software.Connect with us today for a free online demo and bringorganization to your organization.CanadaU.S.A.CaribbeanService is our calling.800.377.5844 www.trialworks.com sales@trialworks.com
Change language