13

REAL ESTATE FRAUD,
FALSE CHARITIES,
AND OUTRIGHT LIES

MY HOME IS MY CASTLE

Nathan Francis had worked for Calgary Transit as a driver for over twenty years. In that time he had seen how the city was expanding and how the real estate market was steadily growing. While driving his route, Nathan would always note the houses that were for sale and how quickly they sold. One particular day Nathan noticed a home in the southwest area of the city that caught his fancy. He wrote down the number of the realtor and called her at the end of his shift that afternoon.

Bridgett Carey, the realtor for the southwest house, had been in the real estate business for fifteen years. She would buy and sell real estate as fast as she could list the property. When Nathan called, Bridgett knew she had another opportunity to make some money.

Nathan told Bridgett that he was interested in the house in the southwest and would like to know some more about it. Bridgett offered to meet with Nathan and his wife so they could look at the house and discuss things further. When Bridgett met with Nathan and his wife, Nathan explained that they were only looking right now, but thought that the house might lead to an investment for them. Bridgett told them that real estate is always a good investment, but if they were not interested in living in the house, she might have another opportunity for them.

The house in the southwest was listed for $220,000. If Nathan was interested, Bridgett would pay him $1,000 to purchase the house, in name only, and then Bridgett would re-list the house for $235,000. It would be a quick turnaround sale for Bridgett, and Nathan would make an easy $1,000. As far as any down payments to the bank were concerned, Bridgett told Nathan that she had some partners who would put up the down payment while the house was being re-sold.

Nathan and his wife talked it over and thought this might be a good opportunity. Both had heard how people bought and sold, or flipped, houses and made a quick profit. Besides, Bridgett was a licensed realtor so what could go wrong? Nathan agreed and signed the forms that Bridgett gave him. He left most of the spaces blank because Bridgett told him that she would fill in the amounts at her office. Bridgett then gave Nathan a cheque for $1,000 and the deal was done.

When he agreed to Bridgett’s scheme, Nathan became what is known as a straw-buyer. A straw-buyer is someone who is paid for the use of his or her name and credit information in order to make a fraudulent mortgage application. Most straw-buyers are paid several thousands of dollars for the use of their name and identity. A fraudster uses a straw-buyer in several ways:

• stating that the straw-buyer will reside in the property when there is no intention of doing so;

• claiming that the down payment has come from the straw-buyer’s own funds; or

• signing documents that inflate the value of a property.

It should be noted that although there is usually another fraudster who is the architect behind this scheme, the straw-buyer is also guilty of committing fraud and may face criminal charges. Claiming that you did not know that your information was going to be used to commit mortgage fraud is not an excuse.

After a straw-buyer takes the title to the property, the fraudster behind the scheme usually assumes the mortgage and the title to the property. The fraudster will then sell the house or rent the property to someone for other criminal activity, such as a marijuana growing operation. If the mortgage payments are not paid, the lender may foreclose on the property to recover their losses. The straw-buyer may be sued for the amount owing on the mortgage and any legal fees and costs incurred by the lender.

Real estate fraud is rapidly becoming one of the most profitable forms of fraud in North America. First Canadian Title, a company that provides title insurance to consumers, estimates that real estate title fraud costs Canadians $300 million to $1.5 billion annually, ¹ while law enforcement officials and lenders estimate that 10 to 15 percent of all mortgage applications contain false information.² There are two types of real estate fraud: mortgage fraud and title fraud.

Mortgage fraud, like the story involving Nathan and Bridgett, generally targets financial institutions that lend the money to purchase property. Mortgage fraud artificially increases the property value of a property by selling and reselling the property until the main fraudster behind the scheme decides to end the circle, make a final sale, and move on to another property. The end buyer becomes an innocent third-party victim when they try to sell the property to discover that the price was inflated and whose market value is less than the mortgage that they have. The fraudsters, if they are caught, often receive a minimal punishment, if any at all. Nathan was not charged for his part in the scheme because the financial institution determined that it was not worth their time and resources to pursue criminal charges against him. Bridgett had her realtor licence suspended for six months but also was not charged criminally.

In another case, Christopher and Janice had been married for two years and bought their first home with the help of both of their parents. They had been living in their house for three years, when one afternoon a real estate agent pulled up in front of their house and started to put a “For Sale” sign on their lawn. It was only at this time Chris and Janice discovered that they had been made a victim of title fraud and that there was a lien placed on their property.

Title fraud is the most frightening form of real estate fraud for the individual homeowner because it targets them directly, and in many cases, it is easy. In a title fraud, the fraudster will use stolen identities or forged documents to transfer ownership of a property to themselves without the property owner knowing of the transfer. The fraudster obtains a mortgage on this title and, once the money is given to him, he disappears, leaving the property at risk of being foreclosed. In other cases, the fraudster will claim that they are owed money and will file documents with the court and have a lien placed on the property. The courts would enforce the lien because the victim would be unaware of it and not show in court to dispute the claim.

Once a title fraud has been committed, the burden of proving the deception is placed on the original homeowner. This means that it is usually up to the homeowners to prove that they are victims of title theft. This can often cost the homeowners thousands of dollars and several years to restore their title. As for the fraudster, he may or may not be charged. In the case of Chris and Janice, the fraudster received sixty days in jail to be served on weekends. He was also ordered by the court to repay Chris and Janice but has not done so.

When buying property, whether for an investment or to purchase a new home, there are several things that you can do to help protect yourself:

• Do your homework: Do your research on the Internet to determine the market value of the properties in the area. Compare the size, features, and locations to determine whether the price is reasonable.

• Use a licensed realtor and contact the real estate board to verify that they are licensed. Too often, we take a person’s credentials at face value.

• Obtain a copy of the land title or ask the land title office to do a registry search. Usually a fee is involved for this service, but it could save you thousands of dollars and years of heartache.

• As a homeowner, check your own title on a regular basis. Ensure that there are no liens or title transfers placed on your property. Insurance companies are also offering title insurance for homeowners to help protect them and cover the costs of court proceedings to recover and keep your home.

GIVE ’TILL IT HURTS

Lindsay Barkhaus was not very successful in life. He could not hold down a job, his marriage was over, and he was alienated from the rest of his family. He was living day-to-day, just trying to get by. One day, Barkhaus came upon an idea to obtain money from the local bars.

Barkhaus printed some forms using a library computer, printer, and photocopier. He then went to the bars around his neighbourhood, asking for the manager. Barkhaus explained that he was the manager for the local men’s baseball team, and that he was seeking sponsorship to help offset the cost of uniforms and rent for the sports fields. In return, he would guarantee that his team, and their opponents, would frequent the bar after the games. After all, the amount of beer they would drink would easily make up for any donation made by the bar, plus the bar could use the donation as a write-off for promotion.

Barkhaus had it all worked out in his proposal — how much uniforms would cost (with and without advertising), the cost of renting the field, the cost of umpires, etc. For a small investment of $1,500, the bar could sponsor the team in the coming season. Barkhaus failed to mention that there was no men’s baseball team that he was managing.

Meanwhile, during the day Barkhaus was working another scheme. Several years previously, a fundraising company had hired Barkhaus to canvass for the Canadian Teenage Pregnancy Support Society (CTPSS) based in Toronto. Barkhaus was provided with a campaign kit containing promotional material and donation receipt books. But like all of Barkhaus’ other jobs, this one did not last long. However, when Barkhaus left, he failed to return the campaign kit.

Barkhaus continued to travel door to door asking for donations to help educate, house, and clothe young girls who were single parents. He would show the promotional material to the donor and would issue a charitable tax receipt. For a donation of $10, the donor would obtain a tax receipt and would be helping these young girls. When Barkhaus ran out of original receipts from the campaign kit, he reproduced more receipts using a photocopier. Unfortunately, the money Barkhaus collected would not go back to the CTPSS.

Unscrupulous criminals will often take advantage of natural disasters or tragic events to defraud people. They will pose as canvassers for a charitable organization and ask for a donation. Often, the donation is for a small amount of money, $5 to $10. This is an amount that will not be missed or an amount too small for the victim to bother the police about.

Some of these fraudsters will invent names that sound similar to a legitimate organization in order to deceive those of us generous enough to donate to a cause. Others, like Lindsay, will even have props, such as photocopies of tax receipts, to assist in carrying out their scheme.

If you receive a request to donate to a charity, either by telephone or from a door-to-door canvasser, here are a few points to consider:

1. Decide which charities you wish to support and the amount you can afford to donate, then send your cheques directly to their head office. When approached by a canvasser you can tell them that you have already supported your choice of charities.

2. Ask for identification. Legitimate canvassers have proper identification that includes their name, the organization, and a contact number for the charity. Often they will also have a city licence or permit to allow the charity to canvass in that area on that specific day.

3. Determine if the canvasser has any knowledge of how your donation will be used. Do they know how much of your donation will go toward administrative costs and what percentage will go towards the actual charity? Legitimate charities and canvassers will have some idea of these distributions and will have no problem giving you this information.

4. If you receive a solicitation by telephone, ask for the information to be sent to you.

5. Never give your personal or financial information over the phone or at the door. Obtain the information and mail the cheque later.

6. If you have any questions don’t be afraid to call the charity. Find out if they are aware of canvassers in your area. At this time you can also find out more details and how your donation will be distributed. You may find that there is a way to support this charity that better suits you.

7. Always ask for a tax receipt. Not only will this help you when consolidating your records, but it can also be used by investigators should you fall victim to a false charity scheme.

I AM WHAT I AM

It was a warm spring morning when Madelyn Burton entered the Petite Louvre Art Gallery in downtown Victoria, British Columbia. The Petite Louvre was a store specializing in fine art for home and office. Burton had spotted some art in the window that she would love to have for her office. When she entered the showroom, Christine, the assistant manager, greeted her and offered to help her select pieces that would suit Burton’s style and personality.

Burton told Christine that she was a successful advertising and promotions advisor and that she had moved to the city from Toronto six weeks earlier. Most of Burton’s office furniture stayed behind in Toronto at her other office. Burton now wanted something new and vibrant that would show her clients that she was here to do business. Burton selected several items, including a crystal floor vase, some lamps, and other accent pieces. She arranged to have them delivered to her condo overlooking the park, and gave Christine her business card and a cheque to complete the deal.

That afternoon, Burton went to the Electronix First shop and purchased a new Macintosh computer, a Macintosh laptop to use when she was on the road, and a PDA to help her keep track of her appointments and clients. Burton had the store carry out these items to her Mercedes and put into the trunk. She would have the concierge at the condo help her bring the new computer into her condo.

Burton also went to two different furniture stores and purchased a new bedroom suite and a classically designed modern roll-top desk for her office. These were also to be delivered to Burton’s apartment. Burton again provided her business cards and a cheque to cover the down payment, with the balance due once the furniture arrived safely. Burton told the salesperson that she had had an experience in Toronto, where her living-room suite arrived with chips and it took her months to get it replaced.

Burton also visited the Art1 Gallery to purchase some pieces for her new home and office. Art1 Gallery was another store that specialized in North American artists and had locations in New York, Vancouver, Victoria, Calgary, Toronto, and Halifax. Burton met with Robin, the assistant manager, and selected fourteen pieces that she adored. Burton reminded Robin that Art1 had a contract with Burton’s company in Toronto and arranged to have her new purchases delivered to her condo. In all, Burton’s three-day shopping excursion totaled over $175,500 in art work, furniture, and accessories.

Two weeks after Burton’s visit to Petite Louvre Gallery, Christine was notified by her bank that Burton’s cheque could not be honoured. The account, located in Thunder Bay, Ontario, had closed two years earlier and had no activity on it in that period. Christine grew concerned and called Burton.

Burton was appalled that the cheque had bounced. She had gathered all of her banking records when she moved west and must have inadvertently picked up the wrong chequebook when she went out that day. Burton promised she would be in the next morning to correct the problem.

The next morning came and went without Burton showing at the gallery. Christine made several unsuccessful attempts to contact her. All she could get was Burton’s answering machine. After a month of leaving messages and getting no response from Burton, Christine contacted the police.

While Burton was furnishing her condo and office, another fraudster across the city, Stephen Inman, was in the process of completing a $75,000 deal on five electric generators with Vaughan Agencies. Inman was in his late fifties and was used to industrial equipment. He had been a heavy equipment driver for ten years. He had worked on and driven just about everything that could be found in a heavy equipment lot.

One day, Inman was driving by the yards of Vaughan Agencies when he spotted five industrial generators in the yard. It looked like the generators had been in the yard for a few months, and Inman saw an opportunity. Inman went into the offices of Vaughan Agencies and met with Kurt, the inventory manager for Vaughan. Inman presented himself as a heavy equipment broker and stated that he had a customer for five generator sets. Because the generators had been sitting in the yard for so long, it was easy to convince Kurt to sell him the generators.

Inman explained that this sale was actually to be part of a larger deal involving twenty-one pieces of equipment, valued at over $175,000. Inman then produced a large roll of bills, which he began to give to Kurt, stating that it was a $20,000 cash down payment for the generators. Kurt refused to take the cash, as he wanted a cheque to allow a paper trail.

Inman then offered his Rolex watch and his ring, again supposedly valued at $20,000, as collateral, but Kurt again refused. Inman then wrote Kurt a cheque on his business account, Re-New Equipment, for the entire $75,000. Inman told Kurt that he would return with a certified cheque, as their original bargain called for. Inman’s cheque was subsequently returned as NSF.

Prior to meeting with Kurt, Inman had made a similar deal with Hamilton Equipment in Cape Breton. Inman had contacted Hamilton Equipment and arranged for a shipment of equipment valued at $60,000 to be sent to Inman for another client. A certified cheque was sent to Hamilton Equipment and the equipment was delivered. When this cheque was also returned as NSF, Hamilton Equipment went looking for Inman. As it eventually turned out, Inman had sold the equipment to several construction sites in northern Alberta and the Northwest Territories.

When Burton and Inman met with their victims, each of them told a story of who they were and what they represented. The victims took their story at face value because they were able to talk in the language of the business, and they both provided the props to help complete the deception. In Burton’s case, it was the business cards. In Inman’s, it was the company cheques and the roll of money. Kurt never did examine the money to see if it was all twenties or whether the watch really was a Rolex.

Fraudsters like Burton and Inman are in for the quick buy and sell. They will generally have some buyers ready to purchase what they have to offer. Often, these buyers believe that they are legitimate brokers. When Burton’s condo was searched, the computers, furniture, and art were already gone. The fourteen pictures were in the process of being removed from their frames in preparation for shipment.

Two of Vaughan Agencies’ generators were in the Alberta oil sands, but without serial numbers, they were untraceable. It is important to realize that things, and appearances, are not always what they appear to be.

I CAN MAKE YOU INTO ANYONE YOU WANT TO BE

Hong Ma was a first generation Asian, whose family immigrated to Canada in the 1960s. He obtained his B.A. in Commerce at the University of New Brunswick and had a successful online business where he employed eight people. Ma enjoyed the life of a successful, good-looking male in Fredericton, New Brunswick. He went to the clubs and casinos, making friends and enjoying life.

Ma came up with an idea to forge insurance cheques and get them cashed at the banks before they knew what hit them. If he used insurance companies as the payee, the banks would most likely pass them, because insurance companies often pay out larger sums of money.

To complete his plan, Ma needed some associates that were in need of ready cash, would not ask too many questions, and whom he could manipulate. The answer was staring him in the face at the nightclubs. Ma would recruit young college and university students for his scheme.

Ma approached Stacey and her friend Kimberly, asking if they would be interested in earning $300 each. Ma explained that he was targeting the banks because they were just an extension of the government and that they could afford to lose the money. Besides, with all of the useless bank charges and hidden bills, everyone deserved to get something back. Stacey and Kim agreed with Ma’s sentiments and agreed to go along and help him. Back at Ma’s apartment, Stacey and Kim took advantage of Ma’s offer of cocaine while Ma began setting up the equipment. There was a digital camera, two computers, a photo printer, and an embossing machine. There was also a machine that printed onto white plastic cards, the size of a credit card.

Ma took the two girls’ driver licences and scanned them into his system. He then took each of the girls’ pictures and downloaded them into the program as well. Ma then created new identities for the girls, changed the addresses and birthdates, and printed out forty-five new driver’s licences for each of the girls. He then created similar social insurance number cards for each of the same ninety identities. Ma then took the girls to their homes and told them he would be in touch.

Once the girls had left, Ma returned to his apartment, where he began the task of printing cheques. He opened a box of blank cheques he had bought online in the United States. Such cheques and the plastic cards are lawfully sold to small businesses. He then scanned the logos of various insurance companies into his computer and created cheques in amounts from $16,578.13 to $34,784.68, payable to the identities that he created for Stacey and Kim.

Ma figured that the cheques would appear more believable if they were for odd amounts rather than a rounded number. He then batched the driver’s licences, corresponding SIN cards and the forged insurance cheques into envelopes. He then called Stacey and told her he would pick her up in an hour.

Stacey and Ma first went to the Royal Bank in downtown Fredericton, where Stacey entered the bank. She explained to the customer service representative that she would be receiving an insurance settlement for a car accident she had had last year. She wanted to open an account so that when the cheque arrived, she could deposit it. The customer service representative was sympathetic to Stacey because she had been involved in a car accident four years earlier and was still suffering from the injuries.

An account was opened in Stacey’s false name and photocopies of her identification were taken. Stacey then received a temporary bank card so that she could access her account whenever she wanted. On Friday, Stacey deposited her first cheque for $19,267.67. She and Ma continued this charade twenty-three more times, all under different names and all for various amounts. Ma followed the same pattern with Kim.

The following week, Ma met with Kim and Stacey and began to withdraw money from the accounts. The girls would enter the bank and present their bank card and identification and withdraw the money, usually leaving a few hundred dollars in the account. Sometimes they would withdraw the cash through the automatic bank machine.

Ma would then count out $300 for each transaction and keep the rest. He would also provide a hit or two of cocaine as a bonus for the girls’ good work. This sequence continued over a two-week period until one customer service representative became suspicious and called the Fredericton police, who arrested Ma and another one of his accomplices.

When the police executed a search warrant on Ma’s apartment, they discovered all of the equipment, blank cards, cheques, and computer programs that Ma had used. The police also found $13,000 cash and twelve more sets of identification for other people, as well as over thirty individually packaged hits of cocaine. Over the next several months, the banks in Fredericton, St. John, and Moncton confirmed that the identities discovered by the Fredericton police had opened up accounts and made deposits. Fortunately, the bank’s losses were kept minimal because of the quick action of the Fredericton Police and the alert customer service representative.

Ma was held overnight in jail pending his court appearance the next morning. He was released on $500 bail and a promise to appear in court, for which he failed to appear. The police used the newspapers and television news to ask for the public’s help in identifying Ma’s twelve accomplices. Nine of the twelve were positively identified, including Stacey and Kim. Of these nine, four were charged and found guilty, each receiving a $750 fine, while arrest warrants were issued for four more, including Kim. Stacey pled guilty, provided a statement to the police, and received an unconditional discharge.

IT SEEMED LIKE THE PERFECT VACATION

Noelle was a stay-at-home mother looking for a part-time job to help with the expenses of her two small children. Noelle had seen an ad in the paper advertising for telephone persons interested in working at home. Successful applicants would be paid $10 per hour and could obtain bonuses for completed sales. The ad did not name the company and gave only a phone number to contact. Noelle thought that this would do the trick for her, and called the number.

Noelle was forwarded to a person who stated that his name was Nick, the president of MDC Properties. Nick explained that MDC Properties was a vacation rental and time share company with real estate in Canada and the United States. Nick asked a few simple questions of Noelle and explained that her job would be to receive phone calls forwarded to her and to set up potential bookings for properties. When it came time to close the deal, Noelle would pass the information on to Nick, who would make the final arrangements. Noelle was hired in less than ten minutes over the phone.

Gordon and Debbie had been planning their perfect vacation in Maine for years. They would rent a Cape Cod home on the shore and watch the waves crash into the bluffs in front of the house as they sat on the white Adirondack chairs on the porch. They would indulge themselves and pretend to be living the life of the Great Gatsby. But, as is often the case with such dreams, the expense for this type of vacation was out of their reach for the time being.

One afternoon, Debbie was surfing the web, dreaming of their vacation, when she came across a website for rental vacation properties. The website was managed by MDC Properties. They had a listing of over 120 properties for rent throughout the United States. One link was to Maine Properties and when Debbie went to the site, there was the cottage that she and Gordon had dreamed of.

Debbie had heard of the types of schemes that were offered on the Internet, and she did not want to be disappointed. She called the number on the website and spoke to a customer service representative, Noelle. Noelle explained that MDC was a vacation real estate consortium that rented properties from clients across the United States. These properties would then be offered as vacation packages when the owners would not be using the property. The consortium acted very much like a time-share program, but without the restrictions that a time-share imposes.

Debbie was told that the cost for two weeks at the Maine property was $4,500, plus taxes, but she would have to be contacted by the president to complete the final arrangements and bookings. Two days later, Debbie received a telephone call from Nick, who wanted to close the deal with Debbie. Yes, the property was available on the dates that she wanted. There was a non-refundable deposit of 33 percent required with the balance due four weeks before the possession date.

Debbie was instructed to print the application form from the website, complete the form, and mail it to the MDC offices with her cheque. Once MDC received full payment, Debbie would receive a package in the mail containing all instructions, maps, and keys for the property two weeks before her holiday.

Debbie followed Nick’s instructions. She and Gordon booked their vacations, flights to Maine, and looked forward to the holiday. Four weeks before the vacation Debbie sent the second payment and anxiously looked forward to her vacation package. Two weeks came and went and there was no package from MDC Properties. Another week passed, and still no package arrived. Debbie called the telephone number that she had used before, and only received a voicemail message. The next day, the voicemail box was full.

Debbie and others had fallen victim to a vacation scheme that appeared legitimate, but was all a hoax. The properties listed were actual properties, but they were listed with companies other than MDC. The pictures and descriptions had been downloaded from other sites on the Internet and linked into the MDC Properties website. Noelle was “hired” but was never paid and was not aware that this was a scheme. When contacted, she readily provided the police with a record of all her calls and contacts to assist in their investigation.

Nick had used a virtual office to re-route his calls to Noelle. He also used this office as his mailing address and as a location for his faxes. Unfortunately, no one at the virtual office had ever met Nick and all mail was picked up by a courier.

As it turned out, hundreds of victims lost their money and down payments to MDC Properties and Nick. What was worse, these victims also lost their vacation, flights, and other bookings that were made in conjunction with their vacation because they no longer had a place to stay for their two weeks.

Debbie and Gordon were luckier than most. Although they lost their initial deposit, the police intercepted one hundred envelopes containing cheques made out to MDC Properties and retuned them to the originators of the cheques. The use of couriers and a virtual office meant the police were unable to identify anyone responsible for this scam. Although Federal agents in the United States have linked this scheme to a larger venture operating in Los Angles and Reno, to date no arrests have been made and the culprits are still unknown.

The best thing about the Internet is that it allows you to search the entire world for just about anything you can imagine. From vacation properties, to cars, to tickets for sports and other special events, they are all available on the web. But, as we have seen, there are also unscrupulous people who will take advantage of your trust to take your money.

When purchasing items from the Internet, do your research. When you find an item that catches your interest, do specific searches on the item that is being offered. You can also do a search on the company and the names of the people listed with the company. It is possible to use the Internet to your advantage to determine truth from deception.

After you have completed your search and gathered as much information as you can, ask the people offering the service you are interested in questions about the product and the company. Find out where they are located or if they have a list of satisfied customers that you can contact. If the company is legitimate, they will be able to provide answers to all of your questions. Be wary of vague answers or attempts to conceal information. This may be an indication that the company or the person is not genuine.