A Little Bit of Fraud
By Jerome Mayne
When a company or the authorities begin an investigation into suspected fraud and
misrepresentation, they usually start by reviewing documents. One of the best ways to find
out whether or not someone misrepresented or withheld information on a loan application
is to compare the information contained in the lender's mortgage loan file with information
contained in, let's say, the title agent's file or the real estate file.
From there, the investigators assemble their theories; they develop a list of questions for
which they need answers. Oftentimes, to find the answers to these questions, they will
begin interviews.
The list of interviewees often includes loan officers, wholesale lender representatives,
appraisers, processors, underwriters, real estate agents, title/closing agents, borrowers
and co-workers.
Average Joes - the people who never set out to commit fraud, misrepresent themselves or
profit from misdeeds - can be brought into an investigation. The investigators draw lines
from the primary party being investigated (let's just say, in this example, the loan officer) to
the other parties and vendors. They extract common denominators and continue from
there.
For example, let's say it's been discovered by Bobby Broker that several loans originated
by his loan officer, Slick Rick, have had first or early payment defaults. Before tipping off
Slick, Bobby decides to audit Slicks files.
Bobby notices that many of the files contain different versions of the same purchase
agreement, multiple HUD-1s, the same landlord for different files and different borrowers,
and other coincidences. He also notices that Slick uses a variety of vendors, but on the
files in question, he used the same lender, appraiser, real estate agent and closer.
Bobby contacts the branch manager for the lender and the owners of the appraisal, real
estate and title companies. He shares his findings. These respective managers and
owners agree to review their employees' files.
The lender finds that its representative in question uses the same closer/title company on
the majority of his loans - even loans received from loan officers other than Slick.
Additionally, the branch manager uncovers identical coincidences in the representative in
question's other files. Then, the manager contacts those subsequent managers and
owners to assist in the investigation.
As you can see, this web continues to become more and more tangled. Loan officers,
appraisers and closers can - and do - fall under suspicion for simply being one of the
vendors involved in one or two transactions. Guilt by association is very real. This could be
you.
My knowledge of this process comes from investigations and interviews I have conducted
while rooting out fraud, dozens of stories that I've heard from professionals in the real
estate and finance industry, and my experience as an insider who committed fraud and
was the subject of an investigation myself.
The result of the investigation of which I was the subject was prison.
Investigating fraud is a very difficult job. The investigators need to figure out who the
people are that have information pertinent to their investigation. Once these people are
identified, the investigators need to figure out which of these individuals will actually
cooperate, tell the truth and provide useful information.
The investigator also has to give proper credence to the perspective of the interviewee.
Information obtained during the course of an interview may not be accurate or inaccurate,
as a result of the interviewee fabricating information or lying. Rather, the information
relayed by the interviewee is simply his perspective on the truth.
In the late '90s, I was indicted for my involvement in a conspiracy to commit mail fraud,
wire fraud and money laundering - a fancy way of saying "mortgage fraud." I was the loan
officer who took the loan applications, and received and procured the documentation
necessary to get the borrowers approved. The borrowers were straw buyers. Their role
was to get a loan to purchase, at an inflated value, a property being sold by a flipper.
After I was indicted, I was given the opportunity to review volumes of interviews conducted
by the FBI with the straw buyers. The general consensus of the buyers was that during the
nine months of this fraud scam, I knew absolutely everything that was going on.
I admitted at my guilty plea hearing - and I still admit today that I was involved in a
conspiracy to commit fraud; I was guilty of that. However, in reality, the extent to which I
knew everything was less than that believed by the borrowers - a fact that I later found out
was irrelevant.
However, this shocked and angered me at the time. During my pretrial, I had the
opportunity to review volumes of interviews and nine months worth of mortgage loan files,
as well as files from the title company/closers. I uncovered a lot of information that I had
not previously known.
Years later, it hit me. From the perspective of the straw buyers, I did know everything. Why
would they have thought otherwise? During the nine-month scam, they were given
instructions to make an appointment with me to fill out a loan application. From there, for
the most part, the "investor" (the mastermind of the operation), his associates and myself
handled the lion's share of the documentation.
What did they know? What was their perspective?
They knew that they were going to get $5,000, if they got approved for a loan and
purchased a home from the flipper. They probably knew this was illegal or at least not
quite on the up and up. At this point, I think they assumed that everyone involved in their
loan process - everyone else they came in contact with - was part of this thing that was not
on the up and up. This would include my processor, the appraiser, the closer and myself. If
there was a real estate agent involved, I'm sure it was believed by the straw buyers that he
was in on it, too.
So what did I learn from this? Being involved a little or a lot is irrelevant to the authorities.
Fraud and misrepresentation is fraud and misrepresentation, regardless of the level of
one's involvement. Failure to act on knowledge of illegal activity is tantamount to fraud,
even if you think everyone does it or you've seen other people do it.
If you're involved in something uncomfortable, sneaky or suspicious, talk to somebody.
Ask questions of the other parties involved in the transaction. If you feel that people are not
being upfront with you, stop working with them. If they're doing something illegal, turn them
in.
Even if you think you would have a great defense and you know for a fact that you, yourself,
are not doing anything wrong, your reputation and career will still be ruined if you don't act
on illegal or suspicious activity in which you are involved.
When I first started working with that group of who would later become my co-defendants, I
merely suspected impropriety. From there, it snowballed. I justified not acting on
suspicions, which made it easier to later justify, allow and participate in blatant fraud and
misrepresentation.
You have to be diligent. You cannot turn your head just once. Fraud just once is still fraud. If
you lie down with Slick, you are Slick.
In my case, it didn't matter how right the straw buyers were. One can't be a little bit
pregnant and one cant be a little bit in prison.
Jerome Mayne is a keynote speaker and author. He has worked with dozens of companies and associations
around the country helping their people make the right decisions, when the right decisions aren’t easy. He is a
member of the National Speakers Association as well as the Real Estate Educators Association. He’s the author
of the book, Life Saving Lessons – The Diary of a White Collar Criminal and co-author of Mortgage Fraud and
Predatory Lending – what every agent should know (Kaplan Publishing). .
© Copyright, Jerome Mayne 2008
By Jerome Mayne
When a company or the authorities begin an investigation into suspected fraud and
misrepresentation, they usually start by reviewing documents. One of the best ways to find
out whether or not someone misrepresented or withheld information on a loan application
is to compare the information contained in the lender's mortgage loan file with information
contained in, let's say, the title agent's file or the real estate file.
From there, the investigators assemble their theories; they develop a list of questions for
which they need answers. Oftentimes, to find the answers to these questions, they will
begin interviews.
The list of interviewees often includes loan officers, wholesale lender representatives,
appraisers, processors, underwriters, real estate agents, title/closing agents, borrowers
and co-workers.
Average Joes - the people who never set out to commit fraud, misrepresent themselves or
profit from misdeeds - can be brought into an investigation. The investigators draw lines
from the primary party being investigated (let's just say, in this example, the loan officer) to
the other parties and vendors. They extract common denominators and continue from
there.
For example, let's say it's been discovered by Bobby Broker that several loans originated
by his loan officer, Slick Rick, have had first or early payment defaults. Before tipping off
Slick, Bobby decides to audit Slicks files.
Bobby notices that many of the files contain different versions of the same purchase
agreement, multiple HUD-1s, the same landlord for different files and different borrowers,
and other coincidences. He also notices that Slick uses a variety of vendors, but on the
files in question, he used the same lender, appraiser, real estate agent and closer.
Bobby contacts the branch manager for the lender and the owners of the appraisal, real
estate and title companies. He shares his findings. These respective managers and
owners agree to review their employees' files.
The lender finds that its representative in question uses the same closer/title company on
the majority of his loans - even loans received from loan officers other than Slick.
Additionally, the branch manager uncovers identical coincidences in the representative in
question's other files. Then, the manager contacts those subsequent managers and
owners to assist in the investigation.
As you can see, this web continues to become more and more tangled. Loan officers,
appraisers and closers can - and do - fall under suspicion for simply being one of the
vendors involved in one or two transactions. Guilt by association is very real. This could be
you.
My knowledge of this process comes from investigations and interviews I have conducted
while rooting out fraud, dozens of stories that I've heard from professionals in the real
estate and finance industry, and my experience as an insider who committed fraud and
was the subject of an investigation myself.
The result of the investigation of which I was the subject was prison.
Investigating fraud is a very difficult job. The investigators need to figure out who the
people are that have information pertinent to their investigation. Once these people are
identified, the investigators need to figure out which of these individuals will actually
cooperate, tell the truth and provide useful information.
The investigator also has to give proper credence to the perspective of the interviewee.
Information obtained during the course of an interview may not be accurate or inaccurate,
as a result of the interviewee fabricating information or lying. Rather, the information
relayed by the interviewee is simply his perspective on the truth.
In the late '90s, I was indicted for my involvement in a conspiracy to commit mail fraud,
wire fraud and money laundering - a fancy way of saying "mortgage fraud." I was the loan
officer who took the loan applications, and received and procured the documentation
necessary to get the borrowers approved. The borrowers were straw buyers. Their role
was to get a loan to purchase, at an inflated value, a property being sold by a flipper.
After I was indicted, I was given the opportunity to review volumes of interviews conducted
by the FBI with the straw buyers. The general consensus of the buyers was that during the
nine months of this fraud scam, I knew absolutely everything that was going on.
I admitted at my guilty plea hearing - and I still admit today that I was involved in a
conspiracy to commit fraud; I was guilty of that. However, in reality, the extent to which I
knew everything was less than that believed by the borrowers - a fact that I later found out
was irrelevant.
However, this shocked and angered me at the time. During my pretrial, I had the
opportunity to review volumes of interviews and nine months worth of mortgage loan files,
as well as files from the title company/closers. I uncovered a lot of information that I had
not previously known.
Years later, it hit me. From the perspective of the straw buyers, I did know everything. Why
would they have thought otherwise? During the nine-month scam, they were given
instructions to make an appointment with me to fill out a loan application. From there, for
the most part, the "investor" (the mastermind of the operation), his associates and myself
handled the lion's share of the documentation.
What did they know? What was their perspective?
They knew that they were going to get $5,000, if they got approved for a loan and
purchased a home from the flipper. They probably knew this was illegal or at least not
quite on the up and up. At this point, I think they assumed that everyone involved in their
loan process - everyone else they came in contact with - was part of this thing that was not
on the up and up. This would include my processor, the appraiser, the closer and myself. If
there was a real estate agent involved, I'm sure it was believed by the straw buyers that he
was in on it, too.
So what did I learn from this? Being involved a little or a lot is irrelevant to the authorities.
Fraud and misrepresentation is fraud and misrepresentation, regardless of the level of
one's involvement. Failure to act on knowledge of illegal activity is tantamount to fraud,
even if you think everyone does it or you've seen other people do it.
If you're involved in something uncomfortable, sneaky or suspicious, talk to somebody.
Ask questions of the other parties involved in the transaction. If you feel that people are not
being upfront with you, stop working with them. If they're doing something illegal, turn them
in.
Even if you think you would have a great defense and you know for a fact that you, yourself,
are not doing anything wrong, your reputation and career will still be ruined if you don't act
on illegal or suspicious activity in which you are involved.
When I first started working with that group of who would later become my co-defendants, I
merely suspected impropriety. From there, it snowballed. I justified not acting on
suspicions, which made it easier to later justify, allow and participate in blatant fraud and
misrepresentation.
You have to be diligent. You cannot turn your head just once. Fraud just once is still fraud. If
you lie down with Slick, you are Slick.
In my case, it didn't matter how right the straw buyers were. One can't be a little bit
pregnant and one cant be a little bit in prison.
Jerome Mayne is a keynote speaker and author. He has worked with dozens of companies and associations
around the country helping their people make the right decisions, when the right decisions aren’t easy. He is a
member of the National Speakers Association as well as the Real Estate Educators Association. He’s the author
of the book, Life Saving Lessons – The Diary of a White Collar Criminal and co-author of Mortgage Fraud and
Predatory Lending – what every agent should know (Kaplan Publishing). .
© Copyright, Jerome Mayne 2008
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| Jerome Mayne |
Contact:
612-919-3007
E-mail
9185 Cedar Forest Rd.
Eden Prairie, MN 55347
612-919-3007
9185 Cedar Forest Rd.
Eden Prairie, MN 55347
 |
All of Fraudcon and Jerome Mayne Services:
Jerome Mayne is a Public Speaker for Fraud Conferences and Fraud Conventions, including
Mortgage Fraud Conferences and Mortgage Fraud Conventions. In addition to being a Fraud,
Mortgage Fraud and White Collar Crime and White Collar Mortgage Fraud Public Speaking
Expert, he also consults for Public Speakers who speak in the areas of Fraud, Mortgage Fraud,
White Collar Crime and White Collar Mortgage Fraud Public Speaking.
A customized public speaking engagement can include fraud statistics, federal fraud statistics,
mortgage fraud statistics and the effects of fraud on a company.
Has been an Expert and a Keynote Fraud Public Speaker at Fraud, Mortgage Fraud, White Collar
Crime and White Collar Mortgage Fraud Public Speaking events, including conferences and
conventions. For specific engagements, see client list.
Primary Areas of Expertise:
Mortgage Fraud Public Speaker
White Collar Crime Public Speaker
Fraud Public Speaker Trainer
Fraud Public Speaker Consultant
Fraud Convention Public Speaker
Fraud Conference Public Speaker
Fraud Expert Public Speaker
Mortgage Fraud Expert Public Speaker
Mortgage Fraud Consultant Public Speaker
Jerome has developed a talk on ethics that evokes thought and discussion. He explores the
definition of ethics as described on www.dictionary.com, the differences between general business
ethics and the set of principals of right conduct, or ethics, as set forth by an employer or a trade
association. His talk on ethics was designed for presentation to the MBA program at Hamline
University in Minneapolis, Minnesota.
Jerome Mayne is a Public Speaker for Fraud Conferences and Fraud Conventions, including
Mortgage Fraud Conferences and Mortgage Fraud Conventions. In addition to being a Fraud,
Mortgage Fraud and White Collar Crime and White Collar Mortgage Fraud Public Speaking
Expert, he also consults for Public Speakers who speak in the areas of Fraud, Mortgage Fraud,
White Collar Crime and White Collar Mortgage Fraud Public Speaking.
A customized public speaking engagement can include fraud statistics, federal fraud statistics,
mortgage fraud statistics and the effects of fraud on a company.
Has been an Expert and a Keynote Fraud Public Speaker at Fraud, Mortgage Fraud, White Collar
Crime and White Collar Mortgage Fraud Public Speaking events, including conferences and
conventions. For specific engagements, see client list.
Primary Areas of Expertise:
Mortgage Fraud Public Speaker
White Collar Crime Public Speaker
Fraud Public Speaker Trainer
Fraud Public Speaker Consultant
Fraud Convention Public Speaker
Fraud Conference Public Speaker
Fraud Expert Public Speaker
Mortgage Fraud Expert Public Speaker
Mortgage Fraud Consultant Public Speaker
Jerome has developed a talk on ethics that evokes thought and discussion. He explores the
definition of ethics as described on www.dictionary.com, the differences between general business
ethics and the set of principals of right conduct, or ethics, as set forth by an employer or a trade
association. His talk on ethics was designed for presentation to the MBA program at Hamline
University in Minneapolis, Minnesota.