Countrywide Found Guilty of Fraud, JPM Criminal Responsibility for Madoff PONZI Scheme

“The words PONZI SCHEME and FRAUD applied to the mortgage meltdown has been largely dismissed by policy makers, law enforcement and regulators. Instead we heard the terms RISKY BEHAVIOR and RECKLESSNESS. Now law enforcement has finally completed its investigation and determined that those who set the tone and culture of Wall Street were deeply involved in the Madoff PONZI scheme and were regularly committing FRAUD in the creation and sale of mortgage bonds and the underlying “DEFECTIVE” loans. The finding shows that these plans were not risky nor reckless. They were intentional and designed to deceive and cause damage to everyone relying upon their false representations. The complex plan of false claims of securitization is now being pierced making claims of “plausible deniability” RISKY and RECKLESS.

And if the loans were defective there is no reason to believe that this applies only to the loans claimed to be in default. It applies to all loans subject to false claims of securitization, false documentation for non existent transactions, and fraudulent collection practices by reporting and collecting on balances that were fraudulently stated in the first instance. At this point all loans are suspect, all loan balances stated are suspect, and all Foreclosures based on these loans were frauds upon the court, should be vacated and the homeowner reinstated to ownership of the property and possession of the property. All such loans should have the loan balance adjusted by the courts for appropriate set off in denying the borrowers the benefit of the bargain that was presented to them.

“It is now difficult to imagine a scenario where the finding of the intentional use and creation of defective mortgages will not trickle down to all mortgage litigation. The Countrywide decision is the first that expressly finds them guilty of creating defective loans. It is impossible to believe that Countrywide’s intentional acts of malfeasance won’t spread to the investment banks that used Countrywide as the aggregator of defective loans (using the proprietary desk top underwriting software for originators to get approval). The reality is coming up, front and center. And Judges who ignore the defenses of homeowners who were of course defrauded by the same defective mortgages are now on notice that bias towards the banks simply doesn’t work in the real world.” — Neil F Garfield,www.livinglies.me October 24, 2013

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By Neil F Garfield, Esq. Tallahassee, Florida October 24, 2013. If the mortgages were defective and were used fraudulently to gain illicit profits it is not possible to avoid the conclusions that homeowners are among the victims. By using false appraisals the huge banks created the illusion of rising prices. This was manipulation of market prices just as the banks were found guilty of manipulating stated market rates for interbank lending “LIBOR” and use of the manipulated pricing to trade for further benefit knowing that the reality was different. The banks have continued this pattern behavior and are still doing it, and laying fines as a cost of doing business in the manipulation and ownership of natural resources. They are a menace to all societies on the planet. The threat of that menace must be removed In the face of a clear and present danger posed by the real world knowledge that where an opportunity arises for “moral hazard” the banks will immediately use it causing further damage to government, taxpayers, consumers and investors.

None of it was disclosed or even referenced at the alleged loan closing with borrowers despite federal and state laws that require all such undisclosed profits and compensation to be disclosed or suffer the consequence of required payment to the borrower of all such undisclosed compensation. The borrowers are obviously entitled to offset for the false appraisals used by lenders to induce borrowers to accept defective loan products.

Further, borrowers have a clear right of action for treble damages for the pattern of conduct that constituted fraud as a way of doing business. In addition, borrowers can now be scene through a clear lens — that they are entitled to the benefit of the bargain that they reasonably thought they were getting. That they were deceived and coerced into accepting defective loans with undisclosed players and undisclosed compensation and undisclosed repayment terms raises the probability now that borrowers who present their case well, could well start getting punitive damages awards with regularity. It’s easy to imagine the closing argument for exemplary or punitive damages — “$10 billion wasn’t enough to stop them, $25 billion wasn’t enough to stop of them, so you, members of the jury, must decide what will get their attention without putting them out of business. You have heard evidence of the tens of billions of dollars in profits they have reported. It’s up to you to decide what will stop the banks from manipulating the marketplace, fraudulently selling defective loans to borrowers and pension funds alike with the intention of deceiving them and knowing that they would reasonably rely on their misrepresentations. You decide.”

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U.S. prepares to take action against JPMorgan over Madoff
In what would be an almost unheard of move when it comes to U.S. banks, the FBI and the U.S. attorney’s office are in talks with JPMorgan (JPM) about imposing a deferred prosecution agreement over allegations that the bank turned a blind eye to Bernie Madoff’s Ponzi scheme, the NYT reports.
Authorities would suspend criminal charges against JPMorgan but impose a fine and other concessions, and warn the bank that it will face indictments over any future misconduct.
However, the government has not decided to charge any current or former JPMorgan employees.
The report comes as the bank holds talks with various regulators over a $13B deal to settle claims about its mortgage practices.

Countrywide found guilty in U.S. mortgage suit
A federal jury has found Bank of America’s (BAC -2.1%) Countrywide unit liable for defrauding Fannie Mae (FNMA +22%) and Freddie Mac (FMCC +19.4%) by selling them thousands of defective mortgages.
The judge will determine the amount of the penalty – the U.S. has requested $848M, the gross loss to the GSEs as calculated by its expert witness.
The suit centered on Countrywide’s HSSL – High Speed Swim Lane – program instituted in August 2007, says the government, to keep the music playing as the property market was falling apart.

DOJ probes nine leading banks over sale of mortgage debt
The Department of Justice is reportedly investigating nine major banks over the sale of problematic mortgage bonds, although the probes are for civil infractions rather than criminal ones.
The banks are Bank of America (BAC), Citigroup (C), Credit Suisse (CS), Deutsche Bank (DB), Goldman Sachs (GS), Morgan Stanley (MS), RBS (RBS), UBS (UBS) and Wells Fargo (WFC).
The inquiries span U.S. attorney’s offices from California to Massachusetts, and come as JPMorgan tries to reach a multi-billion dollar settlement over the issue.

Identity Theft: The Nuclear Option

The purpose of this article is to support the prior conclusions expressed in my articles and appearances that in addition to being a Ponzi scheme, a necessary component of the illusion of a securitization plan was identity theft in which the identity of a person or entity is used for fraudulent purposes. The latest round of lawsuits and investigations center in on allegations by the Department of Justice and the Securities and Exchange Commission that the sale of mortgage bonds was fraudulent. We agree, and for more reasons than those reported to be in those lawsuits. Under Federal and State law identity theft occurs when the information is obtained for use in a fraudulent scheme, just as alleged by the department of justice.

I remind the reader that I have repeatedly made the statement that the money from the investor was diverted and misapplied just as the money from the insurance, credit default swaps, taxpayer and federal reserve was misapplied. Research below indicates that such behavior can be and in this case I would argue is criminal conduct with a right of private action for damages.  Thus I would argue that embezzlement and related crimes apply to the securitization scam.

There are many ways in which the damages to the homeowner can be recouped. this article suggests that one of them is through allegations of identity theft. The thief is the bank that set up the false securitization scheme. The victim is the homeowner who gave their name, SSN and other identifying characteristics so that the thief could use it in a variety of ways for trading and profit without the knowledge or consent of the victim. The information was obtained by falsely representing the nature of the transaction in which the alleged loan was closed. The damages are the value of the home, and any other out of pocket expenses or consequential damages to credit reputation etc. plus punitive, treble or exemplary damages.  The defendants are all of the people who knew or should have known or must known the details of the fraudulent scheme.

The interesting legal question that is not answered in the research document below is whether identity theft can be used defensively as part of affirmative defenses or whether it must be used offensively in a counterclaim or separate lawsuit. I would argue that it can be used defensively and that as such the statute of limitations would never apply. The purpose of the transaction was to obtain the homeowners personal financial information in a manner that was not disclosed to the homeowner at the time the information was obtained nor was it disclosed at the time of the alleged loan “closing”, and then the financial information was used for the purpose of selling fraudulent mortgage bonds to investors who now concede that they have no right of action against the homeowner.

The banks will  attack this defense on the same basis as the head of any other organized crime syndicate, to wit: that they had no idea that crimes were being committed in the securitization chain. This claim will not hold much water when it is disclosed that securitization chain is described in documents but was never used and that the banks directly control the movement of money and the fabrication of documents to give a false impression of the movement of money and transacting business.

If the United States Department of Justice wishes to press criminal charges it might find an easy path in identity theft.

I wish to acknowledge that the research presented below was done entirely by a legal intern from the law school at Florida State University. While the initial instructions came from me she performed the research without direct guidance required from me. While I don’t think I am permitted to use her name I would like to say for purposes of disclosure, I am thankful for the work that she performed in producing the information and commentary contained below.

Table of Contents

 

QUESTION 1: What is the definition of ID theft?2

 

a. ON THE STATE LEVEL2

 

b. ON THE FEDERAL LEVEL4

 

§ 1028A. Aggravated identity theft4

 

§ 656. Theft, embezzlement, or misapplication by bank officer or employee4

 

18 U.S.C.A. § 1028(a)(7)5

 

§ 6823. Criminal penalty5

 

§ 6821. Privacy protection for customer information of financial institutions5

 

QUESTION 2:  What can you sue for and/or what damages are you entitled to?7

 

DOCUMENT A8

 

DOCUMENT B13

 

772.11. Civil remedy for theft or exploitation13

 

DOCUMENT C14

 

812.012. Definitions14

 

812.014. Theft15

 

812.019. Dealing in stolen property15

 

 =====================================

QUESTION 1: What is the definition of ID theft?

 

 

 

a. ON THE STATE LEVEL

 

 

Identity theft is covered by FL Stat. §817.02 and §817.568.  §817.02 states that “Whoever falsely personates or represents another, and in such assumed character receives any property intended to be delivered to the party so personated, with intent to convert the same to his or her own use, shall be punished as if he or she had been convicted of larceny.”

 

 

 

§817.568 defines the “Criminal Use of Personal Identification Information.”  I will summarize, but at the end I will include the full text of the statute (see “Document A”).  In the summary below, any irrelevant sections have been omitted, and the particularly important paragraphs have been put in bold font. §817.568 does also specify that the definition of “person” can be found in FL Stat. §1.01(3), which says that, “The word ‘person’ includes individuals, children, firms, associations, joint adventures, partnerships, estates, trusts, business trusts, syndicates, fiduciaries, corporations, and all other groups or combinations.”  Which would reasonably include a bank.  With that in mind, here is the summary:

 

 

 

Subsection (1)(f) says that “personal identification information” is any name or number used to identify a specific individual.  This includes names, postal/email addresses, phone number, SS number, bank account number, credit/debit card number, unique electronic ID number, and “other number or information that can be used to access a person’s financial resources”, among other things.

 

 

 

 Subsection (2)(a-c) specifies the felonies that a person can be charged with if they commit “fraudulent use of personal identification information” by “willfully and without authorization fraudulently uses, or possesses with intent to fraudulently use, personal identification information concerning an individual without first obtaining that individual’s consent”.  Depending on the amount of the injury/fraud, and the number of individuals’ personal ID info that is fraudulently used, a person can be charged with first, second, or third degree felony. 

 

 

 

Subsection (4) says that if you use personal ID info without consent for the purposes of harassing that individual, then they’ve committed the offense of “harassment by use of personal identification information.”

 

 

Subsection (5) says that if the offense was “facilitated or furthered by the use of a public record…the offense is reclassified to the next higher degree.”

 

 

Subsection (9) describes the penalties and definitions for creating, using, or possessing with intent to fraudulently use, counterfeit or fictitious personal identification information.

 

 

Subsection (10) says that “Any person who commits an offense described in this section and for the purpose of obtaining or using personal identification information misrepresents himself or herself to be…an employee or representative of a bank, credit card company, credit counseling company, or credit reporting agency; or any person who wrongfully represents that he or she is seeking to assist the victim with a problem with the victim’s credit history shall have the offense reclassified.”  It then goes on to reclassify the offenses in subsections (a) through (d).

 

 

Subsection (13) describes the restitution the court may order.  It specifies that, “In addition to the victim’s out-of-pocket costs, restitution may include payment of any other costs, including attorney’s fees incurred by the victim in clearing the victim’s credit history or credit rating, or any costs incurred in connection with any civil or administrative proceeding to satisfy any debt, lien, or other obligation of the victim arising as the result of the actions of the defendant.”  The court may also issue orders necessary to correct the public record if need be.

 

 

 

Subsection (14) specifies who may bring the action to the court (any state attorney or the statewide prosecutor).

 

 

Subsections (15) and (16) describe the requirements for jurisdiction and venue.

 

 

 

Subsection (17) describes the statute of limitations. (3 years after offense occurred for subsections (2), (6), & (7).  1 year after discovery of offense by aggrieved party/person who has a legal duty to represent the aggrieved party IF the prosecution is commenced within 5 years after the violation occurred)

 

 

 

 

 


 

 

b. ON THE FEDERAL LEVEL

 

 

18 U.S.C.A. §1028A would probably be the most applicable.  The section on aggravated identity theft is in normal font, and the sections it references are indented and italicized. Andininand willweight of the dealgot a goalshouldI know I just can’t get a matter the house I think he’s out and mixing I know is onin better

 

§ 1028A. Aggravated identity theft

 

 

 

(a) Offenses.

 

(1) In general.–Whoever, during and in relation to any felony violation enumerated in subsection (c), knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person shall, in addition to the punishment provided for such felony, be sentenced to a term of imprisonment of 2 years.

 

 

(c) Definition.–For purposes of this section, the term “felony violation enumerated in subsection (c)” means any offense that is a felony violation of–

 

(1) …section 656 (relating to theft, embezzlement, or misapplication by bank officer or employee)…;

 

§ 656. Theft, embezzlement, or misapplication by bank officer or employee

 

Whoever, being an officer, director, agent or employee of, or connected in any capacity with any Federal Reserve bank, member bank, depository institution holding company, national bank, insured bank, branch or agency of a foreign bank, or organization operating under section 25 or section 25(a) of the Federal Reserve Act, or a receiver of a national bank, insured bank, branch, agency, or organization or any agent or employee of the receiver, or a Federal Reserve Agent, or an agent or employee of a Federal Reserve Agent or of the Board of Governors of the Federal Reserve System, embezzles, abstracts, purloins or willfully misapplies any of the moneys, funds or credits of such bank, branch, agency, or organization or holding company or any moneys, funds, assets or securities intrusted to the custody or care of such bank, branch, agency, or organization, or holding company or to the custody or care of any such agent, officer, director, employee or receiver, shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both; but if the amount embezzled, abstracted, purloined or misapplied does not exceed $1,000, he shall be fined under this title or imprisoned not more than one year, or both.

 

 

 

As used in this section, the term “national bank” is synonymous with “national banking association”; “member bank” means and includes any national bank, state bank, or bank and trust company which has become a member of one of the Federal Reserve banks; “insured bank” includes any bank, banking association, trust company, savings bank, or other banking institution, the deposits of which are insured by the Federal Deposit Insurance Corporation; and the term “branch or agency of a foreign bank” means a branch or agency described in section 20(9) of this title. For purposes of this section, the term “depository institution holding company” has the meaning given such term in section 3 of the Federal Deposit Insurance Act.

 

18 U.S.C.A. § 656 (West)

 

 

 

(4) any provision contained in this chapter (relating to fraud and false statements), other than this section or section 1028(a)(7);

 

18 U.S.C.A. § 1028(a)(7)

 

“…knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person with the intent to commit, or to aid or abet, or in connection with, any unlawful activity that constitutes a violation of Federal law, or that constitutes a felony under any applicable State or local law…”

 

18 U.S.C.A. § 1028 (West)

 

 

 

(8) section 523 of the Gramm-Leach-Bliley Act (15 U.S.C. 6823) (relating to obtaining customer information by false pretenses);

 

§ 6823. Criminal penalty

 

(a) In general

 

Whoever knowingly and intentionally violates, or knowingly and intentionally attempts to violate, section 6821 of this title shall be fined in accordance with Title 18 or imprisoned for not more than 5 years, or both.

 

15 U.S.C.A. § 6823 (West)

 

 

 

§ 6821. Privacy protection for customer information of financial institutions

 

 (a) Prohibition on obtaining customer information by false pretenses

 

It shall be a violation of this subchapter for any person to obtain or attempt to obtain, or cause to be disclosed or attempt to cause to be disclosed to any person, customer information of a financial institution relating to another person–

 

(1) by making a false, fictitious, or fraudulent statement or representation to an officer, employee, or agent of a financial institution;

 

(2) by making a false, fictitious, or fraudulent statement or representation to a customer of a financial institution; or

 

(3) by providing any document to an officer, employee, or agent of a financial institution, knowing that the document is forged, counterfeit, lost, or stolen, was fraudulently obtained, or contains a false, fictitious, or fraudulent statement or representation.

 

(b) Prohibition on solicitation of a person to obtain customer information from financial institution under false pretenses

 

It shall be a violation of this subchapter to request a person to obtain customer information of a financial institution, knowing that the person will obtain, or attempt to obtain, the information from the institution in any manner described in subsection (a) of this section.

 

15 U.S.C.A. § 6821 (West)

 

 

 

18 U.S.C.A. § 1028A (West)

 

 

 

 

 

 

 

 


 

 

QUESTION 2:  What can you sue for and/or what damages are you entitled to?

 

 

Under Florida law, §817.568(13)(a-b) specifies the restitution an aggrieved party is allowed to recover.  It states,

 

(a) In sentencing a defendant convicted of an offense under this section, the court may order that the defendant make restitution under s. 775.089 to any victim of the offense. In addition to the victim’s out-of-pocket costs, restitution may include payment of any other costs, including attorney’s fees incurred by the victim in clearing the victim’s credit history or credit rating, or any costs incurred in connection with any civil or administrative proceeding to satisfy any debt, lien, or other obligation of the victim arising as the result of the actions of the defendant.

 

(b) The sentencing court may issue such orders as are necessary to correct any public record that contains false information given in violation of this section.

 

 

The statute does not specify that you can sue the convicted defendant and recover the benefits they received from stealing your identity. 

 

 

Most the cases I am finding about recovering damages from a bank because of identity theft result from the bank losing the personal information or somehow making it accessible (often through a bank employee), and then the bank being sued under the doctrines of agency/respondeat superior.  Because they were the custodian of the information and they didn’t employ reasonable standards to safeguard the personal information, they are then the proximate cause of the plaintiff’s suffering and liable for damages.  Which is probably not quite the right situation here.

 

 

HOWEVER, I did find a (what I believe to be) legitimate way to recover damages from the banks.  Florida law allows for recovery of damages. If you read FL Stat. Ann. §772.11, “Civil Remedy for Theft or Exploitation” (see “Document B”), it states that, if you can prove a violation of §§812.012-812.037, you can recover treble damages as well as reasonable attorney’s fees and court costs.  You cannot recover punitive damages.  It also lays out special procedures you must follow before you may file an action for damages.  The sections that I believe are actually applicable are §§812.012 (“Definitions”), 812.014 (“Theft”), and 812.019 (“Dealing in Stolen Property”).  The best way for you to understand what I’m talking about would be to read the relevant sections (see “Document C”).  Essentially, my thought process is that if you can show the bank obtained the property by fraud in order to temporarily or permanently benefit from the property, or that the bank coordinated the theft of the property where the value of the property exceeds $3,000, you’ll have them for theft under 812.014.  Which would then allow you to recover damages under §772.11.  OR, if you show that the bank “initiates, organizes, plans, finances, directs, manages, or supervises the theft of property” and “traffics in such stolen property” AKA they “buy, receive, possess, obtain control of, or use property with the intent to sell, transfer, distribute, dispense, or otherwise dispose of such property”, then you would again be able to recover damages.  Just to be clear, “‘property’ means anything of value”, examples being “real property” as well as “tangible or intangible personal property, including…interests and claims”. 

 

DOCUMENT A

 

 

 

817.568. Criminal use of personal identification information

 

(1) As used in this section, the term:

 

(a) “Access device” means any card, plate, code, account number, electronic serial number, mobile identification number, personal identification number, or other telecommunications service, equipment, or instrument identifier, or other means of account access that can be used, alone or in conjunction with another access device, to obtain money, goods, services, or any other thing of value, or that can be used to initiate a transfer of funds, other than a transfer originated solely by paper instrument.

 

(b) “Authorization” means empowerment, permission, or competence to act.

 

(c) “Harass” means to engage in conduct directed at a specific person that is intended to cause substantial emotional distress to such person and serves no legitimate purpose. “Harass” does not mean to use personal identification information for accepted commercial purposes. The term does not include constitutionally protected conduct such as organized protests or the use of personal identification information for accepted commercial purposes.

 

(d) “Individual” means a single human being and does not mean a firm, association of individuals, corporation, partnership, joint venture, sole proprietorship, or any other entity.

 

(e) “Person” means a “person” as defined in s. 1.01(3).

 

(f) “Personal identification information” means any name or number that may be used, alone or in conjunction with any other information, to identify a specific individual, including any:

 

1. Name, postal or electronic mail address, telephone number, social security number, date of birth, mother’s maiden name, official state-issued or United States-issued driver’s license or identification number, alien registration number, government passport number, employer or taxpayer identification number, Medicaid or food assistance account number, bank account number, credit or debit card number, or personal identification number or code assigned to the holder of a debit card by the issuer to permit authorized electronic use of such card;

 

2. Unique biometric data, such as fingerprint, voice print, retina or iris image, or other unique physical representation;

 

3. Unique electronic identification number, address, or routing code;

 

4. Medical records;

 

5. Telecommunication identifying information or access device; or

 

6. Other number or information that can be used to access a person’s financial resources.

 

(g) “Counterfeit or fictitious personal identification information” means any counterfeit, fictitious, or fabricated information in the similitude of the data outlined in paragraph (f) that, although not truthful or accurate, would in context lead a reasonably prudent person to credit its truthfulness and accuracy.

 

 

 

(2)(a) Any person who willfully and without authorization fraudulently uses, or possesses with intent to fraudulently use, personal identification information concerning an individual without first obtaining that individual’s consent, commits the offense of fraudulent use of personal identification information, which is a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.

 

(b) Any person who willfully and without authorization fraudulently uses personal identification information concerning an individual without first obtaining that individual’s consent commits a felony of the second degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084, if the pecuniary benefit, the value of the services received, the payment sought to be avoided, or the amount of the injury or fraud perpetrated is $5,000 or more or if the person fraudulently uses the personal identification information of 10 or more individuals, but fewer than 20 individuals, without their consent. Notwithstanding any other provision of law, the court shall sentence any person convicted of committing the offense described in this paragraph to a mandatory minimum sentence of 3 years’ imprisonment.

 

(c) Any person who willfully and without authorization fraudulently uses personal identification information concerning an individual without first obtaining that individual’s consent commits a felony of the first degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084, if the pecuniary benefit, the value of the services received, the payment sought to be avoided, or the amount of the injury or fraud perpetrated is $50,000 or more or if the person fraudulently uses the personal identification information of 20 or more individuals, but fewer than 30 individuals, without their consent. Notwithstanding any other provision of law, the court shall sentence any person convicted of committing the offense described in this paragraph to a mandatory minimum sentence of 5 years’ imprisonment. If the pecuniary benefit, the value of the services received, the payment sought to be avoided, or the amount of the injury or fraud perpetrated is $100,000 or more, or if the person fraudulently uses the personal identification information of 30 or more individuals without their consent, notwithstanding any other provision of law, the court shall sentence any person convicted of committing the offense described in this paragraph to a mandatory minimum sentence of 10 years’ imprisonment.

 

 

 

(3) Neither paragraph (2)(b) nor paragraph (2)(c) prevents a court from imposing a greater sentence of incarceration as authorized by law. If the minimum mandatory terms of imprisonment imposed under paragraph (2)(b) or paragraph (2)(c) exceed the maximum sentences authorized under s. 775.082, s. 775.084, or the Criminal Punishment Code under chapter 921, the mandatory minimum sentence must be imposed. If the mandatory minimum terms of imprisonment under paragraph (2)(b) or paragraph (2)(c) are less than the sentence that could be imposed under s. 775.082, s. 775.084, or the Criminal Punishment Code under chapter 921, the sentence imposed by the court must include the mandatory minimum term of imprisonment as required by paragraph (2)(b) or paragraph (2)(c).

 

 

 

(4) Any person who willfully and without authorization possesses, uses, or attempts to use personal identification information concerning an individual without first obtaining that individual’s consent, and who does so for the purpose of harassing that individual, commits the offense of harassment by use of personal identification information, which is a misdemeanor of the first degree, punishable as provided in s. 775.082 or s. 775.083.

 

 

 

(5) If an offense prohibited under this section was facilitated or furthered by the use of a public record, as defined in s. 119.011, the offense is reclassified to the next higher degree as follows:

 

(a) A misdemeanor of the first degree is reclassified as a felony of the third degree.

 

(b) A felony of the third degree is reclassified as a felony of the second degree.

 

(c) A felony of the second degree is reclassified as a felony of the first degree.

 

For purposes of sentencing under chapter 921 and incentive gain-time eligibility under chapter 944, a felony offense that is reclassified under this subsection is ranked one level above the ranking under s. 921.0022 of the felony offense committed, and a misdemeanor offense that is reclassified under this subsection is ranked in level 2 of the offense severity ranking chart in s. 921.0022.

 

 

 

(6) Any person who willfully and without authorization fraudulently uses personal identification information concerning an individual who is less than 18 years of age without first obtaining the consent of that individual or of his or her legal guardian commits a felony of the second degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.

 

 

 

(7) Any person who is in the relationship of parent or legal guardian, or who otherwise exercises custodial authority over an individual who is less than 18 years of age, who willfully and fraudulently uses personal identification information of that individual commits a felony of the second degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.

 

 

 

(8)(a) Any person who willfully and fraudulently uses, or possesses with intent to fraudulently use, personal identification information concerning a deceased individual commits the offense of fraudulent use or possession with intent to use personal identification information of a deceased individual, a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.

 

(b) Any person who willfully and fraudulently uses personal identification information concerning a deceased individual commits a felony of the second degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084, if the pecuniary benefit, the value of the services received, the payment sought to be avoided, or the amount of injury or fraud perpetrated is $5,000 or more, or if the person fraudulently uses the personal identification information of 10 or more but fewer than 20 deceased individuals. Notwithstanding any other provision of law, the court shall sentence any person convicted of committing the offense described in this paragraph to a mandatory minimum sentence of 3 years’ imprisonment.

 

(c) Any person who willfully and fraudulently uses personal identification information concerning a deceased individual commits the offense of aggravated fraudulent use of the personal identification information of multiple deceased individuals, a felony of the first degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084, if the pecuniary benefit, the value of the services received, the payment sought to be avoided, or the amount of injury or fraud perpetrated is $50,000 or more, or if the person fraudulently uses the personal identification information of 20 or more but fewer than 30 deceased individuals. Notwithstanding any other provision of law, the court shall sentence any person convicted of the offense described in this paragraph to a minimum mandatory sentence of 5 years’ imprisonment. If the pecuniary benefit, the value of the services received, the payment sought to be avoided, or the amount of the injury or fraud perpetrated is $100,000 or more, or if the person fraudulently uses the personal identification information of 30 or more deceased individuals, notwithstanding any other provision of law, the court shall sentence any person convicted of an offense described in this paragraph to a mandatory minimum sentence of 10 years’ imprisonment.

 

 

 

(9) Any person who willfully and fraudulently creates or uses, or possesses with intent to fraudulently use, counterfeit or fictitious personal identification information concerning a fictitious individual, or concerning a real individual without first obtaining that real individual’s consent, with intent to use such counterfeit or fictitious personal identification information for the purpose of committing or facilitating the commission of a fraud on another person, commits the offense of fraudulent creation or use, or possession with intent to fraudulently use, counterfeit or fictitious personal identification information, a felony of the third degree, punishable as provided in s. 775.082, s. 775.083, or s. 775.084.

 

 

 

(10) Any person who commits an offense described in this section and for the purpose of obtaining or using personal identification information misrepresents himself or herself to be a law enforcement officer; an employee or representative of a bank, credit card company, credit counseling company, or credit reporting agency; or any person who wrongfully represents that he or she is seeking to assist the victim with a problem with the victim’s credit history shall have the offense reclassified as follows:

 

(a) In the case of a misdemeanor, the offense is reclassified as a felony of the third degree.

 

(b) In the case of a felony of the third degree, the offense is reclassified as a felony of the second degree.

 

(c) In the case of a felony of the second degree, the offense is reclassified as a felony of the first degree.

 

(d) In the case of a felony of the first degree or a felony of the first degree punishable by a term of imprisonment not exceeding life, the offense is reclassified as a life felony.

 

For purposes of sentencing under chapter 921, a felony offense that is reclassified under this subsection is ranked one level above the ranking under s. 921.0022 or s. 921.0023 of the felony offense committed, and a misdemeanor offense that is reclassified under this subsection is ranked in level 2 of the offense severity ranking chart.

 

 

 

(11) The prosecutor may move the sentencing court to reduce or suspend the sentence of any person who is convicted of a violation of this section and who provides substantial assistance in the identification, arrest, or conviction of any of that person’s accomplices, accessories, coconspirators, or principals or of any other person engaged in fraudulent possession or use of personal identification information. The arresting agency shall be given an opportunity to be heard in aggravation or mitigation in reference to any such motion. Upon good cause shown, the motion may be filed and heard in camera. The judge hearing the motion may reduce or suspend the sentence if the judge finds that the defendant rendered such substantial assistance.

 

 

 

(12) This section does not prohibit any lawfully authorized investigative, protective, or intelligence activity of a law enforcement agency of this state or any of its political subdivisions, of any other state or its political subdivisions, or of the Federal Government or its political subdivisions.

 

 

 

(13)

 

(a) In sentencing a defendant convicted of an offense under this section, the court may order that the defendant make restitution under s. 775.089 to any victim of the offense. In addition to the victim’s out-of-pocket costs, restitution may include payment of any other costs, including attorney’s fees incurred by the victim in clearing the victim’s credit history or credit rating, or any costs incurred in connection with any civil or administrative proceeding to satisfy any debt, lien, or other obligation of the victim arising as the result of the actions of the defendant.

 

(b) The sentencing court may issue such orders as are necessary to correct any public record that contains false information given in violation of this section.

 

 

 

(14) Prosecutions for violations of this section may be brought on behalf of the state by any state attorney or by the statewide prosecutor.

 

 

 

(15) The Legislature finds that, in the absence of evidence to the contrary, the location where a victim gives or fails to give consent to the use of personal identification information is the county where the victim generally resides.

 

 

 

(16) Notwithstanding any other provision of law, venue for the prosecution and trial of violations of this section may be commenced and maintained in any county in which an element of the offense occurred, including the county where the victim generally resides.

 

 

 

(17) A prosecution of an offense prohibited under subsection (2), subsection (6), or subsection (7) must be commenced within 3 years after the offense occurred. However, a prosecution may be commenced within 1 year after discovery of the offense by an aggrieved party, or by a person who has a legal duty to represent the aggrieved party and who is not a party to the offense, if such prosecution is commenced within 5 years after the violation occurred.

 

 

 

Fla. Stat. Ann. § 817.568 (West)


 

DOCUMENT B

 

 

772.11. Civil remedy for theft or exploitation

 

 

 

(1) Any person who proves by clear and convincing evidence that he or she has been injured in any fashion by reason of any violation of ss. 812.012-812.037…has a cause of action for threefold the actual damages sustained and, in any such action, is entitled to minimum damages in the amount of $200, and reasonable attorney’s fees and court costs in the trial and appellate courts. Before filing an action for damages under this section, the person claiming injury must make a written demand for $200 or the treble damage amount of the person liable for damages under this section. If the person to whom a written demand is made complies with such demand within 30 days after receipt of the demand, that person shall be given a written release from further civil liability for the specific act of theft or exploitation by the person making the written demand. Any person who has a cause of action under this section may recover the damages allowed under this section from the parents or legal guardian of any unemancipated minor who lives with his or her parents or legal guardian and who is liable for damages under this section. Punitive damages may not be awarded under this section. The defendant is entitled to recover reasonable attorney’s fees and court costs in the trial and appellate courts upon a finding that the claimant raised a claim that was without substantial fact or legal support.  In awarding attorney’s fees and costs under this section, the court may not consider the ability of the opposing party to pay such fees and costs. This section does not limit any right to recover attorney’s fees or costs provided under any other law.

 

 

 

Fla. Stat. Ann. § 772.11 (West)


 

DOCUMENT C

 

 

 

812.012. Definitions

 

 

 

As used in ss. 812.012-812.037:

 

 

(3) “Obtains or uses” means any manner of:

 

(a) Taking or exercising control over property.

 

(b) Making any unauthorized use, disposition, or transfer of property.

 

(c) Obtaining property by fraud, willful misrepresentation of a future act, or false promise.

 

(d)1. Conduct previously known as stealing; larceny; purloining; abstracting; embezzlement; misapplication; misappropriation; conversion; or obtaining money or property by false pretenses, fraud, or deception; or

 

2. Other conduct similar in nature.

 

(4) “Property” means anything of value, and includes:

 

(a) Real property, including things growing on, affixed to, and found in land.

 

(b) Tangible or intangible personal property, including rights, privileges, interests, and claims.

 

(c) Services.

 

(5) “Property of another” means property in which a person has an interest upon which another person is not privileged to infringe without consent, whether or not the other person also has an interest in the property.

 

 

(7) “Stolen property” means property that has been the subject of any criminally wrongful taking.

 

(8) “Traffic” means:

 

(a) To sell, transfer, distribute, dispense, or otherwise dispose of property.

 

(b) To buy, receive, possess, obtain control of, or use property with the intent to sell, transfer, distribute, dispense, or otherwise dispose of such property.

 

(9) “Enterprise” means any individual, sole proprietorship, partnership, corporation, business trust, union chartered under the laws of this state, or other legal entity, or any unchartered union, association, or group of individuals associated in fact although not a legal entity.

 

(10) “Value” means value determined according to any of the following:

 

(a)1. Value means the market value of the property at the time and place of the offense or, if such cannot be satisfactorily ascertained, the cost of replacement of the property within a reasonable time after the offense.

 

2. The value of a written instrument that does not have a readily ascertainable market value, in the case of an instrument such as a check, draft, or promissory note, is the amount due or collectible or is, in the case of any other instrument which creates, releases, discharges, or otherwise affects any valuable legal right, privilege, or obligation, the greatest amount of economic loss that the owner of the instrument might reasonably suffer by virtue of the loss of the instrument.

 

 

(c) Amounts of value of separate properties involved in thefts committed pursuant to one scheme or course of conduct, whether the thefts are from the same person or from several persons, may be aggregated in determining the grade of the offense.

 

 

 

Fla. Stat. Ann. § 812.012 (West)

 

 

 

 

 

812.014. Theft

 

 

 

(1) A person commits theft if he or she knowingly obtains or uses, or endeavors to obtain or to use, the property of another with intent to, either temporarily or permanently:

 

(a) Deprive the other person of a right to the property or a benefit from the property.

 

(b) Appropriate the property to his or her own use or to the use of any person not entitled to the use of the property.

 

(2) (a) 1. If the property stolen is valued at $100,000 or more…

 

 

(b) 1. If the property stolen is valued at $20,000 or more, but less than $100,000;

 

 

(6) A person who individually, or in concert with one or more other persons, coordinates the activities of one or more persons in committing theft … where the stolen property has a value in excess of $3,000 commits a felony of the second degree…

 

 

 

Fla. Stat. Ann. § 812.014 (West)

 

 

 

 

812.019. Dealing in stolen property

 

 

(1) Any person who traffics in, or endeavors to traffic in, property that he or she knows or should know was stolen shall be guilty of a felony of the second degree…

 

(2) Any person who initiates, organizes, plans, finances, directs, manages, or supervises the theft of property and traffics in such stolen property shall be guilty of a felony of the first degree…

 

 

Fla. Stat. Ann. § 812.019 (West)

 

 

 

 

 

Litigation AFTER Eviction or Sale

I’ve been thinking about this for a while. In fact, when I first started out on the blog in 2007 I spent quite a bit of time interviewing big and small law firms and retired judges and they all said the same thing: wait until the whole thing is over and they can’t move the goal post around anymore.

The action would then be for damages sand could be settled for the house plus the money. And the lawyer could get a contingency fee, which in all states, is allowable after the primary case is over. The key question is how you collect when the monetary settlement is nominal even with an award of attorney fees and costs (which could be substantial). I would be willing to provide considerable assistance in getting the pleadings right and the exhibits.

The attack would center on the money and the fact that the “credit bid” was offered by a non-creditor (i.e., a party who neither loaned the money nor purchased the loan). The secondary attack would be that the amount stated in the notice of default and sought for collection was wrong because there were co-obligors who presumably paid (insurance, credit default swaps etc.).

The payment was received by the investment bank affiliate who served as MASTER SERVICER that was the agent of the investors, even if they failed to adhere to the requirements of the PSA in transferring the loan into the REMIC pool. The fact that the REMIC pool was unfunded by either cash or assets, and that there was no trusts account for the pool would be beneficial in that claim. Remember that only the subservicer submitted an “accounting as to how much was due and payable.” The MASTER SERVICER never submitted anything so they could “plausibly deny” the “mistake.”

By claiming that the investors should have been informed of these payments might be the key to unlocking discovery on who the investors are. The real issue of course is that by diverting the investment capital obtained from the investors away from the REMIC, the account(s) from which the loans were funded were not disclosed to the investor or the buyer, who signed a note evidencing an obligation that differed in terms of repayment from the terms of the “mortgage bond” which was issued by the unfunded REMIC.

This approach side-steps the dubious conclusion by most courts that practically ANYONE can initiate the foreclosure “on behalf of” the actual investor-lenders. They might be able to start it but they can’t finish it with a credit bid in anyone’s name except the real creditor(s). The real creditors are not just the investors in the REMIC because their money was never invested in the REMIC.

The real investor-lenders are ALL of the investors whose money was commingled by the investment bank into one or several accounts without regard to the REMICS. In order for them to prove otherwise they would be required to show that the accounts had entries with reference to the REMICS.

It is doubtful that any such accounts exist, since it was the investment banks who were “Borrowing” the ownership of the loans so they could trade the loans, buy insurance, credit default swaps etc. Then they “borrowed” the loss from defaults and the loss declared by the Master Servicer (which was always more than the actual amount of projected losses on defaults) to collect insurance, credit defaults swaps and bailouts.

But since they were the agents of the investors and were acting contrary to the contractual provisions of the prospectus and PSA, the money received from these co-obligors should have been paid to the investor-lenders, and thence reducing the principal balance due to the investor-lender. Instead the bank kept the money and they intend to keep it.

If the principal balance (receivable) was reduced by the proper allocation of funds received from insurance, credit default swaps, cross collateralization and over-collateralization, then the borrowers’ payable would be correspondingly and proportionately reduced. The only way this would not be true is if the the loan were considered to be sold to the payor. But the insurance contracts and contracts for credit default swaps specifically and expressly state a waiver of subrogation or any claim against the borrower (to prevent the duplicate filings of foreclosures).

With the use of insurance, credit default swaps and outright multiple sales of the same loan to different entities, the banks were able to sell most loans for multiples of the amount actually funded. Thus an overage might be created that would entitle the homeowner to receive the extra money that should be allocated to investor-lenders. So your cause of action would, in addition to wrongful foreclosure, RICO etc., would be under contract or common law that specifically states that a creditor is entitled to be repaid only once — not multiple times through the use of sham conduits.

ONE CAVEAT: The more you litigated during the foreclosure and eviction, the more likely the doctrine of res judicata or collateral estoppel might be applied — unless the case was brought on new facts that could not have been determined during the litigation of the case before.

Appraisal Fraud and Facts: Essential to Securitization Scam

The REMICS are mirror images of the NINJA loans — no income, no assets, no job

the borrower did not realize that the false appraisal and other deficiencies in underwriting had shifted the risk of loss to the homeowner and the investors

Editor’s Notes: Our economy and the economic structure in other countries is stuck because of the false appraisal reports that supported funding of at least $13 trillion (U.S. only) of loans that were so complex that the Chairman of the Federal Reserve, Alan Greenspan didn’t understand them nor his staff of more than 100 PhDs. They were intentionally opaque because complexity is the way you get the other side of the “deal” (the buyer) to accept your explanation of the transaction. It also is designed to avoid criminal penalties even when the scheme unravels. Getting a Judge or Jury to understand what really happened is a challenge that has been insurmountable in both civil and criminal cases and investigations.

As stated in the 2005 petition to Congress from 8,000 appraisers who did not want to “play ball” with the banks, the appraisers were faced with a choice: either they submit appraisal reports $20,000 higher than contract and earn more money for each appraisal and earn  more money through volume, OR they won’t work at all.

Developers, mortgage brokers, and the “originators” (sales organization that pretended to be the lender), sellers and homeowners needing cash in an economy where there wages and earnings were not keeping up with the cost of living —- all reacted with glee when this system went into action. As “prices” rose by leaps and bounds — fed by a flood of money and demands for more mortgages — everyone except the banks ended up crashing when the money stopped flowing. That is how we know that it was the money that made prices rise, rather than demand.

So most appraisers were both stuck and pleasantly enjoying incomes 4-10 times what they had previously received, and obediently submitted appraisal reports that were in fact unsupportable by industry standards or any other standards that a reasonable and rational lender would use — if they were lending their own money. By lending money from investors the risk of loss was entirely removed. The originators got paid regardless of whether the mortgage was paid, or went underwater or caused the homeowner to execute a strategic default.

By using the originators as surrogates at the closing, the appraisal report was accepted without the required due diligence and confirmation that would be present if you went to the old style community bank loan department. The fact is that there was NO UNDERWRITING involved as we knew it before the securitization scam. The “extra” interest charged to No DOC loans (usually 3/4%-1.5%) and the premium interest charged on NINJA (No income, no assets, no job) loans was sold to borrowers on the premise that the “lender” was taking a higher risk. But the truth is they didn’t do any due diligence or underwriting of the loans regardless of whether or not the borrower was submitting information that confirmed their income, assets and ability to pay.  Thus the premium for the “extra risk” was based upon a false premise (like all the other premises of the securitization PONZI scheme).

The normal way of judging the price of a loan (the interest rate) was the perceived risk composed of two elements: ability to repay the loan, and the value of the property if the loan is not repaid. The banks that foisted the securitization scam upon the world got rid of both: they did nothing to confirm the ability to repay because they didn’t care if the borrower could repay. And they intentionally hyped the “value” of the property far above any supportable level as is easily shown in the Case Schiller index.

This is where PRICE and VALUE became entirely different concepts. By confusing the homeowner and hoodwinking the investors with false appraisals, they were able to move more money into the PONZI Scheme, as long as investors were buying the bogus mortgage bonds issued by fictitious entities that had no assets, no income and no prospects of either one. The REMICS are a mirror image of NINJA loans.

The value of the property was not the same as the prices supported by the false appraisal reports. The prices were going up because of the sales efforts of the banks to get homeowners giddy over the the numbers, making them feel, for a few moments as though they were more wealthy than they were in reality. But median income was flat or declining, which means that the value was flat or declining.

Thus prices went up while values of the homes were going down not only because of the median income factor but because of the oversold crash that was coming. Thus the PONZI scheme left the homeowner with property that would most likely be valued at less than any value that was known during the time the homeowner owned the property, while the contract price and appraisal report “valued” the property at 2-4 times the actual value.

The outcome was obvious: when all was said and done, the banks would be holding all the money and property while the investors, taxpayers, and homeowners were all dispensable pawns whose losses came under the category of “tough luck.”

While this might seem complex, the proof of appraisal fraud is not nearly as difficult as the explanation of why the banks wanted false appraisals. In the civil actions for wrongful lending or wrongful foreclosure, the homeowner need only show that the lender intentionally deceived the borrower as to the value of the property.

And the lack of actual underwriting committees and confirmations is essentially the proof, but you would be wise to have an appraiser who can testify as an expert as to what standards apply in issuing an appraisal report, to whom the appraisal report is addressed (i.e., the “originator”). Then using the foundation for the standards apply it to the property at hand at the time the original appraisal report was issued. It might also help if you catch the “originator” getting a part of the appraisal fee (like Cornerstone Appraisals, owned by Quicken Loans).

The borrower testifies that they were relying upon the “lender” representation that the loan had been carefully reviewed, underwritten, confirmed and approved based upon market conditions, ability of the borrower to repay and the value of the property. After all it was the “lender” who was taking the risk.

Thus the borrower did not realize that the false appraisal and other deficiencies in underwriting had shifted the risk of loss to the homeowner and the investors whose money was used to fund the loan — albeit not in the way it was presented in the prospectus where the REMIC was the supposed vehicle for the funding of the loans or the purchase of the loans.

Everyone in the securitization PONZI Scheme got paid. When you look at it from the perspective described above then you probably arrive at the same conclusion I did — all that money that was made and paid and not disclosed to the borrower changes the dynamics of the deal and the undisclosed compensation and profits should be paid to the borrower who was the party with the real risk of loss.

And in fact, if you look at the Truth in Lending Act, THAT is exactly what it says — all undisclosed compensation (which is broadly defined by the Act) is refundable with treble damages. Why lawyers have not taken action on this highly lucrative and relatively easy case to prosecute is a mystery to me.

Because of the statute of limitations applied in TILA cases, the TILA cause of action might not survive, especially in today’s climate, although more and more  judges are starting to see just how badly the banks acted. I therefore recommend to attorneys to use alternative pleading and add counts under other federal statutes (RICO, etc) and state statutes of deceptive lending, and common law fraud. The action for common law fraud, is the easiest to prosecute as I see it.

The interesting aspect of this that will lead to early settlement is that the pleading is simple as to the elements of the cause of action and can easily survive a motion to dismiss, the facts are clearly going to be in dispute which makes survival on a motion for summary judgment a much higher probability, and in discovery you have a nuclear option: since your cause of action is for return or sharing of the unlawful booty that was paid, plus treble, punitive or exemplary damages, discovery into all the different parties who made money in the chain is far easier to argue than the usual defensive foreclosure case.

The other thing you have is the possibility of stating a cause of action to force the retention of the property, to protect the homeowner in the collection of damages rendered by the final verdict. A lis pendens might be appropriate, and the bond need not be much more than nominal because unless the bank or servicer has a BFP to buy the property, you can easily show that your client is already posting bond every month they pay the utilities and maintain the property.

The compensatory damages would be a measure of the difference between the actual value of the deal and the deal that was offered to the homeowner. In simple terms, it could be that the appraisal report was $250,000 higher than the actual value of the property. As a result, the damages include the $250,000 plus the interest paid on that $250,000 and where appropriate, the loss of the house in foreclosure, plus interest from the date of the fraud (i.e. the closing), attorney fees, and costs of the action.

This action might also have special applications in commercial property cases where the appraisals are known to have come in much higher than the owner or buyer had ever expected. In some cases the “appraisal” actually changed the terms of the contract on the assumption that the property was worth much more than the original offer.

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