By Alan Steven Wolf of The Wolf Firm (USFN Network News, Spring 1993)
By Alan Steven Wolf of The Wolf Firm The Bankruptcy Fraud Committee has been hard at work developing systems and procedures for the referral of bankruptcy matters to the appropriate criminal authorities. The committee has decided to use the Bernard Gross case as a test case in the development of these systems and procedures.
Mr. Gross is now under investigation by both the FBI and the City Attorney of Los Angeles for his involvement in an allegedly complex rent skimming scheme involving hundreds of properties located in California and Arizona. The operation allegedly includes the purchase of properties by Mr. Gross for $100 to $500 in return for Mr. Gross' promise that the loans will be brought current, the property repaired and sold, and the proceeds divided with the original homeowner.
The complaints allege that the checks tendered by Mr. Gross for transfer of title often bounce, that the lenders are not brought current, that the property is not repaired, and that the property is eventually lost to foreclosure. The complaints also allege that Mr. Gross has placed tenants on the properties, collects the rents, and delays foreclosure by the serial filing of bankruptcy petitions by approximately 20 entitles owned or controlled by Mr. Gross. Those entities include the following:
ENTITIES OWNED OR CONTROLLED BY GROSS
| Arroyo, Isabelle | Pichu Corp. |
| Berrocal, Peter | Picu, Inc. |
| BBS Pacific | S&B Commonwealth |
| Chris Marshall Corp. | Shimizu,Hisatoshi |
| Early, Rory | Slama |
| Investors Mortgage Holding Company | Strike-it-Rich |
| King, Judith K. | Tri-Metro investment |
| Kleinman, E. | Voice Mail of Nevada |
| Marshall, Chris | Weinstein, Daniel |
| North American Investments |
The Committee is asking members of the mortgage banking
community to do a search
of their bankruptcy files to determine whether or not
a servicer has been involved in one or more of these bankruptcy cases.
Once a hit is found, the collection of certain information is necessary in order to facilitate the prosecution of the cases. In addition to a copy of the promissory note, the U.S. Attorney has asked for certified copies of the following documents:
Servicers should also provide loan information showing a breakdown of the default as of the time that the transfer occurred from the original borrower to one of the "Gross" entities and a similar breakdown of the default at the time of the foreclosure sale. Finally, a listing of the name, address and any telephone numbers of the original borrowers and of any tenants would prove helpful in the prosecution.
The Bankruptcy Fraud committee will be developing a form to be filled out by servicers in referring these matters to the U.S. Attorney's Office. Also, the form will require the name of the investor so that Fannie, Freddie and other investors can be advised of the scope of their involvement.
Until that form is developed, we ask that each servicer review their files and begin to put together the information that will be necessary to aid in the prosecution of is case. Servicers who are not federally regulated entitles should check with their own in-house legal counsel regarding the propriety of releasing information that might be deemed confidential. If necessary, subpoenas could be obtained to facilitate the transmission of this information.
Only through coordinated efforts of the entire mortgage banking community can we stimulate the prosecution of these cases and thus create a deterrent to bankruptcy abuse. Your cooperation is greatly appreciated.
For further information please contact:
The Wolf Firm, A Law Corporation, is an "AV" rated law firm which concentrates on providing superior legal services to the mortgage banking industry. The firm's national clientele includes many of the largest mortgage bankers in the country, as well as a variety of savings banks, commercial banks, commercial finance companies, credit unions, and the Resolution Trust Corporation. With a staff of approximately forty individuals, including attorneys, certified paralegals, legal secretaries, administrators, clerical personnel, and a full time computer systems analyst, the firm represents its clients on a wide range of matters including all aspects of both residential and commercial/multifamily mortgage loan origination and servicing, securitization, regulatory compliance, bankruptcy, and litigation related to the foregoing in both federal and state courts throughout California. For more routine matters, such as residential bankruptcies, evictions and receiverships, The Wolf Firm has developed extremely cost-effective and efficient programs using specially trained paralegals and computer technology to assist its attorneys in handling these matters at rates that are the most competitive in the State of California and, through its membership in the USFN, the Firm is able to arrange similar services in virtually every state in the nation.
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