When you work in criminal justice, the endless examples of man's inhumanity might not desensitize you, but they certainly will acclimate you. The report that makes your jaw drop in week two can make you yawn at week 202. This is true for those who work on non-violent financial crimes or violent physical crimes. For the former, the shock-and-awe value of the case is usually driven by the dollar amount of the theft. However, it's easy to lose sight of the horrific damage that financial crime can inflict on individuals and businesses even when the loss doesn't reach Bernie Madoff proportions.
But then you meet these individuals face-to-face as part of the investigation of crimes, preparation for criminal trials, testimony in sentencing hearings and research for a restitution memorandum. Then victims' anguish becomes all too real — even for the most seasoned criminal justice professionals. Sometimes, hearing their stories and looking into their eyes is almost too painful to bear.
Here I highlight this impact of fraud beyond the statistics in these six financial-crime victims' stories from criminal prosecutions I assisted as a paralegal CFE.
We're all are aware of the sweeping damage that mortgage fraud has inflicted on the U.S. and global economies. My office, one of many worldwide, has dedicated significant energy to the prosecution of mortgage fraud. As part of that effort, I met with numerous individuals who suffered from fraudulent mortgage transactions. Though the lenders in these cases were identified as victims, these individuals suffered nonetheless.
A DYING HUSBAND'S WISH
Leticia Watkins lived in north Minneapolis — an area ravaged by real estate fraudsters of all stripes. She and her husband, both modest earners, had managed to cultivate a nest egg of about $100,000 by the time their children were grown. Watkins' husband fell terminally ill, and had a few serious talks with her. When I met with her, she said her husband told her, "Tish, if you're careful, this money will take care of you until Jesus comes for you, even if he's walking real slow."
After his death, Watkins decided to refinance her house's mortgage. She was referred to M.P., a corrupt mortgage broker who was part of the scourge of the north side. Instead of simply finding Watkins a good refinance vehicle, he quickly persuaded her to become a real estate "investor." She purchased four homes at inflated prices with kickbacks built in to each. These kickbacks included money from the purchase price, were more than M.P.'s normal fees, were undisclosed to the lender and would illegally go to M.P.; however, he promised to use these amounts to make the monthly mortgage payments. He told her that given how quickly housing prices were rising, she could sell within a year and make a profit of her own, or she could easily rent the homes to tenants and receive Section 8 housing assistance.
Well, M.P. didn't pay a dime of the monthly payments, none of the houses rented, the market started to tank and Leticia was left with four stiff monthly mortgage payments which quickly drained her nest egg. When she met with us to prepare for her testimony in the criminal trial against M.P., she was living with her adult son and thought she'd have to do so for the rest of her life. She shook her head, and said more than once, "I let everyone down. I was so stupid. I let everyone down, especially my husband. He warned me. He warned me."
TRUCKER LOSES NEST EGG
Jerome Peters, like Watkins, was a hard worker of modest income. He was a long-distance trucker who also had carefully amassed a nest egg that he hoped would carry him and his wife through retirement. He too had the misfortune of meeting a mortgage fraudster who advertised for amateur real estate "investors" to buy properties, rent them out and sell at a profit in an endlessly rising market. Just as in Watkins' case, kickbacks were built into these purchase prices, the mortgage broker promised to make monthly payments and then broke that promise. Peters couldn't sell the houses, and his nest egg was drained as he and his wife fought off foreclosures. They lost their fight, and soon after went broke.
I met with Peters and the prosecutor to prepare for his testimony in the ensuing criminal trial. He was somber, remote and sat in his chair with his entire torso curved inward as if to protect himself. He had to confirm every detail of his previous statements and identify all the loan documents that spelled his financial doom. I remember what our office's investigator, another CFE, told me about his interview with Peters: "At the end I asked him if he had anything to add. He was quiet for a minute, and then said, ‘I . . . just . . . wish . . . I'd never met this man.' And then he hung his head and sobbed."
MISGUIDANCE BEGETS MALFEASANCE
Devontae Crimmins and Kevin Bumphurs — handsome young men in their mid-20s — were mortgage fraudsters in training. Older experienced criminal mortgage brokers told them it was standard practice to deliberately make false statements on borrowers' loan applications. Crimmins and Bumphurs were uneasy but they needed to keep their jobs. So, they trusted their managers — whom they admired — and each generated four loan applications containing false information and signed the applications as the "loan originator." They and their bosses were subsequently charged with felonies for these transactions, and their bosses also received racketeering charges.
I met with Crimmins, Bumphurs and their attorneys — after they reached plea agreements with the prosecutor — in proffer meetings that would factor into the prosecution of their bosses. They were polite, cooperative, reserved, resigned and under no illusions about their own responsibility in the crimes.
They'd looked up to their supervisors not only as mentors and teachers but also as role models and successful black businessmen after whom they could pattern their own careers. Instead, their bosses told them lying was legal, and now the two young men would carry felony records the rest of their lives. "I‘m still angry but I don't want to waste any more time fighting," Crimmins said. "I just want to tell the truth, clean out my closet, and move on." Bumphurs, at the end of his second proffer meeting, sighed as he rose from his chair and said, "I knew it would come to this." Both Crimmins and Bumphurs served a few months of workhouse time (a form of incarceration for less-severe criminal convictions) for their convictions and returned to their interrupted lives sadder but hopefully wiser.
ENTREPRENEUR EMBEZZLEMENT
Ignacio Velez and Sebastian Barrientos, both from Mexico City, had lived in Minneapolis for about 10 years when they decided to buy a dry cleaning business. They were new at operating a dry cleaners, managing any business, and they weren't proficient in business English. So, they sought out a consultant who could help them set up their office and manage the financial operations. They found Sherman Teasdale, a man with native English-language skills, modest talent in I.T. and an impressive array of civil judgments.
Teasdale set up their computer systems and bank and credit card accounts so he could remotely access everything. He fudged the books so it appeared that he was paying the business' sales taxes. He even diverted Internet searches for the business phone numbers so that Google hits would direct searchers to his own telephone number. He embezzled more than $250,000 from the business and left the owners with a sales tax liability, which they struggle to repay to this day.
I found it difficult to maintain a neutral face when I listened to Velez and Barrientos' tale of working 14- to 16-hour days while slowly discovering Teasdale's thefts while enduring his evasiveness, dismissiveness and condescension.
Surprisingly, they were very matter-of-fact in their recitation. Perhaps they, like Crimmins and Bumphurs, consciously chose not to waste precious energy on well-earned anger. However, I had to work hard to displace my own outrage and return to a strictly analytical frame of mind — maybe this old CFE could take a page from their book.
Or maybe not. The day I'm impervious to the suffering of financial crime victims is the day I don't deserve my job. Or my CFE credential.
Annette Simmons-Brown, CFE, is a senior paralegal in the Hennepin County Attorney's Office in Minneapolis, Minnesota.