[WSBARP] LLC Identity Theft

[Rowley, Rob]

Of interest to the RPPT Section from a local Spokane title company.




Fraud Alert: LLC Identity Theft

*December 13, 2018*

In 2017, title companies uncovered a large-scale national fraud scheme
targeting distressed properties and borrowers. In the scheme, criminals
would obtain information about a loan in default or already in foreclosure.
The wrongdoers then create and record fraudulent instruments related to the
loan in the land records. The fraudulent instruments may vest title to the
perpetrators, which can allow them to sell or refinance the property.

This fraud has evolved over the past year. *Criminals are now hijacking
legitimate LLC real property owners by filing fraudulent annual statements
of information with Secretaries of State, presenting fraudulent operating
agreements, impersonating managing members with counterfeit identification
and obtaining hard money cash out loans. This is typically happening with
free and clear vacant land, meaning the criminals disappear with the money.*

In many instances, the criminals are getting on the websites of Secretaries
of State and modifying the statements of information online. Traditionally,
title companies have relied on the validity of Secretary of State filings
to help confirm the managing member. This is not a safe bet anymore. In
addition, many Secretaries of State are not reviewing statements of
information to confirm that the last managing member shown on the previous
filing is the same as the latest filing. This basically allows anyone to
hijack an LLC.

“The bad guys are exploiting the hard-money space due to the focus on the
collateral, not the borrower, and their tendencies to not meet the borrower
and transact the loan online and through email,” said Bill Burding NTP,
executive vice president and general counsel of Orange Coast Title Company.
“This allows domestic and overseas criminals to commit loan and title
fraud.”

Thus additional very careful scrutiny of the LLC is required, including a
review of the entire SOS SI chain, comparing the date of the operating
agreement to when they were incorporated & purchased the property and
require, as practical as possible, for the lender & escrow to deal with the
principals in-person and not from a far.

Red flags include:

   - Free and clear property
   - Vacant land
   - Cash out hard-money brokered loan
   - Loan broker/lender never meets with principals
   - Latest Secretary of State Statement of Information not executed by
   last managing member shown on the previous filing
   - LLC operating agreement not executed at time of incorporation or
   purchase of property
   - Loan documents emailed to borrower instead of delivered by title
   company-approved notary service
   - Typographical errors
   - Non-matching signatures
   - Unknown terms

“If there are any red flags or discrepancies, the mantra should be to pump
the brakes and slow the transaction down,” Burding said. “If you suspect
fraud and before proceeding any further, you should escalate the file to
the underwriting and legal team immediately.”

*Link to the original article here:
https://www.alta.org/news/news.cfm?20181213-Fraud-Alert-LLC-Identity-Theft
<https://www.alta.org/news/news.cfm?20181213-Fraud-Alert-LLC-Identity-Theft>*


Anthony V. Carollo

CEO

[image: Merry Christmas from Vista Title and Escrow]



201 W. North River Dr., #205, Spokane, WA 99201

Mobile 509.999.7050 | Direct 509.321.3940

acarollo at vistatitle.com | vistatitle.com <http://www.vistatitle.com/> |
Facebook <https://www.facebook.com/vistatitleandescrow/>

WARNING – FRAUDULENT FUNDING INSTRUCTIONS

Email hacking and fraud are on the rise to fraudulently misdirect funds.
Please call your escrow officer immediately using contact information found
from an independent source, such as the sales contract or internet, to
verify any funding instructions received. We are not responsible for any
wires sent by you to an incorrect bank account.
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