SEC Charges Three Subprime Lenders with Fraud

Real Estate

Reported from the Mortgage News Daily and Jann Swanson:

Three former mortgage executives were charged with fraud on Monday for activities growing out of their roles at the defunct New Century Mortgage

The charges were brought by the U.S. Securities and Exchange Commission (SEC) which accused the three of covering up the rapidly declining financial condition of their firm before it filed for bankruptcy in April, 2007.

The three are Brad Morrice, former Chief Executive; Patti Dodge the former CFO and former Controller David Kenneally.  The SEC is seeking to permanently enjoin the defendants from future violations of the federal securities laws, disgorgement of funds with prejudgment interest and to bar them from acting as an officer or director.  The suit, filed in federal court in the Central District of California also seeks unspecified civil penalties.

New Century was one of the largest of the independent providers in the subprime lending market, lending to persons with poor credit or high debt ratios.

The government accused the officers of attempting to keep investors in the dark about the financial condition of New Century, assuring investors that the business was performing well while failing to disclose a growing incidence of loan defaults, mandatory loan repurchases and requests for repurchases.

The SEC also charges that Dodge and Kenneally fraudulently accounted for some of the expenses associated with repurchasing bad loans.   Kenneally, with Dodge’s knowledge, allegedly changed New Century’s accounting method for loan repurchases.  These changes violated generally accepted accounting standards and led to what the SEC said were materially overstatements of the company’s financial prospects.

The executives are also charged with causing substantial investor losses.  The company announced in February 2007 that it had to restate its 2006 financial statements at which point its stock plunged 36 percent to the high teens.  It was trading at less than $1 when the company finally filed for bankruptcy.

Today’s indictments come less than a month after U.S. Attorney General Eric Holder announced the creation of a new interagency fraud unit that will oversee investigations into the mortgage meltdown.  The SEC is a participant in that fraud unit.  At the time of that announcement Holder made it clear that investigations of subprime mortgage irregularities were already underway and that prosecutions would be forthcoming.

Based in San Diego, California, the licensed brokers and attorneys at The JK Law Firm, APC represent residents throughout the region who have been injured as a result of real estate fraud and scams. Contact The JK Law Firm by calling (858) 755-0455 or by emailing jonathan@thejklawfirm.com for a free consultation.

Consumer Advice: Don’t Let Scams Ruin Your Cyber Monday Shopping Experience

Consumer Law

Reported by the National Consumers League:

Washington, D.C.- As Americans return to the workplace next Monday after the long holiday weekend, many will spend a portion of their day surfing the Internet for deals from online retailers. Monday, November 30 is known as “Cyber Monday,” what the retail industry claims to be one of, if not the, busiest Internet shopping days of the year, and with more and more consumers opting to avoid the mall, e-shopping next week is expected to be higher than ever. According to the National Retail Federation, 53.5 percent of workers with Internet access, or 68.8 million people, will shop for holiday gifts from work this holiday season; three-fourths (73.8 percent) of young adults 18-24 with Internet access will shop at work, and men are more likely to shop from work than women (56.3 percent vs. 50.8 percent).

Whether consumers do their shopping online at the workplace or at home, advocates are reminding them to practice safe e-shopping habits in the coming weeks and year-round. “The Internet can make your shopping faster and easier, but there can also be pitfalls if you’re not careful,” said Sally Greenberg, executive director of the National Consumers League, which today released its top ten tips for avoiding cyber grinches and scams this holiday season. “There are ways to ensure you have a safe online shopping experience, so that gift-giving is a joyous occasion, not an opportunity for cyber thieves.”

  1. Don’t shop online on an unencrypted or open wireless network. An airport or coffee shop’s wireless network is not an appropriate place to conduct financial transactions. Entering personal financial information over an unsecured connection may leave your computer open the to hackers and thieves to capture your financial information. Home Wi-Fi networks can also be compromised, so consumers should find out how to secure their connections.
  2. Secure your computer before shopping online. Before connecting to the Internet or shopping online, take the following three core protections: 1) Install anti-virus and anti-spyware programs and keep them up to date; 2) Install a personal firewall; 3) Regularly update operating system and anti-virus programs to current protections.
  3. Know who you’re dealing with. Before shopping online with an unknown e-store, check out the seller and be sure to get the name and physical address of the vendor in case something goes wrong. If you’re buying gifts on an online auction site, check the track record of the seller before you bid.
  4. Pay the safest way – by credit card, especially when you’re purchasing something that will be delivered later. Under federal law you can dispute the charges if you don’t get what you were promised. You may also dispute unauthorized charges on your credit card.  Many card issues have “zero liability” policies under which you pay nothing if someone steals your credit card number and uses it. Increasingly, debit cards are also offering good protections, so check with your bank to learn more about protections offered.
  5. Only shop on safe sites. When providing payment information, the Web site URL address should change from “http” to “https,” (or, less frequently, “shttp”) indicating that the purchase is encrypted or secured. Look for an icon on the browser (generally in the bottom right of the window), such as an image of a padlock closing, to indicate that the page is secure.
  6. Don’t fall for a phishing email or pop-up. Legitimate companies don’t send unsolicited email messages asking for your password, login name, or your financial information. But scammers do, and it’s called “phishing.” Crooks often send emails that look like they’re from legitimate companies – but direct you to click on a link, where they ask for your personal information. Delete these emails.
  7. Be careful when shopping for a gift in an online auction. Consumers sometimes turn to auctions for harder-to-find collectibles or expensive electronics. Understand how the auction works, and check out the seller’s reputation before you bid. Use safe ways to pay, like a credit card. If you use a 3rd party payment system, read the terms carefully to understand what protection, if any, it offers if you don’t receive what you were promised. Always ask about terms of delivery and return options.  Be especially wary of auctions that ask for payment via wire transfer.
  8. Turn your computer off when you’re finished shopping. Many people leave their computers running 24/7, the dream scenario for scammers who want to install malicious software—“malware”—on your machine and then control it remotely to enable them to commit cyber crime. To be extra safe, switch off your computer when you are not using it.
  9. Don’t be tempted by offers of free money. Con artists take advantage of cash-strapped consumers during the holidays to offer personal loans or credit cards for a fee upfront. These scammers simply take the money and run. Beware of emails offering loans or credit, especially if you have credit problems.
  10. Visit www.fraud.org to learn more about protecting yourself from online scams year-round and to report suspicious sites, sellers, or scams. You don’t have to be a victim to report a scam, and your information will help law enforcement go after cyber grinches.

Based in San Diego, California, the Consumer Law attorneys at The JK Law Firm, APC represent residents throughout the region who have been injured as a result of consumer fraud and scams. Contact The JK Law Firm by calling (858) 755-0455 or by emailing jonathan@thejklawfirm.com for a free consultation.

New Legal Protections for the Elderly

Elder Abuse

Courtesy of Time Magazine and contributor, COELI CARR:

Misappropriation of an elderly person’s assets by someone legally authorized to oversee them may now be a lot tougher to pull off in the State of New York. New legislation that went into effect Sept. 1 — in the form of a radically changed power-of-attorney (POA) document — couldn’t have come at a better time. “Financial abuse is one of the fastest growing areas of elder abuse,” says Andrea Lowenthal, an elder-law and estate-planning attorney in New York. “Older people are a growing segment of society and are among the most vulnerable, often because of their misplaced trust.” But if seniors are the prey, then they often choose their predators — people they’ve empowered to act on their behalf, as agents, in financial matters, though a POA. (Watch TIME’s video “Seniors Say End-of-Life Care Matters.”)

To be granted the rights associated with a POA was pretty uncomplicated under the old document. Only one signature was required — that of the principal assigning POA to the agent. In some cases, the agent — usually an offspring — didn’t even know he or she had been named in the document until the principal became unable to take care of day-to-day financial affairs. Such secrecy generally led to confusion down the road, with the appointee often woefully ignorant of the principal’s state of affairs. In other instances, a health-care aide or housekeeper with ulterior motives might procure a POA and persuade a gullible senior to sign it. The signature of the principal was basically all that mattered then.

Now things are different.

“The new power of attorney has teeth,” says Ronald Fatoullah, an elder-law and estate-planning attorney in New York. One safeguard is a multiplicity of signatures. Now both the principal and the agent must sign the POA, and each signature must be notarized. “This is a big change,” he says. “The document specifically states that when you accept the authority to act as agent, you create a special fiduciary relationship with the principal that imposes legal responsibilities until you resign or the power of attorney is terminated.” (Read “The Real Issues of End-of-Life Care.”)

Another important provision of the statute is the right of the principal to appoint a monitor, like a trusted accountant, to oversee the activities of an inexperienced agent, or a family member to ensure that an agent acts according to the principal’s wishes. Those who have POA must now keep records and account for every penny, which was not a requirement under the previous law, says Louis Pierro, an elder-law and estate-planning attorney in New York, adding, “The new law makes it easier to bring a civil suit against an agent who has acted inappropriately.”

The new law goes even further when addressing gift-giving. In the past, it was relatively easy for people expecting to be named as agents to slip into the POA a self-serving gift-giving provision. Because these write-ins would often be overlooked by the principal, it was possible for agents to write checks to benefit themselves and clean out a principal’s bank account. Now such doings will be harder to get away with. If the principal wants to grant the agent the specific power to make gifts, the principal must initial a box on the POA authorization form, and then describe the types of gifts on a separate statutory major-gifts rider. The rider must contain the signature of the principal and two witnesses and also be notarized.

The new rider is unique to New York, notes Pierro. “Having the obligations spelled out makes the person acting under power of attorney subject to virtually the same rules as someone who operates as a trustee,” he says. Might other states adopt the rider? “They’ll likely wait and see New York’s experience with it,” he says.

Based in San Diego, California, the Elder Law attorneys at The JK Law Firm, APC represent individuals and families throughout the region who have been physically or financially injured as a result of Elder Abuse. Contact The JK Law Firm by calling (858) 755-0455 or by emailing jonathan@thejklawfirm.com for a free consultation.

Are CA budget cuts concealing elder abuse?

Elder Abuse

Reported from CBS News:

A state watchdog group says elder abuse may be underreported, in part because of budget cuts to ombudsman programs.

The California Senate Office of Oversight and Outcomes says the number of complaints from ombudsmen are down more than 40 percent since budget cuts were enacted last year.

The report’s authors fear the decline in reports means abuse is going unreported in the state’s elder care facilities.

Last October, Gov. Arnold Schwarzenegger cut all state funding for the ombudsman program, dropping the budget to $4 million in federal funds for fiscal year 2009, down from $7.9 million the previous year.

In many parts of the state, budget cuts have resulted in staffing cuts, and fewer facilities are being checked for problems.

Based in San Diego, California, the Elder Law attorneys at The JK Law Firm, APC represent individuals and families throughout the region who have been physically or financially injured as a result of Elder Abuse.  Contact The JK Law Firm by calling (858) 755-0455 or by emailing jonathan@thejklawfirm.com for a free consultation.