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(Canadian Institute of Mortgage Brokers and Lenders)

The Canadian Institute of Mortgage Brokers and Lenders says mortgage fraud is on the rise and costing Canadians hundreds of millions of dollars each year. The most common method used to perpetrate mortgage fraud is to misrepresent the purchase price of a property

(CBC ersonName>MarkersonName>etplace)

laceName>OntariolaceName> laceType>LandlaceType> Title Registry Office: Responsible for province-wide administration of local land title offices. Tesoro was able to walk into a local land title office with forged documents and transfer title to six homes to himself.

In 1999, the province began a pilot project allowing online registration of land titles. By September of 2002, the service was extended to 12 municipalities, including Toronto.

The tate>Ontariotate> government describes it as the first ever self-serve, electronic land registration system in the world. The Ministry of Consumer and Business Services says electronic registration will cut down on frauds like Tesoro’s. Others suggest the system may provide opportunities for a technologically savvy con artist.

(The Law Society of tate>Upper Canadatate>)

The Law Society of tate>Upper Canadatate> is aware of increasing instances of fraud in relation to mortgage loan transactions. These frauds usually involve either complicit or fraudulent purchasers, and/or real estate agents, mortgage brokers and unfortunately, in some cases, lawyers.

Typically, mortgage fraud involves the use of false identities and the artificial inflation of property values. Both these elements can be present in the same transaction.

A PROPOSAL TO SOLVE THE MORTGAGE FRAUD PROBLEM

HOUSE KEY

A house or property owner is given a card with an 18 digit code.   This code is kept by the true owner of the property and the government land titles office. 

The filing of the code does not form part of the land titles public record but is filed with the land titles office.  

Title cannot be transferred, conveyed, or charged unless the pass codes match between the land titles office and the true property owner when instruments are to be applied to the title of the property.

This concept would have to be administrated through the government land titles office.  Private corporations who have been selected to computerize the land title data would have to work with the government to administrate the program.  

The House Key program could be a free or paid service whereby property owners have to voluntarily subscribe to the program to protect their properties.    Insurance companies may insist that property owners subscribe to the program before underwriting any policy be it, property insurance or title insurance. 

What about Judgments, Executions, and Construction Liens?

It is doubtful that a perpetrator of fraud would file a fraudulent Judgment, Execution or Construction Lien.  In most cases these instruments are paid upon the sale of a property.   The true owner of a property is usually notified of outstanding charges upon a close.   

Why are other fraud programs failing?

Proactive vs Reactive

Kevin Bousquet, a Certified Fraud Examiner and President of The Corpa Group, a 15 year old Private Investigation agency maintains the focus of most fraud programs are on a failing REACTIVE program.  Reactive meaning “after the fact”. Reacting to the fraud after it has been perpetrated.   

Bousquet’s agency continues to be retained by title insurance companies and their legal counsel and states that his case load is increasing more and more each month.

Victims of mortgage fraud (and fraud in general) are relying on public law enforcement to punish perpetrators and the civil court system to collect their losses. “Both of which will most certainly fail” says Bousquet.  

Most municipal Police forces are backlogged over a year on fraud matters, some over two says, Bousquet.     By that time the perpetrator has ample time to get away. Witnesses have probably moved, documentation relating to the matter can become harder to find.   “It’s all a big waste of time says Bousquet”. 

“If you think you’re going to actually collect your losses through the civil court system you’re well mistaken” says Bousquet.   Statistically most perpetrators have no assets in their name.   The proceeds from fraud are seldom deposited in any bank account that could be garnished.  While victims of fraud may succeed in getting a civil court judgment (or a criminal restitution order) it will most certainly be an uncollectible worthless piece of paper.    

Bousquet says, “the rules of civil collection with a judgment or a restitution order are very simple.   You have to try and collect on a bank account, employment wages, property, or a vehicle that has no lien on it”.  “Good luck and don’t expect the court to help you find these assets in order to collect on them, you’re on your own” says Bousquet.       

These methods of attacking fraud are nothing more then punishment and collection all of which fail without doubt.  At the end of the day the property owner is completely victimized and in some cases financially ruined with their credit record destroyed.  

Bousquet argues that a true fraud program should be towards a PROACTIVE program to stop the act before it can occur.      A clear program with the cooperation of the government land titles office and the companies that they are using to computerize the land title data to protect property owner.  

In Bousquet’s system the true property owner is notified every time an instrument is being applied to the title of their property be it a mortgage, lien, transfer or conveyance.  “No different then a password or secret code that may be associated with your credit card” says, Bousquet.    A kind of system where the land registry office must see the true owners secret code when the documents are being filed either at the land registry office or through the computerized system. 

Bousquet has forwarded his ideas to Teraview, a company that has been responsible for computerizing the land title data in tate>Ontariotate>. 

Bousquet maintains mortgage fraud is completely out of control. The changes have to start with the government implementing this kind of a program or at least focusing on a Proactive system.  

While many experts are maintaining that people should be checking their credit bureau file on a regular basis.  Bousquet maintains this is still a reactive view. It has to start with the government implementing a new proactive system.

“Everything I am seeing now is all about changes to the laws, hiring more police.  It’s not going to resolve the problem” Bousquet says.

Kevin Bousquet is Certified Fraud Examiner and President of The Corpa Group Inc (www.corpa.com).

Corpa is a 15 year old private investigation agency involved in Fraud, Asset and corporate  Investigation.  Corpa continues to be retained by law firms, banks, insurance companies (and their legal counsel) as it relates to their specialized area of investigation.

Kevin Bousquet

The Corpa Group Inc.

www.corpa.com

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Why Your Child Support Will Never Be Paid

The Worthless Paper

By Kevin Bousquet – Private Investigator – The Corpa Group Inc.

Copyright – Kevin Bousquet

Due to the fact that there is so much attention by the media about the Family Responsibility Office (FRO), right now, about collecting child support, I would like to help people understand the real reason why their child support will never be paid or collected.

For the most part, there is no point in blaming the FRO – they run into the same problems as any starving recipient trying to collect support.

It is about trying to find the assets, the employment, the bank account, the property and the vehicle of the payer. There is no point in looking to the FRO for help in discovering this information.

There is no system, nor any powers of a support order, which will allow recipients of support orders to properly get information which will identify assets to succeed with garnishment of bank accounts and employment and other forms of collection.

Child support orders are rapidly becoming worthless (no different than judgments). It’s not a collection problem, it is an ability to have some power to get information like bank accounts, employment, the vehicles owned etc., For example, how is anyone expected to find the bank account of their ex-spouse? The FRO needs not only the bank, but the actual branch information – and how can anyone know if there is actually money in the account?  The banks won’t give this information, as they will protect their customers, and even more so now, with the new privacy legislation and fraud and identity theft on the rise.

A recipient’s ability to identify assets in order to collect on them will soon be non-existent.

But what about the other side of the coin? Much of the reason why child support is not being paid is that many respondents (the payers of child support) cannot easily and cheaply apply to the court to have their support orders reduced if there is a change in their employment of financial situation.

The result is that these payers fall drastically into arrears, since they are unable to afford to get their orders to reflect their true income. The ultimate result is that the payer will become so far in arrears that they find their only alternative is the underground economy(working for cash under the table) to avoid a large garnishment of wages that may, in fact, be unfairly registered against them.

If payers don’t go underground, they jump from job to job to avoid garnishments, or they try to work out illegal contractual agreements with their employer – invoicing their employer instead of being on payroll – to avoid garnishment.

Finding out if a person is working can be impossible if the person works under the table; for example driving to a construction site every morning. It is illogical to expect the FRO or a starving recipient to follow a dead-beat dad at 6:00am to a construction job-site so he can be garnisheed.

Payers will continue to renege on support, turning their back on an expensive, time-consuming effort in the court system to have their support orders amended.

The average retainer to have an order reduced can be anywhere from $3000 and up. What would you do?

For example: a seasonal worker in Canada, like a landscaper, may earn very high wages in the warm, summer months, but in the winter his wages will drop or he may earn nothing at all.

The seasonal worker may be paying $700 per month in support, based on a job he had two years ago at the ersonName>timersonName>e of his divorce. Now, years later, his income has dropped. It will cost him close to $3000 in legal fees to get the order changed also known in legal terms as  ‘varied’. And, chances are that if he comes into the court system already in arrears, the judge won’t give him any standing at all, despite his valid excuse for being in arrears in the first place. Many judges will not allow payers to represent themselves in court, or fill out their own paperwork, and it could take months or even years to get the order changed through the court system.

Many who work in construction or retail, who jump from job to job, have old orders filed against them that may not, in fact, reflect their current income (whether more or less). But no-one in thier right mind will spend the ersonName>timersonName>e and money to have his order changed every ersonName>timersonName>e there is a change in his financial circumstances.

The system at hand continues to drive would be payers into the underground economy, where they will not only continue to avoid paying child support, but also personal income taxes.

To recap:

1.      Until the court is willing to give more judicial powers to support orders and judgments information be impossible to find to allow people to collect on their Orders and Judgments Things like the order having authority or power to force a payer’s employer to give circumstances regarding employment.  A bank being served with a support order to be compelled to report on all bank accounts registered in the payer’s name. The department of transportation upon being served with a support order being compelled to provide a vehicle and address information so a vehicle could be seized or a license suspended. Assets have to be identified before there can be collection and/or enforcement.

2.      Until a simple paper system is in place to allow parties to go to court (with or without a lawyer) to get their orders changed, simply and cheaply, every ersonName>timersonName>e there is a change in their financial circumstances, payers will continue to outsmart the system, go underground and not pay support or income taxes. It is possible to represent oneself in small claims court and landlord tenant cout but not in the family court. These hearings could be conducted with a simple set of forms and be heard by a referee, arbitrator or registrar, instead of busy judges with overloaded family court dockets.  The system right now is too complicated, ersonName>timersonName>e consuming  and expensive.

3.       The only way to catch a person working for cash is to follow them in to work – plain and simple. No search method on earth will reveal how a person is truly spending their working day if he or she is not reporting his income.

Government Insurance companies like the Workmens Compensation Board (now the WSI spend millions of dollars to hire independent private investigation firms to use private investigators to follow (via surveillance) on would-be cheaters of the insurance system to see if they are continuing to work or faking their injuries during the business day. It’s the only way to fight this kind of fraud. 

Revenue Canada (or the IRS in the United States) should be teaming with the FRO to help fund Private Investigation agencies to conduct surveillance and inquiries on cheaters not only of child support but working underground for cash.   A person working for cash trying avoid child support is not only cheating the family court system but is in fact committing tax evasion.  This makes the problem a joint responsibility of Revenue Canada and the IRS who continue to unsuccessfully battle the underground economy.  The underground economy is partly manufactured by the failing family court and FRO system.     

Privatization of the FRO, or forwarding child support orders to collection agencies, will accomplish nothing in the way of actual collection. You can’t collect on what you don’t find. Dead-beat parents need to be followed into work – plain and simple – there is no other way.

Kevin D. Bousquet

Certified Fraud Examiner`

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By Kevin Bousquet, Certified Fraud Examiner,
President Corpa Investigation

www.corpa.com

No we don’t really use a baseball bat, but I do feel your pain and frustration.

Because of the worsening economy, solicitors more and more are reporting having file cabinets full of uncollectable Judgments.

The result is usually an unhappy client who blames the Solicitor for an expensive legal bill and a worthless uncollectable Judgment.

The cause is usually a failure to properly identify assets in advance, and to determine the likelihood of collecting on those assets before starting the action.

It is best to become involved either before an action or after an action, either to assist in the collection of a Judgment, or to determine the likelihood of recovering a Judgment.

Don’t be misled by the endless information brokers waiting to sell you searches.

A proper asset investigation is a study of collectable assets. All criteria has to be met in order to properly confirm that the assets are properly registered to the debtor, and are free and clear of attachments in order that they can be seized, garnished or sold through the courts.

There may very well be creditors out there ahead of you who have priority over you. You may only be part of the picture.

You will find thousands of investigators and/or information brokers, willing to sell you searches pertaining to vehicles, land, bank accounts etc. This is not an asset search or even investigation, in our view. We call it bits and pieces, and it’s a waste of time and money unless you know exactly what you’re doing.

“You can’t get a little bit pregnant.” We have to be retained to investigate the whole picture, or please don’t bother to write or call us. There is no one search that will identify bank accounts alone. That’s is the honest truth. Leads have to be obtained from through basic searches and inquiries.

Does the person bank at the same institution they have their mortgage? 

Would the bank pay into a garnishment when the bank has loans and/or a mortgage with the debtor?

Even though you think you have found the bank account that bank branch can deny paying into your garnishment and claim they have priority over your judgment as a result of lending products their customer (i.e your debtor) has with them.

THIS IS WHY CONDUCTING SINGLE INDIVIDUAL SEARCHES DOESN’T WORK. YOU HAVE TO INVESTIGATE THE WHOLE PICTURE.

There might be other people just like you (creditors) who also have judgment. Did you know that if you collected money through a garnishment that you may have to share those collected funds with other creditors who have also registered their judgment with the courts?

Net worth has nothing in the world to do with enforcement of Judgment. It’s what you can collect through the court that counts.

The individual you’re investigating may drive an expensive car, live in a million-dollar home, and have access to thousands of dollars a day. These assets may be jointly held and/or financed by secured creditors.

The assets may have been conveyed (or fraudulently conveyed) elsewhere since the date you obtained Judgment.

The biggest battle for asset investigators these days is, without any doubt, the underground economy.

The underground economy is alive and well in Canada and the United States. As long as there is cash there will always be an underground economy.

Sooner or later we will all be living in a cashless society. It will be the only possible way governments will be able to even attempt to clean up the underground economy and money laundering in North America.

Until the cashless society arrives, if a person is working for cash and/or being paid “under the table,” no computer search in the world is going to identify this information.

I have made a career of developing various methods to identify this kind of information.

In creditor/debtor situations, very often a debtor will default (or defraud) more than one creditor at a time For example, the debtor may have defaulted on his credit cards, loans, the mortgage of his home, the car lease, etc.

Mistakes can be costly and can add to further losses. How much have you spent already? 

Asset Reports  should not just a bunch of brokered computer searches on flashy letterhead.

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By Kevin Bousquet, Certified Fraud Examiner

www.corpa.com

The Problem

More and more each day competitors, ex-associates, new start-up ventures, and unscrupulous individuals are using electronic eavesdropping as a way to gather information that could seriously damage your business.
“Bugs” telephone taps and video transmitters (above) are readily available that can compromise your business secrets for as little as $30.00. The manufacture, sale, installation, and monitoring of these devices is a multi-billion dollar industry in North America.

Unless you are a law enforcement agency with an Order or Warrant for a wire tap, it is a criminal offence to record the conversations of two or more persons without their consent.

How Do You Know If You’re Bugged ?

• Confidential information seems to be getting out to competitors.
• Competitors seem to be just one step ahead all of the time.
• Your office was broken into yet very little or nothing was taken.Sockets or switches show signs of being moved slightly, ie: the wallpaper may be disturbed.
• Vehicles parked near to your premises, that appear to be empty.
• Your telephone rings but no one speaks or you just hear a short tone.
• Unusual sounds (crackling, clicks, volume changes) on your telephone handset.
• Indications that your handset may have been exchanged, ie: numbers in memory may be lost.
• Repairers or utility companies turn up to carry out work when they have not been called.
• Furniture or items appear to have been disturbed.
• Interference on your radio or television.
• Unexplained brick or plaster dust on floor.

The most commonly and widely used of all the devices is the RF (Radio Frequency) transmitter bug. These devices are inexpensive easy to use and require no specialized receiving equipment a simple AM or FM radio can be used to monitor the bug. Due to their low cost, there is very little incentive to recover these devices once planted.

The Spectrum Analysis we use to detect RF devices is capable of monitoring frequencies up to 36 Gigaherts. This will also include very low frequency (VLF) devices which transmit on frequencies down to 15 Kilohertz.

The next method is often known as the “wire tap” or a “hard wire bug”. The wiretap will use any existing wiring in the home or office ie: the electrical plugs (see photo above), alarm systems or even the telephone wiring. This is similar a typical baby monitor situation where you plug the transmitter into one room and the receiver in the other.

Many think that telephones are only a security risk when being used but a simple modification to the handset can leave the microphone connected, even when the phone is not in use.

Wired and wireless transmitters must be physically connected to the line before they will do any good. Once a wireless tap is connected to the line, it can transmit all conversations over a limited reception range. Wired taps, on the other hand, need no power source, but a wire must run from the line to the listener or to a transmitter.An ‘Infinity Transmitter’ or ‘Harmonica Bug’ must be installed inside the phone. When someone calls the tapped phone it rings, blows a whistle over the line, and the transmitter picks up the phone via a relay. The mike on the phone is activated so that the caller can hear all of the conversations in the room.The telephone line analyzing equipment used during the sweep (photo above) is capable of determining illegal taps, defective phones, room listening devices, splices, VLF devices, infinity triggered devices, and selectively targeted phones in situations where a tap has been placed in a wire closet or a telephone room.A signal is generated from your phone right to the Bell Canada Phone Centre (or the main phone centre of your particular State or Province). The purpose is to evaluate the current in the line and to discover if any device has been placed on the line that might be causing a drop in the current.

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By Kevin Bousquet, CFE

Investigate, Investigate, Investigate

After twelve years of working in the investigative industry, I am still amazed at the number of clients who have come to us for help after being victimized financially. In most cases the matter results from a failure to do their homework or make some basic inquiries before transacting a deal.

I am going to discuss with you some of the basic situations we run into on a regular basis and offer some basic advice. This is not to put the scare in you in order to generate business for our agency. It’s just to let you know why we suggest that you allow us to look at things for you from the beginning instead of at the end, when it may be too late to recover your investment.

As far as fraud, white collar crime, and general commercial crime are concerned, you should be aware that most police departments that have specialized units in this area are highly backlogged. With robbery, drugs, and assault offences on the increase, your investigation is not going to be on the top of the list with any law enforcement agency.

In Canada it has become so bad that in most cases, we will simply bypass laying a complaint (or an occurrence) with the police. Instead we bind and tab up the investigation and lay the charges ourselves, privately through a Justice of the Peace.

The other aspect that most business professionals don’t realize is that you can’t use a criminal process to resolve a civil process. This means that you can’t threaten to criminally charge someone for not returning your money. To do so is called extortion. It’s a criminal offence right across North America and Europe—the law is virtually the same when it comes to extortion.

Punishment or Collection

In most cases you’re going to have to make a decision. Do you want to criminally charge the person in the criminal court? Or do you want to try and collect your money in the civil court? You can ultimately do both but you have to be very careful not to break the law.

Punishment

If you choose the criminal charge, you had better be prepared to wait and hope the judge will give you a restitution order as well. This process can be frustrating, and the outcome, in terms of the actual sentence handed out, is often disappointing to the victim.

Collection

If you go civil, then you’re going to have to hire a lawyer to try and collect your money (unless the amount falls within the mandate of the Small Claims Court).

In this situation you’re hoping that the individual you’re suing has enough assets that you’ll actually be able to collect if you win your lawsuit.

The end result of a lawsuit is a piece of paper called a Judgment. The court doesn’t collect your money for you and they won’t do anything to an individual with a Judgment against them who just refuses to pay.

This means your Judgment could be worthless. All the Judgment has given you is the power to do things like garnish bank accounts and seize assets. These remedies are effective only if you can find the assets. See our section on Asset Investigation.

This is why we push the principles of “Investigating before Investing” and “Investigating before Litigating.” This means taking a look at things in the beginning to ensure the deal is clean, to prevent suffering in the end.

For the record, I am not talking just about big deals here. This could be as basic an renting out your basement apartment to a tenant you’re nervous about, or taking on a new employee or business partner. The matter could be as extensive as conducting background investigations on individuals behind a venture capital deal. It’s all the same principle.

General Comments & Advice

Never take anything at face value. You must seek professional, financial and legal advice before transacting any deal. Don’t get caught up in pretty web pages and well decorated offices. Most of all, don’t rush into the deal. Take your time and do your homework no matter what the pressures of the moment seem to be.

In most States and Provinces the courts will usually use the principles of “let the buyer beware.” This most commonly means that the onus is on the buyer (i.e. the person on the receiving end) to do the homework.

If you are starting to get nervous about the entity you are dealing with, it is up to you to spend the time and effort to do your homework. You may very well get to the point of hiring a Private Investigator or a Forensic Accountant to look into the backgrounds of the individuals behind the deal, and most importantly, into their past deals or actions (if applicable).

It doesn’t matter what end of the deal you’re on. Whether you’re an investor or the person seeking investment, you can be easily scammed.

There are endless PIs and Forensic Accountants who like us specialize in due diligence and background investigation. Many traditional investment firms actively retain investigators, or they may have in-house due diligence departments.

Depending on the State or Province in which you reside, you may wish to know if the individuals you deal with have criminal records, have ever been bankrupt, have been defendants in lawsuits, or have had unsatisfied judgments filed against them in the civil courts.

A complete background investigation can cost anywhere from $500 to $1,000 plus disbursements. Individual specific searches can be conducted for under $200 in most cases. Most PI firms specialize in a number of areas, so for instance if you need a background investigation, you must retain a firm that specifically does work of that kind.

In most cases these investigations can be conducted very discreetly and lawfully without the person or company knowing they are being investigated.

It may be necessary for a credit report to be obtained to see if there are outstanding creditors and collectors. To do a credit report you will need some form of consent. All this basic information can be relevant to ensure a safe deal.

Scams To Watch For (If you are seeking investment)

If you use a company or a middleman such a loan broker to try to find you an investor or a venture capitalist, you may be asked to pay a large fee up front before any financing has been obtained. This advance payment may be called a processing fee, finder’s fee, or credit application fee.

Prior to being told about the up-front fee, you will be put through an exhaustive array of frustrating paper work which will include credit applications, the business plan, references, co-signers, numerous interviews, etc.

Even though you have been told the fee is completely refundable, you may have trouble collecting your refund through the court system if the middleman has no assets.

You should be aware that there are thousands of fraudulent companies and fraudulent middlemen who make their living scamming for these processing fees. The agreement between you will be so fine that you may find yourself in the cold as a result of some unconditional clause in the contract. There are hundreds of reasons why you could be denied independent financing under the contact.

This processing fee scam has gotten so bad there has been new legislation written in many States and Provinces to protect consumers from it. This type of scam is most commonly found in the mortgage broker and loan broker field. I could write a book on the number of mortgage brokers I have investigated in my career.

If you are using a middleman you must check references. Have them give you the name of 10 to 20 individuals for whom financing has been successfully obtained. Pick up the phone and call these individuals.

If you are nervous about paying the finder’s fee, pay the fee to your lawyer in “trust.” Your lawyer will disburse the finder’s fee only when the financing is in place. Just have your lawyer write the middleman a letter confirming that his fees are being held in trust upon completion of financing. It must be your lawyer, and not the lawyer acting for the middleman.

There are a number of legitimate middlemen out there who work on a “No Find No Fee” basis; to find them you’re going to have to call around. A reputable real estate lawyer or securities lawyer should be able to refer you to someone.

We are not stereotyping these middlemen. We’re merely suggesting that if you are dealing with an individual or a company whom you don’t know, you must check references. You may even wish to perform a litigation search to see if the middleman has ever been a defendant in a lawsuit. This basic search should cost you no more than $100.

Scams To Watch For (If you are an investor)

Needless to say, the investigative and due diligence efforts that have to be made by an investor cannot be summarized in a few paragraphs.

There is an endless number of situations in which investors have been scammed lending money to new ventures that were nothing more than fraudulent paper corporations with no real foundation. The money gets invested into a corporation, the directors abscond with the money, and the company goes bankrupt. The same scam can apply to fraudulent real estate deals.

We would suggest that all investors conduct extensive due diligence and investigative research before extending money to any individual or company. It is important to investigate not only the company you’re looking to invest in, but most of all the individuals who are truly behind the company.

Do these individuals have criminal records? Have they been defendants in lawsuits? Is there a history of bankruptcy, in which the individual formed a company that was shortly bankrupted after being financed by investors?

It will be necessary to know where these individuals were before they started their new venture. If they were in a previous business, why did it fail? What is the likelihood of success this time around?

We would again suggest that if you do not know how to do your own due diligence or homework (or you just don’t have the time) then you may wish to consider an outside source.

It is best to go to a corporate lawyer (in the city where you reside) who can refer you to a reputable Private Investigator or Forensic Accountant.

Make no mistake about it, your investment success or failure will be determined by how much time you spend doing your own research.

If you have questions regarding due diligence, private investigation, or forensic accounting, please feel free to email us corpa@corpa.com or speak to your corporate lawyer.

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