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Tipline Investigation: Foreclosure Activists Claim Billions Stolen Using Fraudulent Records

By C.J. Ward, KEYT - KCOY - KKFX Anchor/Reporter, cj.ward@keyt.com
Published On: Dec 24 2013 04:55:00 PM CST
Updated On: Nov 27 2013 11:59:31 PM CST

Group alleges bogus real estate documents led to foreclosures

SANTA BARBARA COUNTY, Calif. -

Is it possible that one of the biggest local scams of all-time is playing out right now, under our noses?

One group says it can prove it. Members claim billions of dollars have been stolen in Santa Barbara County and those who have the power to stop it are just letting it happen.

Losing your home to foreclosure is devastating beyond belief.

A group called "Save Our Homes Santa Barbara" was born from that type of  tragedy. It's purpose - to stop illegal home foreclosures.

Marina Read, who lost her home and other investment properties to foreclosure, is one of the group's founders.

In October, Read and another member of the group, Candace Jones, took their fight to the Santa Barbara County Board of Supervisors.

Jones is a former bank executive with 40 years experience. She also spent decades working as an expert for the FDIC and other government agencies uncovering bank fraud.

"We have gone on numerous occasions to ask that an audit be done of the county recorder's office to show them where the fraud is. We were always told they didn't have the funds to do so. But yet, these funds have been there." said Jones as she address the Board of Supervisors during its Oct. 15 meeting.

Jones and Read claim Santa Barbara County has collected about $750,000 over the last six years in fees under Government Code 27388. Most people have never heard of that obscure law. But, if you've ever bought or sold real estate in the county, you've probably paid the fee. It used to be $3.00, but just recently it more than tripled to $10.00. The money collected goes into the county's Real Estate Prosecution Trust Fund. As the name implies, the District Attorney's office is supposed to spend that money to stop real estate fraud.

"I think they've completely shrugged their responsibilities as far as reading the code and implementing the code," said Read during an interview with NewsChannel 3.

"Save Our Homes Santa Barbara" put together a 104-page report that it claims proves the county misspent the $750,000 meant to fight real estate fraud.

Kelly Scott, chief deputy district attorney in charge of the trust fund says the group is wrong.

"The criticisms in the report are incorrect and contain a number of misinterpretations of the law." said Scott.

Specifically, the activist group claims all the money collected for the prosecution trust fund must be spent to investigate and prosecute fraud involving only recorded documents, nothing else.

"That would be one tiny fraction of the real estate fraud that exists in California. The state legislature intended for county prosecutors to investigate and prosecute real estate crimes in general," said Scott during an interview from the D.A.'s main office in downtown Santa Barbara.

Scott, who is based out of the D.A.'s Santa Maria office, also said that ultimately every real estate fraud case is connected to recorded documents.

Read and Jones claim so many fraudulent documents have been filed at the County Recorder's office that they estimate $4.3 billion worth of real estate has been stolen from homeowners through illegal foreclosures.

They point out one title document in particular as a glaring example. It's a deed of trust for a home in Santa Barbara. It was recorded by IndyMac Federal Bank on April 15, 2013. But IndyMac went out of business in July 2008. Why would a bank official file a deed for a bank that no longer exists and five years late?

We showed the document to Kelly Scott who didn't know the answer. But, she said so far no one has filed a complaint with her office.

Jones said they discovered hundreds of questionable recorded documents.

"Out of the 505, we went in and did an audit on, I have to say that all 505 were fraudulent," said Jones.

Jones and Read also blame Santa Barbara County Clerk Recorder Joe Holland. They say Holland has the power to stop the fraud at the source before the documents are recorded. They believe if all of the documents are accurate and filed properly, fewer people would be thrown out of their homes.

"These documents are being used to foreclose on people and it's his responsibility to ensure our land title and that's what he is not doing," said Jones.

"If a document meets the basic recording requirements, we record it. We don't check for fraud, but if we do see something suspicious we'll forward it on the DA," Holland told us during an interview outside the Hall of Records in downtown Santa Barbara.

Holland said he has met with the group and read the report, but he didn't find any fraud.

"They've said well, we'd like you to conduct an audit. Well, we don't do audits. I'm not going to audit myself and I'm not even sure what they would have us audit?" said Holland.

Besides, Holland said his 20 person staff records up to 160,000 documents a year, not including marriage, birth and death certificates. He said they wouldn't have time to scrutinize every signature and notary.

Read and Jones refuse to accept that.  They are convinced the time for sympathy and lip service has passed.

"Oh yes, we understand. Oh yes, our sympathies go out to you. Well, on sympathies. What is your duty and where are you in this? You're not doing your job and you're getting paid. No, we're not going to do that anymore," said Read with conviction in her voice.

Read is suing some county officials in federal court alleging they've violated RICO laws.

Although the D.A's office disagrees with the group's report, Kelly Scott said both sides have one important thing in common,  they both want to stop real estate fraud.

Scott said her team has prosecuted dozens of real estate fraud cases and they will continue to do so.

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