Karl Schneider recently concluded a Medicaid fraud criminal trial in State Court in Columbus.  The State of Ohio brought charges of Medicaid Fraud, Forgery and Theft involving activities of a home health care firm in Northeast Ohio.

Trina Goethals and Karl Schneider, recently concluded a mortgage fraud conspiracy criminal jury trial in Federal District Court.  The Government brought allegations of bank fraud and money laundering, involving short sale transactions and the procurement of mortgage financing where loan proceeds were distributed to borrowers and facilitators in Ohio and Florida.

Maguire & Schneider, LLP is pleased to announce that two of its Partners, Karl H. Schneider and Keith W. Schneider, were named 2013 Ohio Super Lawyers. Karl Schneider and Keith Schneider were additionally selected in the Top 50 in Columbus listing. We are also pleased to announce that Firm Attorneys Trina N. Goethals and Mark R. Meterko were named by Super Lawyers magazine as 2013 Ohio Rising Stars.

Super Lawyers is a comprehensive and diverse listing of exceptional attorneys representing a wide spectrum of practice areas, firm sizes and geographic locations. The list is based on surveys of thousands of lawyers and peer reviews. Only the top five percent of lawyers from nearly sixty practice areas are named Super Lawyers.

Trina Goethals successfully represented a Columbus brokerage in its capacity as a property manager.  The Plaintiffs made a claim of nuisance due to excess noise and illegal activity allegedly caused by tenants occupying an apartment complex managed by the Defendant brokerage.   After the Defendants prevailed on summary judgment in the trial court, Plaintiffs appealed to the Tenth District Court of Appeals.  The case was affirmed in full on September 6, 2012 in favor of Defendants broker and owner.  For the full opinion see:  Hamilton v. Hibbs LLC, 2012 Ohio 4074 (10th Dist. 2012).

By Karl H. Schneider

Published in the the Ohio Division of Real Estate & Professional Licensing Fall 2012 Newsletter

As a result of the housing crisis, there has been a significant rise in mortgage fraud prosecutions by the federal government and State of Ohio. The increased prosecutions demonstrate the need for real estate brokers and salespersons to be increasingly wary of participating in real estate brokered transactions that do not pass the ‘smell test.’

Times have changed dramatically over the last 20 years in mortgage financing. Not long ago, mortgage lending was primarily “local.” Often the lender knew the borrower and something about the property that would collateralize the loan.

The move to the brokering of loans in the wake of the Savings & Loan crisis of the 1980s precipitated loan schemes not prevalent years earlier. True, lenders have to take some of the blame for underwriting negligence, lack of oversight, lax internal controls and the desire to aggressively book loans in a competitive market. Nevertheless, when mortgage financing models changed, lenders became more vulnerable to loan fraud. A rapid rise in property values fueled the fire of would-be schemers. Lenders were often happy to oblige, feeling secure in the collateral and creditworthiness of borrowers. The scope of this article is to address multi-facet schemes of mortgage fraud and their consequences for the unwary real estate licensee. It is not intended to cover single-person frauds, which are also problematic but arise when a borrower individually misleads a lender into making a loan. The multi-faceted schemes are fraught with risks for real estate licensees. A licensee may unwittingly become a co-conspirator of a large mortgage fraud scheme while having done very little to gain than unflattering distinction.

Mortgage fraud is governed by federal and state criminal statutes. The federal crime of “bank fraud” (18 USC Sec. 1344) makes it a crime for anyone to knowingly participate in a scheme to defraud a financial institution. Ohio does not have a bank fraud criminal statute per se, but Ohio’s theft by deception statute can be applied to participants in the transaction alleging the loan proceeds were taken under false pretenses. In either case, federal and state prosecutors enjoy considerable success pursuing these prosecutions. In their arsenal is the ability to charge loan frauds as conspiracies, or as racketeering, where the penalties are severe, usually involving a prison sentence. Prison time is partially determined by the “loss” a financial institution suffers because of deception. Under conspiracy law, a participant need not be the central planner, nor know everything or everyone who may be involved. To support a conviction, a person must have done something that furthers the objective of the conspiracy, with knowledge of it. Here, the unsuspecting real estate licensee is at huge risk.

The lender’s vulnerability to an over-inflated appraisal in today’s mortgage market is great. Vulnerability to “subject to” appraisals, where listed repairs or renovations are not intended or completed is high. Many times the lender is at the mercy of the mortgage broker, where the lender can be misinformed through the application process. Misrepresentation over owner-occupant status or of a borrower’s income, deposits, and credit standing are often central to loan frauds. The use of straw purchasers has also become problematic. The lender is vulnerable to undisclosed contract addenda that materially changes the terms of the contract, essentially funding a loan on terms far different than those secretly agreed upon by the parties.

This article could not begin to address all variations on fraud schemes; but many require the efforts of multiple players who nearly always are motivated to receive disguised compensation out of the loan proceeds.

Variations of these schemes continue to occur, keeping federal and state prosecutors, regulators and their investigators busy. More resources continue to be devoted to both federal and state prosecutors. Both enjoy multi-jurisdictional task forces, some of which are shared. Often the task forces are comprised of agents from the FBI, IRS, HUD, Ohio Division of Real Estate & Professional Licensing, Ohio Division of Financial Institutions, Ohio Department of Insurance, and detectives from local jurisdictions. These task forces are seasoned and adept at spotting fraud schemes and building solid cases for eventual prosecution.

Regardless of the pressures associated with the real estate brokerage business, real estate professionals should raise their awareness of fraud schemes that could lure the unsuspecting licensee. Real estate licensees would be well served to immediately hit their “refresh button” and be on guard for loan fraud schemes. Licensees should to stay vigilant when approached to prepare an addendum at or near the time the principal contract comes to fruition, particularly if the requested changes deal with material terms such as price, distributions or concessions. Asking questions and engaging in due diligence above and beyond the industry norm in order to ensure that a lender is not being deceived, can reduce the risk of becoming a target in a mortgage fraud investigation. Better recognition of the lines between suspicious and acceptable undertakings can do wonders to reduce the licensee’s risk of criminal prosecution and then, without doubt, the sleepless nights that follow.

Pradaxa is a prescription medicine used as a blood thinner.  It was intended to be used to prevent strokes in people with atrial fibrillation and was designed to replace the blood thinner warfarin (known by brand names Coumadin, Jantovin and Marfarin).

Recently, Pradaxa has been implicated in several reports of bleeding fatalities.  Patients with impaired renal function are particularly susceptible to its adverse side effects because their kidneys are unable to completely flush the drug from their system.

If you or a loved one has suffered dangerous side effects of Pradaxa, please contact Maguire and Schneider, LLP for a legal evaluation of your claim.

Partner, Karl H. Schneider was the featured speaker for Central Ohio Land Title Association’s May 14th meeting.  Mr. Schneider presented on the notable rise in mortgage fraud prosecutions and the extension of conspiracy law to charge various real estate trade professionals, including title agents, mortgage brokers, real estate agents and appraisers with criminal fraud including the penalties on conviction.

Congratulations to the M&S team that serves our LegalShield Members!  They earned the #1 spot in January for surveys scoring an “Excellent” rating.  These surveys are sent randomly to LegalShield Members who have recently called into our office for assistance.

These surveys rate the performance of each person at M&S who interacted with the LegalShield Member.  An “Excellent Survey” is a survey in which each category was scored “excellent” by the LegalShield Member!

Karl Schneider and Trina Goethals successfully represented a brokerage in a breach of fiduciary duty claim, along with several ancillary issues, in which purchasers of real property sued the brokerage and its agent alleging that latent and patent defects were found for which they were not warned and not properly advised.  Additionally, Plaintiffs contented that because the occupants had special needs, additional inspections should have been conducted.  On behalf of the Defendant brokerage, Maguire & Schneider successfully argued that the agent and the brokerage fulfilled all of their duties under Ohio law in properly advising the purchasers of all available inspections and relaying all of the information that was disclosed to them about the property.  The Cuyahoga Court of Common Pleas agreed that the agent and brokerage fulfilled their duties under the law and granted summary judgment to the Defendants in full.  The purchasers appealed the decision, which was fully briefed and argued to the Eighth District Court of Appeals in February 2011.  In March 2011, the Eight District affirmed the trial court’s decision in full (Wolk v. Piano, 2011 Ohio 1065), holding that the agent and brokerage “provided evidence demonstrating that the buyers were sufficiently informed,” that “the buyers failed to establish that the realtor breached her fiduciary duty,” and that the agent and brokerage used  best efforts under Ohio Revised Code § 4735.62. On August 24, 2011 the SCO declined jurisdiction.

Karl Schneider and Mark Meterko successfully represented the purchaser of a foreclosed property at a sheriff’s sale in an appeal of the underlying foreclosure judgment and confirmation of sale before the Tenth District Court of Appeals for the State of Ohio. Mr. Schneider and Mr. Meterko successfully argued that the purchaser should be allowed to intervene in the appeal to protect her interest in the property, and successfully argued for the affirmation of the underlying foreclosure judgment and confirmation of sale.