A New Twist on Identity Theft and Fraud: How can Realtors, Lenders, Title Companies and Law Firms Protect Your Clients and Yourselves?
A case out of Virginia Beach underscores the deviousness of those who engage in identity theft. As reported in Virginia Lawyers Weekly, Guy Gugliotta owned two lots in Virginia Beach. A local realty company maintained contact with Gugliotta via mail in case he was interested in selling the lots. In 2012 someone purporting to be Gugliotta notified the tax assessors office to change the mailing address for tax bills. Then they notified the realty company that they had decided to sell the lots. The lots were listed for sale and in August, a purchaser made an offer.
The seller documents were handled via mail with the fraudulent seller executing documents in Florida and sending them to the closing agent. Deeds to transfer property require that the seller’s signature be notarized so surely this was the end of the road for the fraudster.
But no, not only did the thief take the identity of the owner; he also took the identity of a notary public in Florida. The notary public declared under oath that it was not his signature and that he had never notarized the documents.
The closing went through, the deed was recorded and all remained fine until Gugliotta, the true owner, decided to sell his lots and called upon the same realty company. At this point the fraud was discovered.
Gugliotta hired counsel and filed suit to get his lots back. The court determined that the property had never transferred – one cannot transfer what one does not own. The court held that the deed was void and determined that Gugliotta was still the owner of the lots. Gugliotta spent over $100,000 in attorney fees to get his property back–costs that were not recoverable–and there are still remaining claims among lenders, the title company and the realty company.
In Williamsburg, news was reported on a similar rental property scam. Here, the scammer alters postings from legitimate real estate websites and reposts them. When the victim sees the posting, she sends an email to the scammer. The scammer asks the victim to send a security deposit to confirm the transaction and the fraud is complete.
It is difficult to protect your company and yourself against those who cheat and lie, however, there are some lessons to take from this case. Realty companies, lenders, title companies and law firms may need to review policies and add some additional best practices to further their protections against fraud.
- Request identification. Law firms and settlement agents typically handle this step at the closing as a requirement of the lender’s instructions but should also require identification in cash transactions and if the lender fails to request it. When an “owner” contacts a realty company, the realtor can request identification from the owner. For title insurance companies, their involvement is all paper–no personal contact with seller, purchaser, lender, etc. Perhaps identification should become part of the title company’s requirements. Although not foolproof, because an identity thief could still have false identification that appears to be valid, the more parties asking for identification in the process may help discover the fraud before it is complete.
- Verify identity by personal contact. Many of us now use email to transact business, however a phone call to the client or customer could reveal the fraud. Checking the phone number provided against the listed phone number in a phone directory is not very time consuming and may save you the cost, expense and liability of being involved in a case such as the Gugliotta case.
The best advice at this point is to reevaluate your policies, discuss your potential liability with your attorney or insurer, and modify your policies to provide your business with the best practices to avoid being involved in an identity theft case.
Tarley Robinson, PLC, Attorneys and Counsellors at Law
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