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The recent financial fraud charges filed against Todd Leary, and before him, his alleged co-conspirator Joseph Garretson, highlight an area of focus for Allen County Prosecutor Karen Richards.
Financial fraud cases, such as Garretson’s misappropriation of title funds, are becoming more sophisticated, she said, and people might not initially be aware they are victims.
But in recent years, more people have been reporting such crimes to her office, Richards said.
Garretson pleaded guilty this week to charges of conversion or misappropriation of title escrow funds, corrupt business influence and unlawful loan origination activities. He admitted to arranging mortgage refinancing loans for area clients and failing to use the money to pay off the initial loans, causing mortgage holders to default, with losses totaling more than $2 million.
Facing 17 counts, Leary is accused of conspiring with Garretson to misappropriate title escrow funds.
Although Richards and Allen County Deputy Prosecutor Tim McCaulay cannot talk specifically about the Leary case, they explained how mortgage title fraud schemes work.
Those seeking mortgage refinancing loans are especially vulnerable, McCaulay said.
Mortgage lenders often send their borrowers to title or escrow agents to close the deal, with the money from the new loan coming into the agent and to be paid out within about three days to pay off the original mortgage, he said.
But in some cases, the deal turns into a version of the classic Ponzi scheme, with the money coming in but not going out. Sometimes the fraudster might make a few mortgage payments or eventually pay off the loan using proceeds from another loan, McCaulay said.
“Whenever you have a stream of money flowing in, the ethically challenged may be more tempted,” he said.
Richards said victims might not be tipped off to the fraud until they receive double paperwork about escrow activity such as tax payments. They also might fail to receive notification of the release of the first mortgage.
For those who suspect they have been the victim of such a scheme, Richards encourages them to call the Indiana Department of Insurance at 1-800-622-4461.
