Following our exposé of a large-scale real estate fraud ring in several Brooklyn neighborhoods, we were contacted by the New York City Department of Finance, an organization that includes the Office of the City Sheriff. Both City Finance Commissioner Jacques Jiha, PhD, and City Sheriff Joseph Fucinto made themselves available to discuss their recently-appointed roles, their interest in prosecuting deed fraud, and the need to make residents aware of such schemes to prevent them in the future.
Commissioner Jiha assumed his position in May. He began his career in Albany, as an economist for the Ways & Means Committee. He moved to the city and became the Deputy Comptroller for Budget for New York City and Nassau County, then went back to the Statehouse where he became Chief Investment Officer, followed by some time in the private sector as CFO & COO for the Black Enterprise, a media organization.
Brooklyn Brief: Tell us a bit about the Department of Finance and what you do here.
Jacques Jiha: This is an agency that handles the administration of all the tax and revenue laws of the city, encompassing some $30 billion in yearly revenue. We’re also in charge of the Office of the City Register, which is the office that handles the recording of all deeds for real property. We also advise the mayor on pension policy and administration. We handle all collection-related aspects for the City of New York.
BB: You mentioned the Office of the City Register, which is incharge of recording deeds. Since coming into this role, have you encountered complaints about deed fraud?
JJ: Yes. I was surprised how easy it was for someone to fraudulently record a deed. Immediately we heard stories of fraud from news outlets, and I knew we had to implement some changes. We realized the law does not currently give us much wiggle room because the City Register is required to record evey single deed as long as its in “recordable form,” meaning it’s certified by a public notary, has a seller’s signature, a buyer’s signature, and all the correct documentation.
We knew we had to find ways to make it more difficult for people who had underhanded intentions, and were taking properties away from the proper homeowners. Since the Sheriff’s Office reports to me as Commissioner, we decided to place the Sheriff as a roadblock to vet suspicion deed filings. Previously, if our staff reviewed a deed and their some questionable issues, they used to return the deed to the filer with what was essentially a “road map” advising how to cure the defects and resubmit the deed so that it would be filed. We were trying to be consumer-friendly, but incidentally we were also helping certain determined people commit fraud.
Now, if our staff reviews a deed and identifies a problem, it is referred to the Sheriff’s Office for investigation. The Sheriff will contact all the respective parties involved–the buyer, the seller–to make sure they understand what’s going on. If, from the investigation, it appears the filer has a legitimate application but needs help with a few defects, the Sheriff will work with the filer to fix the issues in about 36 hours and the filing will move forward. If the filing is not legitimate, the Sheriff can continue investigating and if appropriate, make an arrest for fraud.
BB: Are you satisfied that this new system will help alleviate deed fraud?
JJ: This is not a permanet solution; it’s merely a road block. We’re pushing for several pieces of legislation in Albany that would change the process and further assist us. One requirement would be to mandate that all real property conveyances require a deed to be registered in the State of New York. Though it’s often done out of practice, currently there is no such requirement, and especially in the case of inherited properties, a deed is often not filed, and those who inherit property in this manner are often the targets of fraud. We’d also like to strengthen the process by which public notaries are held accountable, requiring fingerprint identification for the signature of the parties in the document, for example. A third law we are seeking would allow us to “undo” a deed that our investigation reveals to be fraudulently filed. Currently, the Sheriff can investigate and even make arrests, but our office cannot legally remove a deed from the records that was discovered to be fraudulent. Affected parties have to seek their redress in Court, spend money, and go through a lengthy process to have their transaction reversed.
BB: In the real estate scheme we uncovered, a fraud ring convinced homeowners to sign their properties over to a shell company that claimed it would short sell their home, but then rented the properties and never actually effectuated such a legitimate sale. What about a law that could deem a deed to be a candidate to be “undone” even if a homeowner signed it, if it can be determined that the homeowner signed the document under false pretenses?
JJ: That is a little more tricky, because along with true cases of fraud, you’ll have situations where you’ll have buyers remorse, or seller’s remorse. How do you separate that from true instances of fraud? Once you sign a document, it’s presumed that you understood the terms and what you were getting into. It will take some more effort for us to analyze how we could determine whether someone is trying to back out of a deal made in good faith versus a situation where someone was fraudulently induced into conveying their real property.
This is a major problem. We are aware of what’s taking place in many communities where fraud rings are trying to take advantage of people who are either unsophisticated, not represented by a lawyer, have a language barrier, or a combination. One of the things we have to do going forward is community outreach so that people can be aware of their rights, the fraud schemes that are prevelant, and how they can protect themselves.
We also have a new “Notice of Recorded Document System” whereby deed holders are automatically signed up for alerts by e-mail and telephone with respect to any new filing that takes place concerning their property. It used to be an elective program, but now we are presuming people want to be notified and collecting their contact information for this purpose whenever they record a deed. Anyone who currently holds a deed and wants to be part of the program can also sign up online. The program is free.
Joseph Fucito, of the New York City Department of Finance Office of the Sheriff, has worked in the department for 26 years, working his way up to his appointment as Sheriff in June.
Brooklyn Brief: with over two decades in the Sheriff’s Office, can you tell me about your time here?
Joseph Fucito: I started as a Deputy Sheriff. I worked my way up through the ranks. Sargeant, Deputy, Lieutenant, Chief Deputy, Under Sheriff, and now the Sheriff. The Sheriff handles the enforcement of Court Orders, and we do other types of criminal investigations which includes deed fraud. Another big component of our investigations are tax cases, and tobacco enforcement.
BB: Let’s talk about deed fraud. Up until recently, was there not as much of a focus on this issue?
JF: Everyone develops policies for good reasons and intentions, and it’s hard to realize the unintended consequences at the outset. Several years ago, the Department of Finance adopted a policy where they were trying to expedite the recording of deeds. That’s very helpful for the hundreds of thousands of people who need their property recorded. But it also had the effect that, if you were trying to defraud the system, it provided instructions on how to file fraudulent deeds. Defects in filings were treated as errors as opposed to an attempt at deed fraud, and in the interest of customer service, the filer’s package was returned with an outline of what they needed to do to correctly file the deed.
BB: Since becomming Sheriff, how have you started to tackle this problem?
JF: Immediately there were a couple of cases that came to the new commissioner’s attention. We started talking about what the Department could do to curb this problem from a law enforcement perspective. The employees at the City Register’s Office are very good at picking up on a filing that doesn’t look quite right, but in the past their direction was to return it. So now we’re utilizing their skills for when something doesn’t look correct, they’re referring those cases to the Sheriff’s Office.
BB: And from there, you will investigate the deed someone attempted to file?
JF: Exactly. We look at what the reasons were for the suspicion. An example is the use of multiple social security numbers over several documents. An irregular chain of title is another cause for concern. Another component related to deed fraud is mortgage fraud, which is comingled in many deed fraud schemes, where a deed is filed but there’s no satisfaction of the mortgage but no claim of a lien on the property either. Other times, it’s more benign: a woman used her maiden name when she purchased the property and is now using her married name. The first thing we always do is contact the parties involved and ask, “what can you tell us about this?” Sometimes a defect that appears to be fraudulent is actually an innocent mistake. Sometimes it’s not, like in the case of internal family values over a property.
BB: If you find evidence of fraud, what actions can the Sheriff’s Office take?
JF: If we are given enough evidence, we can make an arrest. But an arrest is followed by a prosecution, and sometimes the arrest must go on hold until there’s enough evidence for a successful prosecution by the District Attorney’s Office of the jurisdiction where the fraud is taking place. What we’ll do is research whether there are any parrallel investigations ongoing with respect to the property, collect evidence, and contact the respective District Attorney to provide a referral regarding probable cause for an arrest. Sometimes we become an investigative arm for them as we look at a case jointly to see if we have enough to go forward.
BB: And these are felonies we’re talking about?
JF: Yes. In fact, in order to file a fraudulent deed, each fraudulent tax document you submit is in and of itself its own felony charge, offering a false instrument for filing. In order to record a deed, you have several accompanying documents that create a package. Each instrument, like the tax documents, the affidavit for water, sewer, and smoke detectors, all the accompanying documents are false instruments. So a fraudulent filer can be charged indepentently for each one. The overall theft, if the property is worth more than $50,000, is grand larceny. On top of that, each one of these forms, if they’re notarized, and you offer a false swearing to an officer, is an additional felony of perjury. It’s anywhere from ten to eleven felonies if you attempt to successfully file and record a fraudulent deed package.
BB: In the real estate scheme we uncovered, the victims were unwitting participants in a deed transfer, who knowingly signed deeds to their property to the fraud ring. The ring would then record the documents, indicating a sale price of several hundred thousand dollars that neither the victim homeowner or the banks ever received. Is that a different shade of fraud?
JF: On the one hand, it’s a different type of fraud that’s harder to prove because the victim acquiesced to it. One where you had no attachment to the fraud is the easiest. That being said, if the tax documents are not an accurate reflection of what occurred during the transaction, that is a false instrument for filing. It’s a secondary type of investigation, which we handle, but it would be more of a tax crime issue we are investigating, not as much of a deed fraud case.
A lot of these cases overlap from deed fraud to mortgage fraud to tax fraud. It’s often this multi-tentacled creature, and we’re trying to get to what’s at the core. What we see is attempts to get a homeowner to somehow acquiesce to a sale, then keeping a property in a “limbo” phase so that the fraud ring can actually collect rents while the bank is in the process of foreclosing. There’s scam after scam after scam involved in these things. Ultimately, the people that pay are the tenants, the banks, the city and the Department of Finance if we’re not collecting the proper taxes we should be receiving, and the economy as a whole as the ownership of the home remains uncertain.
BB: The fraud ring we uncovered committed their acts with “shell companies.” But even legitimate companies often create these entities for real estate transactions. Do you have any problem finding out who is behind these companies, and would you propose any changes?
JF: The problem is when there’s a shell behind a shell behind a shell, especially with the LLCs. It tends to become difficult to track down a body behind it. At least corporations have corporate offices where you can find someone to speak with and attribute the company’s actions to. When you don’t have anyone as a contact, it’s hard to investigate these issues.
We’ve talked about how it may be more beneficial to have more information as to who is behind an LLC, especially in the filings. Like a document that would say, “this is the LLC, and these are the individuals who are attached to or invested in the LLC.” Attaching a responsible party, even if they’re not liable for the actions of the organization in a civil realm, would be helpful if criminal conduct is being conducted in the LLC’s name. It would allow us to focus our investigative efforts as to who these people are.
Interview conducted, condensed, and edited by Matthew Taub.
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