Tag: fraudulently

On Cloaking Devices And Usury: Lender Can Be Sued If It Uses Corporate Shell To Cloak A Personal Loan As A Business Loan

 by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Star Trek (pd)Cloaking devices are common in sci-fi movies like Star Trek and Star Wars. They are used to render an object, usually a spaceship, invisible to nearly all forms of detection. Although scientists are apparently working to make real-life cloaking devices, at this point they exist only in the movies and, apparently, in New Jersey courts, at least according to the Appellate Division in Amelio v. Gordon.

In Amelio, plaintiff owed an apartment building in Hoboken. He approached defendants about obtaining a loan to finish renovations on three units in the building, along with the common areas. Plaintiff claimed that defendants instructed him to create a corporate entity to obtain the loan. Plaintiff did as he was instructed, and formed a limited liability company, which obtained the loan from defendants. Plaintiff, who was identified as the managing member of the limited liability company, signed the loan documents on behalf of the company.

Plaintiff later sued, arguing that the fees and interest payments under the loan exceeded the amounts allowable under New Jersey's usury laws. He also claimed that defendants fraudulently convinced him to create a limited liability company and have that entity obtain the loan, just so they could charge him usurious fees and interest. Plaintiff sued in his individual capacity, not on behalf of the limited liability company. On the day of trial, defendants argued that the complaint had to be dismissed because plaintiff lacked standing to sue since the company was the borrower, not plaintiff. With little explanation, the trial court granted the motion and dismissed the complaint. Plaintiff appealed. 

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Lengthy Prison Sentence Affirmed For Former Florida Beekeeper Of The Year Turned Mortgage Fraud Kingpin

by: Peter J. Gallagher

A federal appeals court recently affirmed the 28-year prison sentence doled out to Phillip Hill, a Georgia man convicted of mortgage fraud who was once named the beekeeper of the year in the state of Florida (proving once again that all things foreclosure have some connection to the Sunshine State).  The Atlanta Journal Constitution reported on the story in an article entitled "Convictions Upheld In Massive Mortgage Fraud Scheme" (h/t How Appealing).  The government described Hill as the leader and kingpin of a scheme, pursuant to which Hill and his associates "fraudulently obtained 300 mortgage-backed loans for buyers who used the loans to buy properties [from Hill] at more than market value."  Hill and eight of his partners in crime — who were also hit with lengthy prison sentences — pocketed approximately $22 million dollars in ill gotten gains through the scheme from 2000 to 2003.  

The U.S. Court of Appeals for the Eleventh Circuit put an unusually personal spin on Hill and his scheme, when it began its opinion as follows:

When Phillip Hill was a young man growing up the small town of Sumatra, Florida he helped tend his grandfather’s beehives. He would, as his lawyer would later tell the jury, “get the honey out of the hives.” And he was good at what he did, being named “Florida beekeeper of the year” when he was twenty years old.  Three decades later, Hill got involved in the busy hive of Atlanta’s high-end residential real estate market. His goal was still to get out as much honey as he could.

Leaving no pun unturned, the court later noted that almost all of the loans entered into by Hill and his band of thieves went into default, "causing lenders and guarantors to be stung with over $38 million in losses."