Monday, August 8, 2011
The South Carolina Supreme Court has publicly reprimanded an attorney on these facts:
From December 2003 through early September 2004, respondent conducted numerous closings involving Johnny Hoy. On more than twelve occasions Hoy purchased a parcel of land and, in a back-to-back transaction, sold the parcel and a mobile home on it to another purchaser. In these back-to-back transactions, Hoy financed his purchase of the parcel with the proceeds of his sale of the parcel and mobile home. The individuals who purchased the properties from Hoy secured financing though Branch Banking & Trust (BB&T).
Respondent's contact at BB&T was loan officer Robert Byron Green. Respondent used the instructions Green provided for completing the HUD-1 settlement statements. The settlement statements respondent submitted to BB&T failed to reflect that Hoy used the proceeds he received from his sale of each parcel and mobile home to fund his purchase of the parcel. Additionally, the settlement statements for Hoy's sale of the properties indicated the purchasers made substantial down payments to Hoy outside of closing. Respondent notes that Green advised him that BB&T would not review the HUD-1 settlement statements prior to closing and that BB&T was aware of the back-to-back transactions.
In June 2004, respondent had his office staff attend a South Carolina Bar seminar where they learned they should be on the lookout for closings like the Hoy back-to-back closings. On July 20, 2004, the Court issued In the Matter of Barbare, 360 S.C. 560, 602 S.E.2d 382 (2004), which addressed the importance of ensuring that HUD-1 statements submitted to lenders accurately reflect the transactions of the buyer, seller, and lender. After learning of the Barbare decision, respondent immediately changed all closings involving Hoy and began requiring Hoy to bring certified funds to the closings where he was purchasing properties. In early September 2004, Hoy stopped using respondent's services.
Hoy, Green, and several others were indicted by a federal grand jury for one count of conspiracy to commit bank fraud and thirty-nine counts of making (and aiding and abetting each other in making) false statements to BB&T, a federally insured financial institution. The superseding indictment explained that Hoy, Green and the other defendants conspired with each other to deceive BB&T as to the credit-worthiness of certain mortgage loan applicants. Some of the properties on which respondent had conducted the back-to-back closings were identified in the superseding indictment.
And many complain that CLE is a waste of time. Here, it likely prevented the attorney's indictment. (Mike Frisch)