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Theft of Wallet Plunges Victim Into Black Hole of Mortgage Fraud

January 22, 2006|David Jackson | Chicago Tribune Staff Writer

Meghan Ross took all the obvious steps when her wallet was snatched in a crowded bar three years ago.

Grabbing a cellphone, she canceled her credit cards, filed a police report and awakened her mother for advice.

Ross, 22, a student improv performer at Chicago's Second City theater, made follow-up inquiries over the next few days. Then she figured the ordeal was over and had cost her the $40 in cash she had in the wallet.

Sixteen months later, in April 2004, a private detective tracked down Ross' parents and handed them a sheaf of court papers. Ross was being sued by lending companies based in New Jersey, California and Pennsylvania.

Her wallet had been filched by a sophisticated mortgage fraud crew who used her identity to take out loans.

Ross' story shows how something as simple as a stolen wallet -- which used to mean somebody might run up a tab of a few hundred dollars at a nearby store -- can plunge a victim into a world of high-stakes fraud involving people and places never heard of and sums never imagined.

Her ordeal, told in land records, interviews and internal loan company files, also shows how the booming crime of mortgage fraud can play out beyond the reach of law enforcement and lender safeguards.

In an audacious series of face-to-face scams, con artists used Ross' identity to secure loans worth $412,300 on three buildings that they didn't own on Chicago's West Side.

Three lending companies that had purchased the mortgages sued Ross, seeking full repayment. Her family spent about $10,000 in legal fees fending off those claims.

Her once good credit has been shredded: She can't rent an apartment or lease a car without her parents' co-signing.

Ross met with several law-enforcement agencies but got little help. At one meeting, she recalls, a Chicago police detective advised her to dye her hair and move out of town. "He told me, 'These people are dangerous.' "

Chicago police spokeswoman Monique Bond said Ross' case was closed, and it was not clear whom the detectives were. But Bond said she could not imagine an officer saying that to a victim.

Following a paper trail from Ross' credit report through land records to title company documents to a title company, a reporter was able to trace who stole Ross' identity in less than two weeks.

Her identity was assumed by a 37-year-old convicted check forger, Freddie "Knucklehead" Johnson, who was already on the lam when he began using her name in real estate transactions, the Tribune found.

On June 4, 2003, Johnson was scheduled to report to federal prison to begin a 15-month sentence for taking part in a conspiracy that used counterfeit checks to buy race car engines, jewelry and pit bulls. Johnson failed to show up, federal court records show, and a judge issued a warrant for his arrest.

Bank records indicate that he was still in Chicago.

A week later, on June 11, 2003, Johnson endorsed and deposited a $75,818 mortgage check from the first "Ross" sale in an account at a West Side bank, records show.

Two more deals followed within the next month. Johnson remains a fugitive.

Like Ross, the actual owners of the homes were plunged into legal and financial chaos.

The family of 75-year-old Ruth Williams spent personal funds -- she declined to say how much -- to clear the title to her two-story brick home.

"I got mine straightened out," Williams said. "I don't know about the others."

Two doors away, Corey Latimer managed to forestall the court sale of his property. But he can't sell his building or borrow against it because a lending company hasn't released the phony mortgage. "The house is just sitting there with a cloud on the title," said Latimer's attorney, Dennis Kral.

About a mile southeast stands a once-sturdy three-story building. That owner never stepped forward to assert his claim amid the tangle of litigation that followed the third phony "Ross" mortgage. That property is headed for a court-ordered sale to repay the bank holding the fraudulent loan.

Although traditional theft and forgery laws should protect all these victims, mortgage fraud's complexity leaves law enforcement struggling to keep up.

In addition to the police, Ross took her case to the FBI, the U.S. Secret Service, the Federal Trade Commission, the U.S. Customs Service and the Cook County state's attorney's office. None has contacted her for more than a year, she said. *

It was just below freezing but dry and nearly windless on the December night in 2002 when Ross and her troupe stepped across the street to the Old Town Ale House, piling their coats on a chair. Minutes later, she and another woman reached for their wallets and came up empty.

Ross agreed to talk about what happened despite concerns that she might provoke further retribution from the swindlers, who apparently are still at large.

Ross' mother, Eileen, is vice president and general manager of a real estate firm that specializes in industrial property. But even her expertise and industry connections were of little help.

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