Insurance News - Title company owner gets 18 months for mortgage fraud [The Capital, Annapolis, Md.]

Insurance News - Title company owner gets 18 months for mortgage fraud [The Capital, Annapolis, Md.]:

'via Blog this'April 01--The Crownsville co-owner and president of a Greenbelt-based title company was sentenced to 18 months in prison for a wire fraud scheme that cost lenders and another title insurance company $3.1 million, federal prosecutors said.

James Kevin Hughes, 53, will be on supervised release for three years and must pay back the millions he stole. He also was ordered to forfeit his interest in a South Carolina condominium and perform 300 hours of community service.

The sentence was handed down Thursday by U.S. District JudgeWilliam N. Nickerson in Baltimore.

Hughes, co-owner and president of Troese/Hughes title company, andBrenda Lukenich, the company's escrow accountant, pleaded guilty last fall to defrauding the victims of $3.1 million.

Lukenich, 60, of Hughesville, will be sentenced April 10.

Title company co-owner Stephen J. Troese pleaded guilty in October to defrauding the victims of at least $937,000. He was sentenced in February to a year in prison and three years of supervised release.

According to the plea agreement, Hughes oversaw daily activities at the company and was a signatory on the escrow account.

Prosecutors said the company had an agency agreement with Chicago Title that enabled Troese/Hughes to provide title insurance -- making Chicago Title liable for title defects to homeowners and lenders.

Hughes' company shared an escrow account with another title company, Troese Title Services. Hughes was unaware the escrow account was shared, but prosecutors said he was informed about shortages within the account.

In 2006, the company opened a new escrow account. Lukenich then assigned a $1 million escrow shortage to the new Troese/Hughes account, according to the plea.

The real estate market began to slow that year. And as business slowed, it became the policy of Troese/Hughes to check with Lukenich about when mortgage payoff checks would be mailed out to ensure there were sufficient funds in the escrow account to cover them. Prosecutors said those mortgage payoff checks were filed in Federal Express envelopes under a credenza in Hughes' office.

The plea says Hughes made efforts to fill the company's escrow shortage by refinancing his own home twice and not paying the previous mortgage -- causing a $1 million loss to Chicago Title.