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Jenkins and the others secured what are known as owner-occupied loans, which require borrowers to live in the properties they purchase. These loans are often easier to obtain, according to industry experts, because lenders assume borrowers won't walk away from their primary residences. They also allow borrowers to take a higher percentage than usual of the appraised properties. Jenkins, who lives in Orange County, says she didn't know she was applying for this kind of loan and never planned to live in the property, even though records show she applied for five owner-occupied loans.
Less than a year later, Jenkins said the condos she and her friends purchased are all in foreclosure. The buyers never saw their promised money, she said, and their credit is in shambles. According to San Diego County records, the units bore different names on the grant deeds, but shared the same Hayward address — one of McConville's properties.
Although McConville allegedly recruited buyers, records show that in one instance, developers selling the properties gave $180,454 of the loan, more than half the selling price, to one of McConville's companies, 3 Mac Asset Portfolio. This was described on the documents as a "marketing fee"; developers told the news media they instructed the escrow officer to show buyers an addendum about the fee. Jenkins said neither she nor her friends saw it. When Jenkins contacted the escrow officer, she said the officer indicated that she had never seen that instruction.
Closing documents also show that in at least one of the straw buyer transactions, $5,000 of the loan went to a company called United Equity for "broker fees." According to the California Department of Real Estate, United Equity is another business name for Global Financial Group, Inc., headed by Anton Ewing, who was arrested by the FBI in early April along with 24 others for alleged racketeering in a mortgage fraud scheme involving gang members, brokers, appraisers, accountants, and notaries.
An FBI press release said that defendants in the Ewing case recruited straw buyers to purchase cheap Southern California properties at inflated values; submitted falsified loan applications to get inflated loans secured by those properties unbeknown to the buyers; and arranged to have the amount of the loans that exceeded the asking price funneled into a shell company. Ewing's case is still pending in San Diego.
The FBI's Web site says roughly 80 percent of all reported mortgage fraud losses involve collaboration or collusion by industry insiders. One of the most unacknowledged of those insiders is the escrow officer. Cases involving escrow officers are also some of the hardest to prosecute, according to William Denny, Alameda County's lead real estate fraud investigator.
An escrow account is opened at the start of a real estate transaction. An assigned escrow officer controls it throughout the process by ensuring all of the title documents are filed properly and in the right order, according to instructions from the parties. In Northern California, escrow is commonly handled by title companies.
In June, Denny's fellow investigator, David Lim, successfully prosecuted an escrow officer involved in mortgage fraud — but he says it wasn't easy. Escrow officers commonly argue that their job is to take directions, not act as police officers.
The state's laws make it difficult to prove conspiracy among title company employees, Denny says, because according to the state's insurance statute, title companies in charge of escrow files — where all of the transactions should be documented — have no record retention requirements.
"The escrow file is the mother's milk of proving criminal fraud," he said. Where records rule in the court of law, he added, it is ridiculous that title companies can make their records disappear and not be held accountable.
Denny said that a year ago, thousands of escrow files went missing after a South Bay company, Alliance Title, suddenly declared bankruptcy. This didn't help him in a case he was trying to build against an escrow officer employed by Alliance. He says much of the real estate transaction process revolves around the organization, honesty, and integrity of the escrow officer — yet those disappearing files make it difficult to prove involvement.
According to records, McConville used the same escrow officers for many of his transactions. One was Agnes Kantere, a Pacifica resident. Records show that she disregarded instructions from the broker and lender several times. In one instance, documents show that Wachovia loaned McConville $1.1 million after Narraway had already loaned him $345,000 — both loans were secured by a San Francisco property. Kantere closed the deal, even though according to Wachovia's instructions, no second financing was permitted on top of its loan.
Although escrow officers are not supposed to have financial interests with any party they work for, Kantere bought property from one of McConville's companies in 2006. Records also show that in January 2008, she sold four properties in Kern County to another of McConville's companies. Around that same time, she was also notarizing documents for McConville's companies, according to county records. A civil suit Narraway brought against Stewart Title in December alleges that Kantere neglected to follow instructions from the broker. A company spokesman responded that Stewart has an "open inquiry on this matter" and thus could not comment publicly.
Narraway said that, despite the complexities, he refuses to let industry insiders off the hook, as he says some of the other investors have done. When asked what he thought should happen next, Narraway didn't skip a beat: "We can cause a fucking ruckus," he said. "That's what we can do."
As Narraway started to explain the details of said ruckus, he got a phone call. It was a representative from Nancy Pelosi's office.
He listened intently. "Okay," he said finally. "Even though there's fraud involved?"
Face drawn, lips taut, he put his free hand to his forehead. "Okay, so any suggestions as to what I can do short of having to pay a lawyer another $150,000 in fees to go after Wells Fargo?" he asked.
