FDIC Attorney Pleads Guilty to Defrauding a Bank

An attorney with the Federal Deposit Insurance Corporation was caught playing fast and loose with the facts in order to convince a bank to approve a short sale on her house.

This case proves a Ronald Reagan quote holding “One way to make sure crime doesn’t pay would be to let the government run it.” It also falls into the category of “You can’t make this stuff up!”

The Facts

Here are the facts of the case according to the IG investigator as submitted to the U.S. District Court involved:

  • There’s a government program called HAFA or “Home Affordable Foreclosure Alternatives” run by treasury and HUD.  It allows a mortgagee to be released from their mortgage debt for various reasons.
  • The Federal Deposit Insurance Corporation attorney involved, owed around $800,000 on her mortgage. It was determined she wanted to do a short sale on her home to her “live-in boyfriend”, another Federal attorney for $500,000.  Under HAFA, the players can’t be connected and the person asking for the relief must show a hardship.
  • She claimed in her application for the short sale that she had serious financial difficulties caused by a loss of income due to the Federal employee pay freeze. To be able to short sell the property, she claimed a hardship in letters to her bank.
  • It was found that during the period involved in her case, not only wasn’t her pay frozen, but it went from $166,522 in 2007 to $230,700 in 2013.  During that period, she also received about $30,000 in awards from the Agency. (The investigator involved apparently thought she wasn’t in a hardship situation.)
  • HAFA also requires that what you sign be true.
  • The IG investigator looking the above called her actions a “scheme”.

What’s a Short Sale

For a better understanding of a short sale, see Fannie Mae’s Website. According to Fannie Mae, a short sale, also known as a pre-foreclosure sale, is when you sell your home for less than the balance remaining on your mortgage. If your mortgage company agrees to a short sale, you can sell your home and pay off all (or a portion of) your mortgage balance with the proceeds. Depending on your situation, you may be required to make a financial contribution to receive a short sale.  A short sale is an alternative to foreclosure and may be an option if:

  • You are ineligible to refinance or modify your mortgage
  • You are facing a long-term hardship
  • You are behind on your mortgage payments
  • You owe more on your home than it’s worth
  • You have not been able to sell your home at a price that covers what you still owe on your mortgage
  • You can no longer afford your home and are ready or need to leave.

The Record

Attached are the person’s plea agreement before the District Court and the Statement of Facts in the case.  All of these are, by the way, public documents.  They are each worth a read, if for no other reason than to see how it all works.

The Price

Lawyer friends of mine say she’ll likely pay a hefty fine, lose the house and may even go to the Federal slammer for some hard time.  It will be interesting to see if a former banking agency attorney of 28 years can convince the Judge to lessen her sentence on the claim that she didn’t understand what she was doing.

The Lesson

Interestingly, Alan Greenspan said, “Corruption, embezzlement, fraud, these are all characteristics which exist everywhere. It is regrettably the way human nature functions, whether we like it or not. What successful economies do is keep it to a minimum. No one has ever eliminated any of that stuff.

I don’t understand how someone making very good money could jeopardize their livelihood and freedom for a few bucks but the Roman Seneca certainly got it when he said, “For greed all nature is too little.”

About the Author

Bob Gilson is a consultant with a specialty in working with and training Federal agencies to resolve employee problems at all levels. A retired agency labor and employee relations director, Bob has authored or co-authored a number of books dealing with Federal issues and also conducts training seminars.