Wednesday, October 21, 2009

Tempest in a teapot or record-breaking fraud? Mississippi Valley Title sues Evans brothers alleging fraud.

Related post: Banks loaned nearly $40 million to Evans

Did a huge case of mortgage fraud take place in Madison County? Mississippi Valley Title and its parent company, Old Republic National Title Insurance Company, filed suit within the last several weeks in Madison County Chancery Court against Jackson attorney Charles Evans, Jr. and his brother, Jon C. Evans, alleging fraud.

JJ is reviewing court documents as well as conducting its own investigation about this potential scandal. Charles Evans, Jr. is an attorney who was certified by Mississippi Valley Title Insurance Company to provide title certificates for real estate insured by MVT. Jon Evans controlled or owned 25 companies (most of them were LLC's. See note below). These companies bought properties in Madison County and obtained multiple mortgages for each property. The mortgages ranged from approximately $300,000 to nearly $1.5 million apiece. Charles Evans apparently issued the title certificates for these properties.

Mortgages were obtained from many Mississippi banks by the Defendants. National banks such as JP Morgan Chase, Wells Fargo, Bank of America, and others (except for Regions) were avoided. Cedar Lake Investors alone obtained sixteen mortgages for only a few properties of prime real estate in Madison (it owned a tract on the corner of Hwy 463 and Highland Colony Parkway for example) from Bancorp South, Bankfirst, Bankplus, Britton & Koontz, Citizens National Bank of Meridian, Community Bank, Consumer National Bank, First Bank (McComb), Merchants & Farmers, Madison County Bank, National Bank of Commerce, Omnibank, Regions, and State Bank & Trust. The total amount issued for just Cedar Lake was $9,976,192.

A review of only a few other deeds of trust for other properties showed mortgages issued by Bank of Holmes County, Bank of Yazoo, and banks in Warren County, Copiah, and others in Mississippi. If the allegations in the lawsuit are true and the information JJ has uncovered so far is any indication, the amount of money involved could be a staggering amount.

Mississippi Valley Title gets Temporary Restraining Order
Mississippi Valley Title and others filed several actions against the Evans brothers and their various companies. (See below for other lawsuits). MVT filed a Complaint for a Temporary Restraining Order and Preliminary Injunction and Other Relief on September 18, 2009 (MVT is represented by Adams & Reese) in which it alleged fraud. Copy of lawsuit . The motion for the TRO alleged the Defendants "fraudulently and intentionally obtained mortgages on properties located in Madison County and throughout the State.
2. These mortgages were obtained through fraudulent and/or inaccurate misrepresentations on certificates of title issued by Charles H. Evans to Plaintiffs. In reliance on these fraudulent and inaccurate certificates of title, Plaintiffs issued title insurance. The details of this fraudulent activity are outlined in the affidavit of Brad Jones, which is incorporated by reference and attached hereto as Exhibit 1." Copy of motion

The Court granted the TRO on the same day and stated:
"1. Charles H. Evans was an approved attorney for Plaintiffs and provided title certificates for certain lands owned or controlled by Defendants....
3. Charles H. Evans provided certificates of title to Mississippi Valley Title upon which title insurance policies were issued.
4. Based on the evidence, including a sworn affidavit, there is a substantial likelihood that Plaintiffs are likely to prevail on the merits." Copy of order

The Court froze all assets of the Defendants and ordered an inspection of the books within five days of the order's "entrance", a list of all real property owned, and a list of all financial institutions where "the Defendants have assets.".

Exhibit 1 goes into more detail about how the fraud occurred. Unfortunately, Mississippi Valley Title filed the exhibit under seal and claimed "Public disclosure of the information contained in the affidavit may cause harm to both Plaintiffs and Defendants in this case. Furthermore, public disclosure of the information contained in the affidavit may violate applicable financial privacy laws." Copy of Motion to file under seal and Order

Is that really the case, or is it more a case of if all these banks discover they were ripped off by a scheme involving Charles Evans, they might start filing claims against Mississippi Valley Title? One must ask why the Court couldn't simply redact the personal and private financial information as the public has a very strong interest in learning how large-scale real estate scams such as the one they allege, operated and deceived so many people and banks. One would think the Court would pay more attention to the issue of transparency as well as protecting the public from scam artists.

The Court extended the TRO on October 9. Copy of Order granting extension. Up until this point, John Collete has represented Jon Evans. Mr. Colette recently filed a motion to withdraw from the case but the plaintiffs are fighting his attempt to withdraw. The Plaintiff's response makes several claims against Colette and the Evans brothers. Colette stated he was withdrawing because Evans was supposedly represented by counsel from his Errors & Omissions coverage. Mississippi Valley Title argued that no lawyer from the insurance company has appeared to represent any of the defendants, no list of properties was provided as ordered by the Court in its TRO, Charles Evans "failed to produce any information or documents as ordered by the Court." It accuses Mr. Colette of filing his withdrawal motion as a "strategic ploy" to buy time for the Defendants and accused them of trying to "manipulate this court". Response to Motion to Withdraw

It is also important to note that the Plaintiffs have not specified a dollar amount for the alleged fraud. Mississippi Valley Title at this time probably has no idea what the total is (if fraud indeed did take place) and its motions show right now, it is just trying to determine exactly what happened.

Other banks file complaints
Meanwhile, Community Bank and Cadence Bank have filed their own lawsuits against the Evans brothers. Community Bank filed a "Complaint for Declaratory Relief, Reformation, Equitable Lien, and Other Equitable Relief" on September 11, 2009 against two of the Evans' companies: Old Agency Business Park Inc. and Madison Avenue Development Company, LLC (Hint to Community: You might want to look at Cedar Lake. Does $720,000 ring a bell?). Copy of Complaint

Community Bank states Madison Avenue issued a Deed of Trust for $776, 129.50 in 2006 for three acres of property and that Madison Avenue Development did not have title to the property. The bank asks the Court to transfer the property to Madison and give its lien first priority and makes several other requests in the alternative if this one is denied. Community Bank realizes it might be behind other creditors and is probably trying to file an action to jump to the front of the "line".

Cadence Bank filed a similar action against Old Agency Business Park, Inc. on October 2, 2009. Cadence stated the Defendant gave it a Deed of Trust for $600,200 in 2003 (Hint to Cadence: You might want to look at the Deed of Trust for $760,241 you got from Cedar Lake in January 2005.). The complaint asks for a correction to be made to the Deed of Trust and in the alternative asks that the Court give its lien first position. Copy of complaint

It should be interesting to see how many Mississippi banks are dragged into this as its clear something occured on a large scale. If the banks were defrauded by Jon and Charles Evans, it must also be asked if Mississippi Valley Title is liable for any fraudulent acts committed by Charles. The country is littered with massive real estate and mortgage fraud cases over the last few years. One can only hope the same thing didn't happen in Mississippi.

Note (This note is about the MVT lawsuit): These companies are owned/controlled by Jon Evans according to the lawsuit and ownership is verified by Secretary of State's website:
1. Woodgreen Development Corp (Filed intent to dissolve 9/25/09)
2. White Oaks Investment LLC
3. Westwoods Investments LLC
4. Twinbrook Run Development Company LLC. Jackson attorney James Bell's firm is
mentioned as a registered agent. According to a letter filed with the SOS, his firm represented quite a few of the Evans' companies as a registered agent.
5. Town Park of Madison LLC
6. Snowden Lane Investments LLC. James Bell is registered agent. Evans is member.
7. Snowden Grove Investors LLC
8. Old Agency Business Park, Inc. Filed intent to dissolve on 9/25/08.
9. Nottaway Pointe, LLC
10. Madison Avenue Development Co. LLC
11. Highland of Ridgeland, Inc.
12. Highland Development Group, Inc. (Dissolved in 2004)
13. Highland CE Corp. (Dissolved in 2004)
14. Hanover Investments LLC. The registered agent and member is Lynne Knight. However, the address listed for her, 1542 Brecon, Jackson MS, is owned by Jon C. Evans
15. Colony Construction Ltd. Filed intent to dissolve on 9/25/08.
16. Clear Creek Development LLC
17. Cedar Lake Investors LLC
18. CE Development LLC. Filed intent to dissolve on 9/25/08.
19. C. H. Evans Company Dissolved in 1998.
20. C&L Inc. Dissolved in 2004.
21. Brisbane Centre LLC
22. Brashear Heath LLC
23. 463 Development Company LLC

These companies are owned by Charles Evans according to lawsuit and verified on Secretary of State's website:
1. Windsor Pass LLC (Jon is registered agent)
2. Park Place Commons LLC (Jon is registered agent)

27 comments:

Anonymous said...

Well, hot damn. Now I finally know who the Evans boys are! Good going, KF.

Anonymous said...

I would guess Ms. Valley Title could go bankrupt after this.

Anonymous said...

this makes steadivest look like a game of pocketpool

Anonymous said...

WOW. Judge James Bell is involved. Double WOW.

Kingfish said...

I don't think he is. Just named as registered agent for a few of these companies.

Anonymous said...

i just hope the banks are able to get reimbursed for all this fraud - i have seen a bank go under when coverage was denied on title policies because of an amended insured closing letter.....

Anonymous said...

So is there a radar that gets flown under when dealing with the smaller banks?

Anonymous said...

He's BAAAAACK!

Kingfish said...

What do you mean?

Anonymous said...

5:15, not so much of a radar as sometimes less than perfect underwriting. Things get by them that larger banks have seen and flagged as suspect.

Kingfish said...

They also don't have the same softwqare, reporting systems, quality control departments, and other tools a Chase or Citi has.

Bill said...

One interesting point is that the loan policies purchased by the lenders will only pay them the current value of the property. Most of these properties have declined in value over the last couple of years. So if a lender made a loan of $1 million in 2007 secured by land in Madison County, and that land is now worth only $500,000, MVT is only required to pay the lender $500,000, not $1 million. This can turn into a battle of appraisers, but the point is that this is title insurance, not loan insurance. Some lenders are about to learn a hard lesson about about the limits of title insurance.
One mystery here is why MVT would take a certificate of title from Charles when the borrower was an entity in which Charles had an interest. Another mystery is why a red flag didn't go up when the Evans' approached small banks outside of the metroJax area about financing development in Madison County. Why wouldn't a banker in Natchez question why some alleged big dog developer from Ridgeland wanted to use a Natchez bank to finance property in Madison County rather than a Madison or Jackson bank? [apparent answer: lax underwriting] MVT/Old Republic can handle the losses (and the fees), but this is may be the end of the "approved attorney" in Mississippi title insurance practice. The title insurance companies audit agents regularly, but "approved attorneys" like Charles are not audited.

Anonymous said...

Here again, in the grand ole' state of MS, we see the privileged, "approved", protected, and unchecked legal OFFICERS of the courts...doing what? Finish it yourself. I'm just waiting for the Feds to show up and take a gander at a lot of the shenanigans going on down here. Why earn it when you can steal it legally?

Any attorney that has knowledge is complicit under the ethics of the MS Bar. If there are known illegal or even, god forbid, unethical activities being perpetrated by another within their profession, they are bound by their license to report such behavior. IT NEVER HAPPENS. I invite any attorney to respond in the alternative.

Anonymous said...

to Bill: MVT would be required to either cure the defect and give the lender 1st priority lein or payoff the balance of the note. The property value has nothing to do with it. I know,I am involved.

Anonymous said...

IT NEVER HAPPENS. I invite any attorney to respond in the alternative.

I disagree. I've seen it happen and the matter is still pending. Once it hits the public I will post it. Otherwise, I cannot post the information to prove you wrong. IMHO, the process of disciplining lawyers is too slow.

Anonymous said...

when the other sides attorney directly mailed me legal advise, my attorney notified the MS Bar and I filed a complaint, it was all dismissed by the MS Bar. That might be why attorney do not take the time to file complaints

Anonymous said...

to bill: i think most of those lenders have branches in madison county, or used to back in 2003-2004

Anonymous said...

The big problem for MVT is that while one entity owned the parent tract (Cedar Lake Investors & Highland of Ridgeland, for example), almost all of the loans were given to Jon (brother of Charles) Evans' LLC's that DID NOT own the land. There were surveys done for many, many smaller tracts (1.5 to 4.25ac), and these smaller tracts were used as security for the loans. It was an obvious breakdown in underwriting and due diligence on the part of MVT, as a check of the Secretary of State's website would have revealed the apparent relationship between the borrower (who was certified to be the record owner by Charles on his certificate of title, but mysteriously NEVER with a deed reference) and the issuing attorney. I would like to see the banks file against MVT, since IMHO this is where the responsibility lies.

Kingfish said...

Bill: good points. Now IF, and I mean IF, MVT has to pay out alot of claims, and I think MVT's capital reserves are under $40 million BUT I could be wrong (not counting Old Republic's reserves), I could see Old Republic saying thats enough and pulling the plug.

Anonymous said...

Apparently some time after the suit was filed there was a meeting among the banks and MVT were the banks were advised that this is only 30-40 million, not 100 million. I was told this by a banker whose institution was affected and have no way of verifying this information.

Anonymous said...

Ok, I'm just plain dumb, I'll admit it. Evans #1 would write a fake title and Evans #2 would take it to the bank and get money? If that's so, why would MVT be paying out claims--it wasn't their policy to do this, it was an employee who did this. My other dumb question--if there's a loan on a piece of property by ABC bank, and you go to a second bank for a second loan, doesn't the first bank do a credit check or something?

My apologies for the ignorance, just trying to understand this one.

Anonymous said...

Well, Evans 1 (Charles) would write a certificate of title showing whichever of Evans 2's (Jon Chris) LLC's owned the land (most of the time they never owned it) and then that would be used to obtain a mortgage policy from MVT in favor of whichever unfortunate bank they were going to borrow from. The policy would reflect 1) that the LLC owned the land 2)that the bank now held a lien in first position (which they usually did not). A credit check would not have helped because the loans were in corporate names, and would not show up on personal credit reports. MVT's liability would be based on the fact that they INSURED the position of the lender, based on Evans 1's certificate of title. And Evans 1 wasn't an employee of MVT, just an agent.
Also, if a typical title search would have been done prior to all this coming out, there's a 99% chance the loans in the name of the LLCs that DIDN'T own the land wouldn't have been found. And even if the search would have picked up the existing (bogus) loans, there weren't any searches done - MVT relied solely on Evans' certificates.

Kingfish said...

On the other post, look at how many closings were on the same date. The deeds of trust are available on Madison County's website.

Anonymous said...

Any ideas as to their whereabouts?

Anonymous said...

thanks, Anon @ 9:25. Some of us old dump folks just need a picture drawn for us.

Anonymous said...

The lenders will start filing suit against the appraisers on these properties as well. It is becoming standard fare when commercial title fraud has taken place to hit the appraisers E&O pockets.

Old Republic must be looking for a way to dump their title business after this hit.

Anonymous said...

Lynne Knight has worked for them for years, and I doubt she even knows she was listed as an agent for that particilar LLC. Last address I saw for her was in Tennessee. She also lived in Texas for some time.

Not exactly sure what she does, but they were masters at keeping things secret, jumbled , so you had no idea what was going on. It was like trying to put a puzzle together without all the pieces.

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