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Fifth Third Mortgage Co. v. Kaufman

United States Court of Appeals, Seventh Circuit

August 9, 2019

Fifth Third Mortgage Company, Plaintiff-Appellee,
v.
Ira Kaufman, et al., Defendants-Appellants.

          Argued April 15, 2019

          Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 12 C 04693 - Matthew F. Kennelly, Judge.

          Before Wood, Chief Judge, and Bauer and St. Eve, Circuit Judges.

          Bauer, Circuit Judge.

         Fifth Third Mortgage Company sued several individuals and businesses after it fell victim to a mortgage fraud scheme. At issue in this appeal is the personal liability of Ira Kaufman. Kaufman participated in numerous fraudulent closings as the attorney for the seller. Kaufman is also the owner of Traditional Title Company, LLC, which was the title company used for several closings that facilitated the fraud. For the reasons that follow, the judgment against Kaufman is affirmed.[1]

         I. BACKGROUND

         The mortgage fraud scheme at issue began with Yaseen Ahmed, the president of High Point Developers, Inc. Ahmed also co-owned 4725 S. Michigan, LLC, which owned a condominium building located at 4725 S. Michigan Avenue. Ahmed obtained the proceeds of 35 mortgage loans through false statements and omissions made in loan applications and supporting documentation by purported buyers. Ahmed and five others pleaded guilty to criminal offenses related to the scheme.

         Ahmed and another man, Eliot Higueros, recruited individuals to pose as buyers for units at 4725 S. Michigan Avenue. These straw buyers submitted fraudulent loan applications to various lenders, including Fifth Third. The participants in the scheme split the loan proceeds when disbursed; no payments were ever made on the loans.

         Nine different borrowers purchased 26 properties at 4725 S. Michigan Avenue. 4725 S. Michigan, LLC was the seller and Kaufman was its attorney for each of the closings. The closings were conducted by Traditional Title, and took place at Kaufman's law office. The loan applications contained misrepresen- tations about the buyers' employment status, assets, and income. The applications also falsely indicated the units were going to be the primary residences of the buyers, despite each buyer purchasing multiple units in the building.

         Traditional received closing instructions from Fifth Third that required it to notify the bank immediately of any misrepresentations that would influence the bank's decision to make the loan. The instructions also required Traditional Title to suspend the transaction and notify Fifth Third if "the loan is owner occupied and the closing agent has knowledge that the borrower does not intend to occupy the property." Kaufman failed to abide by either requirement by concealing the buyers' misrepresentations from Fifth Third and instructing closing agents to complete closings even when buyers were purchasing multiple properties.

         Ahmed then extended the scheme to units in other buildings. Fifth Third was the lender for four of these properties. Kaufman participated in the transactions as the attorney for the seller; Traditional Title did not participate in these closings.[2]These properties include: unit 5 at 6621 S. Ingleside Avenue; unit 2 at 7919 S. Phillips Avenue; unit 1 at 5416 S. Michigan Avenue; and unit G at 5416 S. Michigan.

         Kaufman testified that he was not aware of the mortgage fraud scheme. He claimed that he reviewed the numbers for the sales but "didn't really look at the people." He also said that it was not his job as the seller's attorney to review the closing instructions or the buyer's loan application. Ahmed testified that Kaufman knew the buyers were part of the scheme. Two closing agents, Julio Martinez and Michael Lee, testified that they informed Kaufman about the misrepresentations in the loan applications. Kaufman testified that they never gave him that information.

         Fifth Third filed seven claims of fraud against Kaufman, based on his knowledge that the individuals had been recruited as straw buyers, and that they made false representations in their loan applications. After a bench trial, the district court entered judgment for Fifth Third against Kaufman.

         II. ...


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