In James Doran’s article in this morning’s National he makes reference to the "worse than junk" [mortgage] loans that were taken out by people who couldn't repay them. This portion of the article is worth expanding upon.
Some would have us believe that these loans existed because lenders' loan programs allowed for practically anyone with a heart beat to get a loan. This, however, is only part of the truth.
While the loan program guidelines were lenient, many of those in charge of enforcing the lending guidelines, or the loan originators) were negligent and reckless in their administration of them. The stated income loan for example, was insane from the standpoint of a secure investment but to many loan officers offering this loan to their would-be customers, it was a dream come true. It was often referred to as a "liar loan." Stated income - meaning you didn't have to provide any documentation to back up your statement of your own income.
In heated debates with loan officers I would often defend that just because the customer didn’t have to prove their income didn’t mean that they could lie about it. The general attitude was of the flavor, “Well, if they’re not going to ask for proof, what do you THINK they [the lenders] expect from us.” Which is sad since the statement implies that dishonesty from a loan officer is something that can be expected.
I’ll take this moment to state that I do not view all loan officers or mortgage originators as dishonest. Most of them that I’ve met in my nearly 20 years in this profession have been nothing but honest and professional.
That said, I don’t think that the origination of the loan products with the seemingly lax guidelines can be ignored as a contributing factor in the sub-prime problems of this decade.
Monday, December 14, 2009
Thursday, October 15, 2009
Fraud Story
It's still happening! Even after all the news about fraud, loan originators are still willing to "bend" the guidelines.
I won't say who, but I am helping a couple of friends understand the process of obtaining a loan - as they go through it. We'll call the first one Jack. Jack owns his home free and clear. He has no provable income so he needed a co-borrower/co-signer. A friend of ours, we'll call her Paula (she does not live at Jack's house) agreed to co-sign on a home equity loan.
Let's get a bit of history first.
Jack (a non-banker, real estate, mortgage or finance guy) originally applied for the loan, by himself. He was told by his banker that he could get a loan - no problem.
First of all, this advice from his banker made no sense whatsoever. Jack is a great guy, decent credit, decent assets, but no income. By the way, the banker I am referring to works for the 6th largest bank in the country. They do not have a loan program for people with no provable income.
But when Jack hears his banker tell him that he would have no problem getting a loan on the home that he owns free and clear, Jack gets excited - of course. So Jack fills out the loan application.
The banker submits the loan. I have no idea what the banker listed as income on the application, but Jack certainly didn't lie and say that he had income, because he doesn't. Jack doesn't know enough about the loan guidelines to lie about income.
Response came back from the underwriters; they needed clarification on a few things. They saw a foreclosure listed from back in 2000.
Check back to read about the conclusion.
I won't say who, but I am helping a couple of friends understand the process of obtaining a loan - as they go through it. We'll call the first one Jack. Jack owns his home free and clear. He has no provable income so he needed a co-borrower/co-signer. A friend of ours, we'll call her Paula (she does not live at Jack's house) agreed to co-sign on a home equity loan.
Let's get a bit of history first.
Jack (a non-banker, real estate, mortgage or finance guy) originally applied for the loan, by himself. He was told by his banker that he could get a loan - no problem.
First of all, this advice from his banker made no sense whatsoever. Jack is a great guy, decent credit, decent assets, but no income. By the way, the banker I am referring to works for the 6th largest bank in the country. They do not have a loan program for people with no provable income.
But when Jack hears his banker tell him that he would have no problem getting a loan on the home that he owns free and clear, Jack gets excited - of course. So Jack fills out the loan application.
The banker submits the loan. I have no idea what the banker listed as income on the application, but Jack certainly didn't lie and say that he had income, because he doesn't. Jack doesn't know enough about the loan guidelines to lie about income.
Response came back from the underwriters; they needed clarification on a few things. They saw a foreclosure listed from back in 2000.
Check back to read about the conclusion.
Thursday, September 17, 2009
Ethics Lesson From A Stand-up Comedian
“All the world’s a stage, and all the men and women are merely players…”
Shakespeare.
I have been a performer all my life—a musician, an actor, an improv-comedy performer, and a stand-up comedian. On the other end of the spectrum, I have participated successfully in business for most of my adult life. I founded three separate corporations—a real estate investment company, a mortgage brokerage firm and now a public speaking and training company.
I am proud that I have been able to find success with both the left and the right brain—until a few years ago when I realized that, believe it or not, the qualities of a successful businessman are the same as a successful performer.
Acting is all about honesty. If you can fake that, you’ve got it made.
George Burns
A successful performer is genuine, truthful and passionate. He is confident and trustworthy. You can’t succeed in business without these qualities either.
Well, you can’t fake honesty. I suppose it is possible to construct a facade—a persona of sincerity, honesty and passion—but for most people it will be transparent, at least more transparent than the designer intended it to be.
I say most of us because there is the “con man.” He makes a false connection with his audience/customer. He is looking for the quick sale. Even if his scam is considered a long con, his desired result is not a life long relationship.
It is interesting, however, that one of the qualities of a good performer, as well as a good businessman, is confidence. Con men exude confidence, but most lack something more important: genuineness—the quality that creates buyers, customers or clients for life.
If you have ever been to a stand-up comedy show you know that sometimes the comedians are funny and sometimes they are not. We laugh when we feel that the comedian is telling us something true—a real story or an occurrence that they actually experienced. If we feel that the story is made up, we don’t buy it, and we don’t laugh.
We can watch a stand-up comedian who is telling a true story, but if he is not sincere or imbued with true confidence, we will not laugh. We may not be cognizant of his insecure delivery, but we feel it. And we rarely laugh when someone displays weakness.
In business, the customer is your audience. He won’t buy from you if he doesn’t feel that you are truthful and confident. We do business with people we like, and we like people we trust.
Shakespeare.
I have been a performer all my life—a musician, an actor, an improv-comedy performer, and a stand-up comedian. On the other end of the spectrum, I have participated successfully in business for most of my adult life. I founded three separate corporations—a real estate investment company, a mortgage brokerage firm and now a public speaking and training company.
I am proud that I have been able to find success with both the left and the right brain—until a few years ago when I realized that, believe it or not, the qualities of a successful businessman are the same as a successful performer.
Acting is all about honesty. If you can fake that, you’ve got it made.
George Burns
A successful performer is genuine, truthful and passionate. He is confident and trustworthy. You can’t succeed in business without these qualities either.
Well, you can’t fake honesty. I suppose it is possible to construct a facade—a persona of sincerity, honesty and passion—but for most people it will be transparent, at least more transparent than the designer intended it to be.
I say most of us because there is the “con man.” He makes a false connection with his audience/customer. He is looking for the quick sale. Even if his scam is considered a long con, his desired result is not a life long relationship.
It is interesting, however, that one of the qualities of a good performer, as well as a good businessman, is confidence. Con men exude confidence, but most lack something more important: genuineness—the quality that creates buyers, customers or clients for life.
If you have ever been to a stand-up comedy show you know that sometimes the comedians are funny and sometimes they are not. We laugh when we feel that the comedian is telling us something true—a real story or an occurrence that they actually experienced. If we feel that the story is made up, we don’t buy it, and we don’t laugh.
We can watch a stand-up comedian who is telling a true story, but if he is not sincere or imbued with true confidence, we will not laugh. We may not be cognizant of his insecure delivery, but we feel it. And we rarely laugh when someone displays weakness.
In business, the customer is your audience. He won’t buy from you if he doesn’t feel that you are truthful and confident. We do business with people we like, and we like people we trust.
Saturday, August 22, 2009
Top 10 Reasons To Commit Fraud
10. You wanted some time to mull over a career change.
9. You always thought you'd look great in an orange jump-suit.
8. You wanted to see just how bad Martha Stewart really had it.
7. You won’t have to worry about buying Christmas presents for your pesky kids.
6. You wanted to sharpen up your fighting skills.
5. You were just sick and tired of voting anyway.
4. You wanted to see if that escape plan you dreamed up would really work.
3. You wanted your mom to drive 300 miles to visit you for a change.
2. You thought it might be kind of cute for your kids to call someone else Dad.
1. You always wanted a roommate named Bubba.
Jerome Mayne is the author of the book, Life Saving Lessons – The Diary of a White Collar Criminal. Get you copy at www.fraudcon.com. He is also a keynote speaker and has worked with dozens of companies and associations around the country helping their people make the right decisions, when the right decisions aren’t easy. He is a member of the National Speakers Association as well as the Real Estate Educators Association. He’s also the co-author of Mortgage Fraud and Predatory Lending – what every agent should know (Kaplan Publishing). He can be reached at jmayne@fraudcon.com.
9. You always thought you'd look great in an orange jump-suit.
8. You wanted to see just how bad Martha Stewart really had it.
7. You won’t have to worry about buying Christmas presents for your pesky kids.
6. You wanted to sharpen up your fighting skills.
5. You were just sick and tired of voting anyway.
4. You wanted to see if that escape plan you dreamed up would really work.
3. You wanted your mom to drive 300 miles to visit you for a change.
2. You thought it might be kind of cute for your kids to call someone else Dad.
1. You always wanted a roommate named Bubba.
Jerome Mayne is the author of the book, Life Saving Lessons – The Diary of a White Collar Criminal. Get you copy at www.fraudcon.com. He is also a keynote speaker and has worked with dozens of companies and associations around the country helping their people make the right decisions, when the right decisions aren’t easy. He is a member of the National Speakers Association as well as the Real Estate Educators Association. He’s also the co-author of Mortgage Fraud and Predatory Lending – what every agent should know (Kaplan Publishing). He can be reached at jmayne@fraudcon.com.
Friday, July 10, 2009
Mortgage Fraud Arrests Being Made All Over The World
Fraud in the mortgage industry, for the US is at an all time high. We all know that. I subscribe to a service on Google that sends me any news story, published anywhere in the headline, the words "mortgage fraud." It's amazing how there are just as many feeds from non-US news sources ans there are from the US. See link I have provided as an example. There are gangs of organized criminals perpetrating fraud as if this were the latest mafia scam. There are plenty of news sources saying that it in fact is the new mafia money source.
Friday, June 19, 2009
Mislead or Misunderstood
If you take my money without me knowing you did, as in stealing my identity and using my credit, you are defrauding me. That's obvious. If you make me an offer and I think I am getting X but as the buying process moves along (or is completed) I wind up with Y, I have been mislead - perhaps you have defrauded me.
I am able to keep my cool in many situations. This is a story of the fact that it sometimes pays to just take is easy, relax and don't assume the worst, first.
I recently received an unsolicited email from a teleconferencing company. The subject line read, Call for Speakers. The email said that, "XYZ tele-conferencing company is looking for dynamic speakers to participate in our upcoming Business Webinar Series." The email also provided a link where I could sign up and submit my topic.
In the speaking biz, a Call For Speakers means that a company or organization is putting the call out to get submissions for speakers, to speak at their event. As a speaker, you usually don't want to miss this calling. It's a bit exciting, especially if you get one in the email specifically sent to you. Typically you would fill out their extensive form or provide information about yourself, your credentials, your topic, etc.
Anyhoo, when I clicked on the hyperlink, I was taken to a page where I would've expected to see information about the webinar (date, time, general content, audience, etc.). But I did not see that. It was an offer to sign up for their conferencing services - a free trial. There was only one box/field and that was a space to enter my speaking topic. I was convinced at this point, that I was being misled.
I called XYZ company to let them know how I felt. I got the director of sales and not the marketing director (she was out). I asked when the webinar series was going to take place. The director of sales did not know the details of the webinar series - but she did tell me all about the "free-trial." In her defense, she was an incredibly nice, receptive and professional woman. She was also not the marketing director. She took my number and offered to have the marketing person call me back (I did receive the email from the marketing person).
I told her that it wasn't imperative that the marketing person return my call, I'd heard enough. At the end of the call, the director of sales commented that this particular campaign was quite effective. I bet that it was!
Well I did get a call back from the marketing director.
Here's the deal - and why there wasn't info on the webinar series. They were obviously trying to sell conferencing services - nothing wrong with that; we are all trying to sell something. And they, in fact, ARE going to have a Business Webinar Series.
At the start of this campaign they did not know what kind of response they were going to have so, they did not know what kinds of topics (speakers) they were going to be able to choose from. Nor did they know what the speaker's schedules were going to be - this is why there was no date.
Based on the response they were getting, they will probably have several webinars. I hope so. That's what a "series" is.
In the end, the way in which they dealt with my concern was very commendable. It was those two women, the marketing and sales director, that calmed me down. It reminded me that we do business with PEOPLE and not business entities.
I believe I was mislead, but they taught me to "just take it easy." Maybe sometimes, it is just a MIS-understanding.
I am able to keep my cool in many situations. This is a story of the fact that it sometimes pays to just take is easy, relax and don't assume the worst, first.
I recently received an unsolicited email from a teleconferencing company. The subject line read, Call for Speakers. The email said that, "XYZ tele-conferencing company is looking for dynamic speakers to participate in our upcoming Business Webinar Series." The email also provided a link where I could sign up and submit my topic.
In the speaking biz, a Call For Speakers means that a company or organization is putting the call out to get submissions for speakers, to speak at their event. As a speaker, you usually don't want to miss this calling. It's a bit exciting, especially if you get one in the email specifically sent to you. Typically you would fill out their extensive form or provide information about yourself, your credentials, your topic, etc.
Anyhoo, when I clicked on the hyperlink, I was taken to a page where I would've expected to see information about the webinar (date, time, general content, audience, etc.). But I did not see that. It was an offer to sign up for their conferencing services - a free trial. There was only one box/field and that was a space to enter my speaking topic. I was convinced at this point, that I was being misled.
I called XYZ company to let them know how I felt. I got the director of sales and not the marketing director (she was out). I asked when the webinar series was going to take place. The director of sales did not know the details of the webinar series - but she did tell me all about the "free-trial." In her defense, she was an incredibly nice, receptive and professional woman. She was also not the marketing director. She took my number and offered to have the marketing person call me back (I did receive the email from the marketing person).
I told her that it wasn't imperative that the marketing person return my call, I'd heard enough. At the end of the call, the director of sales commented that this particular campaign was quite effective. I bet that it was!
Well I did get a call back from the marketing director.
Here's the deal - and why there wasn't info on the webinar series. They were obviously trying to sell conferencing services - nothing wrong with that; we are all trying to sell something. And they, in fact, ARE going to have a Business Webinar Series.
At the start of this campaign they did not know what kind of response they were going to have so, they did not know what kinds of topics (speakers) they were going to be able to choose from. Nor did they know what the speaker's schedules were going to be - this is why there was no date.
Based on the response they were getting, they will probably have several webinars. I hope so. That's what a "series" is.
In the end, the way in which they dealt with my concern was very commendable. It was those two women, the marketing and sales director, that calmed me down. It reminded me that we do business with PEOPLE and not business entities.
I believe I was mislead, but they taught me to "just take it easy." Maybe sometimes, it is just a MIS-understanding.
Saturday, May 02, 2009
What's An Ethic?
We all have an inner voice that tells us right from wrong. All of us, except sociopaths, are guided daily by this inner voice. We get ourselves into trouble when we hear the voice and choose to ignore it. We must trust the inner voice without questioning it.
My experience of being on the wrong side of the law did not make me an expert on fraudulent behavior, ethics, business or sales. It was my experiences after I suffered the consequences and the humility I gained that helped me discover what works and what doesn’t in business.
Ethics is a set of principals of right conduct. Who decides what right conduct is? Usually, a company or a professional association gets to determine what they consider appropriate behavior. In the past, I had some trouble with ethics. It was something I had never thought about. I have now had time to ponder, and I believe I now understand the issue.
The confusion came when I thought about how someone could learn ethics or teach it. For every right way to act in a particular situation there is a different situation that may require yet another right way to act. There are too many situations, too many variables. A code of ethics can’t possibly account for every situation. I know now that ethics isn’t about what to do; it is about how to behave. The actions we take and the decisions we make are what develop our character and our ethical core.
In discussing genuineness, honesty and self confidence as they relate to business and sales, a word about personal growth is needed. You can’t fake it and lead a dual life—at least, not for long. Some people think that in business, they can lie (or as some like to call it, “stretch the truth”), misrepresent, backstab and just generally be a snake, and then go home and be a good parent or friend. It just won’t work. This type of behavior goes directly against human nature.
Sometimes it is frustrating because we know that a competitor is lying and cutting corners in order to get the business and make the sale. His paychecks are huge, and so are his cars and houses. I hear stories from business professionals about the frustration they feel when they see false advertising and flat-out fraud being committed by their competitors. In real estate finance, for example, houses can be appraised for thousands of dollars more than they are actually worth so that the unscrupulous competitor can make a higher profit. The authorities don’t have enough resources to stop all of it. In the meantime, the honest ones sit in their offices quoting the regulations. The only recourse for these upright professionals is to accept the fact that dishonest businesses will always exist. Whining about it only detracts from their own success.
Success in business is not about what other people are doing; it is about you and how you conduct yourself. It is about your personal integrity. How are you perceived in business? How do your customers perceive you? Do they like you? We will do business for a lifetime with someone we like. Sure, they need to deliver the goods, but how they make us feel is equally important. We like and connect with people we trust. We trust people who are sure of themselves.
Communicating ethically starts with communicating with honesty and confidence. We need to be likable. To succeed in business, we need to present ourselves as trustworthy and genuine. This all starts with having the guts to listen to your gut. There are no tricks to connect with your customer. The key is to focus on and develop your self confidence. Connecting with your customers or your audience with honesty, trust and self confidence will propel your business and your sales to new levels.
Every corner you cut trims a little piece from your soul. Believe me, I know from experience that it is almost impossible to get that back. There is no gray area. There is a thin black line. You are either on one side of it or the other. There is no quick sale and there is no quick buck. In the end there is just you, your audience, and trust.
My experience of being on the wrong side of the law did not make me an expert on fraudulent behavior, ethics, business or sales. It was my experiences after I suffered the consequences and the humility I gained that helped me discover what works and what doesn’t in business.
Ethics is a set of principals of right conduct. Who decides what right conduct is? Usually, a company or a professional association gets to determine what they consider appropriate behavior. In the past, I had some trouble with ethics. It was something I had never thought about. I have now had time to ponder, and I believe I now understand the issue.
The confusion came when I thought about how someone could learn ethics or teach it. For every right way to act in a particular situation there is a different situation that may require yet another right way to act. There are too many situations, too many variables. A code of ethics can’t possibly account for every situation. I know now that ethics isn’t about what to do; it is about how to behave. The actions we take and the decisions we make are what develop our character and our ethical core.
In discussing genuineness, honesty and self confidence as they relate to business and sales, a word about personal growth is needed. You can’t fake it and lead a dual life—at least, not for long. Some people think that in business, they can lie (or as some like to call it, “stretch the truth”), misrepresent, backstab and just generally be a snake, and then go home and be a good parent or friend. It just won’t work. This type of behavior goes directly against human nature.
Sometimes it is frustrating because we know that a competitor is lying and cutting corners in order to get the business and make the sale. His paychecks are huge, and so are his cars and houses. I hear stories from business professionals about the frustration they feel when they see false advertising and flat-out fraud being committed by their competitors. In real estate finance, for example, houses can be appraised for thousands of dollars more than they are actually worth so that the unscrupulous competitor can make a higher profit. The authorities don’t have enough resources to stop all of it. In the meantime, the honest ones sit in their offices quoting the regulations. The only recourse for these upright professionals is to accept the fact that dishonest businesses will always exist. Whining about it only detracts from their own success.
Success in business is not about what other people are doing; it is about you and how you conduct yourself. It is about your personal integrity. How are you perceived in business? How do your customers perceive you? Do they like you? We will do business for a lifetime with someone we like. Sure, they need to deliver the goods, but how they make us feel is equally important. We like and connect with people we trust. We trust people who are sure of themselves.
Communicating ethically starts with communicating with honesty and confidence. We need to be likable. To succeed in business, we need to present ourselves as trustworthy and genuine. This all starts with having the guts to listen to your gut. There are no tricks to connect with your customer. The key is to focus on and develop your self confidence. Connecting with your customers or your audience with honesty, trust and self confidence will propel your business and your sales to new levels.
Every corner you cut trims a little piece from your soul. Believe me, I know from experience that it is almost impossible to get that back. There is no gray area. There is a thin black line. You are either on one side of it or the other. There is no quick sale and there is no quick buck. In the end there is just you, your audience, and trust.
Wednesday, April 15, 2009
5 Steps To Prison
“How many times do we have to hear yet another felon talk about how he committed a crime, went to prison and how it just wasn’t worth it?” It would be great if the answer to that question was: Not much longer.
But that doesn’t appear to be the case since arrests for white collar crimes are still on the rise. We keep feeding the felon pool. So you’re probably going to hear more and more and more from us.
Some of us felons care about the rise of white collar crime, the image of our (former) industries and the damage it does and has done to unsuspecting victims. I, as it turns out, I also care that you don’t have to walk down the same shameful destructive path I did – post crime. And to address the white elephant, some of us also make a living now at risk mitigation, fraud consulting and public speaking.
Many of us have a perception of what fraud is. Fraud is Enron or Bernard Madoff where hundreds of millions of dollars are skimmed, stolen or embezzled. We are lulled into the belief that dollar amounts and publicity define fraud. To our co-workers and colleagues we regurgitate the CNN reports, with our own commentary added in, on how “those despicable So-n-Sos” are disgracing corporate America.
Well, your reiteration of the news and its despicableness (wow, spell check didn’t catch me on that one – big surprise, I’m excited that I got away with something) do fall into the fraud category. But it doesn’t end there.
Fraud is not just major news stories and multi-million dollar crimes. Fraud does not have to be profitable, or successful to be a crime. I met unsuccessful, broke, white collar convicts in the houscow.
How did I get there? I didn’t start out with a scheme or a plan, but I definitely got involved and was one in the minority of the inmates who admitted to it.
In 1994 I was in real estate finance – large national lender. I was approached by a group of investors who were buying and selling homes. Over the course of 7 months, I did loans for their end buyers knowing that their documentation was not on the up-and-up. A few months into this relationship, I started getting a couple hundred bucks here and there for “looking the other way.” I eventually got in on a transaction and made $10,000 on a sale to a borrower I knew was made of straw. I found out years later all of those loans defaulted which resulted in losses.
After my $10,000 transaction, I cut from this group and quit my job for fear I would get fired. Over the course of the next four years I founded and grew a real estate investment company and a mortgage company. Believe it or not, my companies were squeaky clean – the employees who got fired for mere impropriety could vouch for this.
At the end of 1998, four years after my association with the “real estate investors”, I was arrested by the FBI outside of a restaurant and charged with conspiracy to commit mail fraud, wire fraud and money laundering. I fought the charges; as did my co-conspirators, but we all eventually plead guilty. I received a 21 month sentence which started on November 4th, 1999.
I have taken some time to chronicle my journey into the joys of federal prison. Take these action steps and you too can change your career and your life forever.
1) Subscribe to the “Business As Usual” attitudes
In all industries, there are procedures and practices that would be termed as “cutting corners.” Perhaps at one company or with one client this corner cutting isn’t done or expected but at another company or with another client it is. Refusing to cut corners can be exceedingly difficult when you are trying to keep your job or retain your company’s clients. I know your mother told you that one white lie can lead to another less-white lie then another and another – before you know it you’re in way over your head.
Action: Don’t listen to your mother, go with the flow and cut corners.
2) Don’t just turn a blind eye – help out
It is my opinion that most fraud does not occur without collaboration, collusion or knowledge from someone on the inside. That is to say that for the most part, the person keeping the books or adding up the numbers suspects, knows or is outright helping the person with the master plan. If you’re a licensed professional it is unlikely that you are being completely duped by someone at your own game. At the very least you have a gut feeling.
Action: Make a conscious decision to ignore your gut feeling and assume that your instinct is telling you to do the wrong thing, first.
3) Trust everyone
This step addresses the balance of the “most” I am referring to above. Confidence men are good. They construct a facade—a persona of sincerity and honesty that for most part will not be transparent. They will become your friend and they will use every resource available to get you to do what they want; assist them in perpetrating a scam. This is an exception to the above in that you will be beat at your own game.
Action: Trust everyone
4) Justify your unethical actions
My involvement in the scam that ultimately led to my indictment for a fraud conspiracy included the justification of many things. Examples: I told my self that since I was not explicitly told, by the king-pin, that the documents I received were fakes, it was not my job to act on my suspicions and check them out. After all, I didn’t create any fake documents. I also told myself that even if I knew that the documents were fakes, it wasn’t going to hurt anyone or create more risk. And finally, “It’s not like this is the S & L scandal or anything.”
Action: Lie to yourself until you feel okay
5) Subscribe to the belief that if a money tree falls in the forest and no one is around, you can take all the money
This might seem like a no-brainer but you’d be surprised. Being a felon and all, I’ve rubbed elbows with some unsavory sorts, you know, at the bottom of society. I’d say that at least half of them actually committed “opportunistic” fraud or fraud justified by need. They’d known for some time of a weakness in the system or a loop-hole. They never exploited it because by doing so, well, that would be just wrong, unethical and perhaps even criminal. For weeks, months or years the loop-hole just sat there; quietly. Then one day, BAM the sick aunt broke a hip, no health insurance and the money available from the hole made by the loop was extracted. There was an opportunity and a need and no one would ever know.
Action: The money is yours as long as nobody is looking
Some may feel that the above can be placed in categories ranging from big to small, severe to not so severe. Perhaps some of the actions above appear to be the cutting corners or to be present only in the wildly popular “gray area.”
Know this; every corner you cut trims a little piece from your soul. Believe me, I know from experience that it is almost impossible to get that back. There is no gray area; there is a thin black line. You are either on one side of it or the other.
If you think otherwise, follow steps 1 through 5 and get back to me. Depending on which prison you go to, I might know a few guys who can get you an extra dessert.
Jerome Mayne is the author of the book, Life Saving Lessons – The Diary of a White Collar Criminal. He is also a keynote speaker and has worked with dozens of companies and associations around the country helping their people make the right decisions, when the right decisions aren’t easy. He is a member of the National Speakers Association. He’s also the co-author of Mortgage Fraud and Predatory Lending – what every agent should know (Kaplan Publishing). He can be reached at jmayne@fraudcon.com, www.fraudcon.com.
© 2009, Jerome Mayne
But that doesn’t appear to be the case since arrests for white collar crimes are still on the rise. We keep feeding the felon pool. So you’re probably going to hear more and more and more from us.
Some of us felons care about the rise of white collar crime, the image of our (former) industries and the damage it does and has done to unsuspecting victims. I, as it turns out, I also care that you don’t have to walk down the same shameful destructive path I did – post crime. And to address the white elephant, some of us also make a living now at risk mitigation, fraud consulting and public speaking.
Many of us have a perception of what fraud is. Fraud is Enron or Bernard Madoff where hundreds of millions of dollars are skimmed, stolen or embezzled. We are lulled into the belief that dollar amounts and publicity define fraud. To our co-workers and colleagues we regurgitate the CNN reports, with our own commentary added in, on how “those despicable So-n-Sos” are disgracing corporate America.
Well, your reiteration of the news and its despicableness (wow, spell check didn’t catch me on that one – big surprise, I’m excited that I got away with something) do fall into the fraud category. But it doesn’t end there.
Fraud is not just major news stories and multi-million dollar crimes. Fraud does not have to be profitable, or successful to be a crime. I met unsuccessful, broke, white collar convicts in the houscow.
How did I get there? I didn’t start out with a scheme or a plan, but I definitely got involved and was one in the minority of the inmates who admitted to it.
In 1994 I was in real estate finance – large national lender. I was approached by a group of investors who were buying and selling homes. Over the course of 7 months, I did loans for their end buyers knowing that their documentation was not on the up-and-up. A few months into this relationship, I started getting a couple hundred bucks here and there for “looking the other way.” I eventually got in on a transaction and made $10,000 on a sale to a borrower I knew was made of straw. I found out years later all of those loans defaulted which resulted in losses.
After my $10,000 transaction, I cut from this group and quit my job for fear I would get fired. Over the course of the next four years I founded and grew a real estate investment company and a mortgage company. Believe it or not, my companies were squeaky clean – the employees who got fired for mere impropriety could vouch for this.
At the end of 1998, four years after my association with the “real estate investors”, I was arrested by the FBI outside of a restaurant and charged with conspiracy to commit mail fraud, wire fraud and money laundering. I fought the charges; as did my co-conspirators, but we all eventually plead guilty. I received a 21 month sentence which started on November 4th, 1999.
I have taken some time to chronicle my journey into the joys of federal prison. Take these action steps and you too can change your career and your life forever.
1) Subscribe to the “Business As Usual” attitudes
In all industries, there are procedures and practices that would be termed as “cutting corners.” Perhaps at one company or with one client this corner cutting isn’t done or expected but at another company or with another client it is. Refusing to cut corners can be exceedingly difficult when you are trying to keep your job or retain your company’s clients. I know your mother told you that one white lie can lead to another less-white lie then another and another – before you know it you’re in way over your head.
Action: Don’t listen to your mother, go with the flow and cut corners.
2) Don’t just turn a blind eye – help out
It is my opinion that most fraud does not occur without collaboration, collusion or knowledge from someone on the inside. That is to say that for the most part, the person keeping the books or adding up the numbers suspects, knows or is outright helping the person with the master plan. If you’re a licensed professional it is unlikely that you are being completely duped by someone at your own game. At the very least you have a gut feeling.
Action: Make a conscious decision to ignore your gut feeling and assume that your instinct is telling you to do the wrong thing, first.
3) Trust everyone
This step addresses the balance of the “most” I am referring to above. Confidence men are good. They construct a facade—a persona of sincerity and honesty that for most part will not be transparent. They will become your friend and they will use every resource available to get you to do what they want; assist them in perpetrating a scam. This is an exception to the above in that you will be beat at your own game.
Action: Trust everyone
4) Justify your unethical actions
My involvement in the scam that ultimately led to my indictment for a fraud conspiracy included the justification of many things. Examples: I told my self that since I was not explicitly told, by the king-pin, that the documents I received were fakes, it was not my job to act on my suspicions and check them out. After all, I didn’t create any fake documents. I also told myself that even if I knew that the documents were fakes, it wasn’t going to hurt anyone or create more risk. And finally, “It’s not like this is the S & L scandal or anything.”
Action: Lie to yourself until you feel okay
5) Subscribe to the belief that if a money tree falls in the forest and no one is around, you can take all the money
This might seem like a no-brainer but you’d be surprised. Being a felon and all, I’ve rubbed elbows with some unsavory sorts, you know, at the bottom of society. I’d say that at least half of them actually committed “opportunistic” fraud or fraud justified by need. They’d known for some time of a weakness in the system or a loop-hole. They never exploited it because by doing so, well, that would be just wrong, unethical and perhaps even criminal. For weeks, months or years the loop-hole just sat there; quietly. Then one day, BAM the sick aunt broke a hip, no health insurance and the money available from the hole made by the loop was extracted. There was an opportunity and a need and no one would ever know.
Action: The money is yours as long as nobody is looking
Some may feel that the above can be placed in categories ranging from big to small, severe to not so severe. Perhaps some of the actions above appear to be the cutting corners or to be present only in the wildly popular “gray area.”
Know this; every corner you cut trims a little piece from your soul. Believe me, I know from experience that it is almost impossible to get that back. There is no gray area; there is a thin black line. You are either on one side of it or the other.
If you think otherwise, follow steps 1 through 5 and get back to me. Depending on which prison you go to, I might know a few guys who can get you an extra dessert.
Jerome Mayne is the author of the book, Life Saving Lessons – The Diary of a White Collar Criminal. He is also a keynote speaker and has worked with dozens of companies and associations around the country helping their people make the right decisions, when the right decisions aren’t easy. He is a member of the National Speakers Association. He’s also the co-author of Mortgage Fraud and Predatory Lending – what every agent should know (Kaplan Publishing). He can be reached at jmayne@fraudcon.com, www.fraudcon.com.
© 2009, Jerome Mayne
Friday, March 20, 2009
Guilty Until Proven Innocent
Perception is reality. There are examples of it every day. Stocks are bought or sold because someone with credibility (or perceived credibility) says they do or don't like this, that or some other thing about a company. If this person is important enough or in a position where they are perceived to be an authority, their opinion will be taken as fact - a truth.
Here's another example:
A reporter with The Salt Lake Tribune (Pretty important title, wouldn't you say?) writes a story that starts with the headline, "Three Utah Men Charged in Mortgage Fraud Scheme." So far that's not bad. Three Utah men were in fact charged in a mortgage fraud scheme. I will however assert that this would not be an odd exchange over the breakfast table this morning.
(Frank reads this news story on his laptop)
Frank: Honey, look at this. Three more schemers ripping off the banks.
Honey: They should be shot!
Then Frank and Honey grab their pitchforks and hunt down those dirty schemers.
There is no way in hell that Frank is going to read that story and say, "Gosh, I wonder if they did it." Please please please read the story and tell me that I'm wrong. Tell me that after reading it you actually think that these three might be innocent.
I am not saying that the information in the article is factually untrue, I am saying that it is written in such a way that most people would undoubtedly believe these three are absolutely guilty. But check this section of the story. I will highlight the words that I think skew the reader - on purpose.
"Haycock allegedly formed four companies, referred to as Haycock Properties. Prosecutors say the straw buyers were told that the companies would be making loan payments for them, buyers would not have to make a down payment and the homes, whose appraisals had been rigged for more than they were worth, would be quickly sold. Buyers were allegedly paid from $7,000 to $20,000 to sign purchase and loan documents. "
I believe that we are so numb to the word allegedly that it might as well not even be there. And if the Prosecutors say something, aren't we supposed to believe it? Seriously.
The story could have said - "The prosecutors think that Haycock might have formed four companies, referred to as Haycock Properties, but this has not been proven so no one really knows yet."
You can say, "Come on Jerome. One of the guys said he wasn't involved but he was an attorney who was disbarred in 2001. He's clearly lying. And the other two guys didn't even want to talk to the reporter - if they didn't do anything wrong, why are they hiding."
Instead of saying, "Smith couldn't be reached for comment.", why didn't the reporter say, "We couldn't get a hold of Smith, so let's not make any assumptions here. He'll have a chance to retain an attorney and present his side of the story." Why? Because by saying he couldn't be reached for comment, it sounds like he's avoiding comment and therefore, must have done something wrong.
I believe the story was written this way so that we will make the assumption that these are dirty rotten criminals. It would seem to me that most of us find dirty rotten criminals more interesting than people who, "might have done something wrong but we're not sure." I think it's more interesting. But I don't think it's right that a reporter, a newspaper, takes advantage of the fact that the general public has a perception that they are just reporting the facts, in order to sell more papers.
You know what? I think the guys did it. Maybe not everything in the indictment, but they did some of it - maybe even most of it. The reason I think that is because I was in the same position they are in right now.
15 years ago I was involved in a fraud conspiracy. It's a long story, but to cut to the chase, I did it. I committed a crime, I plead guilty to the crime and I served time in prison for it. But I remember clearly, the feeling that I had to prove I was innocent. The papers, the community, heck, even some of my family and friends believed I was guilty - before my first hearing.
All they had to go on was the indictment, which is nothing more than an accusation. Don't forget, it is an accusation by an authority figure - the federal prosecutor. They wield quite a bit of influence and believe me, they're really really scary.
Here's another example:
A reporter with The Salt Lake Tribune (Pretty important title, wouldn't you say?) writes a story that starts with the headline, "Three Utah Men Charged in Mortgage Fraud Scheme." So far that's not bad. Three Utah men were in fact charged in a mortgage fraud scheme. I will however assert that this would not be an odd exchange over the breakfast table this morning.
(Frank reads this news story on his laptop)
Frank: Honey, look at this. Three more schemers ripping off the banks.
Honey: They should be shot!
Then Frank and Honey grab their pitchforks and hunt down those dirty schemers.
There is no way in hell that Frank is going to read that story and say, "Gosh, I wonder if they did it." Please please please read the story and tell me that I'm wrong. Tell me that after reading it you actually think that these three might be innocent.
I am not saying that the information in the article is factually untrue, I am saying that it is written in such a way that most people would undoubtedly believe these three are absolutely guilty. But check this section of the story. I will highlight the words that I think skew the reader - on purpose.
"Haycock allegedly formed four companies, referred to as Haycock Properties. Prosecutors say the straw buyers were told that the companies would be making loan payments for them, buyers would not have to make a down payment and the homes, whose appraisals had been rigged for more than they were worth, would be quickly sold. Buyers were allegedly paid from $7,000 to $20,000 to sign purchase and loan documents. "
I believe that we are so numb to the word allegedly that it might as well not even be there. And if the Prosecutors say something, aren't we supposed to believe it? Seriously.
The story could have said - "The prosecutors think that Haycock might have formed four companies, referred to as Haycock Properties, but this has not been proven so no one really knows yet."
You can say, "Come on Jerome. One of the guys said he wasn't involved but he was an attorney who was disbarred in 2001. He's clearly lying. And the other two guys didn't even want to talk to the reporter - if they didn't do anything wrong, why are they hiding."
Instead of saying, "Smith couldn't be reached for comment.", why didn't the reporter say, "We couldn't get a hold of Smith, so let's not make any assumptions here. He'll have a chance to retain an attorney and present his side of the story." Why? Because by saying he couldn't be reached for comment, it sounds like he's avoiding comment and therefore, must have done something wrong.
I believe the story was written this way so that we will make the assumption that these are dirty rotten criminals. It would seem to me that most of us find dirty rotten criminals more interesting than people who, "might have done something wrong but we're not sure." I think it's more interesting. But I don't think it's right that a reporter, a newspaper, takes advantage of the fact that the general public has a perception that they are just reporting the facts, in order to sell more papers.
You know what? I think the guys did it. Maybe not everything in the indictment, but they did some of it - maybe even most of it. The reason I think that is because I was in the same position they are in right now.
15 years ago I was involved in a fraud conspiracy. It's a long story, but to cut to the chase, I did it. I committed a crime, I plead guilty to the crime and I served time in prison for it. But I remember clearly, the feeling that I had to prove I was innocent. The papers, the community, heck, even some of my family and friends believed I was guilty - before my first hearing.
All they had to go on was the indictment, which is nothing more than an accusation. Don't forget, it is an accusation by an authority figure - the federal prosecutor. They wield quite a bit of influence and believe me, they're really really scary.
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