Ann Startup paid cash for her Tooele condo. Or so she thought.
About six months after she closed on the home, Startup, a 58-year-old former medical transcriptionist now living on disability, started getting foreclosure notices.
"I called my real estate agent, and he said there wasn't anything to worry about, that I had paid for title insurance," Startup said.
But Startup quickly found that the title insurance she paid for had never been recorded. Along with 76 other plaintiffs, Startup alleges in a class-action lawsuit filed this week that she was swindled by the title insurance agent and the company he represented, Attorneys Title Guaranty Fund.
In what Startup's attorney, Jay Gurmankin, called "maybe the biggest real estate scam in the history of the state," the lawsuit (which exceeds 450 pages) alleges that Attorneys Title, its parent company and more than 40 other defendants knew about, initiated or covered up various schemes that cost the alleged victims more than $22 million.
"ATGF agents looted escrow accounts, stole innocent victims' equity in real property and stacked mortgages to deprive victims of any security for the equity in their real property," the lawsuit states. Then, according to the document, the defendants tried to cover up the alleged bad acts and absolve themselves of the victims' losses.
The tactics varied, according to Gurmankin. Some people, like Startup, believed they had lawfully purchased title insurance only to find out later that the money was gone and their property at risk. Others were allegedly led into a Ponzi-type scheme, where prospective home sellers were told that if they put a portion of the sale proceeds into an escrow account, they could get it back risk-free, with interest, after a certain period of time.
"People were told their money would be put into the trust account of an ATGF agent," Gurmankin said. "They were told it was sacrosanct, that it couldn't be touched. But the money was misappropriated, and the clients were never paid."
Daniel W. Jackson, also a plaintiff's attorney, said the money was removed "almost immediately."
"Some money was used to pay other victims," Jackson said. "Some was used for personal expenditures, like clothing and homes. These people lived very well."
ATGF attorney Paul Drecksel said the company neither knew about nor condoned the actions of a few former agents and employees of agents.
"These separate business deals have nothing to do with us," Drecksel said. "We are not in the business of insuring investments. It is not reasonable for people to believe that Attorneys Title Guaranty Fund as a title insurance company would be insuring investments, particularly on the terms that some of these investments were done. . . . We never authorized anyone to insure investments, and certainly we never authorized anyone to engage in illegal activities."
One former ATGF agent, Clay Harrison, has pleaded guilty to felony securities fraud, misappropriation of funds from trust accounts, wrongful appropriation of funds and breach of fiduciary duty.
Five other individuals named in the lawsuit also face securities fraud and other charges, according to Utah Assistant Attorney General Charlene Barlow. They are Dale McAllister, a former employee of Harrison's, along with Calvin Paul Stewart, Alvin C. Anderson, ReNae Bolson and Gerald Steven Wallace.
Stewart, Anderson and Bolson were not affiliated, "tangentially or otherwise," with Attorneys Title, Drecksel said.
"Attorneys Title, along with lots of people, is one of the victims in this scheme," Drecksel said. "They are now a defendant in a number of lawsuits. It has created significant pain for the company, just as it has created significant pain for investors who have lost money.
"But the individuals involved in this, over the period of time they were in business, didn't just fool these investors and Attorneys Title," he said. "They fooled state regulators, they fooled law enforcement agencies who looked at these folks. They fooled bankers and lawyers. None of these lawyers or bankers, as far as we can tell, ran to law enforcement after speaking with their clients, saying 'There's something wrong with this.' "
The lawsuit was filed under the RICO (Racketeer Influenced and Corrupt Organizations) Act and seeks treble damages: upwards of $60 million, plus attorneys' fees and costs.
Ann Startup just wants to own her condo, free and clear, once and for all.
After the initial money was lost, Startup said she was "within hours of having my condo sold off."
"I was on disability," Startup said. "I wasn't able to get a loan. I wasn't able to do anything like that."
Habitat for Humanity came in at the last minute and paid the mortgage, with the stipulation that if, after three years, the mortgage hasn't been paid off, Startup will have to sell the condo or give it to Habitat.
The whole ordeal has Startup steaming.
"These people have caused so much damage," she said. "You think when you go to people who are licensed with the state, that you have some kind of protection. Everything I did, I did by the book. And yet, these people who worked for the title company were dishonest."
"I went to Attorneys Title (to explain the situation)," Startup said, thinking that they'd make good on the policy. "Their representative was representing them. As far as I'm concerned, Attorneys Title should at least be reimbursing me. I wasn't in on any schemes. All I did was buy a condo. You'd think that'd be a very simple deal, and under normal circumstances it is. But not with Attorneys Title."
Harrison, the former ATGF agent, is scheduled to be sentenced next week. He faces two second-degree felonies, each punishable by up to 15 years in prison; and two third-degree felonies, punishable by up to 5 years in prison.
McAllister "is in plea negotiations now," on the securities fraud charges against him, Barlow said. Anderson faces a July preliminary hearing on securities fraud and racketeering charges. Wallace is scheduled to enter a plea on securities fraud charges in mid-July. Bolson has a July 29 hearing date. Stewart is scheduled for trial in August.
Charges may be filed against others who were allegedly involved in the scheme, Barlow said.
"More charges could still come forward," she said. "I have prepared charges that have not yet been filed against another individual. We're not done."