The Criminal Justice System Takes No Pity On Agents Who Commit Fraud
In a world filled with malicious intentions, real estate agents must constantly be vigilant when it comes to keeping themselves and their clients safe. It’s a matter of life and death and should be taken seriously. But what happens when the roles are reversed and it’s the agent who is the culprit?
Real estate agent fraud is a real thing and is something all real estate professionals should pay attention to if they value retaining their license and ethical standards. However, for some, the opportunity of a big payout at the expense of their clients can overcome responsible foresight. While the money may be enticing, the punishment when caught can destroy your future career as a real estate agent.
What Is Real Estate Agent Fraud?
In most cases, real estate agent fraud is proven when there is proof that the “real estate agent had the intent to defraud, deceive, or misrepresent facts to the detriment of the plaintiff.” Fraud can mean many things. An agent can purposely list a home with larger square footage or fail to disclose vital information, like recent water damage or knowledge of new construction that will happen right next door. Some other examples of real estate agent fraud include:
Breach of Contract
This type of fraud is when an agent violates the agent-client contract.
Breach of Duty
When this fraud occurs, it’s because the agent did not act in their client’s best interest.
Agents who commit this fraud owed a duty to their clients but breached this duty.
The act of real estate agent fraud is broad and covers many different types of illegal actions a real estate agent could commit against their client. You can learn more about your ethical duty by taking one of our Ethics courses that satisfy your Continuing Education and NAR requirements.
Notorious Agents Who Committed Real Estate Fraud
In the criminal justice system, real estate crimes are considered relatively egregious. At The CE Shop, our experts investigating these notorious felonies are members of an elite squad known as the Real Estate Fraud Experts. These are the stories they uncovered.
Crime #1: The Suffering of Toledo
The Culprits: Ronald Wilson, Sherri Wilson, Murphy Feeny
What They Did: Husband and wife, Ronald and Sherri Wilson, teamed up with Murphy Feeny and conned investors out of $3.9 million. Under the guise of the Sierra Real Estate Service, this dynamic trio urged investors to purchase and renovate rental properties in the Toledo area with the assumption that the investors would take ownership while the con artists managed the properties. Limited Liability Companies (LLC) were opened for the investors. However, the Wilsons and Mr. Feeny failed to transfer ownership and used this power to defraud rehabilitation projects, insurance companies, and the U.S. Department of Housing and Urban Development.
Why It’s Illegal: Committing wire fraud, bank fraud, conspiracy to commit wire fraud, mail fraud, bank fraud (wait, did we say that already?), and embezzlement of government property is a sure-fire way to lose your license and find yourself living in a 48 square-foot cell with an unsavory roommate named Bob. So, if this wasn’t obvious enough, don’t do these crimes.
Time for the Crime: The “mastermind of the scheme,” Ronald Wilson, received a seven and a half year sentence. His wife Sherri was deemed less culpable in the crime and only received a three and a half year sentence. Their partner, Murphy Feeny, only received three years’ probation. “In addition to the victim investors from around the world, the city of Toledo and its residents continue to suffer. Toledo has struggled mightily to revitalize sections of the city, including removing blighted properties and rehabilitating others, at great cost to its citizens,” U.S. Attorney Justin Herdman wrote in court documents.
Crime #2: Investigated and Dealt with Appropriately
The Culprit: Chung Tran
What They Did: A former Sydney real estate agent, Mr. Tran misappropriated $187,500 of his clients’ money after failing to register plans for a mixed-use development called the ‘Horizon Project’ (that doesn’t sound sketchy). After the buyers found out the money deposits they had sent to Mr. Tran were not being used for any such project, they canceled their contracts and demanded their money back. Tran refused to pay them and instead moved the funds elsewhere.
Why It’s Illegal: As an agent, you have a fiduciary duty to do what is best for your clients. Instead of registering plans for the mixed-development project in Parramatta, Australia, Mr. Tran took the money for his own endeavors. What those endeavors were are still up for speculation but The CE Shop’s theories include: he tried to bribe Russian authorities to release Edward Snowden, a long-needed ski trip for him and his girlfriend, or a one-time donation to Michael Scott’s Dunder Mifflin Scranton Meredith Palmer Memorial Celebrity Rabies Awareness Pro-Am Fun Run Race for the Cure.
Time for the Crime: After pleading to two counts of fraud, Mr. Tran was sentenced to 20 months in ‘Intensive Corrections Order.’ While this is not exactly called jail ‘down under,’ it is considered to be one of the most serious sentences you can serve in Australia. We believe a nice month-long stint in Riker’s Island would’ve been more suitable.
“This case should act as a deterrent to all real estate agents. There can be no tolerance for misusing funds or other fraudulent behavior,” Fair Trading NSW Executive Director of Investigation and Enforcement Valerie Griswold said.
Crime #3: 13 Hard Years in the Wilderness
The Culprits: Phillip Julian Cavanagh, Raghu Aryasomayajulain
What They Did: Back in 2006, Mr. Cavanagh partnered up with a fellow agent, Mr. Aryasomayajulain, at their New Zealand brokerage, Barfoot & Thompson, to develop listings and on-sale them to friends at inflated prices. After financial difficulties strained the project, properties were never exchanged. The partners then changed course and added to their plan a malicious form of crime with the same name of that evil real estate agent stepsister of Cinderella: fraud via falsified mortgage applications. Investors lost $3.84 million (which was valued at less than $13 million in loans) and the rest was history.
Why It’s Illegal: While it is not a crime to develop and upsell properties in New Zealand, it is illegal for an agent to falsify clients’ identities to take out mortgages. So, if you’re thinking of duping little old Miss Eleanor down the street, think again!
Time for the Crime: Mr. Cavanaugh was given two and a half years in prison when he pleaded “Guilty.” Meanwhile, Mr. Aryasomayajulain pled “Not Guilty” and was sentenced to four and a half years in 2011. But this story does have a happy ending: After suffering 13 “hard years in the wilderness,” according to a fellow Auckland real estate agent, Mr. Cavanugh was granted permission to practice as a real estate agent again in August.
Fellow agent Lyn Lockwood commented, “He hasn’t had a chance to celebrate. He’s working too hard to complete his building certificate.” Like the phoenix rising from the ashes, so too do Mr. Cavanaugh’s wings reopen and adventure back into the great, big, wide world of ethical real estate procedures and standards.
Remember, as a real estate agent, it is your legal and ethical duty to do right by your clients. Failure to do so could result in jail time and forfeiture of your license. But as an agent who takes their courses with the best real estate education provider and completes their NAR Ethics requirements every cycle, you already know that.
Bad agents, bad agents, what ya gonna do, what ya gonna do when they come for you. Bad agents, bad agents.
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