Sutton Brokers Were Left $600,000 Short When Their Agency Went Bankrupt

CBC Montreal recently had an excellent report on a group of former Sutton Royal agents who were done out of a combined $600,000 in real estate commissions when their agency was forced into bankruptcy.

The story began with an alleged cheque kiting scheme implicating the agency's director and his executive assistant. Two banks, the TD and National, stepped in when Sutton Royal accounts came up about $2 million short.

When it was discovered that the agency was depositing commission cheques for sales by its agents to a Bank of Montreal account, TD and National  asked the court to seize the money. Last December, the Dollard des Ormeaux agency was forced into bankruptcy.

That's when things got ugly for Sutton Royal's agents. Money they had earned selling homes and supposedly held in trust by their agency, as per the Real Estate Brokerage Act, was gone - poof - sponged up as part of the bankruptcy proceedings. To make matters worse, Sutton Quebec appears to have quietly paid off the collaborating agents (the agents who represented buyers in deals involving Sutton Royal's sellers) while stiffing their own people. Ouch.

I cannot imagine the nightmare these brokers are living. First, the agency they work for collapsed in scandal. Next, their revenue was snatched away - in the case of one agent, $300,000 ! The brokers allege Sutton Quebec president Christophe Folla promised to help them but has not.

An aside. When I was The Gazette's real estate reporter, I had a story about a Sutton agent (they were called agents then, not brokers) at the La Salle brokerage, who appeared to pretty much try to screw an old lady out of her condo. Her daughter came to me with the story. (Quebec's real estate authority later convicted him of breach of ethics and his license was suspended.)

I tried very hard to talk to Christophe Folla at that time. He never once called me back. I hope these agents have better luck. 

Click on the link above to read the whole story and watch the TV report. The CBC promises that a second report is coming up.

Stay tuned, as they say.

The Newest Identity Thief: Grandma

Identity theft by relatives appears to be on the rise. One young lady was shocked to find out that her 71 year old grandmother opened a credit card in the grand-daughter's name: and did not pay the bill (See, Family Credit Card Fraud). While wrong, the difficulty of the whole matter is obvious. Who wants to put grandma in jail for fraud? Other common identity victims are children, whose parents sometimes open accounts in their names and don't pay (See The Newest Identity Thieves: Parents; All in the Family). Crime and wrong-doing in one's own family is not unheard of. After all, I just taught Gimpel v. Bolstein this week where the family ousted one relative from employment at the family farm after he embezzles some $80,000+. The thief ultimately sues on a claim that his stock is worthless in a company without a job or dividends and the court agrees (at least as to dividends or buying him out). So, stealing in one's own family . . . yes it happens.

Here though, the problem is not only might the relative have to shoulder the financial loss, but sustain damage to their credit score if they don't turn in grandma. Most card issuers require a police report in order to document the account fraud. There is definitely a heavier loss here than presented in Gimpel where the thief lost his job but was not prosecuted . . . and the family farm just lost the money. While I condemn the thieves here, card issuers have some responsibility as well for issuing cards in children's names in the first place. While card issuers have responsibility for fraud, they seem to find clever ways to shift it back to consumers (See credit card skimming).

- JSM

Credit Card Skimming and Card Issuers Behaving Badly

This past June I attended the CALI Conference, hosted by Rutgers University - Cambden. I stayed in the Philadelphia area for about ten days, since my sister lives there. I have a credit card that I often use for business and did on this particular trip. Not having used the card, which is currently in a locked box in Florida, since that trip, there should be no new charges. Yet, on August 20, 2010 two new charges appeared on my card from convenience stores located well outside of the Philadelphia area. Moreover, the record indicated that the user presented my card for the transactions, which I later learned were made at gas pumps with no receipt or documentation. As the card is here with me in Florida, I know I did not present it in Pennsylvania and that someone replicated my card.

Counterfeiters can replicate your credit card by "skimming" the data information from the card's magnetic strip during an ordinary transaction. (See Visa, Credit Card Fraud). They then use the information to make replica cards and engage in fraudulent transactions. The skimming behavior is just one way that fraud occurs. Of course, TILA 133(a)(1)(B) (Regulation Z 226.12(b)(1))limits the cardholder's liability for unauthorized charges to a maximum of $50 and network rules typically protect the cardholder (me) from liability. See Visa's Zero Liability Policy.

I notified the card issuer, Household Bank, of the unauthorized transactions right away. Within 24 hours, one of the vendors, Wawa, reversed the charge. The other merchant, Turkey Hill gas did not and within 24 hours I received the following email from the card issuer:

This charge represents an automated gas terminal charge. At the time of the
transaction, your credit card was not reported lost or stolen, and this type of
transaction required that your card be present.

In addition, your Account history indicates that this charge is consistent with your spending pattern. For these reasons, we consider this charge to be valid. Although we are unable to assist you, you may pursue this matter further with the merchant.

Note that because the transaction was electronic, we are unable to
provide a receipt.

Unfortunately, we have no recourse to pursue your dispute. Although we are unable to credit your Account, you may still pursue this matter further with the merchant.

If you require additional information, please reply to this message or call us at 1-503-293-4037 and one of our Customer Service Representatives will be glad to help you. To ensure a quick response, please refer to the following reference number: XXXXXXXXX.

For your records, you will receive a separate confirmation letter via
the U.S. Mail.

Sincerely,


Customer Service Department

Knowing I did not authorize the charge, I called the issuer to dispute this denial and to request a new card number. You see, issuers bear the loss generally under network rules in "face-to-face" transactions for unauthorized charges as long as the merchant follows the requisite procedures (often signature and authorization for the transaction). My suspicion is that the issuer would bear the loss in this case, so they wanted to force it back on the consumer. When I called, they told me initially there was nothing they could do, the "documentation" showed that I was in PA and made the charge. I reminded them their own letter said that there was no receipt and the back peddling began. Now, they admitted they were still waiting on a response from the merchant. They had no documentation. They would "reopen" the investigation right away. In addition to talking to them on the phone, I should also respond to the email confirming the conversation.

This type of issuer behavior really gets me going! They knew they did not investigate the transaction, but sent a denial right away of the claim I did not authorize the transaction. The "game" here is to send the denials on fraud claims knowing that only some consumers will pick up the phone and complain. Moreover, when I responded to their email as invited, it turned out to be a "no reply" email address. Since the issuer provides no fax number, I submitted yet another message through their online system. Surely this will take my time in following up on a $25 transaction, but I cannot give a pass to a card issuer attempting to avoid its responsibility under TILA and the Visa network rules regarding fraud. And some wonder why we need a Consumer Financial Protection Bureau . . .

- JSM